THIS JUST IN

The Wall Street Journal: New Gold Rush- Data Centers March 9, 2010

2010-03-09T20:13:50Z

A new trend has emerged among rural communities: luring electronic data facilities.

Today’s The Wall Street Journal reports that the Northwest’s climate (low humidity and cool nights) and attractive tax incentives make the area ideal for operating large data centers.

Prineville, OR is the latest community to win a facility. Facebook promised to spend $175 million to build a 145,000-square-foot-data-storage farm in the area. For a county that has been hit hard by the recession, the investment provides a much needed boost to its economy.

Other Northwest communities that have successfully recruited data centers include Quincy, WA; Boardman; OR; and Dalles, OR.

Andy Levine

President/Chief Creative Officer

Where Clouds Displace Forests

Oregon Town Is Latest in Northwest to Leverage Cheap Electric Power to Lure Data Farm

By Joel Millman

March 9, 2010

PRINEVILLE, ORE.—The rumble of backhoes and bulldozers on the outskirts of this city of 10,000 is sweet music to a municipality that has lost hundreds of blue- and white-collar jobs in the recession. With a combination of cheap power and favorable climate, Prineville is joining the region's new gold rush: housing electronic data.

Facebook, Inc. has promised to spend $175 million over the next three years to build a 145,000-square-foot data-storage farm. The Palo Alto, CA.-based company conducted a lengthy, mostly secret, site search for its facility, selecting Prineville over such competitors as Ontario, Ore., on the state's border with Idaho, and Moses Lake, a farming town in Washington state popular with retirees.

These banks of computers store every bit of electronic flotsam—from wedding photos to music to instant messages—for millions of members uplink each day. The data centers consume huge amounts of electricity, which has made the Pacific Northwest, with its abundant supplies of hydropower, a favored destination.

Prineville prevailed over its rivals thanks to its generous package of tax breaks, plus proximity to trendy Bend, Ore., whose ski slopes and upscale resorts and restaurants were an added bonus.

"It was a combination of things: Low cost land, high voltage power lines nearby," says Steve Forrester, Prineville's city manager. "The critical thing was our climate: low humidity and cool nights."

Facebook says it intends to use evaporative cooling technology to keep banks of humming computers from overheating, obviating the need to construct the costly water-cooling towers its uses at the data centers it's leasing in Virginia and the Bay Area.

With unemployment nearing 20% here, Prineville was reeling last year when the town's best-known employer, the retailer Les Schwab Tire Centers, decided to move 300 management jobs to Bend. The recent housing slump has also hurt Prineville's traditional lumber products manufacturers.

Even before the downturn, few timber states have been impacted as severely as was Oregon, which largely depends on extraction from federal lands, whose regulations to protect endangered wildlife habitat restrict logging.

Five sawmills closed in Prineville between the early 1980s and 2002, cutting hundreds of jobs and depriving the local economy of any ripple effect from a housing boom that lifted other logging centers in the past decade.

At the same time, expectations that Prineville could become a bedroom community for pricier Bend, Ore, led to overbuilding in some new housing developments where today between 2000 and 2,500 homes remain unsold.

As a result, Prineville was staring at a future all too common in these parts: the rapid abandonment of a once thriving rural community. Driving east and south from Prineville, residents here pass dozens of near ghost towns, places marked by abandoned gas stations and boarded-up downtowns, where school children commute long hours each day to consolidated "regional" campuses, and hospitals no longer offer obstetrics or pediatrics.

"We bottomed out," says Steve Uffelman, a city councilman, who explains the city has tried to recruit a prison, a trade school, "even a Nascar track" to increase employment. A youth detention center built by the state that would have created up to 70 permanent jobs ended up abandoned, and is used now by the National Guard for occasional training exercises.

Bringing in Facebook gives Prineville a chance to catch a wave that has lifted other small towns in the region. Quincy, WA, with a population of 5,000, lured Intuit to build a 240,000-square-foot data center, not far from similar operations run by Yahoo and Microsoft. Boardman and The Dalles, two cities that hug Interstate 84 along Oregon's border with Washington, have welcomed Amazon and Google, respectively.

Like those cities, Prineville had to offer generous property tax incentives, in this case on 124 acres of land Facebook acquired for some $3 million last year. Facebook will be taxed for the next 15 years only at the current assessed value of the unimproved parcel, around $25,000 a year, with the county foregoing as much as $3 million annually on the value of any new structures on the property.

In exchange, Prineville will receive an annual $110,000 "community fee" from Facebook, and stands to reap $50,000 in user fees for every $1 million worth of power Facebook buys from local provider, Pacific Power Inc.

Prineville officials say the real value to the city is permanent jobs—35 engineering, maintenance and information technology positions the city calculates will have a combined annual payroll of $1.75 million. Prineville is also counting on contractors flocking to the region to service Facebook's installation, providing air conditioning and ventilation maintenance, security, landscaping and janitorial services.

For now the up-tick is coming from construction jobs—around 150 just in the clearing and leveling of the land. Several nearby homes have been sold in recent weeks to contractors expecting to be here for the long haul.

Steve Forrester, Prineville's city manager, has already seen the impact on at least one local retailer—the Subway sandwich franchise he and his wife operate near City Hall. Lunch sales are up 5% over last year, he says "that's 75 to 100 more sandwiches a week."

The New York Times: A Nation 400 Million Strong March 1, 2010

2010-03-01T17:32:49Z

If you attended the IEDC Leadership Summit last month, you may recall urban scholar Joel Kotkin’s keynote speech promoting his new book “The Next Hundred Million: America in 2050.”

The book predicts that as the U.S.’s population passes the 400 million mark, the shift in diversity and demographics will move the country to become “the one truly transcendent superpower in terms of society, technology and culture.”

This past weekend, The New York Times published their review of the book. And while it does challenge some of Kotkin’s predictions, the article does acknowledge that his book will provide fodder for serious public policy debate.

Andrew Levine

President/Chief Creative Officer

Books of The Times

A Nation 400 Million Strong

By Sam Roberts

March 1, 2010

At 7:46 a.m. on Oct. 17, 2006, precisely the moment that the Census Bureau estimated that the American population would reach 300 million, Emanuel Plata was born in a public hospital in Queens. His parents were Mexican immigrants. The doctor who delivered him was from Argentina. One nurse was from Russia, another from India. The anesthesiologist came from Bulgaria. As that benchmark birth demonstrated, in 2006 the United States was a very different country than it had been less than 40 years earlier, when the number of Americans topped 200 million. (The population passed 100 million five decades earlier in 1915.)

In “The Next Hundred Million: America in 2050,” the urban scholar Joel Kotkin, 57, suggests that the diversity that may once have seemed unique to New York and other gateway cities for immigrants will be mirrored all over America, and that the nation’s “demographic vitality” — driven by birthrates higher than in developed but aging European and Asian counterparts and by a continuing influx of immigrants — will make it not only bigger but also better when the population passes 400 million before mid-century.

“The America of 2050 may not stride the world like a hegemonic giant, but it will evolve into the one truly transcendent superpower in terms of society, technology and culture,” Mr. Kotkin gushes. “Its greatest power will be its identification with notions of personal liberty, constitutional protections and universalism.”

Given the viral finger-pointing and hand-wringing over what’s seen as America’s decline these days, Mr. Kotkin’s book provides a timely and welcome — if sometimes Panglossian — antidote. He builds his case for the prevalence of American exceptionalism on the nation’s adaptability, ingenuity, vast land and other resources and religiosity (and also on a less convincing argument that the country has rebounded before).

Those singularly American virtues collectively endow the country with sokojikara — the Japanese scholar Fuji Kamiya’s description of “a reserve power that allows it to overcome both the inadequacies of its leaders and the foibles of its citizens.”

If that remarkable reserve appears to be depleted these days, Mr. Kotkin, a distinguished presidential fellow at Chapman University in Orange, Calif., and a columnist for Forbes magazine, projects a resurgence in the next four decades — if the nation can overcome its ennui. Meanwhile, he asserts, China is aging more rapidly and its population may begin to decline before mid-century, and India remains impoverished and divided.

What will this nonhegemonic transcendent superpower look like? The Internet’s democratization of information will mean more people will work at home. The heartland will be revived as places with “skill surpluses” like Fargo, N.D., and Boise, Idaho, prosper through technology. The nation’s suburbs will become more like preindustrial villages with vibrant town centers and less like bedroom communities catering to commuters. As a result the core of many central cities will shrivel and become anachronisms as the sprawling, multipolar, car-dependent cities of the South and Southwest (which can lure younger families with lower property prices) become cutting-edge cultural incubators.

Some older urban areas, like New York, may survive as “luxury cities,” but Mr. Kotkin perceptively warns that municipal officials who believe they can position their cities only as playgrounds for the rich are doomed to a demographic dead end. He invokes Jane Jacobs: “Cities don’t lure the middle class. They create it.”

