Regional Economic Development

The world is on fire. What’s a board to do?

-Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor. He writes on economic development.

The roiling world economy is shaking up traditional ED board roles

As the long grind out of the economic malaise of 2008 continues for countries, regions and communities around the Board_room world, economic development practitioners and institutions find themselves faced with a burgeoning set of new on-the-ground normals.

Forces of economic good -- for example, the blistering pace of innovation in western countries creating new industries in months instead of decades (see Uber and Jet.com) -- are meeting those of prospective bad, such as stagnant wage growth in many bellwether global economies, which is causing unprecedented levels of political instability with wide-ranging effects on global business (see Brexit and the recent chartering of the Asia Infrastructure Investment Bank).

The simultaneous convergence of unprecedented economic opportunity and the weakening of U.S.-led, postwar institutions (per Brexit: the weakening of the EU; per Asia II Bank: the marginalization of the World Bank) means that the picture of what job and economic growth will look like in the future for communities and regions everywhere is more opaque than ever. This creates spectacular challenges for strategic planning and the assembly of accurate and reliable individual and organizational performance measures for economic developers everywhere.

Enter the new board of directors. For decades, boards of directors of local and regional economic development GoogleTrendsEconDev organizations for the most part served a handful of functions: offer credibility in the community for the organization; provide fiscal, legal and other organizational oversight; and hire and fire the chief executive. For a nice list of typical nonprofit1 board roles and responsibilities, click here.

The role of a board member on an economic development board differed in substance and responsibility not much from a board seat on any number of local or regional nonprofit boards. Hospital boards, library boards, tourism boards, etc. -- all generally, in years past, called on a similar set of skills in their board members. Content differed, but the role didn’t.

No longer. As nonprofits diversify their income streams and become increasingly organizationally sophisticated to take on more and more of the work once reserved for or led by government as public finances are squeezed (with mixed results), the complexity and breadth of mission has exploded for organizations in a number of nonprofit sectors, including social services, health care -- and economic development. 

For some industries, the expansion of services by nonprofits has been driven by demographics and the economy -- health care activity has been and is projected to continue to tick upward as America’s population gets grayer faster, and many social service organizations have expanded to serve a growing needy population in the wake of the recession. This expansion of revenues and programmatic offerings places fresh demands on the boards that oversee nonprofits in growth sectors -- in most cases creating demand for more experienced and capable board members.

 

Trickle-down challenges; from global headline to the ED board room

While the nonprofit economic development sector does not appear to be measurably growing nationwide (the industry has an identity crisis on its hands, but that’s another blog), the job of a board member on any local or regional economic development organization of any complexity has become immeasurably more challenging -- and important. 

We noted earlier that as the world’s economic order roils in a period of unprecedented resetting, the faraway challenges and opportunities we’ve become accustomed to reading about in The Wall Street Journal or The Economist are all of a sudden before us, locally and regionally. Consider:

  • The unprecedented pace of merger and acquisition activity in the marketplace. Driven by ready access to capital, rock-bottom interest rates and an increasingly impatient investor class starved for yield following a near decade of middling market returns, 2015 was the biggest year for M&A in history, with more than $4.3 trillion in activity in the sector. Due in part to a federal clampdown on corporate inversions, it is likely that 2016 M&A activity will not outpace 2015, but it still likely will end up as another of the strongest years ever.
  • The most uncertain trade environment in at least a generation. The U.S. alone faces a frightening roster of problems on the trade front today -- a stubbornly strong dollar; political and economic near-chaos in the Eurozone, a historic trade partner that is today historically weak; the very real possibility of Congress failing to act on the Trans-Pacific Partnership trade deal, which might be our last chance to prevent China from rewriting the rules of trade in Southeast Asia for a generation; and presidential nominees from both major political parties who are both proudly anti-trade2.  
  • A completely unworkable immigration policy. Dan Culhane, CEO of the Ames Chamber, crafted a great piece last year on the lunacy of an H1-B immigration policy that helps ensure that virtually all of the 4,800 foreign-born students who graduate from Iowa State University annually -- many with degrees in a STEM field -- will leave the country after graduation. In a state with enormous supply/demand imbalances for jobs in the STEM field, the deadlock in Congress on immigration inflicts more damage every day that goes by.

Now consider how the preceding three major national challenges affect your community’s ability to grow and prosper today in Central Iowa. Each one does. Every day.

 

No such thing as a free lunch

And so, local and regional economic development organizations are turning to their boards of directors not only for legitimacy, oversight and their money. We are increasingly turning to them to contribute a new way of thinking to the most complicated and challenging market road map any economic developer has ever seen.

Successful economic development boards are not just hoarding CEOs around their board tables just for the sake of it, as in years past; they are diversifying their board makeups to include executives in a diversity of industries and specialties -- including executives in marketing, tax, finance, supply chain, public policy and entrepreneurs. The challenges local and regional economies face are diverse, global and more complex than ever; boards must begin to reflect the reality. No longer can a board member of a successful economic development organization expect to show up monthly for the free lunch and nothing else. We're asking members to work.

By asking more diverse boards to actively help interpret the forces that are affecting wealth creation and quality of place in their communities to solve problems and help develop strategic solutions, successful economic development organizations today are acknowledging that the world is not the same place it was in 2008 and never will be again. And neither will their boards.

______________________

1In referencing ‘nonprofit’ organizations, I include both fully privately funded organizations and those that are considered public-private -- organizations that receive some funding from the public sector.

2Read this op-ed by the two co-chairs of the Greater Des Moines Partnership’s International Trade Council for more on what needs to change in our immigration system to benefit states like Iowa.

 

Contact Brent Willett:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

 

The importance of being earnest

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor. He writes on economic development.

In 90% of life, being humble is a good thing. In economic development, it can be a death sentence.

“In matters of grave importance, style, not sincerity, is the vital thing.” ― Oscar Wilde, The Importance of Being Earnest

We’re Iowans. We’re nice. How do you do? 

So starts the biggest uphill battle an economic developer can hope to never face. I wrote recently about the increasing role of capacity building in modern economic development — that successful practitioners today are spending less time selling and more time improving their product. But while there is a pronounced trend toward asset building Nice_guy at the expense of traditional cold call/trade show/road warrior selling by local and regional economic developers, transactional acumen remains a critical skill for all of us. What makes the sales-ish process in economic development perhaps a bit unique is the fact that practitioners must rely on the collective will of our community colleagues — including both those who are involved in projects day-to-day (like city staff and real estate developers) and everyday people who are often a great source of leads — to play as big a role in making the sale as any one economic developer. And what makes the sales process uniquely challenging in a state full of humble, nose-to-the-grindstone people, like Iowa, is the fact that we’ve got a potential sales force (everyday citizens) who hate to sell.

Aww shucks.

We generate more power from renewable resources than any state in the country (which is huge for many heavy-power tech projects), but it’s no big deal; just ask an Iowan. 

We produce more corn than any other state and most nations (a huge separator for the growing roster of major-user biomaterial producer projects), but that’s just what we do. Ask an Iowan.

We invented the digital computer in Ames, Iowa! Important? Sure! Brag about it a little? Bad form; ask an Iowan.

It’s not that Iowans aren’t proud of our state and its accomplishments; it’s that we are, owing to our German, Norwegian and Quaker roots, a work-is-a-virtue bunch adhering to a societal construct that deems self-promotion and immodesty as taboo and to be avoided. For more on this and a fascinating glimpse at what makes Midwesterners and 11 other regional American populaces tick, read Colin Woodard’s American Nations. You can find my review of the book here.

In Iowa we’re modest and unassuming by nature, and in nine out of 10 walks of life, that’s a great personal or organizational attribute. But in economic development, if not properly managed and mitigated, it can be a death sentence. Our collective ability to compete for capital, talent and innovation in a global economy churning at a blistering pace relies heavily upon our ability — and willingness — to discover, organize and effectively promote our strengths as a state and region.

CXR to the rescue

While I would argue that the decade-long trend toward an increasingly data-intensive site selection process wherein assets and good ideas trump salesmanship is an encouraging trend for the promotionally challenged (that’s us), it remains that, fundamentally, economic development is an enterprise sales endeavor. To make the point again, one of the things that discern the work of economic development from sales in a traditional sense is the fact that to do it well and be successful, economic development practitioners must rely on the collective will of the constituents in the region to promote themselves. The Cultivation Corridor and any other economic development organization in the region desperately needs for Central Iowans to continue the citizen trend we really started to see emerge with the rollout of Capital Crossroads some years ago: a pride in authorship for the spectacular story of growth and prosperity our region has been writing for a decade.

Power of the people

One of the things I’m asked most is where leads for new projects come from. While it’s true that a significant proportion of leads for economic development groups like the Cultivation Corridor come from traditional sources like consultant relationships and trade show networking, often our most actionable and qualified leads come from within the region. They come from existing companies exploring joint ventures with another company, from individuals who on a business trip read in the regional newspaper that an existing company was being yanked around on permits for an expansion, from a local supply chain logistics consultant who identifies a gaping hole in the middle of the country for a particular 3PL service offering. What translates these scenarios from latency to project action is the willingness of the applicable discoverer of information to ask him- or herself an important question: “Why not Iowa?”

Each of the preceding three scenarios is true, and each translated into a jobs creation project in my career. The power of our local stakeholders (especially you, if you’re actually still reading this 800 words in) to deliver ideas that translate into opportunity for our region and state is enormous — and critical to our collective success. So be nice, but keep a bit of a prideful edge, will you?

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett LinkedIn.com/in/brentwillett

MidAmerican changes the game

With its latest announcement, MidAmerican Energy is transforming Iowa’s competitive position for major-energy economic development projects. 

- Brent Willett, CEcD is executive director of Iowa's Cultivation Corridor.  Follow him at @brent_willett.

