Metropolitan Business Planning Initiative

1. CONFIDENTIAL – for Internal Team & Partner Discussion ONLY Metropolitan Business Planning Initiative Seattle Kick-Off Meeting February 10, 2010

2. Project Goals

3. Project Goals IMPLEMENT THE BLUEPRINT:go deeper to model specific, sophisticated development work, develop actionable plans, strengthen partner metro economies and enhance peer learning. ADVOCATE NEW FEDERALISM:identify and reveal the benefits of new partnership approaches and policies that place metros at the center of federal-state-local relations. DISPLAY THE NEW METROPOLITAN LEADERSHIP:demonstrate the existence of strong metropolitan leadership in forging comprehensive, integrated, and sophisticated metropolitan economic strategies. Economic development is metro-led.

4. Why “Metropolitan Business Planning”? The steps to analyzing and improving a regional economy lend themselves to the proven discipline of business planning.

5. Elements of the Business Plan MISSION/VISION Competitiveness (Wages, GRP, Innovation) Sustainability (VMT, Energy Efficiency) Inclusion (Participation in Employment, Business and Market Growth) MEASURABLE OUTPUTS/IMPACTS Wage Growth, Reduction in Unemployment, Reduction in CO2 Emissions, Neighborhood Revitalization MARKET SCAN Status, Systems, Dynamics (Spatial efficiency, Human capital trends matched to business growth, Business clusters/performance….) • INSTITUTIONAL AND FINANCIAL IMPLICATIONS • Regional Information Infrastructure • Regional Coordination • Specific Institutions/Implementation Capacity • Financials  Investment “Prospectus” Tied to Outcome Measures GOALS/STRATEGIES Transit-Oriented Development Coordinated Workforce and Occupational Clusters Inner-City Retail Development PRODUCTS AND INTERVENTIONS WIRED Program, Regional Inclusionary Zoning, Green Impact Zones,

6. Example: From Goals to Products GOAL: Increase innovation rate MARKET SCAN: Patents, technology transfers, venture capital investments, start-ups, ... PRODUCTS/INTERVENTIONS: Innovation funds, business incubators, university partnerships, regional innovation consortia, etc. ILLUSTRATIVE STRATEGY: Increase commercialization of knowledge OUTPUTS/IMPACTS: New products, business starts, increased productivity, employment; …

7. Implications for Federal Policy • The federal government should strategically invest in regional prosperity as a priority for national economic growth. • The federal government should incent and support comprehensive, integrated regional business planning, as it will enable more effective and efficient federal investment. • Since regional performance depends upon local, specialized system interactions, the federal response needs to be cross-program, flexible and performance-driven. Federal policy should be driven ground-up by regional development plans (reversing the current dynamic).

8. Project Outputs • MBP, including Overview and DDI • Prospectus • Cross-site policy implications paper • Summit presentations Demonstrate better ways to invest in metros to strengthen national economy; develop new federal policies and programs.

9. PROSPERITY Sustainable Growth ProductiveGrowth InclusiveGrowth GOOD METROPOLITAN GOVERNANCE INNOVATION HUMAN CAPITAL INFRASTRUCTURE QUALITY PLACES Our Starting Point: the Blueprint Drivers To implement, we need to move from descriptive to explanatory: understand underlying systems/mechanisms, and how to influence their performance.

10. What Drives Inclusive and SustainableEconomic Growth? Local (Regional) Enabling Environment (Government regulation, tax and public goods, including particularly infrastructure and education; civic institutions; qualities of place, including the natural environment; etc.) Key Systems (Market processes – housing, labor, etc.; production dynamics – clusters, value chains, etc.; innovation dynamics - knowledge creation, networks, commercialization, etc.) Inputs to Production (Human capital; real estate; capital; natural and knowledge resources; etc.) Economic Outputs (Businesses – gross regional product, profits; households – wages, other income, etc.) Macro/Global Context & Trends

