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  • Cleveland: How The Comeback Collapsed

    The Cleveland comeback has stalled. Once hailed as a shining example of rebirth in our industrial heartland, Cleveland now sits rudderless and drifting backward. Between 2000 and 2007, Cleveland suffered one of the largest proportional population losses in the country: the city shrank by 8%. Per capita income growth in Cleveland also lags behind cities like Cincinnati, Milwaukee, and Pittsburgh. Since the early 1990s, the gap between Cleveland and these other cities has widened. As a regional economy deteriorates, the pressure for social services goes up. It’s not surprising, therefore, that local tax rates in Cleveland are among the highest in the country. Political corruption also takes a toll; Cleveland sits in Cuyahoga County where federal law enforcement officials recently launched a sweeping probe of political corruption.

    The future doesn’t look much brighter. Cuyahoga County is often described as the epicenter of the foreclosure crisis; since 2000, it has had the highest per capita rate in the country. Overnight, foreclosures have decimated neighborhoods that took years to rebuild. In the Cleveland neighborhood of Kinsman, half of the mortgage properties are in foreclosure. In other neighborhoods foreclosure rates range from 25% to 30% and, not surprisingly, are concentrated in the lowest income neighborhoods, the places hardest to rebuild. About 72 hours after a house becomes vacant, vandals strip appliances, windows, and fixtures (scrap metal recycling is a booming business in Cleveland). Stripping the pipes renders the property a total loss.

    Meanwhile, the Cleveland Municipal School District is making improvements only at a glacial pace. According to a recent report by America’s Promise, Cleveland ranks 48th of 50 large school districts in high school graduation rates. Fewer than six in ten of Cleveland’s 9th graders will complete high school; dropout factories here include Collinwood and East Tech high schools, where only four in ten 9th graders graduate.

    Many older industrial cities face the same set of challenges, but few cities started three decades ago with the same promise of regeneration. The collapse of the steel industry in the late 1960s was the beginning of Cleveland’s spiral downward. It did not help that 40 years ago, when the Cuyahoga River caught on fire, Cleveland jokes became a staple of late-night television. The city hit bottom when it filed for bankruptcy in 1978.

    It turned the page with the election of George Voinovich as mayor in 1980. Voinovich, a tough minded Republican, challenged the business, labor and civic leadership of the city to transform Cleveland, and the business community responded. A core of corporate CEO’s organized Cleveland Tomorrow – modeled on the Allegheny Conference in Pittsburgh – which drove a focused agenda of urban transformation. By 1989, Fortune magazine applauded the new trajectory in “How Business Bosses Saved a Sick City”.

    The partnership between the city and the business community began to shift in 1990 with the election of mayor Michael White. While the business community worked with White to complete projects like a new baseball stadium and basketball arena that had been planned earlier, the relationship between the mayor and the business community gradually deteriorated. A 1995 community push for mayoral control of the city school system represented the last big collaboration. By the time White began his third term in ’97, the Voinovich momentum pushing public-private partnerships had evaporated.

    At the same time, dramatic changes were taking place in Cleveland’s corporate landscape. By the late 1990s, the city had lost five Fortune 500 headquarters. Manufacturing, the backbone of the region’s economy, shrank dramatically. As the influence of manufacturing declined, real estate developers emerged as important forces within Cleveland’s business circle. Entering the 2001 recession, Cleveland was clearly in trouble. The Cleveland Plain Dealer proclaimed a “quiet crisis”. The editors started pushing for a master plan for economic development to follow up on the momentum of the Voinovich years. As one editor noted, the region was about to face “economic extinction.” The business leadership responded by consolidating different business organizations — Cleveland Tomorrow (leading CEOs), the Greater Cleveland Growth Association (a chamber of commerce), the Cleveland Roundtable (a group focused on diversity issues), and the Council of Smaller Enterprises (a small business organization) — into the Greater Cleveland Partnership.

    The Partnership focused its economic development agenda on building a convention center, the last Voinovich era project. It also re-organized a set of affiliate economic development organizations for better control and (hopefully) impact. JumpStart (for start-ups), BioEnterprise (for life science companies), MAGNET (for manufacturing companies), Team NEO (a recruiting organization), and Cleveland+ (a new branding effort) were to drive the transformation of the city-region, renamed Cleveland+. The Partnership has been resourceful in financing. A close relationship with a new coalition of foundations, called Fund for our Economic Future, provides about $8 million a year for the affiliate organizations, and effectively operates as a financing arm for the Cleveland+ strategy.

    To finance the new convention center, the Partnership pushed County Commissioners to approve a sales tax increase for about $500 million. In July 2008, the Commission — cleverly skating past a public vote (which by all accounts would have rejected the plan) — increased the sales tax unilaterally…and in a hurry. The vote to finance a convention center took place without a development plan, or even a site, in place. So, in effect, Cuyahoga County taxpayers are already paying for a non-existent convention center. The reason for all the rush seems clear. Last July, on the eve of the Commission vote to raise the sales tax, the Federal Bureau of Investigation assembled a team of over 200 agents to launch a public corruption probe, with raids of county offices, the home of one commissioner, and the offices of several contractors. Federal prosecutors are looking into the close relationship between county officials and several contracting and real estate development firms.

    Amidst the turmoil, Cleveland’s leadership has drifted into a classic case of group think. By shutting themselves off from public scrutiny, they have tried to shield themselves from growing public opposition. But in the process, they have drifted into a dream world that is increasingly detached from underlying market realities. The City’s future, according to the leadership’s current thinking, hinges on a convention center. There’s only one problem: There is no evidence that this strategy will work (and plenty of evidence that it will not). Convention centers represent a formula for low-skill, low-wage employment and public operating deficits as far as the eye can see.

