January 12, 2011
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Transcript of January 12, 2011
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January 12, 2011
Restarting Private Sector Job Growth in the Greater MSP
Metro Area
Restarting Private Sector Job Growth in the Greater MSP
Metro Area
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Case for Change
What Drives Job Growth?
Strategies for Greater MSP
Agenda
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3
For the past 30 years, the Twin Cities have enjoyed steady growth
GDP per capita1
Real income per capita1
2.0%CAG
R
1.9%1.9%
200520001995199019851980
1.7%
CAGR
1.8%1.4%
200520001995199019851980
1 In 2005 dollars
Midwest
Twin Cities
U.S. average
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The Twin Cities has an incredibly strong private sector . . .
Revenue earned by Twin Cities Fortune 500 companies
$425 billion
Fortune 500 companies headquartered in the Twin Cities
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Ranking among regions for most companies in the Fortune 400 private companies list – including Cargill and Carlson
6th
MSP has the 3rd most Fortune
500 companies per capita in the country
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5th among all states in patents per investment dollar
. . . world-class research and strong human capital . . .
Educational Attainment, 2007
U.S ave
85
MSP
93
Population >25 with high school diploma Percent
2737
U.S. aveMSP
Population >25 with advanced degree Percent
MSP has the 5th best percent of advanced degrees among MSAs
U of M is nationally ranked #7 in patent-revenue generating researchThe Mayo Clinic ranks 2nd in the US News & World Report 2009 America’s Best Hospitals for 5th consecutive year
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Volunteering rate in the nation
#1
And the largest pond hockey tournament in the world!
4 Major League
sports franchises
“Local food” community in the nation
#1
#3 Number of museums
Theatre seats per capita, behind NYC
#2 “Most Athletic City” in the nation
#1
Largest mall in America
#1
. . . and quality of life amenities
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-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1.0
1992 1994 1996 1998 2000 2002 2004 2006 2008
However, the region is losing ground
1 3-year moving average difference between Twin Cities and the U.S. using the given year and the previous two years
Job growth has
significantly declined
relative to the U.S.
Difference between Twin Cities employment growth and U.S. employment growth1
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Our business rankings have worsened
Milken Best-Performing Cities
2003 rank
2009 rank
2003 rank
2009 rank
Austin 81 Raleigh-Durham
12 2
Raleigh-Durham
13 Sacramento 15 58
MSP 7620 Austin 59 4
Columbus 3824 Denver 89 44
Denver 1434
Sacramento 119
36 Columbus 10 135
Seattle 1789 Seattle 13 17
Chicago 71100
Chicago 14 160
MSP 99 123
Forbes Best Places for Business and Careers
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The Twin Cities have a challenging business
climate
Minnesota is 38th out of 50 in terms of overall business climate according to Milken Institute Cost of Doing Business Index
38th
43rd The tax foundation ranked Minnesota 43rd out of 50 on its business tax climate
Twin Cities is 373rd out of 381 MSAs ranked from lowest to highest labor cost
373rd
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High cost of doing business in the Twin Cities is driven largely by tax, regulatory and labor costs
Initial findings
Minnesota ranks 30th on Forbes’ “Best states for doing business” rankings
Minnesota has the most stringent health insurance mandates in the country
Legislative/ regulatory environment
Minnesota ranks poorly both on business climate (41 of 50) and ratio of tax benefit to tax burden (46 of 50)
Minnesota’s corporate tax rate of 9.8% is third highest in the country
Tax environment
Twin Cities has the 8th highest labor cost (out of 381 cities)
15.9% of workers are in unions, above 12.5% national avg.
Wages for low skilled workers in the Twin Cities are 8.5% higher than peer regions
Labor costs
COST OF DOING BUSINESS
SOURCE: McKinsey Global Institute, Forbes, Tax Foundation, Moody’s Economy.com, Firm experts
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MN state rank(1=lowest, 51=highest)
1 Represents the highest marginal corporate tax rate2 Represents the highest marginal personal income tax rate3 This represents the relative ranking of corporate property taxes (0=best possible property tax ranking, 3= US average, 6 = the worst
possible ranking).
SOURCE: Tax Foundation
Corporate Income Tax1
Sales Tax
Personal Income Tax2
Corporate Property Tax Index3
2009, Percent
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39
17
Minnesota
All other states
COST OF DOING BUSINESS
Minnesota’s taxes are among the highest in the country
US Avg.6.6
9.8
6.875US Avg.5.086
US Avg.5.9
7.9
2.21 US Avg. 3.0
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The Twin Cities lack a coordinated business development effort
Site Selection Consultants say . . .