Some individual and institutional stakeholders in today’s job creation landscape cling to a bygone [or never-was, more accurately] era’s definition of what economic Wind_turbine development is, or should be -- some grainy picture of a couple of company executives, joined by the local economic developer, gazing out at a corn field, talking about building ‘a big new plant in town.'

Fortunately, today most of us know that job creation projects rarely come in big, one-off packages with job creation figures in the multiple hundreds. Instead, they tend to come in batches of smaller job creation projects, strung together.

We’re not chasing smokestacks anymore.

Corporate facilities projects everywhere are more capital-intensive than ever as companies drive enormous investment into technology and, in many cases, boast modest job creation numbers.  This is not woe-is-us stuff; quite the contrary.  Economic developers and their stakeholders who have adapted to this new reality can be as successful as ever, delivering new jobs and tax base into their communities at strong rates -- if we acknowledge that economic development has shifted, by and large, from a sales-based endeavor to a capacity-building one.

The end-product landscape has changed from singular, large scale job creation projects to more nimble, technology-MidAm1intensive projects as a product of a global economy changing at breathtaking pace. Successful states and regions, and their economic development partners, have changed, too.

In the past, the working definition of economic development was the marketing of a community to a company in a competitive arena, kind of gladiator style [“Children gather round!  No retreat!  No surrender!”- King Leonidas]. Communities and states competed with dozens, even scores of their counterparts in what amounted to an enterprise sales process. Meeting basic requirements for a project like land, workforce and infrastructure, got you some consideration.

Today, the site selection process for companies has become increasingly global and intensely technology-driven. It’s no longer enough for a region or community to be effective at selling itself to corporate suitors. Technology has stripped out virtually all of the opportunity for a region or community to smooth out its deficiencies with effective salesmanship [“This is Sparta!”]. Today, many times we do not know we are under consideration for projects until we are a finalist community.

Companies have MidAm2 shorter timelines and less capital budgeted for the site selection process, which means site location professionals are conducting perhaps 80 percent of the process digitally.

So in the face of this new[ish] reality, what does a region and state that is truly globally competitive for projects do?  It spends less time selling and more time building capacity, honing and building its assets to align with the demands of global business.

That’s why MidAmerican Energy's announcement today that it will invest $3.6 billion [the largest capital investment ever announced in Iowa history] to grow its wind generation capacity to ultimately represent 85 percent of its total generation capacity in the coming years is exceptionally important to the future of Central Iowa and to other regions in the company’s service territory. Already more than half of the energy MidAmerican produces or will produce it derives from wind- making it arguably the greenest major energy utility in the country. Eighty-five percent is an incredible leap forward.

MidAmerican’s ability to deliver increasingly renewable energy to heavy-load customers is a distinct strategic advantage to every region and community it serves.  One need look no further than the generational investments of Facebook in Altoona [more than $1 billion] and Microsoft in West Des Moines [$2 billion] to prove out this theorem; both Facebook and Microsoft have aggressive corporate strategic priorities which demand that significant proportions of the power which feed their massive data centers be renewable. MidAmerican’s ability to ultimately deliver 100 percent renewable power to Facebook’s data center campus in Altoona has been cited by the company as a major determinative factor in choosing Iowa over other parts of the country.

With its latest announcement, MidAmerican is transforming Iowa’s competitive position for major-energy projects.

Facebook and Microsoft are not alone. Frustrated with the political intractability relating to addressing climate change, companies across the globe are taking the matter into their own hands and rolling out corporate sustainability stratagems which demand increasingly higher proportions of renewable energy to feed new and existing facilities and assets.

The move to shift its energy generation footprint so dramatically toward renewables provides what amounts to an immediate upgrade to the competitive position of MidAmerican-served communities throughout the region.

And it offers economic developers throughout our region a tremendously effective new tool in the battle for the expected proliferation of major power-load projects which will prioritize renewable energy to be sited in the United States in the coming years.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett /LinkedIn.com/in/brentwillett

The trouble with winning

- Brent Willett, CEcD is executive director of Iowa's Cultivation Corridor.  Follow him at @brent_willett.

 

When Alfred Nobel’s brother died in 1888, French newspapers confused the two and Nobel, the inventor of dynamite, had the befuddling experience of reading his own obituary. The headline: “The merchant of death is dead.”

Central Iowa economic development and community leaders certainly did not feel they were reading their own economic obituary when news broke in March that 2016.04.07_pic1 DuPont and Dow would locate a Global Business Center of its new agriculture business following a merger of giants, but they could be excused for looking on with bewilderment at the initially subdued tone of local and statewide news coverage of the announcement. 

Despite the fact that the DowDuPont announcement represented an enormous economic slam dunk for the region and the state at large- including a commitment to $500 million in new R&D investment, the likely retention of thousands of jobs and a commitment to between 250 and 500 high-quality R&D positions in the Corridor- many local media outlets reported the announcement as a bit of a disappointment, somehow a loss. 

The discordance in coverage tone between parts of the Des Moines media and that of Indianapolis -- which was simultaneously announced as the second site for a similar Global Business Center -- was notable. In a larger metro area where the economic impact of such a project is proportionately less, the Indy media struck a decidedly more positive initial tone.

Why? I don’t know; maybe it was the expectations game. The fact that Iowa scrupulously went public first with its incentives package for the project while Indiana has declined to announce theirs publicly meant that a level of anticipation was baked into the announcement in Iowa. Expectations are tremendously difficult to manage ahead of a project announcement which has such wide ranging [and, by the way, hugely positive] impacts on a region, its institutions and its residents. The project itself was unique because it was public knowledge that Dow and DuPont committed to announce the geographic makeup of its to-be-spun-out ag company as soon as it could in a principled nod to its employees and their communities.

I’m not here to litigate the press tone; nobody’s feelings got hurt and after the initial flash of plodding, woe-is-us coverage, local media today is decidedly positive about an enormously positive project announcement for Central Iowa.  And for good reason.

Setting aside the fact that Johnston will retain one of the largest and most advanced agricultural R&D campuses in the known universe and the exceptionally high quality jobs that keep it humming, $500 million in new R&D investment is one of the largest single R&D investments announced in state history. 

Five hundred million dollars! That’s 3.5 Wells Fargo Arenas [inflation adjusted 2005 dollars], or 2.5 times the cost of proposed $200M Des Moines International Airport terminal, or fully to 7 percent of the value of the entire state of Iowa’s 2015 budget. It’s one of the largest private capital announcements in recent years in Iowa; an enormous commitment from what will emerge as the largest ag company in the world once Dow and DuPont merge and is a clear signal to the rest of the world that the Cultivation Corridor is a global center for investment, talent and research in the agbiosciences.

Central Iowa was not selected to house the headquarters of the ag company, which will be in Wilmington, Delaware, home to DuPont for more than 200 years, but what we were selected for is incredibly consequential to the future growth of our region. The retention of the DuPont Pioneer footprint and the larger business to be spun from the merger represents the achievement of an important objective for economic development and community leaders throughout the Corridor: to retain R&D jobs as a long-term growth center for the company. In addition to the retained R&D jobs, the new Global Business Center will maintain leadership of business lines, sales/marketing, supply chain and business support positions. 

We all should be immeasurably proud of the coordinated recruitment work product of the Greater Des Moines Partnership, City of Johnston, IEDA, Gov. Branstad’s office, Sen. Grassley’s office, the Corridor, Polk County and everyone at Pioneer, which ultimately resulted in a highly competitive, aggressive bid for the project. DowDuPont has a strong future in Central Iowa.

 

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

Job creation fuel: R&D policy move is important for Iowa

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor

Congressional leaders reached an agreement on federal spending and avoided a government shutdown at the end of last year when omnibus appropriations and taxIowa_petri_dish bills were signed by President Obama on Dec. 18. Buried in the discussion around the trillion-dollar agreement are important boosts to funding for many science and economic development initiatives important to Iowa, as well as an increase in credits for small and high-tech businesses.

The 12 bills approved under the omnibus package will fund the government at $1.15 trillion in discretionary funds through the end of the 2016 fiscal year. Separate legislation, the Protecting Americans from Tax Hikes Act of 2015 (PATH) makes over 20 key tax provisions permanent while extending and enhancing others.

You’re telling me this why?

The important news for job creation in Iowa [and the country] is that the PATH Act finally makes the federal R&D tax credit permanent. This is a big deal for American research and development -- activities that have contributed to our country’s emergence as the global center of commerce and innovation in the past hundred years. 

Iowa’s Research Activities Tax Credit is more or less is indexed to the federal credit -- meaning if your business’ R&D expenditure activities qualify for the federal credit, those activities more than likely qualify your company for the state credit. Creating certainty around the federal program offers a boost to the competitiveness of states like Iowa with well-designed state R&D credit programs which work in concert with the federal programs. 

The federal R&D program also was expanded to pre-tax startup companies. It will allow them to use the R&D credit against their payroll tax liability. This is important to the sorts of innovative, small startups we seek to cultivate in Iowa who are pre-revenue [which creates no tax liability with which to access a tax credit], yet spend large sums on R&D. To qualify for this treatment, the company must be no more than 5 years old and it must have revenues below $5 million. The credit is capped at $250,000 per year.   

Businesses with $50 million or less in gross receipts may use the federal credit against alternative minimum tax liability, and certain businesses with $5 million or less in gross receipts will now be able to apply the credit against payroll taxes. These changes are also intended to benefit smaller businesses and startups, which were unable to take advantage of the credit in the past. In 2010, Iowa’s 260,000 businesses averaged about $685,000 in gross receipts.

Federal support for R&D: past and present

The R&D tax credit was first enacted in 1981 at a rate of 25 percent in an effort to encourage private sector investment in R&D to act as a salve to the decline in private R&D investment that began in the 1960s. Bill writers and leading economists of the day believed that this decline was to blame for the slowdown in U.S. productivity R&D_graphic1 growth and the unexpected loss of U.S. industrial competiveness in the 1970s. The program has been reworked and tweaked every couple of years since.

