TIP Strategies is a privately held Austin-based economic development consulting firm committed to providing quality solutions for public and private‑sector clients.
This blog is dedicated to exploring new data and trends in economic development.
By William Fulton
Gov. Rick Perry often touts Texas’ economic success, which he attributes to lower taxes and fewer regulations than cash-strapped California. But if Texas is so compelling, why did Perry go to California looking for new companies?
Not long ago Gov. Rick Perry came poaching on my turf. Well, not mine, exactly, but close: He came to Oxnard, Calif., the town next door to the one I’ve lived in for 25 years, in hopes of luring one of our best local employers off to Texas.
I’m not sure how Perry targeted Haas Automation, one of the nation’s leading manufacturers of precision machining equipment. Admittedly, he wasn’t trying to lure the whole company; he just wanted to attract future expansion. Still, it was a rather brazen move. Although Haas and its Oxnard-based founder have had a lot of ups and downs over the years, the company remains large, successful and very civic-minded. Haas pays well and is one of the most philanthropic companies in Ventura County.
Predictably, California Gov. Jerry Brown reacted with hostility. So did many local residents, who staged demonstrations in support of Haas outside the company’s main plant. It remains to be seen whether Perry will lure all or part of Haas to Texas. But the incident brought the contrast between two of our largest states by GDP into stark relief. Is there really a “Texas miracle” California can learn from? And if Texas is so compelling, why did Perry have to come to California with a fishing rod looking for new companies?
Over the past five or so years, as California’s struggled to remain solvent and create jobs, Texas has been justifiably proud of its job creation record. In a sluggish economy, Texas has created more jobs than anybody else, and Perry has been more than willing to take credit for it by citing Texas’ low taxes and light regulatory touch, especially in comparison to California. Meanwhile, I’ve attended innumerable meetings in Los Angeles where economic development types have wrung their hands over California’s troubles, wishing out loud that the state could return to a golden era when taxes were low, regulation was light, the government was small and jobs were plentiful.
Yet there’s also the question of what kind of economy you want to create. Texas’ job creation machine has performed amazingly well. But it’s been criticized for creating low-paying jobs. And Texas’ most successful job creation machine, Austin, is the most California-like city in the state, a place that embraces California creativity and weirdness so enthusiastically that the rest of the state routinely rejects it as being profoundly un-Texan.
California hasn’t been anybody’s model of economic development lately. Though the population is still growing, the state has been shedding middle-class jobs and middle-class families for two decades. Most of the jobs created in the state are also low paying; and, of course, California’s own state government wallowed in insolvency for a decade until voters approved Brown’s tax increase last fall, which has finally balanced the budget. Through it all, California has managed to maintain a big lead in certain high-growth, high-performing sectors, principally technology and entertainment.
In other words, Texas isn’t doing as well as you might think and California isn’t doing as badly as you might think. As our national politics devolve ever more deeply into a war between red and blue states, it’s important to understand the difference between red-blue political rhetoric and the on-the-ground reality of economic development.
Red-state politicians like Perry often claim that low taxes and light regulation are key to their economic success. In fact, however, their economic development experts know this isn’t the whole story. Red-state economic development has been successful in large part because leaders have figured out how to combine the low-tax/low-regulation environment with financial incentives, the power of research institutions and the construction of critical infrastructure. Even if Texas had no taxes or regulation, Austin wouldn’t be a high-tech powerhouse if it weren’t for significant state investments in the University of Texas.
Meanwhile, blue-state politicians often seem to believe that the tax and regulatory environment doesn’t matter at all, which isn’t exactly true, either. States like California can hang on to the desirable high-value-added parts of the economy — e.g., Google and Facebook — through a combination of quality of life and a dense concentration of entrepreneurship, venture capital and a highly skilled labor pool. But they can’t hang on to the middle class without sensible tax and regulatory policies. The current battle in California over the cost of public-sector pensions is a good example of how blue-state politics often divides working- and middle-class folks who have it good (public-sector employees in this case) and those who don’t (private-sector folks who are leaving the state).
There’s a certain short-term logic to Perry’s visit to Oxnard. California companies like Haas must expand, and that’s hard to do locally for various reasons. But just because California is down doesn’t mean it’s out. U.S. history is filled with examples of regional economies that looked dead when traditional industries left — Boston, New York, Pittsburgh, Seattle — but turned things around in a generation. California may have made the mistake of “sitting on a lead” economically for too long. But Texas shouldn’t make the same mistake, either. In economic development, smugness is your biggest enemy.
