There are few things as repetitive as watching economic development presentations from different cities, counties, and states. Everyone's got an educated workforce, everyone's got a top ranked symphony, everyone's got a website with pictures of lab coat techs starting at test tubes. And just about everyone still has high unemployment.
The me-too wastefulness of the economic development industry is best seen in the billions poured into convention centers over the last decade. For some reason, sports stadiums make a lot of academics angry, but convention centers can actually be far more wasteful. Here in DC, there was all kinds of moaning about the $611 million stadium the city built for the Nationals, which is generating more than enough revenue to cover its debt service. But there was barely a peep over the me-too $800 million convention center that the city is struggling to fill.
But instead of wasting taxpayer dollars on copycat slogans and convention centers, it's time for economic development to draw on taxpayers' unique knowledge of their hometowns. Residents are already altering perceptions of cities and states with YouTube clips, from the Arlington Rap to the Hastily Made Cleveland Tourism Video to Minnesota Gurls, all of which get far more hits than any of the vapid symphony, science, and art videos put up by economic development authorities.
Rather than get surprised by some 18 year old's YouTube clip, it makes more sense for recruitment campaigns to incorporate more input from residents. Some cities will hold charettes and go through all kinds of planning debates over a 10 acre parcel of land. But economic development strategies are more important to these cities' futures than the position of the parking garage next to the new "lifestyle center". Moreover, many people developing those strategies are cautious government employees who do not want to venture too far away from conventional themes with predictably mediocre results. So why not involve citizens more?
How Technology Advances Transform Places
Thursday, July 29, 2010
Monday, July 26, 2010
Big Economic Development Win for Greenville/Spartanburg Region
Big win for Laurens County, SC, which is about 30 minutes south of Greenville, SC, with the ZF Group announcing a $350 million plant where the German manufacturer will produce auto transmissions. One of the company's largest customers, BMW, has a facility nearby in Spartanburg.
One of the most interesting aspects of this new plant is the level of employment it will support per capital dollar invested. It's expected to create 900 jobs once it's fully up and running, or one job for every $390,000 of capital invested. This is fairly labor-intensive for modern manufacturing, and quite a bit lower than the $650,000 of capital Toyota will spend for every job it creates at its new Corolla and Prius plant in Blue Springs, Mississippi. It's also far more jobs per capital dollar than the Dow Kokam battery plant in Midland, Michigan, which Joe Biden and Jennifer Granholm have been treating like an economic savior, yet will only create one operational job for every $1 million of capital invested. The ZF plant will need more than 2.5x as many workers per dollar invested than that heavily publicized battery plant.
South Carolina, which has struggled during the recession, has also stayed focused. There haven't been any silly "cool cities" campaigns in Columbia, Greenville, or Charleston, and it's continued to recruit manufacturers, and not fallen for any of the creative city Richard Florida hype. In addition, it's now putting together supply chains of one producer selling to another, which is far more sustainable economically than creating yet another "urban artists neighborhood".
One of the most interesting aspects of this new plant is the level of employment it will support per capital dollar invested. It's expected to create 900 jobs once it's fully up and running, or one job for every $390,000 of capital invested. This is fairly labor-intensive for modern manufacturing, and quite a bit lower than the $650,000 of capital Toyota will spend for every job it creates at its new Corolla and Prius plant in Blue Springs, Mississippi. It's also far more jobs per capital dollar than the Dow Kokam battery plant in Midland, Michigan, which Joe Biden and Jennifer Granholm have been treating like an economic savior, yet will only create one operational job for every $1 million of capital invested. The ZF plant will need more than 2.5x as many workers per dollar invested than that heavily publicized battery plant.
South Carolina, which has struggled during the recession, has also stayed focused. There haven't been any silly "cool cities" campaigns in Columbia, Greenville, or Charleston, and it's continued to recruit manufacturers, and not fallen for any of the creative city Richard Florida hype. In addition, it's now putting together supply chains of one producer selling to another, which is far more sustainable economically than creating yet another "urban artists neighborhood".
Friday, July 23, 2010
Los Angeles Celebrating Metro Rail's 20th Birthday
If you're in LA, you can attend the big bash at the Staples Center today for the MTA rail system. Now carrying 327,000 people a day, the system carries as many people as the Bay Area's regional BART rail, although total Bay Area light rail/heavy rail ridership is right at 500,000 when you factor in Muni.