We have multiple organizations focused on economic development, but no coordinated , regional effort . . .
“You probably have lost a significant amount of corporate prospects due to a lack of regional agency.”
Local Business Leaders say . . .
“Minnesota gets dominated by almost every other state because we have no one hit team, one organization, in economic development. Nothing’s coordinated, it’s a mess . . .”
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Case for Change
What Drives Job Growth?
Strategies for Greater MSP
Agenda
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Three Sources of Job GrowthRetain existing
companies in the Twin Cities and foster an
environment for growth
Enable the creation of new Twin Cities firms through a culture of
innovation
Attract investment and corporate
relocations from outside Minnesota
Quality Job
Growth
Retain
Create Attract
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Human Capital
quality and investment of workforce, education and training
Quality of Life
lifestyle and community factors
Infrastructure
regional transportation, airport access, telecom, utility capabilities
Cost of Doing Business
R&D capabilities, commercializing research and ability to source capital support to entrepreneurs
Innovation and Start-up
level of taxes, incentives , regulatory and/or permitting process
How do you Create Job Growth?
Central ED Governance
A single organization coordinates economic development efforts
Sector Focus Explicitly target particular sectors as growth engines for the region
Economic development strategy developed and institutionalized with main economic development organizations
Unified Vision
Marketing Campaign
Highly visible campaigns which market regional identity
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Cost of Doing Business
Quality of Life
Infrastructure
Human Capital
Innovation and Start-up
MSP above peers and national averageMSP around average
MSP below average
Supporting Facts
Minnesota’s corporate tax is third highest in the nation at 9.8%
MN ranks 43rd in overall tax climate MSP ranks 8th highest in wage labor rates out of
383 MSA’s Ranked #1 on Sperling’s best places, #2 on Forbes Best U.S. Cities to earn a living, and #2 in Next Cities: Hotspots for young, talented workers
36.8% of Twin Cities residents have a bachelor’s degree relative to 27.5% nationally
MSP average commute time of 24 minutes is at the US average and average commute time via public transportation is better than US average
Broadband penetration of 56% is middle of the road relative to peers
Assessment
Greater MSP Assessment
Ranks 22nd in number of entrepreneurs per thousand residents
At 26 deals venture deals in 2007, MSP lags top innovation hubs
En
vir
on
menta
l Le
vers
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Unified Regional Vision
Central ED Governance
Sector focus
Marketing Campaign
Pro
cess
Le
vers
MSP above peers and national averageMSP around average
MSP below average
Supporting Facts
Currently various economic development entities operate with varying visions
ED pursued at a sub-regional level
Currently, ED entities operate largely autonomously
Sub-regions within MSP often compete for business rather than coordinating efforts
Historically limited coordinated cluster efforts but some current activities underway (e.g., RCM, Humphrey Institute)
Limited outreach efforts on regional basis, with most outreach coming from city entities such as Capital City Partnership
More to Life and Positively Minnesota efforts
Assessment
Greater MSP Assessment
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Address the cost of doing business
Develop a regional vision, strategy and approach for economic development
Enhance entrepreneurship and innovation
Proposed 3 Strategic Priorities for the Region to collectively work on…
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Case for Change
What Drives Job Growth?
Strategies for Greater MSP
Agenda
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Where those findings led us: Itasca Job Growth Initiatives
Create new companies and
start-ups
▪ Support and enhance the productivity of the region’s entrepreneurship ecosystem
– Establish a Business Bridge
– Institutionalize working relationships between the University of Minnesota and the Private Sector
▪ Launch a Regional Economic Development Partnership (REDP)
– Private - public partnership
– 13 county MSA definition
– Scope of Activities– Region’s ED vision
and strategy– Branding and
marketing– Retention and
expansion– Attraction
Objective: Fuel Quality Job Growth
Retain, expand and attract
existing companies
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–21
MSP REDP Launch Status
–21
Engaged national executive search firm
Currently in final stages of interviews
New CEO in place in Q1
Incorporating as a 501c3
Creating board governance concepts & documents
Selecting initial board members
Nearing Year 1 Goal: $2.8M
Public Sector: 6 counties & 14 cities contribute over $900K
Private Sector: $1.5M pledged, $1.0M outstanding asksEngaging economic