    Put the convention center aside for a moment. Despite the significant assets within the region, the Greater Cleveland Partnership’s broader strategy for Cleveland is failing to transform the city-region’s economy.

    There are five weaknesses in the current Cleveland strategy: The wrong approach to scale, to public/private partnerships, to theoretical underpinnings, to change, to decision-making, and to understanding metrics.

    In Part II, I talk about what went wrong in each of these important realms, and how to strengthen each one.

    Ed Morrison is an Economic Policy Advisor at the Purdue Center for Regional Development. This article draws from Royce Hanson, et al, “Finding a New Voice for Corporate Leadership in a Changed Urban World”, a case study from The Brookings Institution Metropolitan Policy Program (September 2006).

  • Report: Ontario, CA – A Geography for Unsettling Times

    These are unsettling times for almost all geographies. As the global recession deepens, there are signs of economic contraction that extend from the great financial centers of New York and London to the emerging market capitals of China, India and the Middle East. Within the United States as well, pain has been spreading from exurbs and suburbs to the heart of major cities, some of which just months ago saw themselves as immune to the economic contagion.

    Without question, the damage to the economies of suburban regions such as the Inland Empire has been severe. Foreclosures in San Bernardino and Riverside Counties have been among the highest in the country, while drops in real-estate related employment have resulted in the first net job losses in four decades. This has led some critics to suggest that the entire area is itself doomed, destined to devolve along with other suburban regions to “the new slums”.

    Yet our close examination of both short and longer-term trends suggests these perspectives are wildly off-base. For one, it is critical to separate different parts of the Inland region from one another. A place like Ontario retains many characteristics that make it far more able than other locales in the region to resist the negative trends. These advantages include a diversified economy, a powerful local job center, an excellent business climate and, most of all, a location perfectly positioned along the historic growth corridors of Southern California.

    These assets have already allowed Ontario to weather the current storm far better than many other Inland Empire areas. Foreclosure rates, for example, although far too high, have remained considerably below the average for the region, and far below those in communities that lack the same strong diversified economic base and close access to employment.

    More importantly, Ontario remains well-positioned to take advantage of both the eventual recovery of the Inland region and the greater expanse of Southern California. Housing prices – particularly the availability of single family homes – has been a driver of growth for the inland region for decades. As prices fall, the rates of affordability for the region – which had been dropping dangerously – will once again rise.

    Despite the claims of some theorists, the preference of most Californians for single family housing seems likely to be unabated, particularly as immigrants seek a better quality of life and the first generation of millennials enters the home-buying market. These are populations that have been heading east to Ontario, the surrounding “Mt. Baldy region,” and to the Inland Empire as a whole for decades, and there is no reason to suppose the flow will stop.

    As the Inland Empire restarts its growth cycle, Ontario will remain uniquely suited to take advantage. Significantly, despite the current downturn in energy prices, worldwide supply shortages as well as growing political demands for regulation on carbon emissions will lead businesses to look increasingly at procuring goods and services nearby. As the Inland Empire’s premier business and transportation hub, Ontario will be well-positioned to emerge as the epicenter of the entire Inland Region.

    At the same time, Ontario residents generally have short commutes, and the city sits astride the primary transportation routes of the region. Over time, well-planned developments such as the New Model Colony will offer a wide range of residents an opportunity to live, work and spend their spare time within a relatively compact, energy-efficient place.

    Business friendliness is also a key asset. Ontario enjoys a close working relationship with expanding companies in business services, manufacturing, logistics, medical services, and other industries not directly dependent on the housing sector.

    But more than anything, Ontario’s position rests on the city’s fundamental commitment to a balance of jobs and housing, and to a long-standing focus on economic growth. Unlike many communities in the region, Ontario has grown on a solid economic basis. As the fourth largest per capita beneficiary of retail sales in Southern California, the city has a considerable surplus to meet hard times .

    Although the immediate prospects for virtually all communities will be difficult, few places in Southern California can hope to ride out the current tsunami better than Ontario. And even fewer seem as well-endowed to ride the next wave of growth that will sweep through the region – as has occurred throughout the last century – when the economy once again regains its footing and customary vitality.

    See attached .pdf file for full report.

    Primary Authors: Joel Kotkin, Delore Zimmerman
    Research Team: Mark Schill, Ali Modarres, Steve PonTell, Andy Sywak
    Editor: Zina Klapper

    Photo courtesy of Valerita

  • A Sober Look at the New Year for Obama

    Personal experience made me a skeptic about racial progress. When I was 8, I was upset when our Japanese neighbors in Los Angeles were sent off to internment. In 1963, I traveled across the Deep South, awed by the totality of poverty, segregation and discrimination.

    But the election of Barack Obama restored a degree of faith in the American experiment, and hope for an economic and social turnaround. I was inspired by the inauguration and am encouraged by initial and intended actions. I’m reasonably sure that significant reforms will occur.

    But my skepticism about more fundamental change remains strong. The Democratic Party is of the intellectual rich, not of the worker, and not very inclined to deep change. The most critical political story of the election was the 12 to 15 percent shift of the rich, educated and suburban to the Democrats, offsetting the shift of about 6 percent of the less educated or professional, but more religious and rural to the Republicans.

    Karl Rove’s strategy of combining affluent economic conservatives and social conservatives ultimately failed. He thought tax cuts would keep the rich loyal, but they defected. But at the same time, the shift of the affluent has, in my mind, weakened the historic mission of the Democratic Party.

    By far the greatest issue before us, one barely on anyone’s agenda, is the astounding degree of economic inequality, perhaps approaching the levels of 1929 or even 1913. This obscene outcome, an astounding concentration of wealth by the super-rich, is a consequence of market failure – the capacity of those at the top to exercise monopoly power over the economy, and whose tax cuts and deregulation contributed to the current financial crisis and deepening recession.