11. Prosperity Export-oriented Low-carbon Innovation-driven Opportunity rich Metro-led Fundamental Drivers of Prosperity Innovation Infrastructure Human Capital Quality Places Governance Levers / Interventions Increase SpatialEfficiency EnhanceRegionalConcentrations Developand DeployInformationResources DeployHuman CapitalAligned withJob Pools DevelopInnovation-EnablingInfrastructure Create EffectivePublic & CivicCulture & Institutions Strategies & Implementation

12. Pilot MBPs Will Lay the Groundwork Metropolitan Investment Prospectus

13. What Might a Pilot MBP Look Like? Metropolitan Investment Prospectus

14. MBP Project Timeline is Aggressive * M = Meeting | D = Deliverable

15. CONFIDENTIAL – for Internal Team & Partner Discussion ONLY Metropolitan Business Planning Initiative Seattle Kick-Off Meeting February 10, 2010

16. Micro-Foundations How Metro Economies Grow • Metro economy = total value of goods and services produced in the region • Growth is inherently business sector growth (number, size and profitability of firms) • Business sector grows through firm growth and location decisions (retention and attraction) • Firm growth and location depend upon increases in efficiency and productivity (of firm and system, including product innovation) Core Question: What attributes of the region increase efficiency and productivity, leading to business sector growth?

17. What is it About Place that Affects Economic Performance? “Cities exist to eliminate transport costs for people, goods and ideas” (Glaeser) • Urbanization and Localization Economies: general and industry-specific benefits of concentration as workers and firms co-locate because of spillovers, synergies, shared labor and job pools, backward and forward linkages among firms, etc. – generating increased efficiency and productivity through flow of ideas and technologies, enhancements to human capital, economies of scale, reduced transaction and transport costs, and so forth. (Marshall, Krugman) • New Growth Theory: location is becoming more important, and with different benefits, in the knowledge economy, as metros become increasingly centers of idea creation and transmission (through technology, human capital externalities, intellectual spillovers). Increasing returns to knowledge and imperfect competition lead to metro specialization and divergence. (Romer, Lucas) • Institutional Economics: growth, and particularly innovation, take place in the context of an institutional infrastructure – research, professional and learning networks; universities and civic/business organizations; quasi- and governmental organizations and regulation – which can hamper or accelerate all of the other benefits of concentration. (Coase, Atkinson) Productivity and efficiency depend upon concentrations, interactions and synergies between economic activities  Key Q: Where are the leverage points to improve system performance?

18. Six Key Leverage Points Take Us from Theory to Practice • Enhance Regional Concentrations (and their performance): Industries, Occupations and Functions • Deploy High Human Capital Aligned with Job Pools • Develop Innovation Enabling Infrastructure • Increase Spatial Efficiency • Create Effective Public & Civic Culture & Institutions • Develop and Deploy Information Resources These overlap, and themselves interact. This is work-in-process! Anticipate expanding and refining, especially in practice.

19. Leverage Point 1 Enhance Regional Concentrations: Industries, Occupations and Functions • What is it? This leverage point has to do with “clustering,” recognizing that what is clustering may be shifting -- toward occupations and functions -- and the whole notion may need to be broadened, brought to ground, and complemented with other production-side strategies. It focuses on the optimal interaction between production components of an economy – the optimal mix and scale of industries, occupations, functions; multiple specializations; etc. Cultivating benefits of concentration requires understanding nuances of what and how specific types of concentrations create efficiencies and enhance productivity in your region. • Aspects to consider include: • Current concentrations • High-growth potential areas • Geography of concentrations • Optimal mix and scale of industries, occupations, functions • What factors (locational, institutional, others) contribute to efficiency/productivity benefits gained from concentration • Strategies might include: • Provide co-location opportunities (e.g., business parks) • Offer co-location incentives • Enhance access to capital for targeted concentrations • Strengthen institutional and network infrastructure • Strengthen “inputs” to concentration – from training/education to venture capital