There are four separate components of today’s federal R&D tax credit, but the two most commonly used are the “Regular” research credit and the “Alternative Simplified” credit, both of which offer a tax break equal to a percentage of spending on “qualified research expenses.” The regular method offers a credit of up to 20 percent and the alternative simplified method offers a credit of up to 14 percent.

Qualified research expenses include wages and salaries, cost of equipment and supplies. To qualify, expenses must be experimental for the purpose of discovering information that is technological in nature and used to develop a new product, process, computer software technique, formula or invention that is to be leased, licensed or used by the company.

What took so long?  J/K; it’s Congress.

Why is the R&D tax credit only now being made permanent? At least 15 times in the past, the R&D credit was allowed to expire by Congress and was retroactively extended. The main issue is/was [drumroll…] cost; the program carries a price tag of almost $180 billion. Despite the perception of steep cost, both political parties and economists generally agree that there is economic justification for subsidizing R&D spending; studies have shown that R&D spending not only benefits the private firm, but society as a whole in terms of return from innovation.  

Although until now the federal R&D program has existed in a state of uncertainty, Iowa’s R&D program has remained steadfast since its creation over a decade ago.

What to know: Iowa program meets fed program

Iowa’s Research Activities Credit has several important ties to the federal credit. A company must meet the qualifications of the federal R&D tax credit in order to be eligible for the credit in Iowa. The credits are also similar in the fact that the Iowa credit can be calculated using either the regular or alternative simplified credit R&D_graphic2 method. Also, the definition of qualified research expenditures are the same in both cases, including wages, supplies and other expenses used to discover information that is technical in nature and aimed at the development of a new product. Iowa is one of only a few states to offer a refundable research activities credit.

Iowa’s program offers an incremental credit, meaning that only research expenditures which exceed a base amount are eligible for the credit. The Iowa regular credit is 6.5 percent of the qualifying research expenditures that exceed a base amount or 50 percent of qualifying research expenditures.

A total of $57,147,847 in Research Activities Tax Credits was claimed by Iowa companies and individuals between Jan. 1 and Dec. 31, 2015, according to a recently-released report from the Iowa Department of Revenue. A total of $44,428,444 in tax credit refunds was paid last year – representing about 77.7 percent of the total research activities tax credit claims made. In total, 186 companies received approximately $42 million in tax credit refunds last year. 

The media throws shade on R&D all the time.  It’s not helpful.

Despite the decisive importance of attracting innovation investment to any state attempting to compete in the 21st century knowledge economy,  sustained, bewildering media fire trained on the R&D program in Iowa has become the norm. The coverage [it’s been going on for years], fortunately, has not bent the will of the people of this state and our representatives. And good thing, too; the message sent by a state which pulls back its R&D programming in the face of rare Congressional action to strengthen the federal program would be devastating to the efforts of communities across Iowa working to encourage innovation and the jobs that come with it.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

Iowa's next economic frontier

 - Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.

Fifty thousand jobs.

That’s what is projected to be created nationally in the biorenewable chemicals industry within the next five years, BiochemFullReport_title_pageaccording to “Bio-Based Chemicals: The Iowa Opportunity”, a new report commissioned by the Cultivation Corridor with support from the Iowa Biotechnology Association released earlier this month.  What’s more, the paper argues a significant segment of those jobs could be created right here in Iowa. But they don’t have to be.   Back to that in a minute.

The paper was researched and written by Dr. Dermot Hayes, the Pioneer Hi-Bred International Chair in Agribusiness, professor of economics and professor of finance at Iowa State University; Dr. Brent Shanks, an Anson Marston Distinguished Professor in Engineering and the Steffenson Chair in Chemical and Biological Engineering at ISU; and Dr. Jill Euken, deputy director of the Bioeconomy Institute at ISU.

The report’s findings are striking.  Thanks to the rich supply of Iowa biomass suitable as feedstock for biorenewable chemical production, access to a foundational network of over 50 ethanol and biodiesel production facilities across the state, and nascent biorenewable chemical investment opportunities before us today, Iowa is better-positioned than most domestic competitors to capitalize on the next frontier of bioprocessing in the United States.

Despite Iowa’s obviously discernable advantages in the budding biochem space, however, the Hayes report suggests that the absence of a statewide economic development incentive tailored to address the unique needs of this budding industry stands as a serious impediment to the state’s potential to emerge as a center of gravity for biorenewable chemical investment and job creation in the coming years. The report reminds that the last bioeconomic boom Iowa saw- that of the ethanol industry - did not have to happen here and suggests that it was targeted state incentives which are directly attributable to the decision to choose Iowa over other Midwest states by more than one-third of the ethanol industry. The same dynamic, the report suggests, exists today relative to the biorenewable chemical industry. 

About nine months ago, I blogged about the tremendous opportunity seen in a coming transition from petroleum-based feedstocks to bio-based feedstocks for some of the world’s highest-value chemicals [Why Iowa needs to think like an oil company; May 27, 2015] and how important it was that Iowa leverage its virtually unmatched domestic competitive position to become the destination of choice for biochemical investment in the same way we became the preferred choice for biofuels investment.  I wrote the piece as the Iowa Legislature was debating a proposal to create an economic development tax credit to help entice the industry to choose Iowa, just as we did as a state more than a decade ago to entice biofuels investment. The measure failed [for a quick analysis of what happened, click here and scroll halfway down].

Part of the urgency I suggested we had as a state in 2015 to be a first mover was the fact that other states had begun talking about creating their own biorenewable chemical economic development legislation, and it behooved Iowa to be the first. With the legislature’s failure to act in 2015, the first mover window closed; Minnesota passed the nation’s first biochem legislation last year. Despite that, the 86th Iowa General Assembly has an opportunity before it in 2016 to enact what would be the country’s strongest economic development incentive to help grow the biorenewable chemical industry here, where it belongs.

What’s different this year than last? Thanks to the Hayes report, we’ve got the data to support the assertion that the biochemical industry holds exceptional promise for job creation in our state, much as the biofuels industry did and continues to do.  Among the report’s findings:

  • First-generation biofuels have been important economic drivers for the state of Iowa. Ethanol production alone in Iowa accounts for $2.23 billion per year in state GDP and supports more than 8,693 jobs. However, due to a new Renewable Fuel Standard which rolls back ethanol blend requirements to pre-2007 levels and ongoing feedstock limitations for biodiesel, alternative value-added bioproducts are critical to the future growth of the biomanufacturing industry in Iowa. 
  • Project opportunity exists today. At least five potential bio-based chemical production projects were identified through an industry interview process to as part of the report.  Representatives of each project indicated a biorenewable chemical production tax credit would be fundamental to the ultimate location decision in or outside Iowa.
  • Iowa has competitive advantages in several subfields of the emerging biorenewable chemicals industry. This advantage arises from
    • The availability of byproducts such as glycerin and distillers oils from first-generation biofuels facilities
    • The existence of several underutilized wet mills in Iowa, or close to Iowa
    • The fact that first-generation biofuels can themselves be upgraded into higher valued chemicals.
  • Iowa’s research and technological infrastructure in biorenewable chemicals and materials is second to none. The National Science Foundation Engineering Research Center for Biorenewable Chemicals (CBiRC) led by ISU is the only competitively awarded federal research center solely dedicated to the development of biobased chemicals. Key capital infrastructure needed for biobased chemical development exists at ISU through the BioCentury Research Farm and the Bioeconomy Institute and the University of Iowa through the Center for Biocatalysis and Bioprocessing (CBB). The collective capabilities of these entities for enabling biobased chemicals exceeds those available in any other states.
  • The global petrochemical industry developed in clusters of close proximity to feedstock sources: oil refineries. The bio-based chemicals industry will develop in a similar manner - the economics of agglomeration suggests that industrial biomanufacturing clusters will develop from established biomanufacturing sites rather than from new green field sites. Iowa has more deployed biomanufacturing capital assets than any other state. 

What now, you say?  Read the report [or at least the executive summary]. Contact your legislator. Let him or her know how important it is that we not let another year go by without enacting the biorenewable chemical tax credit.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

Punching above our weight class

-- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor. Follow him @brent_willett.

Boxing_gloves

In college for a time, I held a straight-commission job selling water softener systems door-to-door. I knew that while my particular product may have been top-of-the-line, it was also spectacularly overpriced; many systems you could buy off the shelf at a hardware store for a fraction of the price could do the job nearly as well.

This in mind, I initially targeted the wealthiest neighborhoods in town where, presumably, the highest concentration of customers with the financial wherewithal to buy my expensive product lived.  I didn’t sell a single unit. Frustrated, I readjusted my strategy to target middle-income neighborhoods.

It worked. Once I made a handful of sales in those neighborhoods, often by applying steep discount allowances I had been granted to generate initial sales activity, I moved back to the wealthier neighborhoods. With anecdotes in hand of families of more modest means purchasing the very same system, my sales took off. 

I had learned early a critical lesson: to win, sometimes you’ve got make the prize holder uncomfortable. And then muscle your way into the ring and take it.

Competition is fundamental to industry -- from banking to automotive; journalism to engineering; IT to agriculture.  Economic development, of course, is no different. Engaged in what amounts to enterprise sales with a state, region or community and its qualities as their product, economic developers like those in Central Iowa find themselves regularly engaged in fierce, pitched competitive battles with their counterparts in other countries, states and communities for job creation projects. 

The makeup of our region’s competition for projects is increasingly intimidating and fierce, and that’s a good thing.  Visit with any of the scores of men and women who are professionally engaged in attracting new investment and jobs to their communities in Central Iowa and they will tell you that overwhelmingly, we find ourselves competing with regions and metros much larger than the 900,000-person Cultivation Corridor region. The Central Iowa of 2016 is competing with New York, Indianapolis and Hartford for insurance projects; with Northern California for technology projects; with St. Louis for plant science projects; with Kansas City for animal health projects; with Chicago for publishing and food processing projects; the list goes on. 