    Not unrelated to this process are deindustrialization, over-globalization and overdependence on other nations for resources, products, and credit. The story of the rise of the United States to world power was based on production. Our success over Germany and Japan depended on massive production of war materials (yes, from the likes of General Motors, Ford and Chrysler) and our capacity to destroy the productive capacity of the enemy. Now we are willing to bail out the bloated financial and service sectors, and let industry die. Trade is overall beneficial and it is in our interest to aid in the economic development of all countries, but it is irresponsible and false savings to outsource basic production (and increasingly, even services). It is absurd to believe that we can safely prosper by trading, packaging, moving, storing, advertising, insuring, selling, brokering information, but not MAKING STUFF!

    This system of import dependence has accentuated our growing class divide. We create high-end jobs for some, but very few of the middle class opportunities long associated with production. Production also creates a wide range of higher end service-related jobs. When you are selling things made in China, much of the non-production value added is also exported.

    The increased bifurcation of our society can be seen in other fields. While the United States may have the “finest” education at the top, the general level of education is amazingly mediocre with astounding prevalence of ignorance and superstition, especially about science, economics and geography. I do not see even a hint of a turnaround here.

    I suspect the power of the medical insurance and hospital sectors are sufficient to prevent serious reform of the dysfunctional health system. Nor are we close to abandonment of the hopeless war on drugs, or to real reform of criminal justice, and – despite the election of Barack Obama – the integration of millions of Black males into mainstream society. Do the ivory tower economic theorists, Democratic as well as Republican, have a clue about the disaster potential of 100,000 more unemployed workers in Detroit? Does no one remember the race riots in Detroit or Watts, and the long history of labor unrest in America?

    This sad economic and social restructuring began around 1976. Believe it or not, the lowest level of economic inequality in US history was 1974 in the Nixon administration. Those of us at the top surely believe we earned our way there, but are in denial about the immense cost to the majority left behind.

    I just hope I’m as wrong about prospects for real reform as I was about the election!

    P.S.
    A guy (Obama) who could do the Bump with a 9 year old girl at maybe his 10th inaugural ball is so cool that perhaps I’ll raise my optimism level!

    Richard Morrill is Professor Emeritus of Geography and Environmental Studies, University of Washington. His research interests include: political geography (voting behavior, redistricting, local governance), population/demography/settlement/migration, urban geography and planning, urban transportation (i.e., old fashioned generalist)

  • Florida’s Tourism Addiction

    Remember those innocent days last summer, when the biggest worry was high gas prices? Florida already felt the pinch as tourism dropped dramatically. Then, as the financial markets collapsed last fall, Florida’s leaders woke up and began talking about diversification. Like deer caught in the crosshairs of a rifle scope, economic boosters darted around looking for new safe places in the knowledge economy, ways to revitalize agriculture, and even exploring private space development to supplement the stuttering NASA program.

    But now, having passed through the last quarter, this talk is once more put aside for reliance on tourism again. It appears that the line for Disney’s Space Mountain could be an inverse indicator of the state’s appetite for healthy diversification. As wait time for the ride shortened in October, space programs, research laboratories, and business incubators fell back in the minds of public officials. Today, with lower gas prices, those who still have jobs are coming back to the theme parks, and the relief that state officials feel is audible: no more silly talk about diversification!

    Once upon a time, before all the turmoil, NASA had a space program. From afar, one may infer there is an exciting base of science and technology centered around the Kennedy Space Center, with engineering plants and satellite factories and science laboratories. A visit to this area reveals nothing of the sort: sleepy Cocoa, a beach town seemingly lost in time, housing a few small offices scattered around the town labeled Grumman, Boeing, or Lockheed Martin. NASA’s space program in Florida, as it turns out, produces spectacular launches but not much else; the winds of politics on Capitol Hill blow so hot or cold that little sustained investment is possible into this local economy. In 2008, NASA quietly eliminated 4,000 jobs in Central Florida, as the space shuttle program is phased out and replaced with a more efficient vehicle.

    Meanwhile, tourism grew and no one noticed.

    Once upon a time, before all the freezes, Central Florida had agriculture specializing in citrus. Remember Anita Bryant and the famous Florida Orange? Groves actually extended into southern Georgia a century ago, but citrus farming retreated further and further south as farmers sought less risk from the weather. By the early 1990s, more freezes caused Central Florida farmers to throw in the towel, carrying out with them orange juice processing plants, bottle manufacturers, and shipping and trucking centers. Replacement crops were neither entertained nor encouraged by the State, and the farmers sold their land to developers, who quickly rezoned the land for single family subdivisions. Population grew, and no one noticed.

    Once upon a time, East Coast businesses were moving their corporate headquarters to Florida. If anybody remembers John Naisbitt’s 1980 book Megatrends, Orlando was named one of the top ten cities of the future. AAA, the automobile travel association, moved its corporate headquarters to Central Florida, joining Tupperware and several others. It appeared that low taxes and great weather inevitably would lure more companies. It escaped most people’s notice that the other corporations moving here, such as Harcourt Brace Jovanovich (now Harcourt), weren’t moving their leadership, but only back offices and computer hardware to Florida, taking state business incentives and returning the favor with service workers, not executives. As these service workers are downsized due to outsourcing and automation, Florida’s economy has been dramatically affected. Meanwhile the corporate headquarters in New York were protected. The top executives may have maintained condos in Florida, but never took the place seriously for business.

    But still tourism was growing, and no one noticed.

    Once upon a time, Florida was known as the state of low taxes. No income tax for us, thank you very much, despite a few weak attempts by the legislature. Rather, Florida depends on sales taxes and property taxes to balance its budget, and growth seemed to guarantee that these would rise. But even as low as taxes were, business leaders two years ago pressured the new Governor and legislature to propose a tax cut referendum, and like sheep, the citizens voted yes. Heck, who would not want their taxes cut? Shortly after property taxes were voted lower, the bottom fell out of Florida’s housing market, producing the perfect storm of lower taxes on properties dropping in value. Then, the wise leaders chose to cut necessities like education, rather than luxuries like the purchase of U.S. Sugar’s abandoned properties.