The LA Times story noting the anniversary breaks down into a debate over whether the initial blue line should have been a bus instead. I often think bus service is underrated, because it serves the very important role of getting low wage workers, many of whom don't own cars, to work. But in this case, the rail line hooked up with others that go into some fairly wealthy areas in the Valley as well as with future lines that will run between downtown and Santa Monica. Additionally, with close to 8,000 people per square mile, LA not only had the people to support rail, it had the population density, something we don't see with toy trains that get proposed in smaller cities.
The LA Times story noting the anniversary breaks down into a debate over whether the initial blue line should have been a bus instead. I often think bus service is underrated, because it serves the very important role of getting low wage workers, many of whom don't own cars, to work. But in this case, the rail line hooked up with others that go into some fairly wealthy areas in the Valley as well as with future lines that will run between downtown and Santa Monica. Additionally, with close to 8,000 people per square mile, LA not only had the people to support rail, it had the population density, something we don't see with toy trains that get proposed in smaller cities.
Wednesday, July 21, 2010
Wind Power is Much Better than Solar for Manufacturing Jobs
Solar manufacturing is incredibly capital-intensive. For new solar fabs, like the Amonix plant near Las Vegas, and the Solexant plant near Portland, capital outlays are coming out to just over $500,000 per job created. Solexant, for example, will create about 200 jobs on a $107 million capital investment. Contrast that to the new Vestas wind turbine plant in Brighton, Colorado (a few miles northwest of Denver Int'l Airport), where 850 permanent jobs will be created with just $100 million of capital investment, or about $120,000 of capital outlay per job. So for less capital investment, the wind turbine plant is creating over four times as many new jobs as the solar fabs.
Unlike solar manufacturing, which requires heavily filtrated clean rooms and expensive printing and cutting equipment, much like a semiconductor fab, wind turbine manufacturing requires a lot of people. And if you're the sort who spends more time thinking about microeconomics than microbikinis, you'd say wind turbine manufacturing is labor-intensive.
The diameter of the largest turbine rotors has surpassed 400 feet, so the economics of production are very old-school, dependent on a lot of people converting raw materials into a large item. This is very different than manufacturing a 4 inch solar cell using machinery from semiconductor plants. Building the wind turbine takes a lot of people, building the solar cell a lot of capital equipment.
In addition to differences in manufacturing costs, wind turbines are expensive to ship. While Vestas has imported turbines here from its native Denmark, moving 400 foot wind turbines around is no small effort, and makes outsourcing manufacturing to Asia a very costly effort. Meanwhile, two of America's largest solar manufacturers, First Solar and SunPower, are building new facilities in Malaysia and the Philippines.
Now what's even more impressive about the wind turbine plant is how it compares to factories where other centralized, alternating current technologies are built. I posted a few weeks ago about the new steam turbine plant going up in Chattanooga that will cost $300 million to build, and produce all of 325 jobs. The Brighton wind turbine factory will produce about seven times as many jobs per capital dollar invested as the Chattanooga steam turbine plant.
While most economic development professionals, as well as politicians, are eager to pounce on anything that remotely looks like a "green job", it's becoming very clear that some green jobs are far more sustainable than others. While wind farms produce very few jobs, and are models of efficiency and productivity, a wind turbine plant is hard to outsource, and creates far more jobs per capital dollar invested than just about any electricity generation technology.
Unlike solar manufacturing, which requires heavily filtrated clean rooms and expensive printing and cutting equipment, much like a semiconductor fab, wind turbine manufacturing requires a lot of people. And if you're the sort who spends more time thinking about microeconomics than microbikinis, you'd say wind turbine manufacturing is labor-intensive.
The diameter of the largest turbine rotors has surpassed 400 feet, so the economics of production are very old-school, dependent on a lot of people converting raw materials into a large item. This is very different than manufacturing a 4 inch solar cell using machinery from semiconductor plants. Building the wind turbine takes a lot of people, building the solar cell a lot of capital equipment.
In addition to differences in manufacturing costs, wind turbines are expensive to ship. While Vestas has imported turbines here from its native Denmark, moving 400 foot wind turbines around is no small effort, and makes outsourcing manufacturing to Asia a very costly effort. Meanwhile, two of America's largest solar manufacturers, First Solar and SunPower, are building new facilities in Malaysia and the Philippines.