20. Leverage Point 2 Deploy High Human Capital Alignedwith Job Pools • What is it? This leverage point addresses human capital in the context of economic performance: the goal is not just human capital, but linked, mutually reinforcing, human capital and job pools. Pools of workers and jobs/firms attract each other. Not just quality, but deployment, are key to productivity and efficiency gains. Entails a two-fold, iterative process: • Growing supply of skilled workers to meet employer demands • Growing demand for skilled workers by cultivating appropriate jobs • Aspects to consider include: • Concentrations and growth prospects (both skills and occupations) • Existing skills/education levels – obstacles and opportunities • Quality of education/training system • Attraction/retention record and factors • Strategies might include: • Increase demand-side focus of workforce development • Increase access, reduce transaction costs in labor market • Links to occupational concentration strategies (Leverage Point 1) • Production, attraction, retention strategies

21. Leverage Point 3 Develop Innovation Enabling Infrastructure • What is it?* Innovation inherently drives increasing productivity and efficiency, and is the source of all long-term growth.An infrastructure providing inputs and mechanisms to facilitate interactions and commercialization enhances innovation rates. • Aspects to consider include: • Cluster formation and dynamics • Public sector enablers/constraints • Nature of supporting institutions and networks • Flow of R&D and early-stage business funding • Rate/pattern of commercialization • Firm starts, growth, trajectories • Strategies might include: • Build regional R&D capacity (education, facilities, funding) • Foster entrepreneurship & commercialization of knowledge • Institutional development: facilitate opportunities for interdisciplinary cross-fertilization • Cluster formation, especially high human capital occupational concentrations(Leverage Points 1 and 2) *“…new products, new services, new technologies, new ways of organizing work, and new business models….” (Brookings Metro Policy)

22. Leverage Point 4 Increase Spatial Efficiency • What is it? The location of firms and workers, producers, suppliers and consumers within the region determines transportation costs for people and businesses, and influences agglomeration benefits (such as shared inputs and knowledge spillovers). Generally, to increase efficiency and productivity of the metro economy, we want to: • Minimize transportation costs • Reduce congestion • Maximize agglomeration benefits • Avoid segregation and concentration of poverty • Aspects to consider include: • Public policies re: land use/zoning, infrastructure, etc. • Degree of housing-jobs mismatch • Access to transit • Spatial concentrations of firms, occupations, functions, etc. • Strategies might include: • Transit-oriented and mixed-use/mixed-income development • Affordable housing programs (inclusionary zoning, etc.) • Fostering business co-location

23. Leverage Point 5 Create Effective Public & Civic Culture & Institutions • What is it? Government and civic sector activities hinder or enhance the productivity and efficiency of the economic systems themselves – attracting entrepreneurs, enabling markets, lowering transaction costs, increasing deployment of assets, etc. A culture of trust and collaboration, as well as institutional flexibility and adaptability, are increasingly important (including particularly to leverage points 1 and 3). • Aspects to consider include: • Degree of horizontal and vertical fragmentation • Areas and mechanisms for inter-jurisdictional coordination • Transparency, openness, responsiveness • Strategic engagement of citizens, private and civic sectors • Strategies might include: • Consolidation • Revenue sharing • Civic engagement (program specific) • E-government • Fast-tracking • Special purpose entities • Tailored incentives

24. Leverage Point 6 Develop and Deploy Information Resources • What is it? Rich information resources and networks increase market efficiencies by reducing finding, measurement and other transaction costs; facilitate knowledge spillovers and innovation; and enable continued business planning, monitoring and refinement. • Aspects to consider include: • Collection, accessibility, dissemination of relevant info • Development and provision of analytic tools (not just data: answers) • Specific market inefficiencies, barriers, opportunities • Strategies might include: • Data warehouse • Market driven planning agency • Cluster or strategy specific on-going shared info/analytics

25. Current Economy’s Meta-Drivers AlsoShape Strategic Interventions • Export-oriented • Innovation-led • Opportunity-rich • Low-carbon Huh??? What?!! Eureka!