    But tourism was growing, and no one seemed to care.

    The litany of missed opportunities is longer than the space to list them. To anyone running a business, diversification of sources of income would seem natural to promote the long-term health of your business. But Florida consistently has shown disdain for this sort of behavior, because tourism continues to provide a steady stream of revenue. It is true that historically tourism has risen at the same rate as population growth and there is no reason to doubt that tourism will rebound. So once again, Florida’s reliance on tourism may seem its key to economic survival.

    In Central Florida, the economy is tourism, with worldwide visitorship, and compared to its next closest competitor, Las Vegas, Central Florida has come through smelling like a rose. Hotels within Disney’s property quietly finished 2008 on budget, and other hotels surrounding the theme parks suffered only modest losses. New hotel starts are halted, and owners with cash are not seeking expansion, renovation, nor repositioning while occupancy is down.

    Meanwhile, digital media and medical research remain the two most viable diversification channels for Central Florida. Partnerships between the private sector and the University of Central Florida to create a digital media development center will bear fruit in the coming years, both on campus and in downtown Orlando. Growth in medical research is already happening with the arrival of the Nemours Center for Pediatric Research. Both of these are happening because of internal decisions, windows of opportunity, and with mostly private, not government, help. On the downside, space investment dwindles, agriculture divestiture continues, and the State sits idly by, dreaming dreams of legalized gaming so as to put even more eggs into tourism’s basket.

    These are excellent times for diversifying the state’s economy. Tourism breeds not just an epehemeral city, but an ephemeral state – and the risk of this position is felt every day as jobs get scarcer and scarcer. Florida’s business leaders need to take responsibility for the future of the state, stop their addiction to tourism, and seek higher and safer ground. Only with a diversified economy will the State of Florida have long-term prospects for a prosperous future.

    So come on back, everyone, and get in line for rides at Disney! Those of us living and working in Central Florida thank you for coming. And, while you are here, pat yourselves on the back for helping Florida postpone its inevitable reckoning with economic reality.

    Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

  • Obama’s Other History

    The coverage of President Barack Obama’s first days in office has been intense, to say the least. Yet it has still managed to overlook an historical comparison that is worthy of our consideration.

    Obama took office just a few months after a stock market crash that left no doubt about the rugged shape of our economy. The ensuing decline has been swift and scary, leading some to talk about a possible fall into an outright depression.

    Now consider Herbert Hoover, the president who took office just a few months before a stock market crash that signaled the Great Depression in 1929. Hoover remains a figure of historical disfavor to this day because of what he did — and particularly what he didn’t do — after the crash. He served nearly four years in the Oval Office as the Great Depression raged, continuing to view government’s role in the economy as largely limited. He offered no enormous economic stimulus plans or social programs. Clusters of tent cities occupied by the dispossessed of our land became known as “Hoovervilles.”

    Then came Franklin Roosevelt, who immediately put enormous economic stimulus plans into action and launched a whole host of social programs.

    Timing can be everything — in politics, economic matters, and life in general.

    Our timing might be just right with Obama because our economy’s nose-dive came just a month or so before the presidential election. Obama came to the job at a moment when he has a chance to move on our problems before they settle in to another Great Depression. What if Roosevelt had gotten a shot a few months after the stock market crash in 1929 instead of nearly four years into the mess?

    Here’s another historical comparison worth noting: Hoover won election as a Republican in 1928 in part because of widespread prejudice against Roman Catholics, a sentiment that worked against New York Governor Al Smith, who ran as the Democratic nominee in the race.

    There’s true irony in this piece of history, because Smith had recognized the shaky nature of the economy well before the crash that signaled the start of the Great Depression. The actions he took in New York during the 1920s could be viewed as a state version of what would become Roosevelt’s famous New Deal package of economic stimulus and social programs.

    Bigotry ravaged Smith’s campaign, though. He might not have won in any case, but the anti-Catholic emotions that took wing in large parts of the populace, media and other parts of the power structure left him without a fighting chance.

    Smith’s loss spelled a wait of nearly four years before the federal government became fully engaged in putting its might against the Great Depression. It was just a few months ago that Americans could have again allowed prejudice — this time against African/Americans — to override a presidential campaign. That might have led to another slow response to an economic crisis. It’s not a perfect comparison to match recent Republican nominee John McCain to Hoover, but the Arizona Senator has long favored smaller government, which is nowhere near what we saw from Roosevelt or are seeing from Obama.

    Now here’s the hard part of this history lesson: There’s still plenty of debate among scholars and economists on whether Roosevelt’s massive government programs worked. The New Deal brought immediate relief to millions in dire straits, an invaluable record in its own right. But there is data to indicate that the programs ultimately failed to put the economy back on track. Indeed, the Great Depression didn’t really end until World War II led factories and farms to crank up production. Some would argue that the New Deal amounted to short-term fixes that did more harm than good over the long haul.

    That leaves us to wonder whether the current plans to spend $700 billion to bail out banks and automakers — and hundreds of billions more on roads and bridges — will bring improvements that make such outlays worthwhile.

    The effort will be made sooner rather than later, though, and that’s because Americans didn’t hold a fellow back from the highest office in the land based on prejudice this time around.

    That’s real progress — even if it’s the only progress we can claim for certain as we fight through our tough economy.