Indian writer Toba Beta once said “[j]ealousy is love in competition.” A time ago, the Central Iowa region’s economic developers may have found themselves, hands cupped around eyes, gazing into the proverbial storefront window of major job creation projects as much larger metro areas fought ferociously among themselves for them; Central Iowa not invited to the party.

But success begets success, and as major, brand name projects like Facebook and Athene and Workiva have chosen the region and top national rankings have poured in in the last half decade or so, Central Iowa’s profile among the national site location consultant community and broader corporate sector has grown appreciably.

The result has been new opportunities to compete for projects with major American and international cities which our region in years past would never have been invited to compete for. It’s the functional equivalent of being invited to sit at the adult’s table at Thanksgiving after years of meals around a card table in the living room.

The economic development team at the Greater Des Moines Partnership -- the region’s largest economic development operation -- will tell you that in many more cases than not, Greater Des Moines is the smallest metro in the mix for the projects they are working. The team at the Ames Economic Development Commission will tell you the same thing, as will many other agencies in the region. This is a great compliment and fine testament to the progress the region and its practitioners have made in the last decade.

We’re punching above our weight class in Central Iowa, and we’re landing some punches.

 

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

Where are all the economic development majors?

- Brent Willett, CEcD, is executive director of Iowa’s Cultivation Corridor.  Follow him @brent_willett.

I recently had the opportunity to speak to a college class taking a course on economic development. Afterward, I asked the professor what other courses in the field were available to students at the institution. He told me there aren't any; this was it.

Hurt my feelings a little bit. Mortar_board_word_map

When I attended college in the early 2000s, there were few if any undergraduate economic development major programs in the U.S.  Today, as universities and colleges race to create new curricula to entice students with more post-secondary choices than ever, a handful of non-online undergrad programs have emerged. As far as the Internet tells me, it’s still less than 25 programs.  Graduate programs are a bit more prevalent, but those dedicated to economic development specifically and not, for example, urban and regional planning, remain mostly scarce. 

Why so few programs dedicated to an industry which is more and more in demand of qualified professional leaders?  At first glance, we might blame the relative youth of the economic development industry. (I’ve written in this space about the 1970s origins of the economic development profession.)  But dozens, maybe hundreds of industries, have spawned wide-ranging academic programs in the past 40 years -- from personal computing to nanotechnology. So why so few programs dedicated to a profession which in the U.S. alone employs more than 500,000?

To be sure, half a million or so practitioners in a given profession does not a major make, but as global competition for investment and job creation in every community in the country grows, demand for qualified economic developers is expected to rise. Currently, the International Economic Development Council’s [IEDC] Certified Economic Developer [CEcD] designation stands as the recognized standard for certification of professional economic developers -- CEcDs must possess at least five years of experience and proceed through a four-year training program via either the University of Oklahoma Economic Development Institute or a sister program administered by IEDC before sitting for an exam and oral test. 

Will enough demand for entry-level economic development professionals motivate more undergraduate economic development major programs in American colleges and universities? Today the transient nature of so many economic development jobs -- especially in rural areas -- places pressure on local boards and commissions to simply find someone professionally capable who can learn on the job rather than a candidate with specific pedagogic qualifications. While more young people entering the workforce with economic development degrees may, in theory, increase the supply for rural economic development organizations to choose their leaders and staff from, I’m reminded of the well-chronicled challenges that rural communities have in recruiting other professionals like dentists and attorneys. I’m not sure that more degree-granting in the field would solve the staffing challenges these organizations face.

It’s a struggle the industry has dealt with for many years -- the multiplicity of academic and professional backgrounds that economic developers come from is huge and it contributes to structural challenges within the industry like leadership turnover, inconsistent professional development design and public policy deserts.  Certainly, a logical undergraduate and post-graduate academic path would contribute to an increased level of skillset consistency and a general improvement of the profession’s visibility. 

The University of Iowa offers a Music Therapy certification as part of its Bachelor of Music degree program.  Music therapists do incredible work; I have personally witnessed the impact these professionals have on the ailing and recovering. According to the Iowa Chapter of Music Therapy, there are 90 board certified music therapists in Iowa.

There are no economic developer undergraduate programs or certifications at Iowa colleges or universities. The Professional Developers of Iowa- the state’s largest economic development trade group- has more than 400 members and estimates suggest there are more than 2,000 practicing economic developers in Iowa.

How do we reconcile this? First, by resisting drawing any kind of direct comparison; music therapists and economic developers address vastly different issues in their communities. But the fact remains that we have in Iowa a profession with no undergraduate path with 20 times more practitioners than another with such a path. Such a dynamic suggests to economic developers in Iowa and beyond that work remains to be done to establish the sort of professional legitimacy and post-secondary instructional urgency necessary to inspire institutions of higher education to consider degree or certificate program offerings in the field.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

Economic development has an image problem

Brent Willett, CEcD, is executive director of Iowa’s Cultivation Corridor.  Follow him @brent_willett. 

Modern economic development - which tracks its origins to the formation of local industrial recruitment organizations in response to the economic downturn of the late 1970s - has always seen its practitioners grapple with persistent public controversy and Carrot_stick skepticism regarding the negotiation and application of publicly-funded incentives to secure jobs projects for communities. Economic developers have struggled since the early days of the profession to explain the role incentives play in the recruitment of human and financial capital. 

Incentives play a fundamental role in securing job- and wealth-creation projects for communities in every corner of this country and in many countries of the world. This is pure, unadulterated fact.

Public sector incentives are as principal to the decision-making process for most projects of size as is real estate and talent.  There is plenty to discuss about whether this should be the case, or whether some federal edict ought to materialize prohibiting states and communities from competing with each other with incentives - something some policy makers and lots of armchair quarterbacks in the media are calling for - but that’s a topic for another blog.  I will note what’s glaringly obvious: there is no national legislative cavalry coming.  Such a decree would be impossible to implement and enforce and would create an enormous macroeconomic disadvantage for the United States in a global economy.

Incentives used to get good deal done

Incentives are not boogeymen. Most economic developers subscribe to the sentiment that public financial inducements are designed to get a good deal done, not make a bad deal good. Put another way, incentives, when applied judiciously and as the result of a vigorous and transparent negotiation, have as central and appropriate a role in our public system of government as any basic government service. Incentives play a critical role in ensuring that millions of dollars of future tax base and thousands of jobs matriculate in our state or country rather than another, but the economic development profession has generally done a poor job of communicating this.  As a result, the public, fueled by a general distrust in government and distaste for corporate America, has grown increasingly indignant about the use of incentives to grow and retain jobs and capital in states like Iowa. Such indignation, and the predictable political posturing on the part of elected officials it spawns, poses real threats to future economic growth in our state and nation.

Judicious negotiators of incentives in Iowa and around the country have an image problem which is threefold. 

 

Impersonal impact of project

First, we’ve grown accustomed in economic development circles to communicating the substance of incentivized projects in banal, aggregate terms that mean nothing to the average person. When an economic developer or organization reports that a local employer has agreed to a $20 million expansion which will create 35 new jobs, it’s often a single-day news story, thanks to the two-dimensional nature of how the project’s human and financial community impact is framed [or ignored].  We’ve got to get better at personalizing these projects, communicating the human impact of each new job and what it means to your family and your community - a job which may offer a struggling single parent or determined ex-offender an opportunity to improve their lot in life.

Because most economic developers have our professional performance, at least in part, evaluated based on aggregate job and capital creation, we’ve convinced ourselves that those blocky cumulative figures - instead of broadly accessible accounts of how these projects improve lives in our communities - are what matter to citizens wearily observing the use of public funds to grow business in Iowa communities. Too often we report to the public through the lens of our performance metrics exclusively when the qualitative, human impact of our work is the most compelling.

Incentives fundamental to competition for projects

Second, we’ve been married to the ‘need-based’ narrative in incentives negotiation for far too long. While the concept of ‘need’ in negotiating incentives is sound - it suggests that public sector decision-makers only agree to incentivize a project to the absolute minimum extent necessary to vanquish our opponents and secure the project for our community and state - the word is a problem. Major companies do not, in a semantic sense, ‘need’ the financial allocations made available to them for most projects. The balance sheets of Fortune 500 companies do not see an impact as the result of, for example, a package of tax credits or forgivable loans from a state or community. What’s needed is an effective mechanism to quantitatively communicate the central role incentives play in adjudicating a complex sales process and leveling the competitive playing field upon which job and wealth creation projects are fought for. 

Let’s educate the public on the fact that in lieu of not-going-to-happen federal intervention, public incentives are a fundamental competitive component of any major project negotiation. We should find new ways to demonstrate this - to drive home the fact that failure to maintain and enhance a robust competitive incentives posture in Iowa is comparable with a business failing to reinvest in its own people and product. And when that happens, the business shrinks and dies.

We need to educate the public about the competitive field our communities are playing on for jobs projects and communicate the fact with more depth than our pat answer that ‘in a perfect world, we wouldn’t have to use incentives.’  Of course not. I’ve never lived in a perfect world; have you?  We have an opportunity to elevate the discussion in Iowa and around the country to an informed one which considers the basic role incentives play in business decision-making today.

Incentives aren't all cash

Finally, economic developers like me have turned in woeful performances in clearly communicating the complexity of the incentive tools we use to land projects in our communities. The public is confused about what economic development incentives actually do, and what they cost. Fueled by media reporting which is at best inaccurate and at worse misleading and pronouncements by some policy-makers who have determined that being against incentives is good politics, incentives have been teed up, demagogued and reduced to a single, wholly erroneous narrative: incentives are all cash out of the taxpayer’s pocket. 