“The Next Hundred Million” is presented in easily digestible mini-chapters and provides valuable historical perspective on the nation’s evolution. Mr. Kotkin often couples his conclusions with a welcome human face (but occasionally relies needlessly on quoting other experts when he has already established himself as one). Even if you’re optimistic enough to want to believe his predictions, though, they are largely dependent on demographic trends continuing pretty much as they are or improving. Who knows, for example, whether some unanticipated global crisis will spur immigration or whether it will shrink by Congressional fiat.

Another variable that sometimes seems to be taken for granted as Mr. Kotkin explores the nation’s growing diversity is the impact of race in what he describes as post-ethnic America. Most immigrants from Latin America identify themselves as white, but will the rest of America do so, particularly as non-Hispanic whites become a minority group in 30 years or so? And although the suburbs are becoming much more diverse as he astutely observes, will they be able to predominate, as Mr. Kotkin predicts, if their historic resistance to racial integration endures?

While the book promises to illuminate the path to transcendence, some of the guideposts turn out to be familiar, punctuated by several dimly lighted, dangerous detours and paved with bromides: Invest in public works; make job creation the greatest priority; don’t depend solely on financial services to spur employment; eliminate impediments to upward mobility. Mr. Kotkin also offers a more provocative and less familiar prescription: Don’t succumb to knee-jerk environmentalists; a stagnant or shrinking population would be worse than growth.

“Such antinatalist choices reflect a lack of understanding that depopulation and aging may be an even greater threat to the advanced countries,” he writes.

One advantage to projecting what the world will be like so far ahead — when Emanuel Plata will be 44 years old and, perhaps, living in the suburbs of the Southwest with his family and working from home — is that many of the people who review Mr. Kotkin’s book will be dead by then. But regardless of whether he turns out to be right, his predictions are mostly plausible and are certainly grist for serious public policy debate.

Forbes: Don’t Be an Economic Hypochondriac February 23, 2010

2010-02-23T19:36:51Z

While many believe the U.S.’s economic performance has taken the shape of an “L,” economists Brian S. Wesbury and Robert Stein say recovery will look more like a “V.”

The reasons for their optimism are two-fold: the forecast for real GDP growth has been lifted from 2 to 3 percent, and the cause for worry over the economy keeps changing. Wesbury and Stein go as far to say that we are suffering through “economic hypochondria.”

Could America be exaggerating its economic issues? See below to hear the case for “yes.”

Andrew Levine

President/Chief Creative Officer

Don't Be An Economic Hypochondriac

By Brian S. Wesbury and Robert Stein

February 23, 2010

Over the past year, as we have defended our forecast of a V-shaped recovery and the economy has clearly turned upward, two things have happened. First, slowly and quietly the consensus forecast for economic growth has been lifted--to roughly 3% real GDP growth from an anemic 2%. We expect this to continue as the consensus forecast continues to move toward our forecast of 4% or higher.

Second, the list of worries over the economy keeps evolving. Remember credit card fears? Well, delinquency rates are declining now. What about credit default swaps (CDSs)? Yeah, what about them? As you read this, AIG is writing up the value of these contracts. And who could forget Dubai? Oh, you already did?

But no matter how many of these economy killers disappear into the mist of history, there are more to take their place. A commercial real estate collapse, the "real" unemployment rate, housing foreclosures, ARM resets, deficits, government-created uncertainty, the lack of bank lending, universal health care, cap and trade, looming tax hikes, China, Greece--and don't forget the unwinding of economic intervention by the Fed and Treasury and the petering out of stimulus.

It's almost as if the better the economic data, the more things people worry about.

We don't want to say that all these worries are not important, or misplaced. There are problems and issues, but we do believe they are being overblown. For example, the national office vacancy rate is 17.5%--high--but still lower than it was in the 1990-91 recession and lower than one would expect when the unemployment rate is 9.7%. And now with unemployment declining, vacancy rates should fall as well.

Many people fear a "real" unemployment rate of 16.5% (which includes the official unemployment rate plus marginally attached workers). But this rate is always above the official unemployment rate and moves along with it. In other words it offers no new information. Everyone knows unemployment is high, but recoveries always begin when unemployment is high.

Government deficits are high, and it is true that government activity is creating uncertainty, but this has stirred a political push-back of a kind rarely seen in the U.S. It is very likely that the awakened and renewed political energy showing up these days will finally force Congress to address the issues of its long-term unfunded liabilities and its out-of-control spending. In other words, the worry and fear may finally produce action.

Cities use destination branding to lure tourists- USA Today February 12, 2010

2010-02-12T15:51:53Z

If you’ve recently been a part of a round-table discussion about rethinking your country, region, state or city brand, you’re not alone.

As USA Today notes, "Destination branding… is back in vogue as cities and states pursue image makeovers designed to help them stand out in the weak global economy.”

"The branding bug is definitely on the ascent," notes Ted Levine, chairman of Development Counsellors International.

And if this leads to a resurgence of American travel and global economic stability – that’s a good thing.

Karyl Leigh Barnes

Vice President, Tourism Practice

Cities use destination branding to lure tourists

By Roger Yu

February 12, 2010

Tom Biedenharn's new business cards contain a recruiting message: "Dayton Patented. Originals Wanted."

The cards are a reminder that the city was once a place of innovation and is again serious about recruiting such talent, says Biedenharn, Dayton's public affairs manager.

City employees' business cards are part of a branding campaign designed to revive the city. The tagline was adopted to evoke Dayton's heritage as once having more patents per capita than any other city in the USA and that "the same inventive spark is still present today," Biedenharn says.

"Destination branding," such as Dayton is undertaking, is back in vogue as cities and states pursue image makeovers designed to help them stand out in the weak global economy, attract visitors and even lure people who might relocate. Some are adopting new themes. Others are recalibrating messages to portray themselves as an affordable place to visit.

"The branding bug is definitely on the ascent," says Ted Levine, chairman of Development Counsellors International, which works with cities in promoting tourism and economic development.

North Star Destination Strategies, a Tennessee firm that specializes in c

Among those that have launched rebranding efforts in recent years or are considering new campaigns, according to branding consultants: Fresno; Santa Rosa, Calif.; Providence; the state of Virginia; Beaverton, Ore.; North Port, Fla.; Peekskill, N.Y.; Los Alamos, N.M.; Fairbanks, Alaska; Cleveland; and the state of Florida.

City slogans have been around for decades. But image branding is taking on more urgency as visitors and meeting planners become more discriminating in spending their shrinking budgets. Rust Belt communities hope a refreshed message can help court new business and convince the locals, as much as outsiders, that their best days aren't over.

ity branding, received more requests for proposals in 2009 than ever before, says its CEO, Don McEachern.

City advertising has critics, who say the money is better spent elsewhere. And quantifying a return on investment can be difficult. But effective campaigns in the past have been vital in reinvigorating some destinations, Levine says. Australia emerged from deep down under with its "Shrimp on the Barbie" campaign featuring Paul Hogan. Las Vegas' "What Happens in Vegas, Stays in Vegas" highlighted its unabashed return as a sin city. "I Love New York" and "Virginia is for Lovers" are enduring taglines that still resonate with travelers.

The trend has caught on at the federal level, too. Congress is considering a bill that would create a non-profit company whose primary purpose is to make the USA an attractive destination to foreigners. Geoff Freeman of the U.S. Travel Association says many potential visitors have shunned the U.S. because of stepped-up security after the Sept. 11 terror attacks and the cumbersome process of obtaining entry visas. The new company would be funded through a $10 charge levied on tourists from countries that have a visa-waiver status with the USA. Private companies would match.

But with so many cities claiming to be a unique and fun place to be, most destination campaigns fail, as advertising without substance is inevitably wont to do, Levine says. Cities often neglect to mobilize the community into adopting the spirit of the campaign or fail to target the right audience, he says. "It makes no sense for a small town to market to Australia."

Matching message to audience

Cities are more specific in touting their uniqueness and targeting the demographics more likely to be swayed by their message, says Dan Fenton, chairman of Destination Marketing Association International.

Santa Rosa's previous slogan was "Come Visit," a generic message that wasn't registering with tourists who bypassed it for smaller towns in California's Sonoma County in search of 200 vineyards in the area.

In 2007, city officials spent $80,000 and hired North Star to assess Santa Rosa and learned it was seen as a place of business. Its new tagline, "Place of Plenty," was created to highlight its "agricultural heritage and abundance of food and wine," says Mo McElroy of Santa Rosa Convention & Visitors Bureau.

New logos, websites and brochures — featuring a cornucopia filled with grapes, knives and forks — plug the area's farm-to-table dining with icons representing vineyards, restaurants, shopping and farmers' markets, she says.

It's hard to say whether the new campaign will pay off long term. The number of visitors in Sonoma County remained flat in 2008 with about 7 million. "The economy stopped us short," McElroy say.