    Jerry Sullivan is the Editor & Publisher of the Los Angeles Garment & Citizen, a weekly community newspaper that covers Downtown Los Angeles and surrounding districts (www.garmentandcitizen.com)

  • MC Bailout

    Thanks to Steve Bartin for pointing out this hilarious bailout video, which then led me to The Daily Bail, a new site looking at the lighter side of the financial crisis. Stockbroker thuglife? Good stuff.

  • Even the Super Bowl Can’t Defend Pittsburgh From a Recession

    Somebody call the New York Times. The national economic meltdown has finally come to Pittsburgh, a city-region where you’ll want to be on the day the world ends because you’ll still have several years to live.

    Sunday’s Super Bowl game between the mighty Steelers and the upstart Arizona Cardinals – teams representing regions going in exactly opposite socioeconomic directions since 1950 – has eclipsed all non-sports news coming from Pittsburgh.

    Pro football, which Pittsburgh continues to excel at despite 60 years of economic decline, brutal population loss and criminally inept public sector mismanagement, is a seasonal religion every fall no matter how well the Steelers do. But when the Steelers make it to the Super Bowl, as they did this year for an NFL record seventh time, the region and its 2.3 million people are paralyzed by a religious fervor that can be culturally embarrassing.

    “Go Stillers” signs appear everywhere. Secretaries, retail clerks and TV news anchors wear black-and-gold Steelers garb on game Fridays and during the playoffs. If Ben Roethlisberger game jerseys had collars, an embarrassing number of professional men would wear them under their suits. The Pittsburgh public schools have instituted a two-hour delay Monday morning in an effort to thwart what should be a severe epidemic of the usual morning-after-Steeler-Sunday-night game flu among teachers. Eat n’ Park, a venerable and highly profitable family restaurant chain that ordinarily wouldn’t close if a meteor struck downtown Pittsburgh, has won enormous goodwill because it’s decided to close at 3 p.m. on Sunday so its several thousand employees can not only watch the Super Bowl but have several hours to prepare the sacred sandwiches and dips and dress up for it. If the Steelers lose, the whole town will be on a suicide watch till March.

    Even the Steelers’ success on and off the field could not defend Pittsburgh from the recession forever, however. For the last two months national publications that should have known better (like the Times) came to Pittsburgh, looked around at its service sector-university-government economy, and declared that it was some sort of model for other city-regions because it was apparently recession proof.

    Of course, reality turned out to be not so kind. Pittsburgh’s unemployment rate and stable housing prices were relatively better than the national figures only because its deindustrialized economy was already so stagnant that it never experienced fast job growth or a recent real estate boom and therefore couldn’t go bust.

    The latest regional numbers, as reported by PittsburghToday.org, a useful web site devoted to documenting the economic reality of the Pittsburgh region as well as boosting it, showed job losses accelerating in December for the second straight month.

    Compared to December of 2007, Pittsburgh had 7,500 fewer jobs in December 2008. November’s revised numbers, according to PittsburghToday’s Harold Miller, showed a net loss of 1,600. These numbers, while negative, are minuscule in a region with over 1.1 million jobs. In December jobs were up slightly year-over-year in health care, higher education, professional and business services, mining and construction, Miller reported, but about 10,000 lost jobs in leisure and hospitality, retail and manufacturing offset those gains.

    Miller, per usual for a professional civic booster, looked for and found a few relative silver linings in Pittsburgh’s permanently gray clouds: The job loss – 0.6 percent in December – was small compared to Detroit, which has lost 5 percent of its jobs in the last year. And compared to Cleveland – Pittsburgh’s rival in all things, including pro football, population loss and the rate of post-industrial economic decline – the former Steel City did better.

    The capital of Steeler Nation lost only 1 manufacturing job in 2008 for every 5 lost by the Cleveland, a city whose hapless Browns finished 4-12. But even if the Steelers – who are narrow favorites – whip the Cardinals Sunday and win their sixth Super Bowl in seven tries, it won’t do much to protect Pittsburgh from eventually being hurt harder by the national recession/depression.

  • Hollywood Tax Credits? The Shows Are On The Road

    If you were paralyzed with shock at the October $700 billion dollar Congressional bailout, you may have missed the inclusion of a $478 million-fine-print allotment to Hollywood for tax incentives. A month later, in the midst of California’s on-going fiscal crisis, Governor Arnold Schwarzenegger proposed something called ‘the runaway production provision’, to utilize the bailout incentives to keep entertainment production in California and stimulate investment in motion pictures here. The proposal allows production companies to claim a $15 million deduction per California movie during the first year of filming. The credit increases to $20 million if the company films in an economically depressed area.

    Whatever your thoughts may be on the bailout in general, Hollywood is hurting, and tax incentives — especially if they don’t end up exclusively in the coffers of the major players — are long overdue. If California doesn’t protect its long-standing identity as the center of the entertainment industry, the Hollywood Sign may soon be strung across a mesa overlooking Albuquerque, or facing post-Katrina trailers. Forty states offer financial incentives to feature film and television companies; currently, California does not.

    Los Angeles and the state of California have been victims of runaway production for 25 years, but with California’s shrinking economy and growing anti-business reputation, the fight to keep any of the state’s industries in place has gained importance. Roughly a quarter of a million Californians work directly in the entertainment industry, with a substantial additional segment of the state economy fueled by retail, professional services, health care, and education related to the industry workforce. Entertainment is the fifth largest industry in Southern California.

    ‘Runaway production’ — the popular term for motion picture and television production which moves outside the United States — and ‘production flight’ — production re-located outside of LA — mean job and economic loss for California and greater Los Angeles. Feature film production in the region has dropped by about half since its 1996 peak. By 2007, entertainment production in the region had dropped to 31%. In 2008, television production marginally increased, but the migration continued to states such as New York, New Mexico, and Louisiana, which promised better tax climates.