Now what's even more impressive about the wind turbine plant is how it compares to factories where other centralized, alternating current technologies are built. I posted a few weeks ago about the new steam turbine plant going up in Chattanooga that will cost $300 million to build, and produce all of 325 jobs. The Brighton wind turbine factory will produce about seven times as many jobs per capital dollar invested as the Chattanooga steam turbine plant.
While most economic development professionals, as well as politicians, are eager to pounce on anything that remotely looks like a "green job", it's becoming very clear that some green jobs are far more sustainable than others. While wind farms produce very few jobs, and are models of efficiency and productivity, a wind turbine plant is hard to outsource, and creates far more jobs per capital dollar invested than just about any electricity generation technology.
Tuesday, July 20, 2010
Air Travel's Coming Back
Delta Airlines just completed an incredible quarter, with passenger revenue increasing 19%, and cargo revenue increasing 22% from year ago levels. Additionally, airports across the country are seeing increased traffic, with Charlotte reporting 9% more passenger enplanements in May than it saw in 2009, and even Pittsburgh attracting more passengers than it did this time last year.
Delta flew 1.7% more passengers in the second quarter of this year than it did in 2009. And it was able to charge a lot more, with passenger yields increasing 17% to over 14 cents of revenue per mile flown.
Cities and states waiting around for a recovery need to look beyond the headline data coming out of the Federal Government, because the passenger and cargo figures coming out of ports and carriers are looking very strong.
Delta flew 1.7% more passengers in the second quarter of this year than it did in 2009. And it was able to charge a lot more, with passenger yields increasing 17% to over 14 cents of revenue per mile flown.
Cities and states waiting around for a recovery need to look beyond the headline data coming out of the Federal Government, because the passenger and cargo figures coming out of ports and carriers are looking very strong.
Monday, July 19, 2010
Office Buildings Are So 1997
Last week, I posted a link to a story showing Port of LA cargo traffic is at record highs. At the same time, the office market is still getting worse, with vacancies in the LA-Orange-Inland Empire region pushing 20%.
The Los Angeles CSA (LA, Orange, Inland Empire), has lost 1.7% of its jobs over the last 12 months, but 3% of its office space has been vacated over that same period. Moreover, in Orange County, vacancies are still rising while employment in business and professional services has actually started going up again. Office space leases aren't just lagging, they're contracting at a time when data centers, hospitals, schools, and other workplaces of the 21st century are expanding.
I cover the data center industry in my consulting business, and the industry is adding new capacity as we speak. Unlike the office REITs, data center REITs are seeing double digit annual growth in rent revenue.
Few offices are likely to be needed this decade in the massive Southern California market. Vacancies fell 10 points in the 90s economic expansion, and 7 points in the 2000s expansion. Even in the most optimistic scenario, it is very hard to see overall vacancies in the market dropping below 10% this decade. But this does not mean jobs will not be created, just that they won't be done in the 20th century workplace known as an office building.
The Los Angeles CSA (LA, Orange, Inland Empire), has lost 1.7% of its jobs over the last 12 months, but 3% of its office space has been vacated over that same period. Moreover, in Orange County, vacancies are still rising while employment in business and professional services has actually started going up again. Office space leases aren't just lagging, they're contracting at a time when data centers, hospitals, schools, and other workplaces of the 21st century are expanding.
I cover the data center industry in my consulting business, and the industry is adding new capacity as we speak. Unlike the office REITs, data center REITs are seeing double digit annual growth in rent revenue.
Few offices are likely to be needed this decade in the massive Southern California market. Vacancies fell 10 points in the 90s economic expansion, and 7 points in the 2000s expansion. Even in the most optimistic scenario, it is very hard to see overall vacancies in the market dropping below 10% this decade. But this does not mean jobs will not be created, just that they won't be done in the 20th century workplace known as an office building.
Thursday, July 15, 2010
Port of Los Angeles Breaks Monthly Record for Cargo Volume
Over half a million containers came through the Port of Los Angeles in June, a new record. Traffic was also strong as the neighboring Port of Long Beach. There is still a disturbing trade imbalance at both ports, but according to the LA Times, the logistics jobs tied to the ports are the leading source of stable blue collar jobs in Southern California.
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