It's about stirring locals, too

For cities such as Dayton, Fresno and Cleveland, branding goes beyond tourism. It aims for a new identity that can stir local communities out of economic doldrums. Dayton's $190,000 campaign was as much a symbol of its hoped-for economic transition "from heavy automotive to capturing young creative talent," Biedenharn says.

Its ads depict downtown loft condos, artists and young families who can help in its economic revival. In developing the campaign, city officials invoked the success of early local leaders — industrialist John Patterson, the Wright brothers and Delco founder Charles Kettering — to recall its heritage of innovation. Other businesses and organizations in the city have adopted the logo for use on their own materials.

The "Cleveland Plus" campaign launched in mid-2007 similarly sought to mix the message of the region's viability as a place to invest with its "quirkier side" that might appeal to visitors, says Tamera Brown, a marketing executive at Positively Cleveland, the city's visitors and convention bureau. The campaign featured Iron Chef Mike Symon, a local resident, making pirogi filled with beef cheek. "It's Midwestern hip. But we never say that, because if you say you're hip, you're not," Brown says.

Not everyone bought into the campaign. Local comedian Mike Polk made a parody video, Hastily Made Cleveland Tourism Video, showing an empty downtown, deteriorating factories and trains leaving town paired with a raunchy song about its economic decline. It has become a YouTube sensation, with more than 2 million views.

Cleveland city officials were undeterred. They embraced the notoriety and sponsored a "Hastily Made" tourism video competition that received more than 40 entries. Polk was one of the five judges.

Kauffman Foundation: Leading Economics Bloggers Share Bleak Outlook February 8, 2010

2010-02-08T15:57:53Z

What do the top economic bloggers think about the U.S. economy? The outlook is grim.

The Kauffman Foundation asked 200 of the top economic bloggers to participate in a survey that measured their views on the economy, entrepreneurship and innovation in the U.S.

Results showed that 48 percent of the survey respondents believe that the economy is “worse than official government statistics show.” In fact, 52 percent of the bloggers believe that conditions are “bad” or “very bad” for small business, bank lending to business and individuals.

The Foundation surveyed these economic writers because they have a “unique voice and perspective, and potentially profound influence.” The bloggers will be surveyed every quarter to get a “new gauge for the nation’s fiscal health.”

For the survey's full report, click here: http://www.kauffman.org/uploadedFiles/econ_blogger_outlook_q1_2010.pdf"

Jessica Tuquero

Account Supervisor

Leading Economics Bloggers Share Bleak Outlook, According to Kauffman Foundation Survey

Kauffman releases findings in its inaugural 'Economic Outlook: A Quarterly Survey of Top Economics Bloggers'

(KANSAS CITY, Mo.), Feb. 2, 2010 – Despite promising economic growth numbers in the last quarter of 2009, economics bloggers have a grim outlook, according to a new Ewing Marion Kauffman Foundation survey released today. Just last Friday, the U.S. Bureau of Economic Analysis released its advance report of a 5.7 percent growth rate (annualized) of gross domestic product during the fourth quarter of 2009. But even before the fourth-quarter estimate was published, 48 percent of economics bloggers said in the mid-January survey that the economy was "worse than official government statistics show." Most respondents rate the overall condition of the economy as "mixed," and 33 percent say it is still "facing recession" or "weak and recessing."

In the inaugural Kauffman Economic Outlook: A Quarterly Survey of Top Economics Bloggers, the Kauffman Foundation sent invitations to more than 200 top economics bloggers, most of whom were on the Palgrave's econolog.net December 2009 rankings. The Foundation will be surveying the bloggers about their views of the economy, entrepreneurship and innovation every quarter to provide a new gauge for the nation's fiscal health.

"As independent thinkers who are immersed in discourse through the innovation of blogging, these economics writers have a unique voice and perspective, and potentially profound influence," said Tim Kane, senior fellow at the Kauffman Foundation and author of the study. "While they individually express themselves virtually every day, we think their collective voice needs to be heard."

Research highlights include:

The bloggers expect the greatest growth prospects over the next three years to be in interest rates, inflation and the budget deficit. U.S. output and jobs are expected to increase, but with about half the intensity of growth in global output.

The panel assesses conditions as "bad" or "very bad" for small business (52 percent) and bank lending to business (51 percent) and individuals (50 percent). The outlook for entrepreneurs is a relative bright spot, with opinions mixed between bad conditions (36 percent) and good (26 percent).

Seven out of 10 bloggers say the federal government is too involved in economic matters, and they share a clear consensus for action. Tax cuts, especially on payrolls, are recommended, and three ways to cut the deficit had overwhelming support: Medical entitlements, Social Security and Defense should all be reduced.

Ten core questions and seven topical questions were designed in coordination with a distinguished board of advisors, which includes:

Robert X. Cringley – I, Cringely

Brad DeLong – Grasping Reality

Laurie Harting – Palgrave Econolog

Scott Jagow – Marketplace Scratch Pad

Paul Kedrosky – Infectious Greed

Lynne Kiesling – Knowledge Problem

Donald Marron – DMarron.com

Mark Perry – Carpe Diem

Wade Roush – Xconomy.com

Allison Schrager – FreeExchange

Nick Schulz – Enterprise Blog

Yves Smith – Naked Capitalism

Alex Tabarrok – Marginal Revolution

For the survey's full report, click here: http://www.kauffman.org/uploadedFiles/econ_blogger_outlook_q1_2010.pdf

The New York Times: “More (Steve) Jobs, Jobs, Jobs, Jobs” January 24, 2010

2010-01-25T15:49:59Z

Thomas Friedman has a message for President Barack Obama: make this the year of innovation, the year of “Start-Up America.”

In yesterday’s The New York Times, Friedman says that the President needs to reignite the youth movement he mobilized to get elected and provide them with the support needed to drive innovation.

Reinspiring this group to create start-up companies will create new jobs and keep America on the cutting edge. Friedman cited programs such as “National Lab Day” and the “Network for Teaching Entrepreneurship” as examples of what the President should publicly endorse.

Andy Levine

President/Chief Creative Officer

More (Steve) Jobs, Jobs, Jobs, Jobs

By Thomas L. Friedman

January 25, 2010

The most striking feature of Barack Obama’s campaign for the presidency was the amazing, young, Internet-enabled, grass-roots movement he mobilized to get elected. The most striking feature of Obama’s presidency a year later is how thoroughly that movement has disappeared.

In part, it disappeared because the Obama team let it disappear, as Obama moved to pass what was necessary — the economic stimulus — and what he aspired to — health care — by exclusively playing inside baseball with Congress. The president seems to have thought that his majorities in the Senate and the House were so big that he never really had to mobilize “the people” to drive his agenda. Obama turned all his supporters into spectators of The Harry and Nancy Show. And, at the same time, that grass-roots movement went dormant on its own, apparently thinking that just getting the first African-American elected as president was the moon shot of this generation, and nothing more was necessary.

Well, here’s my free advice to Obama, post-Massachusetts. If you think that the right response is to unleash a populist backlash against bankers, you’re wrong. Please, please re-regulate the banks in a smart way. But remember: in the long run, Americans don’t rally to angry politicians. They do not bring out the best in us. We rally to inspirational, hopeful ones. They bring out the best in us. And right now we need to be at our best.

Obama should launch his own moon shot. What the country needs most now is not more government stimulus, but more stimulation. We need to get millions of American kids, not just the geniuses, excited about innovation and entrepreneurship again. We need to make 2010 what Obama should have made 2009: the year of innovation, the year of making our pie bigger, the year of “Start-Up America.”

Obama should make the centerpiece of his presidency mobilizing a million new start-up companies that won’t just give us temporary highway jobs, but lasting good jobs that keep America on the cutting edge. The best way to counter the Tea Party movement, which is all about stopping things, is with an Innovation Movement, which is all about starting things. Without inventing more new products and services that make people more productive, healthier or entertained — that we can sell around the world — we’ll never be able to afford the health care our people need, let alone pay off our debts.

Obama should bring together the country’s leading innovators and ask them: “What legislation, what tax incentives, do we need right now to replicate you all a million times over” — and make that his No. 1 priority. Inspiring, reviving and empowering Start-up America is his moon shot.

And to reignite his youth movement, he should make sure every American kid knows about two programs that he has already endorsed: The first is National Lab Day. Introduced last November by a coalition of educators and science and engineering associations, Lab Day aims to inspire a wave of future innovators, by pairing veteran scientists and engineers with students in grades K-12 to inspire thousands of hands-on science projects around the country.

Any teacher in America, explains the entrepreneur Jack Hidary, the chairman of N.L.D., can go to the Web site NationalLabDay.org and enter the science project he or she is interested in teaching, or get an idea for one. N.L.D. will match teachers with volunteer scientists and engineers in their areas for mentoring.