By Kathleen Baireuther
TIP recently completed a Talent Report Card for the Maury County (TN) Chamber and Economic Alliance. The project consisted of (1) developing a set of indicators to track talent as it relates to economic vitality, (2) identifying benchmark counties, and (3) comparing the benchmark counties to Maury County across these metrics. The Talent Indicators Snapshot (below) highlights some of the key findings from this analysis.
Our methodology around indicator identification, benchmark selection, and qualitative analysis is summarized here. Our approach to the Talent Report Card reflects our holistic perspective on talent development, retention, and attraction and illustrates how a range of data sets can be analyzed and displayed to tell a compelling story about a community.
The Maury County Alliance initiated this project to gain a better understanding of the factors and trends shaping the population of young professionals in the community. As it is used in this context, talent refers to the population between the ages of 20-39 who have attained a Bachelor’s degree or higher.
This group is not necessarily more “talented” than other demographic cohorts, but it is important to a region’s economic vitality for a number of reasons. From the ages of 20-39, individuals pursue education, begin and develop a career, and, in many cases, start a family and anchor themselves in a community. A higher degree of mobility is also associated with this phase in life. This increased mobility can expose some communities to the risk of losing local talent to other, often larger, cities.
The share of residents ages 20-39 is also critical to maintaining a sustainable economy because it replenishes the workforce as older workers retire. Communities that have trouble retaining and/or attracting young, educated individuals may be at an economic disadvantage over the next twenty years as the Baby Boomers retire and a robust labor pool continues to shape business location and expansion decisions.
Economic vitality measures are also included in this analysis because the overall health of the economy strongly influences how attractive a community is to talent, as well as the breadth and depth of the professional opportunities available in the area. Quality of place describes how attractive a community appears from outside the community. Like economic vitality, quality of place also drives relocation decisions among young, educated professionals and should be considered in tandem with economic and demographic characteristics.
For our Maury County work, a set of nine benchmark counties were identified based on total population, share of population ages 20-39, the presence of higher education, and geography (proximity to a metropolitan or micropolitan area). An in-depth analysis of how the counties compared to one another across each of the talent indicators was also provided to the client as part of the Talent Report Card. The resulting document highlighted Maury County’s relative strengths and opportunities for improvement.
Qualitative Benchmarking: Assets & Amenities
The presence of certain amenities is also relevant in a discussion of what draws people to a community. To capture the “softer side” of talent development, attraction, and retention, TIP also performed a thorough qualitative benchmarking analysis around key amenities and assets in each benchmark county.
Findings from this research were catalogued in an Excel spreadsheet that itemizes over 200 assets and amenities related to talent retention and attraction. The results are summarized in Fig. 15 (below) and presented in an interactive online map, here.
Each asset on the map is labeled (mouse over) and includes a hyperlink to additional information. The interactive map denotes assets by category (identified by the icons above) for all ten counties included in the benchmarking exercise. Different categories of assets can be viewed by selecting them in the bottom right corner of the map. This format allows for a comprehensive scan of a wide range of characteristics that communities leverage to market themselves to young professionals and prospective employers. The geographic clustering of assets is also evident in this format.
This scan illustrates that Maury County possesses many of the key ingredients often associated with successful talent retention and attraction efforts. Enhancing and promoting these assets and amenities will further support local efforts around engaging young talent in the community.
By: Stan Alcorn
Via: Fast Company
Using a site that tracks dollar bills, a theoretical physicist noticed that our state boundaries are rather arbitrary, but that money tends to stay within new, more realistic boundaries.
To theoretical physicist Dirk Brockmann, the borders of the United States are out of date.
“Some are kind of arbitrary like New Mexico, Arizona: They’re just kind of drawn on the map,” says Brockmann. “Often, they no longer correlate with our behavior.”
Specifically, they no longer correlate with how we move.
Brockmann was doing research on human mobility in 2005, and struggling to find useful sources of data, when on the way back from a conference in Canada, he stopped by the home of his old friend Dennis Derryberry in the green mountains of Vermont. Over a beer on the porch, he told Derryberry about his research. Derryberry asked: “Do you know about WheresGeorge.com?”
You can think of WheresGeorge.com as a primitive FourSquare for $1 bills. “Georgers”–as users call themselves–”check in” their bills by entering the zip codes and serial numbers, then write or stamp “wheresgeorge.com” on the bill. If someone finds the bill and enters it again, they get a “hit.” The top Georger–an ammunition dealer who goes by the handle Wattsburg Gary–has entered more than 2 million bills and has nearly half a million hits.
This was, according to Brockmann’s account, the beginning of “Where’s George?” research: “Forming a mental image of millions of these dollar bill journeys in my head, I was convinced that analyzing this data would reveal essential properties of human mobility, the driving force behind the dispersal of bank notes.”