    Here’s a rundown on who’s eating LA’s power lunches:

    Big Apple’s Big Win: Last May Variety announced “Ugly Betty Bites the Big Apple”; the filming of ABC’s hit would possibly move to New York. By summer, persuaded by Governor David Paterson’s expansion of tax breaks, the move took place. It makes sense that “Ugly Betty,” a series about the New York fashion industry, is now actually shot in New York. But production designers are famously skillful at locale substitutions. The dealmaker was undoubtedly New York’s new laws that tripled the eligibility for a tax credit to 30%, with an expiration date pushed to 2013. New York City “tips” an additional 5% tax break.

    New Mexico’s State Motto, Crescit Eundo: Crescit Eundo translates to “it grows as it goes,” and the New Mexico film and television industry has been growing. The program was initiated by Republican governor Gary Johnson, and was then enthusiastically supported by Democratic Governor Bill Richardson. The state recently celebrated the 100th film to collect its 25% rebate through state tax incentives.

    “No Country for Old Men,” the 2007 Best Picture Oscar-winner, was based on a Cormac McCarthy novel set in Texas that used Texas as a metaphor for a changing America. But it was shot in New Mexico. The AMC series “Breaking Bad,” the feature “Terminator Salvation,” the sequel to “Transformers”, and, perhaps most appropriately, a biography of Georgia O’Keefe, were all recently filmed in New Mexico.

    New Mexico claims that its 25% production cost rebate has contributed to building a stable film industry: $600 million in direct spending since 2003, and an estimated $1.8 billion in financial impact as of 2007. In 2008, productions in the state generated about 142,000 days of employment, up from 25,000 in 2004. The state continues to invest in the future of its film industry by building additional studios, and Sony Pictures Imageworks will open a large post-production facility in Mesa del Sol west of Albuquerque in mid-2009.

    The latest California loss to New Mexico: ReelzChannel, after laying off more than 40 employees in Los Angeles, just announced its relocation to Albuquerque.

    Les Bon Temps De Roulez Rolls Over A Grand Bump: Louisiana has a history of aggressive pursuit of film and television production through tax incentives. It offers 25% (plus 10%) transferable tax credits. Jefferson parish, outside New Orleans, offers an additional 3% rebate for production with a cap of $100,000. The cap rises to $110,000 if the production office and stage are in Jefferson Parish.

    The Louisiana Film Commission boasts that more than $2 billion in productions have been filmed in the state, with a direct impact of $1.48 billion for their economy. Film production almost doubled between 2005 and 2007, and film-related jobs have grown 23% per year. An estimated 65 projects were completed in 2008.

    Louisiana’s figures look good, but are they real? In an accounting finesse as creative as a film plot, former Film Commissioner Mark S. Smith inflated budgets and broadly interpreted “film projects” to include the filming of music festivals, thereby bankrolling with taxpayer money almost 30% of some music festivals, handing out $10 million to festival producers. Smith pleaded guilty in 2007 to taking bribes of $65,000, and after numerous postponements is still awaiting sentencing.

    Louisiana quietly closed some of the loopholes related to the actual amount of filming in the state, but the system still poses questions for Louisiana taxpayers. “The Curious Case of Benjamin Button” is as big a Hollywood-picture-not-primarily-shot-in-Hollywood as they come. Most of the filming was done in New Orleans and Montreal, with some sound stage work in Los Angeles. It stars Brad Pitt (and the city of New Orleans), and is up for 13 Oscars, inclduing Best Picture. The film’s $167 million budget was so big and laden with special effects that it required the backing of two studios, Paramount Pictures and Warner Bros. Louisiana taxpayers will provide roughly $27 million of the film’s costs, as the producers who qualified for the incentives (pre-loophole-closing) ultimately cash or sell the value of their tax incentives.

    Production Flight Or Production Fleece?: While Louisiana appears resolute in its determination to be the Tinseltown of the Gulf Coast, other states in the midst of budget slashing are questioning the value of tax incentives for film production in the current economy. With Detroit in a tailspin, fiscal watchdogs in the Michigan congress are looking to cap film credits, enacted in April of 2008, at $50 million. Rhode Island, smarting from paying more in incentives than was returned to the economy on a straight-to-video movie, has also tightened its production incentive laws.

    The confusion and intricacy of exploring the possible tax credits, incentives, and rebates has created its own set of entrepreneurs. Producers who visit The Incentives Office can shop for film incentives in the way that a buyer or broker shops for favorable interest rates. The Incentives Office promises to help producers “maximize their production incentives,” to help states with their film incentive programs, and to assist lenders in verifying estimated rebates and tax credits. “Most effectively, we take care of the entire incentive process for producers, from choosing the right state to filing the final documents and collecting the money.” The Incentives Office is located in Santa Monica, so the incentive consulting business — if not the actual incentives — remain part of the California economy.

    California is struggling with more economic fault lines than a seismic map of the state. Its flagship business, entertainment, is hoping to be re-powered by tax incentives. If the industry does succeed at closing the deal with government, the last words on the script may be “I’ll be back,” and not “Hasta la vista, baby.”

    Nancy Meyer is a broadcast and cable television executive and producer. She also works in university education with the Academy of Television Arts & Sciences Foundation, and is co-author of Television, Film, and Digital Media Programs published by Princeton Review/Random House.

  • Oregon’s Immigration Question: Addressing the Surge in the Face of Recession

    The men huddle outside the trailer, eyeing the passing traffic. Handmade signs stapled to telephone posts speak for them: “Hire a Day Worker!” The site, a fenced-in lot at Northeast MLK and Everett Street, was launched in 2007, a testament both to Oregon’s recent immigration boom and lack of federal reform.

    Since then, Obama’s historic campaign, several wars and a global recession have pushed the immigration question from the national headlines. But in Oregon – where the surging migrant population is on a crash course with a withering economy – the issue is bound to reignite.