development leaders throughout region
Formalizing operating protocol between REDP and other ED organizations
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22
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Hire a CEO
Initiate Legal Incorporation
Secure Year 1 Investment
Draft Rules of Engagement
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Appendix
–23
Active Minneapolis-Saint Paul Regional Economic Development Efforts
Regional Economic Development Activities*
Talent Transportation/ Land Use
Entrepreneurship/
Innovation
Strategy and Growth
Green
▪ 4FRONT▪ TheLineMedia.co
m
▪ Living Cities Corridors of Opportunity
▪ HUD Sustainable Communities
▪ Integrated transit/ROI planning
▪ Central Corridors Funders Collaborative
▪ Entrepreneurial Accelerator
▪ Business Bridge– Minnesota
Showcase– Supplier
Library
▪ REDP: Regional Economic Development Partnership
▪ Brookings Metropolitan Business Plan
▪ Regional Competitiveness Project
▪ Destination 2025
▪ MetroMSP.org
▪ Thinc.GreenMSP
*Funded/Confirmed programs and efforts with individuals actively working to positively impact regional economic development in the greater Minneapolis Saint Paul metro
area
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Where those findings led us: Job Growth Initiatives
Retain, expand, and attract existing
companies
Create new companies and
start-upsKey Itasca Initiatives
Rationale
▪ Support and enhance the productivity of the region’s entrepreneurship ecosystem
– Establish a Business Bridge
– Institutionalize working relationships between the University of Minnesota and the Private Sector
▪ Launch a Regional Economic Development Partnership (REDP)
– Private - public partnership
– Scope of Activities– Region’s ED vision and
strategy– Branding and marketing– Retention and expansion– Attraction
▪ Region’s entrepreneurial activity slowing in recent years
▪ Prominent and critical gaps in funding availability, entrepreneurship culture, and regulations
▪ Opportunity to bundle and promote core assets
▪ Other regions are aggressively competing for jobs, while Twin Cities frequently not in consideration set
Objective: Fuel Quality Job Growth
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Itasca Project History (2003 – 2009)
Ideas, Innovation, and Business Climate
Talent/Workforce
Infrastructure Quality of Life
Retaining and Growing Leading Employers/Grow MN!
Strengthening University-Business Relations
Supporting the Growth of Small Business / GetGoMN.org
Advancing a Comprehensive Transportation Plan
Twin Cities Compass
Creating a World-class K-12 Education System in MN
Supporting the Strategic Redirection of Minneapolis Public SchoolsSupporting Early Childhood
Development
Financially Fit Minnesota
Understanding and Addressing Socio-economic Disparities/Close the Gap
1
2
3
7
8
9
10
6
5
4
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1-3%
Gains fromcreation of new firms4
1-3%
Gains from attracting new establishments5
18%-22%
Gains from existing MNfirms3
Loss from establish-ment closings2
(17%-21%)
(3%-6%)
Loss from contraction1
Twin Cities average gross employment flows Average annual percent change of employment, 2002-2007
SOURCE: Bureau of Labor Statistics, Dunn & Bradstreet, Economy.com, McKinsey analysis
Retain Create
Attract
Employment loss
Employment gain
Retaining and growing Twin Cities-based establishments is a significant opportunity
Key questions
Should we focus on retention of jobs given that it has the largest base of growth?
Which focus – retain, create, attract – would provide the greatest return on investment?
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Small employers account for approximately 76% of job growth
SOURCE: US Census Statistics of US Businesses, McKinsey analysis
Total employment in Minnesota ,Employment growth by enterprise size1
Percent, 2003-2006
0
Large
Medium
Small
Percent of Employment Growth2
24
76
Percent of Employment
49
34
17
Small (1-20 employees)Medium (21-499 employees)Large (500+ employees)
Percent of employment growth, USPercent, 2003-2006
77
21
2
Key questions
Should we develop strategies specific to company size?
Where do we get the greatest return on our investment?
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Twin Cities Job Creation by Sector (2002 – 2007)Percent Employment
Growth CAGRTwin Cities
A small group of sectors has driven the majority of job creation
Other
General MerchandiseStores
Professional Services
Administrative Services
Ambulatory Health Care
Social Assistance
Hospitals
Educational Services1
Food/Drinking Places
Job Creation
31.8
4.06.27.27.8
10.3
10.5
11.0
11.1
SOURCE: Bureau of Economic Analysis, Bureau of labor statistics, Moody’s economy.com, McKinsey analysis
Top employment growth sectors
EmploymentGrowth DifferenceMSP-US
2.3
5.81.81.4
6.8
5.0
4.0
1.1
-0.3
+3.0
+3.3
+0.6+3.7-0.2-1.5-0.3
Key questions
Should we focus on growing specific high skill, high productivity sectors?
Should we focus on improving the economic foundation – “a rising tide lifts all boats” ?