“As soon as you have a match, the scientists and the students communicate directly or via Skype and collaborate on a project,” said Hidary. “We have a class in Chicago asking for civil engineers to teach them how to build a bridge. In Idaho, a class is asking for a scientist to help them build a working river delta inside their classroom.”

The president should also vow to bring the Network for Teaching Entrepreneurship, or NFTE, to every low-income neighborhood in America. NFTE works with middle- and high-school teachers to help them teach entrepreneurship. The centerpiece of its program is a national contest for start-ups with 24,000 kids participating. Each student has to invent a product or service, write up a business plan and then do it. NFTE (www.NFTE.com) works only in low-income areas, so many of these new entrepreneurs are minority kids.

In November, a documentary movie — “Ten9Eight” — was released that tracked a dozen students all the way through to the finals of the NFTE competition. Obama should arrange for this movie to be shown in every classroom in America. It is the most inspirational, heartwarming film you will ever see. You can obtain details about it at www.ten9eight.com.

This year’s three finalists, said Amy Rosen, the chief executive of NFTE, “were an immigrant’s son who took a class from H&R Block and invented a company to do tax returns for high school students, a young woman who taught herself how to sew and designed custom-made dresses, and the winner was an African-American boy who manufactured socially meaningful T-shirts.”

You want more good jobs, spawn more Steve Jobs. Obama should have focused on that from Day 1. He must focus on that for Year 2.

BusinessWeek: “The Return of the Outsourced Job” December 30, 2009

2010-01-04T18:43:31Z

When they needed to outsource work, U.S. companies looked to India for labor supply. Now, the reverse is taking place.

On December 30, BusinessWeek reported on a growing trend among regions to recruit Indian companies that promise to create jobs.

While critics say the new investments do little to boost employment rates, cities including Dallas, Atlanta and Cincinnati believe luring Indian technology giants will bring long-term economic growth.

The Tata Group, Wipro Technologies and Infosys Technologies are examples of corporations that have already invested in new facilities in the U.S.

Andy Levine

President/Chief Creative Officer

The Return of the Outsourced Job

By Mehul Srivastava and Moira Herbst

December 30, 2009,

To boost employment, local governments are wooing Indian companies such as Tata, Wipro, and Infosys. But the job gains are a drop in the bucket

Ohio Governor Ted Strickland is quick to admit that he doesn't "particularly enjoy heights." So why would he climb into a cherry picker to be lifted 40 feet in the air?

To show off a 196,000-square-foot office park in the Cincinnati suburb of Milford to executives from Tata Consultancy Services, India's biggest tech company and a thriving part of the Tata Group conglomerate.

To sweeten the deal, Strickland threw in $19 million in tax credits and invited the TCS crew to a state dinner at the governor's mansion. "The economy is difficult," Strickland says. "I will go wherever I can to find jobs."

TCS said yes, and in November Strickland showed up at the sprawling wooded campus for a ceremony to mark the hiring of the 300th employee at what has become the cornerstone for TCS's North American efforts. Tata has hired some 250 graduates of Ohio State University, the University of Cincinnati, and other nearby schools. Soon the facility may employ as many as 1,000 Americans doing back-office and technology outsourcing for U.S. health-care companies and local governments.

With the economy growing again—but unemployment stuck at double-digit levels—states and municipalities across the U.S. are scrambling to woo anyone with hiring plans—even if that means going, hat in hand, to the same bunch that have been responsible for hundreds of thousands of jobs going overseas.

local talent offers advantages

Dallas, Atlanta, Minneapolis, and Tallahassee have all been actively courting Indian tech outfits. Wipro Technologies (WIT) in March inaugurated a center in Atlanta, which now has 350 employees—nearly 300 of them Americans, including senior managers recruited from U.S. tech rivals. Infosys Technologies (INFY), meanwhile, is planning an operation in Dallas to target some of the $52 billion the U.S. government will spend on outsourcing work in 2010.

For Indian companies, U.S. facilities can mean more work on government and health-care projects—areas where laws prevent the transfer of data overseas. An on-the-ground strategy gives them access to local workers who can better understand cultural nuances. And it lets them better compete against U.S. rivals IBM (IBM) and Accenture (ACN), which tend to win lucrative consulting contracts that hinge on solving complicated business problems on-site, rather than simply writing computer code for cheap wages in India.

"We need to become more efficient, more sophisticated," says Sambuddha Deb, a Wipro vice-president who makes sure the company's India-based and foreign employees work seamlessly together. "It's not just about setting up software factories" in India.

Some critics say that the new centers offer little more than political cover and do little to boost employment in the U.S. "One reason they are doing this is for public relations," says Ron Hira, an expert on offshoring at Rochester Institute of Technology. "They want to send the message, 'We're creating jobs for Americans.'"

Congress to limit temporary visas?

It's true that the jobs Indian companies have created in the U.S. are a rounding error compared with their overall workforce. Even as it hired a few hundred U.S. employees in 2009, TCS took on tens of thousands of newbies in India. And TCS has more than 11,000 Indians working in the U.S. on temporary visas, while Wipro has 7,000.

That could change if a Senate bill introduced in April makes it through Congress. The measure would bar companies with more than 50 U.S.-based employees from using temporary visas for more than half their U.S. workforce, effectively forcing Indian IT companies to hire more Americans.

A further concern for Indian companies is that hiring Americans is far more expensive than shipping work off to India. TCS staffers in Milford, for instance, earn more than $50,000 per year, vs. the $7,000 to $8,000 that Indians doing similar work make in Bangalore.

"Offshore outsourcers' wonderful profitability has largely been on the back of labor arbitrage,"" says Peter Bendor-Samuel, CEO of Everest Group, a Dallas consulting firm that advises companies on outsourcing strategies. "Those profits surely would take a hit if the Indian companies start hiring more Americans."

Time zone proximity preferred

TCS already had to delay opening the Ohio center for almost six months during the recession in the U.S. Wipro says its Atlanta operation isn't yet profitable. Both say American facilities are unlikely to create huge numbers of new jobs in the U.S. soon. For several years, at least, the vast majority of work will continue to be done in India and other low-cost countries, according to Surya Kant, North America president for TCS.

"But many [clients] want work to be done in the same time zone, and we want to be closer to our customers," Kant says. "Increasingly, we will move that work to centers like Cincinnati."

For Strickland and other officials in places where jobs have disappeared as carmakers go bust and steel production moves overseas, the new jobs—and the taxes they generate—are rare good news.

"I certainly don't see it as consorting with the enemy," says Strickland, who ended up sharing a table with Tata Group Chairman Ratan Tata and India's Commerce Minister Anand Sharma at the Nov. 25 White House state dinner for Indian Prime Minister Manmohan Singh. "These are good, solid jobs," adds the governor. "Jobs that we feel will be long-term and that we hope will increase in numbers."

Packaged Travel Predicted to Grow in 2010 December 31, 2009

2010-01-04T16:05:08Z

Could packaged travel be the ray of hope for the tourism industry in 2010?

According to the Wall Street Journal, at least one segment of the industry is banking on it...tour operators!

Considered the Costco of the tourism industry, tour operators are often able to offer travelers great value by selling an experience in large quantities. In 2010, this could lead vacation shoppers flocking to tour operators, as they did to warehouse clubs in 2009.

Let's face it, experiencing more of the world at large, and broadening our global horizons, is an excellent New Year's resolution. And we can thank tour operators for making it more affordable.

Karyl Leigh Barnes

Vice President, Tourism Practice

Travel Watch

Packaged Travel Predicted to Grow in 2010

By Jonelle Marte

December 31, 2009

Vacation Comeback?

Vacations may beat out staycations next year, according to a recent survey by the United States Tour Operators Association that found 75% of its members predict international packaged travel will increase by about 18% in 2010. Just over half of members said domestic packaged travel will grow by about 10%.

Only 7% of respondents said they expect to see domestic travel decline in 2010—an about face from last year when more than 70% said they expected sales to plateau or decline in 2009.

Those planning trips may also find more savings, with three-fourths of tour companies saying they are likely to lower rates next year by an average of 5%.

Where will Americans be venturing? Tour operators say the hottest "up-and-coming" destinations include Latin America, Egypt and South Africa.

Italy was the top international destination for packaged travel for 2009—a rank it has held for seven straight years. New York City was named the top domestic city for vacation packages, planned itineraries and tours.

CNN: “From red to green: China's drive to be a low carbon leader” December 13, 2009

2009-12-14T17:56:14Z

Let the international green race begin. CNN reports that many believe in China’s potential to be the leader of green technology and policies, providing heavy competition for the U.S. and E.U.

Influencers such as Thomas Friedman argue that the country’s rapid industrial development has polluted its environment so much that it leaves its leaders with little choice but to make a green transformation a priority.

Additionally, the country’s numerous investments in renewable energy and clean technology, along with a recent published report entitled “China’s Pathway Toward a Low Carbon Economy” has only strengthened their argument.