Brockmann has, in fact, used the dollar bill data to reveal certain “essential properties” (specifically, that our travels follow a Power Law), and also to model the Swine Flu epidemic. But one of his coolest research projects is his work on “effective boundaries.”
Brockmann took data for how the dollar bills traveled, and used network theory to draw lines where dollar bills are less likely to cross. In places they follow state borders, but not always; Missouri is divided into East and West, as is Pennsylvania. The “Chicago catchment area” includes a big chunk of both Indiana and Wisconsin.
The resulting map shows how “effective communities” don’t necessarily follow state lines. “I don’t know so much about the culture of the U.S.,” says Brockmann, who grew up in Germany. “But when I give talks on this, normally someone in the audience says, ‘Oh, this makes perfect sense.”
By: Catherine Rampell
Via: The New York Times
SACRAMENTO — After six years of waiting on the sidelines, newly eager home buyers across the country are discovering that there are not enough houses for sale to accommodate the recent flush of demand.
“In my 27 years I’ve never seen inventories this low,” said Kurt K. Colgan, a broker with Lyon Real Estate in the Sacramento metropolitan area, where the share of homes on the market has plummeted by one of the largest amounts in the nation. “I’ve also never seen a market turn so quickly.”
The housing turnaround seems to have caught almost everyone in the business by surprise. As desirable as the long-awaited improvement may be, the unusually low level of homes for sale is creating widespread problems for buyers and sellers alike, leading to bidding wars and bubblelike price jumps in places that not long ago were suffering from major declines. In the Sacramento area, where the housing bust took an especially heavy toll, the median sales price has surged 15 percent over the last year, according to Zillow.
Nationwide, sales prices rose 7.3 percent over the course of 2012, according to the Standard & Poor’s Case-Shiller index, ranging from a slight decline in New York to a surge of 23 percent in Phoenix. Tracking more closely with the national trend were cities like Dallas, up 6.5 percent; Tampa, which rose 7.2 percent; and Denver, which gained 8.5 percent.
In many areas, builders are scrambling to ramp up production but face delays because of the difficulty of finding construction workers and in obtaining permits from suddenly overwhelmed local authorities. At the same time, homeowners — many of them lifted above water for the first time in years — often remain reluctant to sell, either because they want to wait and see how much further prices will climb or because they are afraid of being displaced in the sudden buying frenzy.
“You see a home go for sale and within a couple days there are three, four, six offers,” said Carrie Miskawi, a mother of three young children who has been looking for a new home for the last six months with Mr. Colgan’s help. She and her husband have decided not to put their current home on the market because they fear it will be snatched up before they have a chance to bid successfully on a new one.
“It’s kind of a Catch-22,” Mr. Colgan said. As long as large numbers of people are hesitant to put their own homes on the market because so few other homes are available, he said, there won’t be many homes available.
Across the country, the raw number of homes for sale is at its lowest level since 1999, according to the National Association of Realtors. In the Sacramento metro area, home listings were down 60 percent in January from a year earlier, compared with 23 percent for the country over all, according to Zillow.
Inventories have been whittled down largely because new construction ground to a standstill for several years. Investors large and small have also scooped up most of the backlog of foreclosures and short sales; about 40 percent of all homes bought in Sacramento County over the last year were purchased by owners who currently live at a different address, according to county records and title data provided by the Fidelity National Title Insurance Company.
But steady job growth has put more people back to work, and families that put off moving because they couldn’t afford it are finally ready to do so. “Distressed” sales are down and conventional sales are up.
Extraordinarily low mortgage rates don’t hurt, either.
“The recovery is real,” said John Burns, chief executive of John Burns Real Estate Consulting. “But the pace of the recovery has an artificial component to it.”
Some real estate agents in Sacramento, like Tom Phillips, have resorted to knocking on doors in desirable neighborhoods to see if the owners might, if asked nicely and promised a healthy gain, sell to one of his clients. One couple he represents, Darcey and Jason Schmelzer, just moved into a yearlong rental with their two boys because they sold before they could find a new place. They received four offers on the first day they put their home on the market, with the winning bid about $10,000 above asking price.
For the builders who survived the collapse, the tight market is a signal to get back to work.
Monthly permits for single-family homes in the Sacramento area more than doubled from January 2012 to January 2013, though they are still only a quarter of the level they reached during the bubble. Nationally, the construction industry added 48,000 jobs in February, the biggest increase since 2007.
The housing upturn looks set to continue, finally adding a crucial element of support to the slowly improving economy. The government reported Tuesday that housing permits, while far below their peak, surged in February to their highest level since June 2008, an increase of nearly 34 percent from a year earlier. But it will still be many months before new homes now going through the approval process will be ready to move in.