    Oregon’s economic boom, which started later than that in the rest of country, has ended. Unemployment has risen considerably. Oregon’s 9.0 percent unemployment rate was the nation’s 6th worst in December 2008 according to the Bureau of Labor Statistics.

    At the eye of the storm have been losses in the construction industry, a major employer of immigrants. The hard times there will put new pressure on local legislators and law officials to “clean out immigrants”. Oregonians should not give in to such misguided temptations. Oregon’s immigrants have played a historic role in enriching the state’s economy and can continue to do so if given the opportunity.

    Oregon’s immigration explosion is relatively new. The state’s foreign-born make up 9.5 percent of the population, with more than 60 percent of the immigrant population arriving after 1990, according to 2005 census data.

    The influx of Latinos to the state is even more recent. Estimates place 75 percent of Latinos coming between 1995 and 2005. Unlike other immigrants who tend to concentrate to urban and suburban areas, Latinos are dispersing across Oregon. Between 1990 and 2000, the Latino population doubled in 21 of Oregon’s 36 mostly-rural counties. Agriculture employment, cheap housing, and existing Latino communities attract the rural migration.

    Within the Portland metro area, the largest concentrations of foreign-born population live in Southeast Portland (Ukrainians, Russians, Romanians), Northeast Portland (Vietnamese, Africans), and Central Portland (Asians, Eastern Europeans), according to a study by the Urban Institute. Notably, more Russians and Ukrainians moved to Oregon’s suburbs between 2000 and 2005 than to any other region in the nation, according to a recent University of Oregon study.

    Currently, immigrants total over 11 percent of the state’s labor force, up from 5.4 percent in 1990. Yet native unemployment did not increase during this time period.

    One reason for this, argues MIT’s Tamar Jacoby in a recent Foreign Affairs article, is that the immigrant workforce should be viewed as complementary rather than competitive to the native workforce. For example, the business owner who can hire housekeepers and landscapers can devote more time to growing his business, and to leisurely expenditures that support other local businesses.

    Oregon’s diverse agricultural industries – ranking third nationally for labor-intensive crops – offer a more concrete example of the complimentary nature of immigrants.

    The state is home to a $325 million dairy and cattle milk production industry, a $778 million nursery and greenhouse industry, a $380 million fruit and nut industry, and a $200 million wine industry. All are primarily staffed by immigrants. In this case, immigrant labor allows Oregon’s agricultural sectors to thrive in the face of fierce import competition.

    Immigrants have historically had a strong entrepreneurial spirit. Nationwide, 25.3 percent of technology and engineering companies had at least one foreign born key founder, based on a Duke University study. Often with few resources or formal education, immigrant entrepreneurship can foster new kinds of services. The abundance of landscaping businesses and nail salons is a testament to such ingenuity. In 2005, over 6,000 Latino and 400 Slavic entrepreneurs operated throughout the Portland metro area, according to one University of Oregon study.

    Beyond providing jobs and fueling local economies, immigrant entrepreneurs bring the benefits of globalization to places like Oregon. They encourage trade and investment from their connections abroad.

    Immigrants pay taxes, buy houses, food, cars, and clothes just like native residents. Even illegal immigrants – which many immigration-demagogues label as the real problem – have taxes withheld from their paychecks. They also otherwise bring money to the state through sales taxes on local purchases. A study by the Oregon Center for Public Policy found that undocumented immigrants contribute between $134 million and $187 million in taxes annually to Oregon’s economy. These numbers represent only those coming from undocumented workers and exclude the significant investments made through entrepreneurship, agricultural support and the continual purchase of goods and services.

    Yet serious immigration reform is needed. A large portion of immigrants spends only stints working in the states, frequently sending money back home. The consequences of this go beyond the obvious fiscal drain. The stint worker will invest minimally in learning English, will often share rent in decrepit neighborhoods, and spend as little as possible in order to maximize savings for abroad.

    The problem facing Oregonians is not immigration per se – or even illegal immigration, which constitutes only 10 percent of the migration to the state. The real problem is stint immigrants, who invest little in the long-term health of their new communities and the economy of the state.

    The curious delusion about this point is that current federal legislation includes temporary-worker permits as key to reform. By giving only temporary permits to immigrants who might otherwise be coaxed into permanent stay, Washington is explicitly discouraging acculturation and encouraging capital drains.

    In large part, the real solution to the downsides of immigration lies in the permanent integration of Oregon’s new residents. When these residents feel they may be here permanently – without constant threat of deportation – they will be more likely to invest in their new communities and futures.

    Even the state’s recent job-shedding should not derail Oregonians’ historic acceptance of foreign residents. Oregon’s immigrants will stabilize agriculture and other service industries by providing cheap labor through hard times.

    If the incoming administration manages the recession correctly, Oregon’s economy will soon recover. To rebound quickly, the state will need to employ thousands – natives and immigrants – in the infrastructure and Green packages coming from Washington. Oregon’s post-recession economy, like its pre-recession economy, will depend on immigrant labor.

    A comprehensive understanding of Oregon’s immigration question must go beyond viewing the huddle of men on MLK and Everett every morning as mere numbers, bodies for pay.

    A true understanding of the issue will surface only by looking beyond the numbers to recognize these men’s potential, resourcefulness and culture as indispensable components that once shaped our nation’s identity and will continue to mold its future.

    Ilie Mitaru is the founder and director of WebRoots Campaigns, based in Portland, OR, the company offers web and New Media strategy solutions to non-profits, political campaigns and market-driven clients.

  • Financial Crisis: Have We Hit Bottom Yet?

    These are not boom times for optimists. But I believe that – combined with knowledge of what has worked in the past – there are numerous signs that the economy may turn around faster than many think.