If China were to enter the green mix at full force, one can only imagine how this will influence U.S. policy makers and clean tech investors. What are your thoughts?

Julie Curtin

Vice President/Partner

Could China be the world's green champion? It seems unlikely. The vast nation is typically portrayed as a dire threat to the planet, with a booming population and a commitment to that dirtiest of fuels -- coal.

But all that might be about to change.

In a column in the New York Times in September headlined "The New Sputnik" Marshall Scholar and multi-Pulitzer Prize winning author Thomas Friedman argued that not only was China going green, but that the decision would spark change around the world -- particularly in the U.S. - much as the USSR's decision to launch Sputnik turbo-charged the space race in 1957.

"China's leaders have decided to go green," he wrote. "...too many of their people can't breathe, can't swim, can't fish, can't farm and can't drink thanks to pollution from its coal- and oil-based manufacturing growth engine. And, therefore, unless China powers its development with cleaner energy systems, and more knowledge-intensive businesses without smokestacks, China will die of its own development."

The column sparked a fury of debate. In the UK, the Guardian's Jonathan Watts accused him of spending "too long sipping tea with Dalian's technocrats and not enough time breathing the air in Shanxi, Henan and Beijing."

After all, despite impressive investments in green energy, China still depends on coal for 70 percent of its power, rapid industrialization and booming car ownership has cast a pall of smog over many cities and according to the U.S. Energy Information Administration, the country's carbon emissions are now greater than the United States, and are set to keep rising.

But now a major new report has stirred the mix further.

Produced by an international task force and presented to the Chinese government last month, "China's Pathway Towards a Low Carbon Economy" (CPTLCE) presents a clear plan showing how the country can make the switch from red to green.

It can do this, the report suggests, by evolving its economic development model, adjusting its economic structure, enhancing its technological innovation capacity and strengthening the sustainability of its economy.

The problems may be substantial but, CPTLCE argues, the way ahead is clear.

But can China be the leader the world needs?

"If we are talking about green technologies, then I think the answer is definitely 'yes'," the report's co-chair Bjorn Stigson, President of the World Business Council for Sustainable Development, told CNN.

Like Friedman, he believes a green transformation in the country is inevitable.

"In my meetings with Chinese political leaders, including PM Wen Jiabao, I heard very clear signals that this is a priority issue. The Chinese leadership is committed to refocusing attention on environmental protection, water preservation and developing world-leading technologies," he says.

"Given population growth, urbanization and a focus on poverty alleviation among emerging economies, we can foresee that the future world will be resource- and carbon-constrained. China will suffer negative impacts from climate change as well as from resource constraints, unless the world -- and that includes China -- gets onto a low carbon development path.

"In the past China has given priority to economic growth over environmental protection. This has led to air, water and soil pollution. However, recently the leadership has realized this and is taking serious action to address this imbalance."

From factory of the world to innovator

In particular, Stigson believes that China's position as the world's factory puts it in a strong position as a technological innovator.

"[China] can be a leader on the technologies that will be required to deliver green energy: solar, wind, bio-fuels and clean coal," he says.

"Furthermore, as China is going through rapid industrialization, they have a chance to install some of the best available technologies in their industries."

It seems those in the West keen to cast China as an environmental villain could be guilty of a fair degree of hypocrisy -- and may need to look a little closer to home.

"Currently American emissions of greenhouse gas are over 20 tonnes per person, while in China personal carbon footprints are one fifth of that, and 238 million people live below the poverty line," Friends of the Earth's international climate coordinator, Joe Zacune, told CNN.

"Meanwhile, personal carbon footprints in the UK are twice that of China, yet China has a higher proportion of renewable energy for electricity than the UK.

"China does have the potential to be a world leader on environmental issues. Domestically, China has been investing in renewable energy and should continue such steps by expanding investment in appropriate, community-led renewable energy rather than coal and other dirty fossil fuels.

"China seems to be showing much more political will than the U.S. as well as other Annex-1 [rich, industrialized] countries, both domestically and internationally... The primary obstacle for China being a green leader is the lack of a strong example by those countries which are historically responsible causing climate change.

"China's moves to promote clean energy could indeed highlight the lack of action by the U.S. China should most certainly not attempt to follow the U.S.' disastrous 'cap and trade'."

Zacune also believes that China's position outside the Annex 1 group of rich countries identified by the Kyoto Treaty is politically interesting -- giving it a chance to act as a champion for other developing nations at the climate talks currently on in Copenhagen and hold the U.S. and Europe to account.

But, in the end, it may be the fear of being left behind that drives change in the West -- and East.

"The move towards a low carbon economy, not least in China, is triggering a positive race between countries," says Stigson. "The USA has realized that both China and the EU are putting in place serious policies to take the lead on this issue.

"The 'green race' is on, and may the best man win."

Forbes: “The Mayor as CEO,” December 3, 2009

2009-12-08T13:18:02Z

Here’s an interesting “Smart Cities” piece posted on Forbes’ website on December 3. Aaron Renn, an urban success strategist, discusses how cities’ mayors must have the CEO perspective in order to sustain a healthy metro region.

A CEO-mayor understands his/her region’s “brand DNA,” and can answer the question, “why here?” The answer has nothing to do with efficiency or available tax incentives. Rather, it’s about understanding cities’ unique local environments and creating a strategy to recruit the type of businesses and people that fit that brand. In other words, there is no room for imitation or cookie-cutter approaches in urban success.

In his article, Renn provides examples of how cities that think like CEO’s have thrived.

Andy Levine

President/Chief Creative Officer

Smart Cities

The Mayor As CEO

By Aaron M. Renn,

December 3. 2009

Mayors are often called the "chief executives" of a city. But when urban thinkers talk about running a city like a business, they mostly mention adopting private-sector principles for operational efficiency, cost effectiveness and better customer service. While these are clearly important, they are not the functions of a CEO, but of a COO or CFO. Indeed, two key concerns of the CEO, strategy and brand, are seldom discussed in urbanist circles--but they should be.

In a dynamic market there are winners and losers. Over time, disruptions occur, and upstarts emerge. Many fail, some succeed--and we end up better for it. These same forces of creative destruction apply to places as well as companies and industries. Cities and regions rise and fall. Faced with a marketplace challenge, some reinvent themselves successfully, others do not. Once the Rust Belt was in favor; then the Sun Belt. Once people moved to California; now, they move from it. Today's champions--Portland, Houston, etc.--will no doubt meet the same obstacles as other once-great cities down the road.

But while a high business failure rate is often a sign of entrepreneurial dynamism, is it advisable to leave a trail of failed cities in the wake of our civic progress? It isn't realistic to adopt a "no casualties" policy. But to accept marketplace-like civic failure rates is to envision an urban future in America with a dozen or so sustainably dynamic cities that are able to reinvent themselves over time. Others would be doomed to be flowers that bloom for a season and then wither away, sustained on a steady diet of costly subsidies as wards of the state.

That's why the CEO perspective is desperately needed, particularly for our core cities whose success is vital to sustaining healthy metro regions. Cities need to answer a simple question, one that defies a simple answer: Why here? That is, why live, work or locate a business in our city?

This question is one not amenable to COO/CFO type solutions. While efficiency, cost control and limited taxation will always be important, no matter what our core cities do they will never have lower taxes than the suburbs due to their legacy costs and disproportionately large share of social service budgets and nonprofits. What's more, cities will almost always have more crime, worse schools and older infrastructure than suburbs.

So how do you get someone to buy your product when it has those characteristics? That's the great unanswered question in too many American cities.

Core cities are structurally high-cost producers. They need to find a market and product for which people are willing to pay at least some premium, in terms of crime or schools, if not in money. Being a low-cost provider doesn't help you if you're the civic equivalent of a buggy whip manufacturer. Too many urban cores have a surplus of land and houses they can't even give away--look at Detroit.

Cities do have one natural advantage in this regard, being home to most of the nation's supply of traditional urban style development. While urban living may always appeal to a minority, those who prefer it almost have to look at the city. Trying to out-suburb the suburbs with auto-oriented living is a loser's game (as in implementing strip malls and large private parking lots). If people prefer a suburban lifestyle, they can get a better version of it for cheaper just by moving there. Give people a choice between a real suburb and a city trying to act like a suburb, and people will choose the real thing every time.

But adopting the urban revitalization conventional wisdom du jour is also a dead end. Every city has bike trails, stadiums and such. Things like light rail might help, but people who want to live the Portland or Chicago lifestyle will just move there. They don't need a "me too" imitation of it.

The lesson of Portland is that it found a strategy that worked for it based on embracing traditional urbanism, public transit and bicycle transportation. That doesn't mean every city should copy it; others found different paths. Las Vegas found success with its "sin city" approach. Austin decided to be a big college town with a pledge to "Keep Austin Weird." Charleston held firm to its rich antebellum heritage. For Houston, it's the relentless pursuit of the energy sector, America's most aggressive pro-growth policies and no zoning.