Not true.  While most communities and states maintain so-called ‘deal closing funds’ which provide governments the capability to include a certain amount of performance-based cash (Iowa has one of the smallest of these funds found anywhere in the country, and has for years) the vast majority of incentives awarded in Iowa are credits against future revenue, or tax credits.

Simply put, tax credits are instruments to provide a reduction in tax liability for future investments by a company- tax revenue we currently are not enjoying when agreeing to the incentive [because the project and its associated investment have not yet occurred]. Far too often, the total value of a tax credits package [which can include credits against state investment tax, local property tax and other tax streams] are represented to the public as cash, as, in effect, a check written by the government to the company. 

Couldn’t be further from the truth! In virtually all cases, tax credits are awarded not only after the company creates the tax liability, but after it physically creates the revenue by paying its taxes. Only after the new tax receipts are received by the state and local governments does a company receive a credit back. This is completely lost on most members of the public, and it’s on us as economic developers to find better ways to communicate the complexities of incentives packages so that their fiscal impact is truly understood. Tax credits are but one example in a roster of complex local, state and federal incentives programs most people don’t understand [why would they?] but which we have to get better at demystifying.

I suggest above the economic development image problem has three components, but realistically it has many more. Virtually all incentivized projects in Iowa carry with them stringent ‘clawback’ provisions which legally compel the awarded company to pay back all or some pro-rated portion of any incentives it receives should it fail to fulfill its obligations related to job creation, wage levels, capital investment and the like. Now consider the last time you read a detailed account of a successful clawback executed by a government from a company for failing to fulfill its obligations. Part of this is a volume issue - the men and women who negotiate incentives packages across this state are, by and large, excellent stewards of public funds and only recommend packages which have a high probability of success. So clawback scenarios are not particularly common.  But when they do happen, most economic development and other officials engaged in the process don’t court publicity for the process. I would submit that we can do a better job in the profession of educating the public when we do experience a clawback situation to make the public aware of the aggressive stewardship those responsible for overseeing compliance with economic development incentives demonstrate every day.

Another element of the economic development image problem?  New Iowa legislation in 2014 concerning how cities and counties report tax increment financing [TIF] activities now requires local governments to report their property tax credit-against-revenue figures at a ‘not to exceed’ level, which artificially makes project property tax incentives look enormous and is in most cases completely out of step with actual credit values.

I could go on. I will not. There is much work to do to better educate the public on what public sector incentives mean and how they are used. It is incumbent upon every stakeholder in the field of economic development - practitioners, elected officials, even companies utilizing the incentives - to find new ways to communicate the substance and the value behind such a controversial, and important, topic.

Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

 

 

Food and leadership

- Brent Willett, CEcD, is executive director of Iowa’s Cultivation Corridor.  Follow him @brent_willett.

‘Without food…all other components of social justice are meaningless.’ – Dr. Norman Borlaug

Ask yourself whether you believe the United States is the world’s leader in agricultural research and innovation. We have to be, right? For a country that produces 2015.10.14_quote and exports more food than any other, a nation that has engineered historically consequential breakthrough technologies like genetically modified crops, the answer would seem to be obvious. We’re tops when it comes to ag research, yes?

No.

In 2009, China surpassed the United States as the global leader in public spending on agricultural research, and they haven’t looked back. In fact, China is expected to surpass the U.S. in total sovereign R&D funding by 2020. The Chinese achieved this staggering coup by tripling their investment in ag research over the course of five years. Brazil and India have both dramatically increased their spending in the field, and other countries are following suit. Meanwhile, U.S. investments in ag research are down 16 percent in ten years.

This crisis of global leadership on the part of the U.S. was brought into stark relief recently -- if unintentionally -- when Democratic presidential candidate Hillary Clinton released her policy paper on rural economic development, “Plan for a Vibrant Rural America”.  In it, Clinton advocates ‘strengthen[ing] USDA grant programs'. What’s missing in the paper -- and, more importantly, throughout the 2016 presidential campaign as a whole -- is a broader acknowledgement of enormous importance of federal investment in agricultural research and innovation in America and who’s got a plan to ensure our country can return to the forefront of ag innovation in the coming decades. 

For every federal dollar spent on agricultural research in the U.S., nearly $13 is spent on medical research. The USDA’s research budget is just shy of $2.4 billion. The National Institute for Health’s is more than $30 billion. From 1990 to 2012, NIH research funding rose 132 percent. National Science Foundation funding doubled in the same time period.  In those same two decades, USDA saw an increase of just 21 percent and its R&D budget today amounts to less than 10 percent of National Institutes of Health’s (NIH).

Of course, the work of the NIH and the National Science Foundation is incredibly important and they deserve every resource available. But a global population increase which will see 9.5 billion people on earth by 2050 demands that we produce more food in the next 35 years than we have in the last 10,000 combined. Shouldn’t we be talking about how the U.S. can and must again be the global center of innovation to meet these challenges? 

The Clinton proposal comes on the heels of a report issued by the Charles Valentine Riley 2015.10.14_quote3 Memorial Foundation titled ‘Pursuing a Unifying Message’, which summarizes an April 2015 discussion among 23 leaders of universities others on the need for reversing an alarming lack of federal investment in food, agricultural and natural resources research[1]. The report calls for investments in agricultural research to be ‘escalated tremendously’ at U.S.D.A. and suggests in sobering fashion that ‘[s]ome nonprofit entities…appear to be funding applied and basic science in food and agriculture at more aggressive levels than the nation’s investment [my emphasis].’

Come again?  NGAs alone are outpacing the world’s most advanced economy in terms of funding allocations for food research? What year is this? Next to defense, fewer responsibilities are more fundamental to a nation-state than its investment in and capability to feed its people today and in the future. Guns and butter indeed.

The enormous projected global population faces the threat of an inadequate food supply thanks in part to diminishing land and water resources. The amount of farmland available to feed each global citizen will degrade from more than an acre per person in 1990 to less than a third of an acre by 2050 and fully half of the world’s population is projected to face water scarcity inside 30 years. Half.

Global food supply is further imperiled by climate change; science-based evidence is indisputable that our planet’s climate is changing and climate change has already begun to affect crop outcomes in parts of the world.

We know that at the solution’s nexus of the massive challenges mankind faces in the next 50 years -- namely nutrition, energy and environmental sustainability in the face of a burgeoning global population -- is agricultural innovation. Crucially, agricultural and food innovation has historically and necessarily had a dancing partner in the federal government based on the high capital intensity and prolonged nature of much of the field’s research.

National governments will persist as partners in the field and will contribute to solving a pending food crisis which Iowa State University President Steven Leath has called the ‘greatest challenge in human history’. The question is whether the United States is one of those governments.

Three years ago, the President’s Council of Advisors for Science and Technology recommended increasing federal agricultural research by $700 million. Almost nothing happened. The 2014 Farm Bill offered a pittance, just $200 million [which must be matched 2015.10.14_quote2new by other funds to be released] in increased funding. Talk about cognitive dissonance. 

In May, the Chicago Council on Global Affairs recommended that the U.S. double its investment in agricultural and food research in ten years. This is an exceptionally important recommendation to Iowa. Since I’m supposed to be blogging about regional economic development and need to get back in my lane a bit, countless studies suggest that for every dollar spent on agricultural research, more than $20 in economic activity is created.

On October 14-16, the peerless World Food Prize Foundation brought leaders from around the globe to Des Moines to its Borlaug Dialogue to discuss food security and technology and to honor another deserving World Food Prize Laureate in Sir Fazle Hasan Abed of Bangladesh. 

The Dialogue, of course, is held in honor of Dr. Norman Borlaug, the man credited with saving a billion lives thanks to his pioneering research in plant genetics. This celebration of one of the most important men in world history and a model for future change agents compels us each year to consider the future. 

In the face of unnerving statistics about our country’s anemic and in-reverse investment in agricultural research, we must ask: will the next Norman Borlaug change the world from a lab in Iowa, or from one in Beijing?

 


[1] Iowa State University is a lead issuer of the report along with the Riley Foundation.   Dr. Wendy Wintersteen, Dean of the ISU College of Agriculture, was a key contributor to the report.

 

Brent Willett, CEcD, is executive director of Iowa’s Cultivation Corridor.  Contact him:

Human: 515-360-1732

Digital: bwillett@cultivationcorridor.org / @brent_willett / LinkedIn.com/in/brentwillett

 

 

36,001 steps in the right direction

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.

Earlier this month, Iowa State University reported another record year; 36,001 students are enrolled for the 2015-16 academic year. Of the six primary colleges on campus, only one reported a dip in undergraduate enrollment at all (and that dip was a total Beardshear_Hallof four students). The growth in enrollments at Iowa’s largest university has been dramatic -- it’s up by more than 7,300 students since 2010, a more than 20 percent increase in five years. 


The huge increase turns on its head a national trend which has seen a -3.5percent erosion of enrollments at ‘degree granting post-secondary institutions’ [which includes both four- and two-year institutions] in the same time period. 

Depending upon the research that you subscribe to, there are between 15-20 generally recognized ‘innovation clusters’ in the U.S. Harvard economist Michael Porter is perhaps most regularly credited with researching and memorializing the cluster model, and his US Cluster Mapping Project is one of the richest- and easiest to use- geographic cluster-based economic databases publicly available today. Innovation clusters are self-sustaining economic ecosystems with three key ingredients:

  1. A strong concentration of companies and capital oriented around an industry, or, “geographic concentrations of interconnected companies and institutions in a particular field” [Porter, 1998];
  2. A robust pipeline of qualified human capital supplying those institutions with talent to feed innovation and production; and
  3. At least on Tier I research institution that is a global leader in the field referenced in item #1.   

Silicon Valley is the country’s and the world’s best-known innovation cluster.  The North Carolina Research Triangle is another brand-name cluster.  But other lesser-known clusters are functioning at a high level in the Twin Cities [medical devices], Kansas City [animal sciences], New York/New Jersey [pharmaceuticals]- this list goes on. 