    Bottoming Signs

    Here are some small signs that the economy is at last bottoming:

    – The ISM non-manufacturing services report for December came in at 40.6 on the composite index, compared to 37.3 in November. New orders, employment, backlogs, and exports all ticked higher than the previous month. So did the overall-business-activity index.
    – November factory orders rose at a 3.9% annual pace, the first increase in four months and the best gain in 10 months. Computer orders surged 12.5%.
    – Pending home sales declined again overall, but in the West pending sales continued to increase, up 27% since the August 2007 bottom.
    – Commercial construction rose 0.7% annually in November, and is up 12.1% over the past three months.
    – Real disposable personal income jumped 1% in November and is up 7.1% at an annual rate over the past three months. Real consumer spending rose 0.6% in November.
    – Inflation is plummeting, largely a function of collapsing oil and retail gas prices.
    – The money supply of liquid assets, as measured by M1 and M2, is growing robustly, fueled by the Fed’s gigantic increase in the monetary base.
    – The credit freeze continues to thaw. The three-month LIBOR rate is all the way back to 1.4%. Corporate bond rates continue to decline.

    The Economic News Isn’t All Bleak

    What happened after the collapse of Lehman on Sept. 15 was a global, synchronous cessation of all but nondiscretionary economic activity. It came in the wake of a near-collapse of global credit markets. The fall was remarkably rapid. But if things came to a halt more quickly than ever before, they could also restart more quickly than ever before. Zachary Karabell, president of River Twice Research, calls attention to some positive signs:

    – “First, we haven’t seen war, revolution, the collapse of states and governments, or massive demonstrations sweeping the globe.” It is a remarkable testament to global stability even in the most difficult time.

    – “Second, consumers in many parts of the world are in relatively good shape.” A third of American households have no mortgage. The savings rate in China is 50%. The accumulation of wealth is still massive in the US, Europe, Japan, China, the Gulf region, Brazil, India and Russia. Even at its most promiscuous, the credit system did not allow consumers to leverage themselves to the obscene 30:1 ratio that some financial institutions did.

    Karabell continues:

    People have also reacted swiftly to the current problems, paying down debt and paring back purchases out of prudence or necessity. That’s a short-term drag on economic activity, but it will leave consumer balance sheets in good shape going forward. Low energy prices and zero inflation will boost spending power. Even if unemployment reaches 9% or more, consumer reserves in the US and world-wide are deeper than commentary would suggest. Household net worth in the US is down from its highs but is still about $45 trillion. As the credit system eases, historically low interest rates also augur debt refinancing and constructive access to credit for those with good histories and for small business creation in the year ahead. Entrepreneurs often thrive when the system is cracking.
    In addition, corporations generally have very clean balance sheets with little debt and lots of cash, unlike the downturns in 2002 and in the 1980s. And government has more creative ways to spend, which both the current Federal Reserve and the incoming Obama administration intend to do.

    2009 Could Be Better Than You Think

    Here are five good reasons why 2009 could be better than you think, according to Alan Murray:

    1. This will be a good year to invest in stocks (the bottom will be found sometime this year, and it probably won’t be too far below where the market is today).
    2. It will be a good year to invest in real estate (fixed-rate mortgages are at historic lows).
    3. Americans will learn to live within their means (you can’t spend what you don’t earn).
    4. President Obama will have a historic opportunity to reshape public policy (sure, some of the stimulus money will be wasted, but a lot will be beneficial).
    5. Your (federal) taxes won’t rise (not this year, anyway).

    What Could Go Right in 2009

    Superstrategist Ed Yardeni is quoted by James Pethokoukis in US News & World Report on what could go right in 2009:

    1. Lower mortgage rates fuel a refinancing boom which lifts consumer spending.
    2. Home sales increase and home prices stabilize.
    3. Easier credit conditions increase auto sales.
    4. The drop in fuel prices also boosts consumer spending; the unemployment rate peaks below 8%.
    5. Massive spending on infrastructure by the US government offsets weakness in such spending by state and local governments.
    6. The money supply grows rapidly.
    7. Stimulative monetary and fiscal policies overseas revive global economic activity and US exports.
    8. Depleted inventories and improving sales trigger a big jump in industrial production.
    9. Credit quality spreads narrow significantly and rapidly as investors seek better returns than available in Treasury securities.
    10. Stock prices rise 30%-40% in anticipation of better earnings during the second half of 2009 and in 2010.
    11. Inflation remains subdued, and productivity pops.

    Looking on the Bright Side

    Martin Walker, Senior Director of AT Kearny’s Global Business Policy Council, is not down-hearted, for the following reasons:

    First, the financial crisis is starting to ease. The LIBOR rate is back down below the panic level. Credit Default Swaps look much less worrying. International coordination to ameliorate the crisis is unprecedented, and includes China.

    Second, we now have a reasonable sense of how long the recession is going to be; it started in the third quarter of last year, will last for at least 18-24 months, and will see a decline in GDP among the G-7 countries of 2 to 3 percent.

    The growth rate of the BRIC economies – Brazil, Russia, India and China – will slow, as will the growth of such middle-income countries as Mexico, Australia, Turkey, Taiwan, Indonesia, Saudi Arabia and South Korea. But they will all still be growing.

    Third, there is some very good news on innovation which points to a much brighter future. All previous predictions of gloom and despair – from Thomas Malthus in 1798 predicting human population would overwhelm food supplies to the Club of Rome’s forecast of major minerals and commodities shortage in the 1970s – have been proved wrong by human ingenuity and technological progress. Brains, brawn and sheer effort have a remarkable way of overcoming obstacles.

    Dr. Roger Selbert is a business futurist and trend guy. He publishes Growth Strategies, a newsletter on economic, social and demographic trends, and is a professional public speaker (www.rogerselbert.com). Roger is US economic analyst for the Institute for Business Cycle Analysis in Copenhagen, and North American representative for its US Consumer Demand Index.