These cities have the CEO perspective. They understand their "brand DNA." They were able to create aspirational narratives about their brand promise that resonated with the people they wanted to attract. And they understood how to deliver on their value propositions. its terroir.

Governing Magazine: Should Cities Be in the Mega-Hotel Business? December 2009

2009-12-04T15:43:20Z

Governing Magazine

Should Cities Be in the Mega-Hotel Business?

By Josh Goodman

December 2009

Some of the most intense local skirmishes are over convention-center hotels.

The campaigns of Tom Leppert and Anne Raymond spent millions of dollars this spring wooing Dallas voters. Leppert and Raymond debated on radio and television. Both commanded a slate of city council candidates loyal to their causes.

But Leppert and Raymond weren’t running for office against one another. They weren’t running for office at all. They were arguing about a hotel.

Leppert is the mayor of Dallas. He’s also the biggest supporter of building a $500-million, 1,000-room hotel that will be adjacent to the Dallas Convention Center and will be owned by the city itself. Leppert believes the hotel will be the linchpin of Dallas’ downtown economy.

Raymond is an executive with Crow Holdings, a leading Dallas real estate firm. She was the spokesperson for a ballot campaign to block the hotel, arguing that city government should stay out of the hotel business. In that role, Raymond acted as a surrogate for hotel baron Harlan Crow, who spent an estimated $7 million of his own money to promote the measure. Ultimately, Leppert’s side won on a close vote, and construction has already begun. But the hotel debate became Dallas’ dominant political issue for months on end.

Strange as it might seem for a single hotel to command that much attention, it’s increasingly common. In the long war over government’s proper role in economic development, one of the most intense skirmishes has involved convention-center hotels paid for by cities. Today, new convention-center hotels are almost all publicly owned or heavily subsidized. In Texas alone, flagship hotels for convention centers have been approved with public help in Houston, Austin, San Antonio and Fort Worth. Elsewhere in the country, Chicago, Denver, Phoenix, St. Louis and Baltimore have done the same thing.

The elected leaders of these cities believe that by building fancy hotels connected to their convention centers, they can lure more visitors from out of state. The taxes and economic activity generated by these visitors, they wager, can make investments in hotels pay for themselves.

Critics, though, don’t merely say that hotel ownership is beyond the proper scope of government. They argue that cities have placed bets on a declining stream of revenue based on impossibly rosy forecasts. And, there is reason for caution. Some publicly funded convention-center hotels have been solid successes, but others have been colossal failures.

It’s nothing new for cities to fight desperately to attract conventions and trade shows. Conventioneers come, spend money and leave. “Visitors,” Mayor Leppert says, “don’t require schools, they rarely require our fire department. They don’t require our social services.” That appeal has prompted cities around the country to build larger and larger convention centers, even if the previous one is only a decade old.

But even the 1 million square feet of floor space that comes with the largest of the new convention centers isn’t enough for event planners. They want amenities. Chief among those are massive headquarters hotels. “Having a hotel that is literally adjacent, contiguous, connected to the convention center,” Leppert says, “is an absolute necessity.”

But while event planners are convinced they need massive hotels, private developers are less enthusiastic. Since long before the recent credit crunch, they’ve viewed new high-end hotels as a bad investment. With conventional private financing, it simply takes too long for hotel profits to pay off the massive debt that comes from construction of the building.

So cities offer non-traditional financing. They do that in either of two ways: subsidizing the hotels or, increasingly often, issuing tax-exempt bonds to fund them. The specifics of the deals vary dramatically. In some cases, the bonds are paid off exclusively from revenue brought in by the new hotel. In other cases, the city is, directly or indirectly, committing other pots of money to the project. In some cases, as in Dallas, the city actually ends up owning the hotel. Operation of the hotel is usually turned over to Hilton, Marriott, Hyatt or Omni.

The common thread, though, is that the projects wouldn’t have taken place without government intervention. But why intervene on such a massive scale to build a facility that private developers view as a bad investment? That, says Anne Raymond, was the question her side raised in Dallas. “If this was a good real estate transaction, the private sector would do it,” she says. “Dallas is filled with optimistic real estate investors, but no one would step up.” In her view, that’s because they knew more about the market than the local government did.

Of course, a city can make a better deal for itself in the bond market than a private developer can. The bonds cities issue are tax-exempt, and allow them to pay bondholders much lower interest rates. What’s more, says Mayor Leppert, cities simply have different standards of success than private hotel companies do.

For cities, the financial success of the hotel itself is secondary. The point is to have the convention center thrive and for the city to reap the benefits of increased economic activity and increased tax revenue. This, Leppert argues, isn’t some dramatic expansion of government: The hotel is really just an extension of the public convention center itself.

Heywood Sanders has heard all of this many, many times before. Sanders, a professor of public administration at the University of Texas at San Antonio, is the nation’s leading critic of publicly funded convention centers and hotels. He argues that conventions in general, not to mention the facilities that host them, are a declining business. He says that more and more meetings take place online rather than in gigantic buildings, that the recession has only accelerated this process, and that recovery is not going to bring back the old days of massive trade and professional shows with participants flying in from all over the country.

Sanders cringes as he sees cities betting on convention centers that cost hundreds of millions of dollars, then doubling down on that bet with hotels that cost hundreds of millions more. His research suggests to him that the link between new headquarters hotels and increased convention business rarely emerges. “You get to do a big project with big promises and lots of money for consultants and bond counsel and underwriters and engineers,” he says, “but you may do it at the expense of the very important things that may make a city’s future.” Sanders would prefer that cities invest in schools, roads and affordable housing.

This clash between big projects and basic services is a familiar one in municipal politics. In many ways, the current hotel debate is similar to the arguments traded back and forth over publicly funded sports stadiums. (Some of the hotels actually cost almost as much as stadiums.) But in both cases, business interests and labor unions nearly always join forces to promote the project. In Dallas, the new hotel had the backing of both the local chamber of commerce and the local AFL-CIO chapter. Opposition tends to come from a motley coalition of conservatives, who view the projects as government waste, and liberals, who view them as corporate welfare.

In Dallas, though, the clash was as much a personal struggle between two multi-millionaires, Mayor Leppert and developer Crow, as anything else. Opponents of the hotel ran ads calling Leppert arrogant. Hotel backers fired back that Crow’s intervention was mere self-interest—that he was trying to protect the fortunes of his own 1,606-room Hilton Anatole, one of the largest hotels in Dallas. Leppert’s forces carried the day, but just barely. The measure to block the hotel lost by only 2,000 votes.

Did Dallas voters make the right decision? It depends on where you choose to ask the question. Civic leaders in Denver would tell you yes, but those in St. Louis probably would disagree. The two cities illustrate the widely divergent results of past convention-center hotel projects.

By any reasonable measure, the convention-center hotel in Denver has been a success. Since it opened in 2005, the 1,100-room Hyatt Regency Denver has helped the city land major events, including the 2008 Democratic National Convention. The new hotel hasn’t hurt business at older hotels—just the opposite. Room rates and occupancy rates went up after the hotel opened, as more events attracted more visitors to town.

What’s the price tag for Denver taxpayers? “It’s cost them nothing,” insists Bill Mosher, CEO of the Denver Convention Center Hotel Authority. “There’s not a dollar of public money in the hotel.”

That might sound farfetched, given that Mosher’s public authority, a creation of the Denver government, issued $350 million in bonds to build the hotel. But Mosher’s point is that those were revenue bonds, meaning they’re being paid off from the hotel’s earnings, not out of the city’s general fund. If you don’t go to the hotel—and most locals don’t—you aren’t out anything. And since Denver didn’t exempt its hotel from city taxes, the project has been successful enough to redirect millions of dollars to the city treasury.

Given all of that, it’s no surprise that Leppert and his campaign cited Denver as a model to emulate. The opposition, though, pointed to St. Louis.

Even before St. Louis’ 1,100-room, $265 million Renaissance Grand & Suites Hotel opened in 2003, things started going wrong. The terrorist attacks of 2001 weakened the convention industry. The home-based airline TWA ceased to exist, depriving St. Louis of its airport hub. The convention center’s developers were a little cagey in their claims of floor space: To get the total exhibit space to 500,000 square feet, they included the adjacent St. Louis Rams football stadium, which is unavailable for major events during much of the year. Underneath these problems lay the plain truth that not too many people wanted to visit St. Louis in the first place. It wasn’t Orlando, Chicago or Las Vegas. Or Denver, for that matter.

The end result was that, even with the headquarters hotel, the city’s convention business remained flat. Eventually, the hotel was able to turn a small operating profit, but it wasn’t nearly enough to pay off its debt. When the hotel went into foreclosure earlier this year, its bondholders bought it at auction, and kept it open. But that was only after St. Louis had dedicated millions of dollars of federal Community Development Block Grants to the hotel—money that could have been used to pave roads or build housing.