The New Home Company has ramped up building as fast as it can, said Kevin S. Carson, the president of the company’s Northern California division. Founded in 2009 by the veterans of a major home builder that filed for bankruptcy during the crisis, the company plans to build 120 homes in Northern California this year, in contrast to 50 homes last year.
Construction is expected to take longer than usual, though, and expenses are rising, Mr. Carson said. That is primarily because after six years of almost no local building, skilled labor is scarce.
Many workers in the immigrant-heavy industry have left the area, returning to Mexico and other points south. Others pursued work in Texas’s energy boom, where both drilling and construction jobs have become more plentiful. Those who stayed in the local area often switched to medical data entry, U.P.S. delivery services, or anything else that they could find. Or they filed for disability and dropped out the labor force altogether.
Some, like the 38-year-old electrician Gideon Jacks, are gingerly returning to construction work after taking a hiatus (in Mr. Jacks’s case, the hiatus was in several low-paying jobs at restaurants), but others remain reluctant to return to the hard physical labor and unstable job prospects.
“They say, ‘That’s the last time I’m riding that roller coaster,’ ” said Rick Wylie, president of the Beutler Corporation, a Sacramento air-conditioning and plumbing company. In 2005 he employed 2,100 workers, but by 2009 Beutler had only 270 employees. Mr. Wylie, who currently employs about 550, is now having trouble luring back many workers he let go.
“I don’t mean to complain,” he said. “This is a good problem to have, a world-class problem, to not be able to find workers to do all the work you’re getting.”
The shortages aren’t limited to the workers toiling in the hot sun, either.
“You walk into the permit office, and it’s like a ghost town in there,” said Michael Haemmig, president of Haemmig Construction in Nevada City, Calif., about an hour north of Sacramento. He says local governments were caught off-guard by the suddenly renewed interest in building and do not have enough people in place to handle the paperwork.
“This being California, we have more regulations and permits than ever, and it takes more time to get each permit approved,” he said.
For builders still hesitant to dive into the market too deeply, such delays may actually be welcome, since they help buy more time for prices to rise further.
“If we could build 500 houses right now, could we sell them?” asked Harry Elliott III, president of Elliott Homes, a century-old company that built 250 homes last year and plans 350 this year, compared with a high of 1,400 in 2006. “Possibly, but I don’t want to sell all my lots that I’ve held on to forever and have to give them away at these prices.”
“We lost money for a lot of years, and I’d like to make some money for a change,” he added. “I’m not building because I need the practice.”
Via: The Economist
The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies. For those who take their fast food more seriously, [The Economist has] also calculated a gourmet version of the index.
CLICK IMAGE BELOW FOR INTERACTIVE VERSION
This adjusted index addresses the criticism that you would expect average burger prices to be cheaper in poor countries than in rich ones because labour costs are lower. PPP signals where exchange rates should be heading in the long run, as a country like China gets richer, but it says little about today’s equilibrium rate. The relationship between prices and GDP per person may be a better guide to the current fair value of a currency. The adjusted index uses the “line of best fit” between Big Mac prices and GDP per person for 48 countries (plus the euro area). The difference between the price predicted by the red line for each country, given its income per person, and its actual price gives a supersized measure of currency under- and over-valuation.
By: Ted Volmuth
The sole purpose for the Phoenix Chamber of Commerce (www.phoenixchamber.com) to exist is to develop programs to help businesses, most of them small businesses, become more successful and give back benefits to their communities. In that vein, the Chamber just announced another partnership that should help it further its goals and move members into higher levels.
The Chamber has enlisted TIP Strategies, Inc. and Convergent Nonprofit Solutions to help it develop a long range economic development strategic plan. Both organizations have a proven track record of designing successful strategies for regional economic development organizations nationwide.
“The team will be looking at how the Chamber can maximize its strengths and add foundational value to the economic development landscape of greater Phoenix, positioning the Chamber’s efforts as a community and stakeholder asset, increasing community engagement in an actionable plan,” stated Chamber president and CEO Todd Sanders.
“We are confident the expertise of the combined TIP and Convergent teams will result in a practical, action oriented plan that identifies a clear vision for how the Chamber can contribute to the economic vitality of the greater Phoenix region,” said Jon Roberts of Austin, Texas based TIP.
According to the Chamber news release, TIP will draw on the firm’s recent experiences working in such large metro areas as Las Vegas, Oklahoma City and Seattle. The consulting team has been charged with coming up with recommendations to further the unique economic opportunities that distinguish the greater Phoenix area from other parts of the country.