Yet- and this is the very premise of the Cultivation Corridor- no single region has firmly established itself as the US’ preferred destination for capital [see #1], talent [#2] and research [#3] in the field of agbioscience and agtechnology. And because of the unmatched research and instructional capabilities in the field offered at Iowa State as well as the innovation infrastructure represented by a rapidly-expanding ISU Research Park, we are positioned as well as any presumable competition to confirm Central Iowa as the agbio and agtech capital of the world. We believe strongly that as the university’s capabilities grow, so grows the competitiveness of Iowa communities seeking ag-based investment and talent.

Setting aside the cluster model and research institution fitness as one of its core asset drivers for a moment, the health and growth of a land grant institution for the economic region in which it sits is of vital importance to overall economic growth prospects for both its companies and economic institutions and for its residents. According to Brookings, individuals between the ages of 30 and 50 who did not attend college could expect to earn less than $30,000 per year. Those whose highest level of educational attainment was a bachelor’s degree earned just under $60,000 per year [an advanced degree-holder can expect over $80,000].

Too, the availability of quality two-year post-secondary education is of vital importance to a region’s economic institutions and its residents. Over a lifetime, the earnings of an associate’s degree recipient are roughly $170,000 higher than those of a high school graduate. [Brookings]

Prevailing discourse for at least the last 25 years stresses the university's place as a principal player in a global system increasingly driven by information, knowledge and ideas. We have said before that there will be winners and there will be losers in the battle for capital, talent and research in the burgeoning agricultural innovation era ahead. To possess one of the world’s finest schools in the field of agricultural bioscience and technology in our region -- and to witness that university grow in the past five years at a pace 11 times inflation and fully half as rapidly as the S&P 500 during one of the strongest bull markets in history -

Continue reading "36,001 steps in the right direction" »

Stop! In the name of jobs

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor.

For as long as anyone can remember, economic developers in Iowa have touted our state’s stability of government and economy as an important second tier decision motivator [after Iowa_Flag_Golden_Dome_small taxes, workforce and infrastructure] for companies considering locating or expanding here.

The argument has been that compared with a number of peer states and regions, Iowa offers some of the most predictable, practical and civil state governmental machinery. Too, the state’s economic performance, owing to a diversified economy led by agriculture and manufacturing, has grown steadily if not spectacularly. It generally has outpaced the U.S. average for at least the past ten years. (State GDP grew by 2.9 percent in 2014, about double the national rate, and per capita income growth was No. 4 nationally in 2013 -- the fifth straight year of top 25 finishes in the category.) 

Iowa’s economy, it’s been said many times, is rarely too hot and rarely too cold, like a mythical baked potato. 

The stoutness of Iowa’s economy is an obvious selling point for would-be job creators in our state, but the political stability argument can be nearly as consequential.  Company leaders and boards of directors rendering decisions on the large-scale deployment of capital inherently consider the political environment into which their investment is flowing. This occurs at varying levels of formality and intensity from organization to organization,  from subjective speculation around the meeting table to so-called ‘full-cost’ accounting, which seeks to quantify largely subjective matters like political climate and assign a value to be incorporated into project cost matrices.

Iowans tend to vote their tendencies for divided government. From 1992-2013, the state had a ostensible ‘unified’ or ‘trifecta’ government [one where both legislative chambers and the executive branch are all controlled by the same party] only six times, one of the lowest rates in the nation. Governors in Iowa average ten years in office, longer than most other non-term-limited states. And a passing glimpse at our federal delegation reminds us that until the 2015 retirement of Sen. Tom Harkin, Iowans sent one Republican and one Democrat to the Senate for 30 straight years -- the third longest streak in history.

At a time when a single party controls all branches of government in 31 [!] states and nearly half of all legislatures have veto-proof majorities, Iowa is one of just three [!] states with a divided legislature. Lawmakers here have historically been more than happy to point out that in the face of such bipartisan power balances, they have made a conscious effort to avoid Washington-style partisan chaos.

And, largely, they’ve been right. For decades, Iowa’s political process has proven a national example of how a politically-divided state can nevertheless produce budgets, policy and leadership in a deeply bipartisan and civilized way. This track record of political efficiency and pragmatism has proven valuable, as companies routinely cite Iowa’s political environment as a net positive for doing business here.

But now we might mess it up.

Despite what is clearly the better historical judgment of both Iowa voters and their representatives, Iowa, following several split-power legislative sessions full of rancor which have lasted into well into June, faces the very real prospect of a 2016 session more DC than DSM; more cherry blossom than corn cob.

A 2015 session, during which deep interparty disagreement about education funding sucked all the oxygen out of the proverbial room, produced very little in the way of meaningful economic development legislation. In fact, the highest-profile piece of economic development legislation -- a tax credit for biorenewable chemical production in Iowa -- went down in a tragicomedy of partisan maneuvering.

Ask any legislator, bureaucrat or lobbyist to handicap next year’s session and he or she will tell you that the unresolved education funding issue threatens to produce an unusually hyper-partisan environment under the golden dome in 2016. That’s not the Iowa way.

The education issue is incredibly important to Iowa and rightly deserves the keen attention of Iowa legislators, but so is the process by which our political leaders in all three branches of government ultimately find agreement. 

We’ve seen what sorts of monumental results legislative and executive bipartisanship can produce in this state, and very recently. The 2013 Iowa General Assembly was perhaps one the state’s most productive ever, with massive property tax reform, a health care overhaul and education reform bills all reaching the governor’s desk and receiving his signature. Such a session of accomplishment proffers economic development professionals across the state sublime material to discuss with clients. Not only, so the narrative goes, do our political leaders in Iowa achieve big things in the do-nothing Congressional era, but they do it despite a narrowly divided government. That’s the Iowa way. 

Have a look at our state flag and remember that the blue color of the left-hand vertical stripe is meant to represent loyalty, justice and truth and that the red color of the right-hand vertical stripe is meant to represent strength. Remind your legislator between now and January that others are watching how they do their jobs and how they interface publicly with their partisan counterparts and that they can be faithful to both the exertion of strength through party loyalty and deliver justice to their constituents in the form of negotiated, enduring results following a respectful debate.

The next job creation deal could depend on it.

 

Airports matter

- Brent Willett, CEcD, is executive director of Iowa's Cultivation Corridor

Last year, I traveled to the Raleigh-Durham region on business; the place is a hotbed for biotechnology economic development and I was in town to learn about the region’s approach and to visit with a handful of companies. 

At the heart of the North Carolina Research Triangle, which is perhaps the world’s most successful example of regional, cluster-based economic development, Raleigh-Durham and the surrounding area has for decades come to define success for how regional economies can leverage the public, private and academic sectors to produce globally-competitive economic ecosystems in places where before, little in the way of innovation existed. 

The story of the Triangle, to completely generalize a 50-year transformation of an economy for brevity’s sake, goes something like this: throughout the 1950s, 60s and 70s the furniture and textile industries which had dominated the Carolinas' economy for a century experienced marked decline.  In response, public and private sector leaders worked with the North Carolina Legislature to craft and fund new tools and institutions to enable the region and state to pivot from furniture and textiles to the development of a high-value bioeconomy. It’s been a fantastic success.

The Triangle has found success not only in producing an environment that supports innovation at a scale few regions in the world can compete with, but in managing its reputation as a global economic powerhouse with a level of precision and sophistication seen few other places.

This point was driven home to me the moment I stepped off the jet bridge at Raleigh-Durham International Airport [RDU].  “Welcome to the Research Triangle” read a massive glass and steel sign adorning a highly modern terminal.

Research Triangle branding was present throughout the airport [and, indeed, the region], which was nice, but that’s not necessarily my point. RDU’s design and technology modernity -- its Terminal 1 was updated in 2012, and Terminal 2 is slated for upgrades -- joined with the ubiquity of Research Triangle regional messaging (those signs don’t say ‘Welcome to Raleigh-Durham’, remember). Together, they send a loud and clear message to passengers- particularly business passengers who comprise upwards of 45% of domestic air travelers: you’ve entered a place of global business. From the moment I entered RDU to the moment I jumped in a cab, the message was clear. A heck of a way to start a trip if I’m a business person considering this region for investment, I thought.

Airports, by their very nature, play an outsized role in shaping outside public opinion about a region and a state.  Airport users are captive; if you are flying commercially into a community, you’ve got [with few exceptions] one place to enter and exit: that region’s airport. This means airports, fundamentally, offer an opportunity to contribute mightily to the writing of the critical first chapter and last chapter of a book of impressions for visiting decision-makers. There is a reason that cash-strapped airport authorities like those in Atlanta ($6 billion upgrade project), Las Vegas ($2.4 billion), Philadelphia ($5 billion), New York ($7.5 billion), Dallas ($2 billion) and Los Angeles ($4.1 billion) are nevertheless finding ways to add runways, renovate terminals and upgrade amenities in a modern-day transportation infrastructure boom. 

Airports matter, and leaders on both the north and south anchors of Iowa's Cultivation Corridor understand that. In Ames, the city has approved a plan to build a new terminal at Ames Municipal Airport, which may be the only airport in the country that abuts a major university research park- a major competitive advantage for the entire region. The Ames Economic Development Commission is at work raising funds to add a new storage hanger to the airfield as another component of the major Ames Municipal overhaul. 

And the proposed new terminal at Des Moines International- slated, funding-dependent, for a 2024 opening- offers the Central Iowa region another generational opportunity to redefine its front door to the global community. The $400 million project would be one of the largest in the state’s history -- a price tag befitting the opportunity it represents. 

As thousands of Central Iowans continue their work to grow and recast our region as a truly global one, the attention many are paying to the way in which our global customers and colleagues enter our region and experience its first and last impressions, is apt.

The workforce generation that will save the world

- Brent Willett, CEcD is Executive Director of Iowa's Cultivation Corridor

By now, the figures may be familiar.