The failure in St. Louis wasn’t just a matter of bad luck but also wishful thinking. “There were four different consulting groups that wrote negative feasibility studies for the project,” says Gary Andreas, a St. Louis hotel consultant. “They found the one person who said that the other guys were idiots.” Andreas would know. He was one of the consultants who weighed in against the idea.

The question for Dallas—and other cities that are thinking about subsidizing convention hotels—is whether they, too, are engaged in wishful thinking. Dallas just broke ground on its controversial hotel in September. It will be years before we know how well it does.

Even the supporters of convention-center hotels say that cities should act with care. They warn that the deals to build the hotels are hugely complex and that small details come with large financial consequences. And while every city would like to be a hot convention destination, an opulent hotel next to the center doesn’t automatically make it one.

The New York Times: In Detroit, Agencies Compete to Sell City as a Creative Haven November 16, 2009

2009-11-16T20:02:02Z

In an effort to revive Detroit, Time Inc. is holding a competition between local advertising agencies to develop a campaign to recruit the creative and younger generation to the city.

Hoping to sell Detroit as a “land of opportunity,” five advertising agencies have entered the competition and are currently developing campaigns that include using blogs, video clips and mobile applications.

You’ll find the agencies’ work in the December 7 issue of Fortune Magazine, and viewers can go online and vote for their favorite campaign.

Selling Detroit as a land of opportunity to the young and creative class is no small feat, but it is a step towards recovery. I know that we’ll be keeping track of this campaign as it unfolds…

Andy Levine

President/Chief Creative Officer

In Detroit, Agencies Compete to Sell City as a Creative Haven November 16, 2009

By Stuart Elliott

It may not be the advertising version of “Mission: Impossible,” but it is certainly a challenging, if not daunting, task: produce a campaign to encourage young and creative people to consider Detroit as a place to live and work.

Cue the Lalo Schifrin theme music.

The effort, called Selling Detroit, is upfront about its intent. “America’s most struggling city needs to attract business and talent,” a description of the contest begins.

The initiative to help change what may be the most dire urban image in America is being sponsored by the Time Inc. unit of Time Warner as part of a yearlong project, Assignment Detroit, that involves reporters and editors from Essence, Fortune, Money, Sports Illustrated, Time and related Web sites.

Several advertising agencies with offices in the Detroit area were asked to develop campaigns; five agreed to take part. Their work is to appear in the Dec. 7 issue of Fortune, due Nov. 23, as well as on three Web sites: cnnmoney.com, fortune.com and time.com. (The value of the ad pages that Time Inc. is devoting to the contest in Fortune is estimated at $400,000.)

Visitors to the Web sites will be able to vote, beginning on Monday, for their favorite among the five campaigns. The winner is to be announced on Dec. 2, during an annual awards ceremony in Detroit known as the D Show.

“The whole idea of the contest is that we believe in the renewal of the city,” said Mark Ford, president for the news group at Time Inc. in New York. This is to be accomplished partly by people moving to Detroit with their businesses and creativity, and being there “for the long haul.”

To that end, the campaign will be “targeted more to the 18-to-34-year-old demographic,” he added.

Those involved in the contest acknowledge it is a small step toward determining “what is the road out” from Detroit’s difficulties, as Mr. Ford put it.

“I don’t pretend to have the answer to solve the problem,” Mr. Ford said. “You have to expect it’ll take many, many years to recover.”

“But a lot of smart people are committed to bringing the city back,” he added, and “we’ll do our part.”

The campaigns from the agencies certainly try to appeal to the intended audience. They include elements like special Web sites, blogs, video clips and applications for cellphones.

The Kauffman Foundation: Young Businesses Important to Job Creation November 10, 2009

2009-11-10T15:59:43Z

For years, the conventional wisdom has always been that half of the job growth comes from small business. According to a report released last week by the Ewing Marion Kaufmann Foundation, that's only partially correct.

It’s actually the firm’s age, not size, that drives job growth. The study found that companies less than five years old created nearly two thirds of new jobs in 2007.

At a time when the U.S. is exploring ways to fix the national unemployment rate, it’ll be interesting to see how this report will help entrepreneurs receive the help they need from policymakers to thrive in the current economic environment.

For the complete study, click here.

Andy Levine

President/Chief Creative Officer

Kauffman Foundation Analysis Emphasizes Importance of Young Businesses to Job Creation in the U.S.

U.S. Census data showing new and young firms as the primary source of new jobs come at a critical time for policymakers

(KANSAS CITY, Mo.) Nov. 5, 2009 – The Ewing Marion Kauffman Foundation today released a study showing that newly created and young companies are the primary drivers of job creation in the United States. Though perhaps showing some improvement, the Bureau of Labor Statistics update on U.S. employment due out Nov. 6 will likely still show a dismal picture for American workers. Kauffman's analysis of U.S. Census Bureau data showing that companies less than five years old created nearly two-thirds of net new jobs in 2007 could not be timelier.

"Job creation is the number one issue facing families and policymakers during this economic recession, and this study shows that new businesses and entrepreneurs are the key factor in adding new jobs," said Carl Schramm, president and CEO of the Kauffman Foundation. "If the U.S. economy is going to have a sustained recovery, it will be up to entrepreneurs to lead the way."

The distinction of firm age, not necessarily size, as the driver of job creation has many implications, particularly for policymakers who are focusing on small business as the answer to a dire employment situation. This report shows that most net job creation is generated by firms that are one to five years old. These firms create more net new jobs than their older counterparts, as well as a higher average number of jobs per firm. In some cases, these young firms grow into large companies employing thousands of people. Importantly, these companies could still fail at some point or be acquired by older and larger companies; or they could stop growing and remain the same size indefinitely. Some of these firms, meanwhile, continue to generate positive rates of net job creation at older ages.

"During our study of Census data, we continually find that new and young firms drive economic growth and job creation," said Dane Stangler, senior analyst at the Kauffman Foundation and one of the study's authors. "Within this group of companies, moreover, there is a substantial set of rapidly growing businesses that account for a disproportionate share of net job creation."

Net job growth is marked by churn, the process by which jobs are created and destroyed by shifts in the economy. Each year new companies emerge to create lots of jobs and are succeeded in subsequent years by a new pool of firms. The net effect of this is to consistently add two million new jobs to the economy each year.

"This study sends an important message to policymakers that young firms need extra support in the early years of formation so they can grow into viable job creators," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation and one of the study's authors. "Sometimes a single barrier, such as limited access to credit for business growth, can mean the difference between survival and failure. We must create an environment that aids firm formation and growth if we are going to turn employment around."

Kauffman-funded researchers have highlighted the importance of firm age in previous unpublished papers. But this report, which can be downloaded at right, draws on a new set of data, a Special Tabulation conducted by the Census Bureau at the request of the Kauffman Foundation, calculated from the 2009 Business Dynamics Statistics (BDS). The BDS includes measures of business startups, establishment openings and closings, and establishment expansions and contractions in both the number of establishments and the number of jobs. The BDS data provide these new statistics on an annual basis, with classifications for the total U.S. private sector by broad industrial sector, firm size, firm age and state. Further information about the BDS can be found at http://www.ces.census.gov/index.php/bds/bds_home.

BusinessWeek: “Wiring America Up to Green Power” November 9, 2009

2009-11-05T15:33:10Z

To generate jobs and unleash as much as 300,000 megawatts worth of green power in the Western U.S., some policy makers want federal tax dollars to harness high-powered wind from the Dakotas and the intense Southwestern sun to create “green power super highways” for the whole U.S.

Yet, energy firms in the East Coast don’t want federal tax dollars to export jobs to the West, and many fear monopolies will be created from the initiative.

In BusinessWeek’s Nov. 9th issue, John Carey dissects the advantages and disadvantages of both sides. Take a look, and tell us: Should the U.S. subsidize “green power super highways” to transport wind and solar electricity?

Julie Curtin

Executive Vice President/Partner

Wiring America Up to Green Power

Should the U.S. subsidize vast high-voltage lines to transport wind and solar electricity to the big cities?

November 9, 2009

By John Carey

The wind howling over the Great Plains and the unrelenting Southwestern sun pack enough energy to power the entire U.S. with clean, renewable electricity. Trouble is, there's no way to get that power from the Dakotas or Nevada to America's big cities, many on the East Coast. As much as 300,000 megawatts worth of green power, enough to replace more than 300 coal-fired power plants, is being held on the shelf, as it were, because of the lack of transmission lines. This has sparked a movement to create "green power superhighways," as supporters call them. "A high-voltage transmission system will cost a tiny fraction of the money we spent on the highways and do a ton more good," argues Joseph L. Welch, CEO of ITC Holdings (ITC), a Novi (Mich.) transmission line developer.