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Quality of life
Innovation and start-up
Human capital
Infrastructure
Cost of doing business
Central ED governance
Unified vision
Sector focus
External marketing campaign
Best practice regions employ varying mixes of levers but several emerge as consistent across regions
Key area of focus of economic development effortSecondary area of focus of economic development effort Not an area of focus of economic development effort
Consistent lever across regions
Envir
onm
enta
l le
vers
Pro
cess
levers
Nashville
Austin
Pittsburgh
Raleigh-Durham Ireland Singapore
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The Twin Cities compare well against peers in civic engagement and leisure amenities
1 Rank compiles data on dining, shopping, entertainment, outdoor activities, media, performing arts, and museums
SOURCE: Corporation for National & Community Service; Cities Ranked & Rated; Trust for Public Land
QUALITY OF LIFE
Leisure and entertainment rank, 2007Score based on multiple metrics1
63
82
83
86
91
94
94
95
95
98
Raleigh-DurhamSacramentoColumbusAustin
San Diego
Seattle
Denver
Baltimore
MSP
Chicago
Volunteerism, 2007Percent of pop’n volunteering in past year
Denver
29.834.1
SeattleColumbus
MSP
28.3
38.335.1
28.8
Austin
Chicago
22.1
Sacramento
23.2
San Diego
25.9
Baltimore
27.1
Raleigh-Durham
Libraries, 2007Library volumes per capita
Seattle
3.53.6
ChicagoBaltimore
Columbus
2.6
4.23.8
2.9
MSP
Sacramento
1.7
San Diego
2.2
Raleigh-Durham
2.3
Austin
2.4
Denver
Recreation space, 2007Acres of park per 1,000 residents
MSP
18.134.2
San DiegoRaleigh-Durham
Austin
15.3
37.535.9
16.7
Columbus
Chicago
4.2
Baltimore
7.7
Seattle
10.4Sacramento 11.3
Denver
Arts Community, 2007Arts establishments per 1,000 residents
Seattle
0.720.72
AustinMSP
Denver
0.53
0.920.74
0.62
Chicago
Sacramento
0.42
Columbus, OH
0.48
Baltimore
0.52
San Diego
31
Population over 25 with high school diplomaPercent, 2007
SOURCE: US Census “American Community Survey,” McKinsey analysis
HUMAN CAPITALThe Twin Cities have a highly educated population
85
85
86
86
87
88
88
89
91
93
US Average: 84.5
Chicago
San Diego
Baltimore
Austin
Sacramento
Raleigh-Durham
Denver
Columbus, OH
Seattle
MSP
Advanced Degree AttainmentPercent, 2007
14
Austin
12
Baltimore
19 33
Chicago
32
21
US Advanced Degree Average: 27
20 12
San Diego
33
3825 13
Sacramento
3020 10
Raleigh-Durham
4025 15
Denver
3623 13
Columbus, OH
3221 11
Seattle
3523 12
MSP
3725 12
Bachelors
Graduate or Professional
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Average commute time by car, truck, or van aloneMinutes, 2007
SOURCE: US Census Bureau, American Community Survey
INFRASTRUCTURE
Twin Cities residents have reasonable commute times relative to peers
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27
27
25
25
25
25
24
24
15
US Average 25
ChicagoBaltimore
Seattle
Denver
San Diego
Raleigh-Durham
Sacramento
MSP
Columbus, OH
Austin
Average commute time by public transportMinutes, 2007
50
47
46
45
49
34
43
38
36
19
US Average 48
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Venture capital investments
The Twin Cities’ VC market is less robust than its peers
Average annual investment, 2004-2007$ per capita
SOURCE: Capital IQ
INNOVATION
154.1
75.1
23.2
17.5
651.5
541.2
447.1
401.3
264.9
235.4
Denver
San Diego
Austin
Seattle
Raleigh
Baltimore
Sacramento
Columbus
Chicago
MSP
Total venture capital deals
Total, 2004- 2007Number of deals
98
32
55
16
114
114
343
200
349
247Denver
San Diego
Austin
Seattle
Raleigh
Baltimore
Sacramento
Columbus
Chicago
MSP
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Entrepreneurial activity1, 2007Number of entrepreneurs per 100,000 people
22
Minnesota has competitive levels of entrepreneurial activity
SOURCE: Kauffman Foundation Index of Entrepreneurial Activity
26
43
40
19
47
1 Using Census Current Population Survey data, the study tracks the change in the number of non-business owners who become business owners month-to-month
20
10
17
State rank1=highest
INNOVATION
195
217
241
295
312
319
321
338
396
North Carolina
Colorado
California
US Average = 300
Ohio
Washington
Illinois
Texas
Minnesota
Maryland
Entrepreneurship Growth, 2002-2007CAGR
-2.50
-0.20
-2.90
-3.10
-2.50
-3.90
-0.20
-0.80
1.30