  • The first: a global population of 9 or 10 billion by 2050, a 22 to 30 percent increase from today’s 7 billion.
  • A second: that in order to satisfy the skyrocketing protein and energy demands of this global population, we are going to have to produce more food in the next 35 years than we have as a human race in the last 10,000 combined.
  • A third: astonishing global energy challenges are in store as we face a two-fold increase in global energy demand, along with population growth trends as the three most powerful drivers of our energy today – demand, supply, and environment effects – undergo forecasted massive change
  • Fourth: environmental challenges which make the word 'unprecedented' somehow inadequate are in store as we experience and address the effects of global climate change in earnest as up to 5 billion of the 9 billion on earth potentially experience ‘an entirely new climate' by 2050.

As we stare down the monumental challenges facing the global community in the next 35 years, we agree as a global population on very little. From the indispensability of genetically modified crops to address coming nutrition challenges to the role of man in the changing climate, decision makers and everyday people across the planet are participating in an extraordinarily rigorous debate about the future of our world. It's enough to make you toss your head back and laugh -- or cry -- at the tenor and the levity of it all. 

However, in the midst of a ferocious debate, an emerging accord is coming into focus: agricultural science and technology lies at the solution’s nexus of each of the three major challenges we face moving forward -- food, energy and environmental sustainability. And that’s where young people come in.

This year, the millennial workforce generation [generally defined as those born between 1980 and 1997] will surpass the Baby Boomer generation as the largest in America at just over 75 million and growing. And they know what they want in a job.

If we join an emerging consensus that the role of agriculture in the coming decades is perhaps the most important in the world with what we are coming to know about the next workforce generation, something awfully promising pops up.

A 2015 study found that when it comes to careers, the top millennial priorities included their growth and development as an employee while -- and this is the key -- making a positive contribution to their local communities and society. Another report which surveyed more than 1,700 currently enrolled university students spanning three generations found that students consider making a positive social impact on the world as a result of their work more important than having children, a prestigious career, being wealthy or even being a community leader. 

The same report found that 45 percent of millennials would take a 15 percent pay cut for a job that makes a social or environmental impact.  Even taking the latter figure with a grain of salt -- we were all 22 and ready to vow poverty and solve the world’s problems once -- if it’s only half right: would a quarter of your generational colleagues spin off a significant chunk of change for social good?  It’s a bit of a new paradigm. 

Here’s a new generation whose members are deeply interested in food and where it comes from, who have been heavily influenced by technology since birth and who cares -- albeit a bit choppily -- about the future of environment. Enter the future of agriculture.

As the face of production agriculture continues to change, transformative social and economic opportunities are emerging. Technological innovation has helped spur farm consolidation -- far fewer people can now manage much larger production operations -- and helped create new ag jobs away from the proverbial growing field, a trend which many argue will more than offset the contraction in traditional farm jobs. Farmers are generally getting older; the average U.S. farmer is now 57 years old and over half of U.S. farmland is owned by those over the age of 55. Meantime, agbioscience and agtechnology job trends are skyrocketing. While the profile of those tending the land is expected to trend younger in the coming decades, most of the job growth in the ag sector will be in the office or laboratory.

From major companies like John Deere, DuPont Pioneer and Climate Corporation to successful start-ups like Ames-based AgSolver, high-value jobs in the agtechnology and agbioscience sectors are driving growth in the agriculture job market in exponential fashion relative to the previous generation of ag job creation.  Ag technology -- both hardware and software research and development and agbioscience, including plant science and biology -- are not only exploding fields of opportunity for today and tomorrow’s graduates, but they both possess those two characteristics so important to the millennial generation’s perception of a good job. 

Cross-pollinate technology and a positive role in addressing global food, energy and environmental challenges and what do you get? One in agriculture. And an ideal job profile for a many a millennial. 

Central Iowa is better positioned to leverage this looming trend into high-value ag job creation and young workforce interest in the field than many parts of the world, owing to the convergence of blossoming private sector opportunities in the industry in the region and Iowa State University’s position as a leading ag school globally.  It’s already happening; ISU reported job placement rates ranging from 98.6 percent to 100 percent in programs such as ag business, agronomy, ag systems tech and industrial technology. And the university’s College of Agriculture and Life Sciences breaks enrollment records year after year.  DMACC, too, is spinning more and more graduates well-prepared for jobs in the ag field into the region's workforce.

We all stand on the precipice of a golden era of agricultural science and technology- one which, fortunately for them, offers fantastic career opportunities for millenials and fortunately for everyone else offers solutions to both global economic and social challenges we are staring down in the ensuing decades.

There will be winners and there will be losers in the chase for the investment, talent and research which simultaneously supports and follows advances in the field, and we are certainly not the only state and region jockeying for position, but I’d rather be us than them any day, thanks in no small part to the promise of the newest workforce generation which is beginning to see agriculture in a new light. 

Ethics and the deal: When disaster creates an opportunity

  1. Brent Willett, CEcD, is executive director of the Cultivation Corridor

In 2008, the International Economic Development Council [IEDC] established a practitioner Code of Ethics "to ensure a high ethical standard for those involved in economic development."  Several years later, IEDC moved to require ethics training as a condition for all candidates for its industry certification and re-certification program, where it still stands as a certification condition.

It was an industry first. Modern professional economic development is a fairly young industry -- most point to the founding of local industrial recruitment organizations in response to a contraction of manufacturing expansion in the 1970s and the rolling bank savings and loan crises of the mid-1980s as the industry’s jumping off points. For a couple of decades, economic development was defined almost exclusively as a cutthroat industrial recruitment endeavor -- the aggressive courting of external capital and jobs into a defined local or regional jurisdiction. From where that capital and those jobs came -- whether from across the globe or in a neighboring community, and the corresponding ethical underpinnings of how the deal was done -- was less a topic of concern than today.

Today, most states, Iowa included, maintain policies for access to state economic development financial assistance which typically require that a project originate from outside the state or be an expansion of an existing facility in the company's current community. In other words, the state is fundamentally not interested in providing financial incentives for relocations from one Iowa community to another. This is extremely sound and extremely necessary policy. 

The state’s policy position has begun to trickle down to local incentives policy. A handful of regions, including the Des Moines region, maintain some level of anti-piracy protocol which typically requires the sign-off of the home community prior to any other community in the region's economic development organization approving of local assistance to a company considering a relocation from one regional community to another. The One Corridor Agreement by and between Cerro Gordo County, City of Clear Lake and City of Mason City -- the latter two communities which once considered themselves deep rivals for economic development projects despite their immediate geographic proximity, now provides for a clear and cooperative project management process for any project considering both communities or one involving a potential relocation from one community to the other. In another instance, leaders in Iowa’s Creative Corridor are working to craft an agreement by and between the communities in the Cedar Rapids-Iowa City region.

But while intra-state competition is often governed by cooperative piracy policy in Iowa, at any level outside that, you had better believe competition is as fierce and ruthless as ever; and it should be. 

But where does an economic development organization or practitioner draw the competitive line, particularly as it relates to preying on weakened game?  The IEDC ethics code conspicuously avoids any mention of competitive behavior between local organizations or states, and probably for good reason. The dynamics and decision-making triggers for any multi-site project are so varied so as to be virtually infinite. Accounting for them all and providing behavior guidance would be virtually impossible. The closest IEDC gets to wading into competition ethics is a disclaimer attached to its ethics code: “There may be circumstances where the board may choose to interpret and apply this code to a particular event such as a man-made or natural disaster.” 

So where is the line? 

Am I within the boundaries of professional decorum if I make an inquiry to pitch my region to a company in a state currently under natural duress, like a hurricane, based on the impact such trauma has created on that state or region’s near- and mid-term competitiveness? No, probably not; acts of God affecting a competitive community are generally treated with a great deal of forbearance by economic developers.

Am I within those same boundaries of decorum if I embark on such an inquiry with a company in a state under man-made duress, like a debt or political crisis?  Yes, usually. 

Our friends in Illinois, Indiana, Michigan, Arkansas and South Carolina, to name a few, have created for themselves a handful of major man-made disasters of late. They have managed them in both effective and ineffective ways as it relates to the eventual impact on a state’s reputation for business-friendliness for the job creation projects and investments every state in the union is chasing. 

Illinois? A fiscal basket case with a dash of corruption. States like Iowa and regions like Central Iowa love to compete with Illinois. It is perfectly within the boundaries of professional competition to demonstrate to our clients considering the Land of Lincoln that the crushing debt load the state currently acknowledges, and the unfunded liability load it doesn't acknowledge, as a pronounced competitive disadvantage. More debt means more taxes, particularly corporate taxes, in the future. That ought to be considered a tremendous competitive disadvantage when compared to Iowa’s historically sound fiscal [and low, low debt per capita ranking] position.  And that’s before we even start talking about political corruption [four of the last seven [!] Illinois governors have gone to prison]. Oh, and a couple of weeks ago Illinois eliminated all economic development incentives for businesses as part of a plan to address a $3 billion budget deficit.

But what to do when the man-made disaster isn’t as cut and dried, from an ethical perspective, as a preventable state budget calamity?

Indiana, Michigan and Arkansas all have come under intense criticism from their own state’s businesses for social policies and policy proposals related how same-sex couples may or may not be treated both by the state tax code and by their fellow citizens [IEDC Ethics Code item #9: Professional economic developers shall assure that all economic development activities are conducted with equality of opportunity for all segments of the community without regard to race, religion, sex, sexual orientation, national origin, political affiliation, disability, age, marital status, or socioeconomic status].

In perhaps the most high-profile move, e-commerce giant Angie’s List announced in March it would shelve plans for a major expansion in Indianapolis over its opposition to an Indiana ‘religious freedom’ law which many interpreted to permit discrimination against LGBT individuals and couples. [After a national uproar, the law has been largely repealed, but Angie’s List has maintained that it will not expand in Indianapolis.]