The idea has powerful support in Washington. Senate Majority Leader Harry Reid (D-Nev.) sees an expanded power line system as key not only to tackling global warming but also to creating jobs in Nevada and the rest of the West. Now, as the Senate begins deliberation on its climate bill, advocates are pushing for a national transmission effort to be part of the legislation.

But is subsidized transmission really a good idea? Naysayers such as Ralph Izzo, CEO of Newark (N.J.) utility PSEG (PEG), argue that such a system would undermine the development of renewable power. His company is putting solar panels on rooftops and planning to build hundreds of wind turbines in the waters off the New Jersey coast. Those projects would no longer be economically feasible if cheaper wind power from the Dakotas came flooding into the Northeast on the new power lines. Creating a transmission system that's largely free to users, on the model of Interstate highways, "unfairly biases [people] against the construction of renewables in parts of the country closest to the load," Izzo complains.

Worse, from the perspective of both Eastern utility executives like Izzo and many environmentalists, is the fact that many of the power lines we build to transport wind energy are destined to travel through coal regions. An electrical wire doesn't care if electrons are "green" or "brown." And since utilities have every incentive to fill up wires to their capacity, any available cheap coal electricity would hop aboard for the trip to the Northeast. That would hurt local utilities—and increase carbon emissions. "There's a very high risk that new transmission development, however well-intentioned, will simply facilitate more of the same old conventional stuff," cautions Environmental Defense Fund (EDF) analyst Mark Brownstein.

Going Big vs. Going Small

At one level, this debate pits wind developers in the West, who need the transmission lines, against companies like Deepwater Wind in Hoboken. N.J., which is eyeing offshore wind resources on the East Coast. "I don't want federal tax dollars paying to export jobs to the West," says Deepwater Managing Director Jim Lanard. From a more elevated vantage, there's a split over the fundamental vision for America's electricity industry. Is it better to emphasize huge wind farms and solar power plants in remote regions where the winds are strongest and the sun the brightest? Or should investment first be directed toward boosting energy efficiency, thus cutting the need for power, and toward smaller-scale electricity generation by means of rooftop solar panels, offshore wind turbines, and other close-to-home efforts? For all the different players, "the stakes are enormous," says PSEG's Izzo.

Both sides in these debates acknowledge the status quo is not defensible. "Everyone pretty much agrees that the current transmission system is not built to do this job," says Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission. It's antiquated and inefficient, with 9% of all power generated getting lost in transmission (compared with 3.5% in other countries). Plus, mandates for renewable energy in most states and the coming carbon-emissions curbs mean the system must get greener and cleaner. As a result, billions of dollars of transmission upgrades must be made.

The central question is who picks up the tab for new wires. At one extreme are those who argue that since everyone ultimately will benefit, all electricity users should pay a little extra in their bills, just as everyone pays gas taxes to support highways. Yes, the $10 billion high-voltage transmission line ITC wants to build from the Great Plains to Chicago would be a huge boon to wind developers in the Dakotas, but "there are not enough people there to pay for it," says ITC's Welch. "Imagine if you asked them to pay for the Interstate highways." Those who oppose such massive subsidies, like the state of Massachusetts and Northeastern utilities, are looking out for parochial interests, argues Rob Gramlich, senior vice-president for public policy at the American Wind Energy Assn., which is pushing the green superhighway idea. The Eastern states want renewable jobs at home, even if the homegrown clean energy costs more, he says.

Not exactly, retorts PSEG's Izzo. He wants wind developers in the Great Plains or solar plants in Arizona to pay for connecting to the grid. That would make it more expensive to bring that electricity to the East Coast, reducing the chances it will undercut his own renewable projects. His position "is our economic self-interest," he admits, "but it is also aligned with the best interests of the country." Why? Because declining to broadly subsidize electricity transmission would enable local renewable efforts to bloom.

"We Need It All"

It's a difficult debate to resolve. "There are good arguments on both sides," says the EDF's Brownstein. What makes it even more challenging is that the U.S. can't meet the goals of a low-carbon electricity system unless it does everything simultaneously: energy efficiency, small-scale "distributed power" based on renewables, and big wind farms and solar plants. "It's a phony argument. We need it all," says Michael G. Morris, CEO of American Electric Power (AEP).

Sierra Club transmission expert Carl Zichella says the problem could be solved with careful planning. The answer would include making better use of the existing grid and promoting small-scale renewable generation, while also building whatever new power lines the nation needs the most. Zichella is working with a number of groups on proposals for a planning process that could better sort out competing interests on a regional basis. "This may be one of the most important things I have ever worked on," he says.

The New York Times: “Help Small Businesses Hire Again” November 3, 2009

2009-11-03T16:28:43Z

The worst is over. Claims of an economic recovery have been made after a 3.5 percent gain in GDP was revealed. So how can policy makers ensure this expansion lasts?

In today’s The New York Times “Op-Ed” section, Mark Zhandi, Chief Economist of Moody’s Economy.com, says that policy makers should focus their attention to helping small businesses hire again. Zhandi argues that they “have all but forgotten small businesses, finding it both easier and more visible to help large multinational firms.”

Andy Levine

President/Chief Creative Officer

The New York Times

Help Small Businesses Hire Again

By Mark Zandi

November 3, 2009

THE Great Recession is over. The solid 3.5 percent gain in gross domestic product during the third quarter proves that the longest, broadest and most severe American downturn since the 1930s has finally given way to recovery. It is no accident that the recession ended just as Washington’s fiscal stimulus program began providing its maximum impetus to the economy. If the financial crisis had been allowed to continue unchecked by aggressive government action, we would not yet have reached a turning point.

Still, the recovery remains fragile. No doubt, there will be moments in the coming months when the economy appears liable to falter again. In order to ensure that today’s tentative recovery becomes a lasting expansion, the government must now make it a priority to deal with employment — particularly among small businesses.

Small businesses are especially vital to job growth. Establishments with fewer than 20 employees account for 25 percent of all jobs, but these same-sized companies generated 40 percent of the job growth in the last economic expansion, from 2003 to 2007. In their recent efforts to recharge the economy, policy makers have all but forgotten small business, finding it both easier and more visible to help large multinational firms. Unfortunately, though, big business can’t provide the jobs needed to power the economy forward.

Businesses may not be shedding jobs as aggressively as they were earlier this year, but they still aren’t hiring. Unless they start doing so soon, consumers won’t have the wherewithal to keep spending, and the economy could slip back into recession. A cycle of falling wages and prices would likely begin, adding to the danger and giving the Fed and Congress fewer options and resources to respond.

It is conceivable that businesses will resume hiring soon. Employment growth historically lags a pickup in gross domestic product. But firms typically increase production by first increasing workers’ hours and adding temporary help. Neither has happened so far: working hours remain stuck at a record low of 33 hours a week, and the number of temporary jobs is still in decline (nearly a million have been lost in the past three years).

Small firms are now struggling to obtain credit; their principal lenders, small banks, are under intense pressure, and hundreds more are set to be taken over by the Federal Deposit Insurance Corporation. Credit card lenders, another key source of loans to small business, have aggressively raised their underwriting standards. Policy makers could offer quick relief by empowering the Small Business Administration to provide more credit.

The Small Business Administration guarantees bank loans to small businesses, but banks aren’t making very many because the loan’s interest rates are capped at less than 6 percent — not enough to compensate for their risks at a time when business bankruptcies are high and rising. Creditworthy small firms would gladly pay somewhat higher rates to obtain credit. Increasing the maximum size of an S.B.A. loan and temporarily raising the percentage of the loan guarantees to as high as 97.5 percent, from 90 percent, would also prompt much more lending.

To help small companies with cash flow, policy makers should also extend provisions in the current stimulus bill that allow money-losing firms to receive refunds of taxes paid on profits earned in previous years. (In return, they agree to pay higher taxes in the future.) Rules permitting such refunds are scheduled to expire at the end of this year; an extension through next year would provide quick cash for many firms that might otherwise be forced to close. Given the tens of thousands of bankruptcies in the works by businesses of all sizes, expanding this tax benefit to bigger firms than are now permitted in the stimulus package would be a plus. Allowing companies with as many as 250 employees to take advantage of the benefit could potentially help well more than a quarter-million firms.

Finally, the government could help minimize the number of new job losses by promoting work-share programs. Nothing damages morale at a company more than layoffs; the experience not only is crushing for those who lose their jobs, but also weighs on those who remain, including managers. Layoffs are also costly, given severance expenses and the costs of rehiring or training new employees when business picks up again. Seventeen states offer effective work-share programs. Under these arrangements, employers cut workers’ hours — not their jobs — and states make up a portion of workers’ lost wages with unemployment insurance payments. Congress should provide financing to expand such programs nationwide.

These policy steps would not be free, but they could be surprisingly economical. Most of the credit and cash provided by taxpayers up front would come back; loans would be repaid and businesses that are given tax refunds would pay higher taxes on their future profits. This kind of help from Washington could help sustain the new signs of recovery and firmly put the recession behind us.