Governors and legislative leaders in Michigan and Arkansas have also in recent months taken up controversial legislation relating to the treatment of same-sex individuals and couples, have been lambasted by their business lobbies for it, and largely have retreated with plenty of damage done to their states' relationships with some of their largest employers.  

What’s an economic developer in another state to do in a case like this?  [Hypothetically] Pick up the phone to Angie’s List and those businesses like it?  Probably so. Political disasters are by definition man-made, and almost always by definition avoidable. While in most cases it is largely unproductive to craft a pitch to a company focused on a narrow piece of state social policy, controversy over such a policy could create an opening for a broader conversation calling into question one state’s responsiveness to the needs of its business community and its ability to manage its national and global reputation as a place to live and work when compared to my state. 

Occasionally, man-made political disasters which hold the potential to affect investment and job creation decision-making in another state demand a measured approach. Take, for example, the controversy leaders in South Carolina are currently embroiled in over the display of the Confederate battle flag on the grounds of that state’s Capitol.  Certainly, were this a confined issue founded on a purely political grounds, it would be ripe for inclusion in a state-to-state social/cultural comparison.  But it isn’t; while controversy has swirled around South Carolina’s Confederate flag for years [in 2000, the was moved from flying atop the Capitol to a war memorial on its grounds- something only a superlegislative majority can compel], the current controversy has at its basis the unthinkable mass shooting at Emmanuel AME Church in Charleston.  Any decent economic developer- or human being- wouldn’t fathom exploiting a controversy with such a tragedy at its nexus. 

And so, as in most industries, gray area abounds for economic developers all over the country and the world as it relates to capitalizing on the competition’s weakness.  With so much at stake -- jobs, capital, tax base, community pride -- the actions of a local, regional or state-level economic developer in navigating complex ethical challenges are pronounced and are broadly relevant to the community he or she represents.

One is the loneliest number

Brent Willett, CEcD is Executive Director of the Cultivation Corridor.

Last month Iowa’s economic development community gathered for the SMART Economic Development Conference in Des Moines, an annual event organized by Iowa’s investor-owned utilities which attracts economic development, government, business and political leaders to discuss job creation and retention efforts in our state.

So what? Every industry has a must-attend annual conference or two. What makes SMART unique are the collegial dynamics which comprise the industry it represents. 

It’s a small industry, economic development. That claim may seem far-fetched at face value, considering that estimates suggest there are between 7,500 and 10,000 economic development organizations operating in the US today- but broken down, that’s 150 to 200 groups per state before adjusting for population – and Iowa is 30th at 3,090,016 [2013 US Census]. 

The 99-county math is easy: there are, on average, just a handful of economic development professionals for miles around in most parts of Iowa. Join this weak density of practitioners with the transient nature of many rural economic development jobs - figures are hard to come by, but in many small communities the local economic development job is turned over regularly as qualified practitioners find better hours and better money in the private sector - and you’ve got a perfect storm of conditions conducive to a challenging sense of isolation felt by many in the industry. 

Economic development in Iowa is a field in which many practitioners are one of only a small handful [or, in very small communities, the only] person administering professional job attraction and retention services in a city, county, or even cluster of counties. 

What if you were the only person doing your job for 50 miles? Who would you lean on, learn from and engage with to assuage the challenges of a project or stresses of time management? Who would you contact in times of crisis and celebrate with in times of achievement? How would you find your industry mentor? For economic developers throughout the state and across the country, the answer is often counterintuitive: with a competitor.

The field’s diminutive size requires that not only must small community economic developers often function without benefit of an industry colleague nearby, but all practitioners must rely on complex mutual relationships which involve at-times intense competition as well as collegial dynamics. In order to engage in true peer-to-peer exchanges of ideas and challenges, economic developers must often look to an industry colleague elsewhere who, at the end of the day, is fundamentally a professional competitor. It all adds up to a profoundly complicated yet exceedingly tight-knit professional network for Iowa’s economic developers.   

Many of us report to or serve on boards and commissions comprised of competitors, and we know it works. Board ethics [not to mention common courtesy] suggests that you check your competitive fire for your board colleague at the door and find common ground to work together on, relative to the organization or project at hand.

Economic developers are forced to simply accelerate this dynamic. Take, for example, the Professional Developers of Iowa board of directors, a group I was privileged to lead as president in 2012. PDI is a consortium of more than 300 economic developers throughout Iowa and its board is comprised of practitioners from throughout the state- all of whom, on one level or another, are fierce competitors for the same prize: investment and jobs in Iowa. Despite such a unique board room dynamic, PDI has been the premier issues, education and networking organization for economic developers in Iowa thanks to effective volunteer leadership for decades. 

Central Iowa practitioners are a bit more fortunate in terms of colleague access. Concentrated population dynamics make collegial density much higher in the Cultivation Corridor region.  For example, the Greater Des Moines Partnership’s Metro Practioners Group meets six times a year and routinely has 40-50 economic developers in attendance from throughout the region discussing issues and generally commiserating with each other about resources, opportunities and projects. While many in the room are technically competitors, the convergence of government, higher education, workforce and other practitioners who are a part of a larger economic development ecosystem in the Corridor helps produce a well-rounded discussion and group resource.

As within many industries, commonalities abound in the economic development peer-to-peer relationship - common public policy priorities, infrastructure needs, community college workforce development programming and much more binds the industry together.  But it is where natural ties that bind begin to break down that the industry finds a way to support its own- even from a county or two over.

Why Iowa needs to think like an oil company

- Brent Willett, CEcD is Executive Director of the Cultivation Corridor.

In its first quarter earnings rollout on April 30, oil giant Exxon Mobil Corp. revealed that its refining and chemicals units- think lubricants and chemical compounds used to produce things like plastic- together represented 48% of its profits in the first three months of 2015.

In 2014 those units represented just 19 percent of profits [oil and gas production made up the rest]. Across the pond, France’s Total SA, Europe’s largest refiner, said its first quarter refining and chemicals income improved three-fold while production earnings plummeted 56%. Similar trends jumped off earnings pages of oil companies across the globe. 

What’s going on here?  And what does it have to do with economic development in Iowa?

As oil production earnings continue a not-so-slow-motion collapse- oil prices have lost half their value since August- an emerging bright spot for the industry has been the durability of its higher-margin refining and chemicals units. 

How big of a shift is this?  In 2012 ConocoPhillips, amid an industry rush to decommission a refinery inventory thought to be over capacity, decoupled its chemicals and refining businesses from its drilling businesses in a loud-and-clear bet on long-term profitability in the business of oil and gas production. 

It was a bad bet; the derivative business, Phillips 66, is now throwing off higher profits.  For decades, the petroleum industry has honed a refining/chemicals product diversification strategy which not only offers a hedge against intense commodity market pressures like it’s experiencing today, but one which has produced a expansion and diversification model that biofuel-producing states like Iowa have begun to take notice of.

Currently, less than 10% of the world’s chemical industry is bio-based, but estimates suggest that could adjust upwards to close to 25% by the end of the next decade [creating as many as 20,000 new jobs in the US in the process] as rapid biochemical innovation and commercialization begins to create cost parity with petroleum-based solutions. 

Iowa’s vast biofuels industry- and the biomass supply chain, physical infrastructure and research and human capital which has cropped up as a result- positions the state to capitalize on this growth industry more competitively than virtually any domestic peer. 

Iowa’s more than 40 ethanol and biodiesel facilities- many in rural communities- in many cases represent potential buyer/supplier opportunities for a biochemical industry which has been rapidly developing in Europe for years and is poised to grow its relatively small position in the North American market.  

In short, we’ve got a window to leverage Iowa’s dominant biofuels position to diversify into chemicals and materials derived from Iowa biomass.

That’s why economic development and industry groups like the Iowa Biotechnology Association, Iowa Chamber Alliance and the Cultivation Corridor are supporting a bill currently before the Iowa General Assembly to create a first-in-the-world economic development incentive specifically targeted at this nascent industry. 

House File 656 would create a tax credit program administered by the Iowa Economic Development Authority to help support the growth of biochemical investment in Iowa over the coming years. 

The bill would create a tax incentive for the production of a prescribed set ‘building block’ biochemicals which are derived from biomass feedstock abundant in Iowa as either raw materials or co-products of a bioproduction fuel or other process like starch, sugar and lignin.

As the legislature debates the merits of a bill, research and economic development efforts to firmly establish Central Iowa as a global center of excellence in biochemical and biomaterial research and, ultimately, production are well underway. 

Take, for example, the Center for Biorenewable Chemicals [CBiRC] at Iowa State University in Ames, one of the nation’s largest multi-disciplinary and industry-led biochemical research installations, and the new Center for Bioplastics and Biocomposites [CB2] at Iowa State, a pioneering research partnership with Washington State University and private industry.  Indexing these two superb research assets with the physical and supply chain assets already in place in Iowa and, potentially, a global first economic development incentive produces a compelling argument for Iowa to a new and important industry poised to expand.  

  

What would be the 'coolest' economic development investment?

Note: Kyle Oppenhuizen is a reporter for the Business Record. 

Yesterday, Gov. Branstad's office told us they would announce the "largest-ever economic development investment in Iowa." The announcement was to be made at 4 p.m., giving us about five hours worth of speculation in the newsroom.

It made us wonder: What would be the COOLEST project the governor might announce? My vote was for a pro sports team - which I knew, of course, was highly unlikely.

Turns out, the MidAmerican Energy wind energy expansion that was announced IS pretty cool. Approximately 40 percent of the company's electricity will come from wind energy by the end of 2015.

But pretend for a second you didn't know about MidAmerican's plans. If someone told you that a company was about to make the largest-ever economic development investment in the state, what would you hope for?

Let me know. Comment on this post, on the Business Record's Facebook page, or with the hashtag #IAdreamproject on Twitter.

-Kyle Oppenhuizen

Reporter, Business Record

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