Rob’s Summer Read: Thinking, Fast and Slow

by Rob Camoin 16. July 2014 15:04

Thinking, Fast and Slow is a 2011 book by Nobel Memorial Prize winner in Economics Daniel Kahneman which summarizes research that he conducted over decades. It covers all three phases of his career in which he has studied the human decision-making processes. In his latest work, Kahneman theorizes that individuals use two modes of thought: fast and slow, or “System 1” and “System 2.” The former is considered to be more instinctive and emotion-based, while the latter attempts to be more logical. Through experiments, he illustrates that both modes are flawed. Through his work, the author suggests that people place too much confidence in human judgment suggesting that the decisions individuals, organizations, and governments make do not necessarily lead to optimal outcomes.

 

So what does this have to do with economic development?

Well, there is a low but growing murmur, mostly from outside our field, that happiness—not economics—is the future metric of community or regional success. Kahneman may help shed light on this theory. Thinking, Fast and Slow concludes by introducing the economics of happiness, the quantitative and theoretical study of happiness, well-being, quality of life, and related concepts. Happiness economics combines economics with other fields such as psychology and sociology and typically treats happiness-related measures—rather than wealth, income, or profit—as something to be maximized.

 

Thinking, Fast and Slow by Daniel Kahneman

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Michael’s Summer Read: “How the Economic Machine Works” (VIDEO)

by Michael N'dolo 16. July 2014 15:03

My summer reading list begins with the easiest assignment you have ever had: watch this video. It is from Ray Dalio, a genius from the hedge fund world, who is attempting to explain the fundamental workings of our "economic machine" in an easily accessible way. It is like watching a cartoon (literally) that provides a wealth of understanding about the underlying components of our economy and how they fit together into the complex system of debt cycles and productivity growth. It sounds boring, but it's not! It is a fascinating 30 minutes that will leave you captivated.

Reading, however, is necessary to deepen the understanding of the video. Here, Mr. Dalio again provides a treasure trove of free material: www.economicprinciples.org. His discussion about the determinants of economic growth have real lessons for economic developers. (See the end of his last piece on “The Formula for Economic Success.”)

 

“How the Economic Machine Works” by Ray Dalio

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Jim's Summer Read: "The Pitchforks Are Coming... For Us Plutocrats"

by Jim Damicis 16. July 2014 15:03

For my addition to the summer reading list, I chose to share an article which has gained considerable traction nationally, given the recent debates over raising the minimum wage. The article is by Nick Hanauer, and it appeared in the July/August issue of Politico Magazine. It’s entitled “The Pitchforks Are Coming… For Us Plutocrats.” Nick is one of the nation’s top .01 percenters in wealth and made his money co-founding many companies, including Amazon. The premise of the article is that the inequity in wealth in the U.S. is threatening economic growth, and consequently, we must do more to increase the incomes of workers, for wealth and prosperity is driven by workers.  He states:

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

He goes on to suggest that raising the minimum wage considerably is one of those things we must do.

 

I chose this article because of its relevancy to my interest in a need to expand the focus of economic development from narrow goals of business, job, and investment creation to opportunity and income creation across all classes of society. I recently had the opportunity to speak at the World Future Society 2014 Annual Conference on “Reconstituting the Middle Class” where I used the above quote for a call to action. In addition to Hanauer’s call for an increased minimum wage I add that we must make entrepreneurship and innovation pervasive throughout our culture and among all classes. To do so we must build skills for workers to operate in networks for learning and diffusion of knowledge and increase access to entrepreneurial resources. I will highlight this presentation in a future issue of the Navigator.

 

“The Pitchforks Are Coming…For Us Plutocrats” by Nick Hanauer

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Rachel’s Summer Read: Why This Work Matters: Wisdom from the People Who Are Making Communities Better

by Rachel Selsky 16. July 2014 15:01

If you only have a little bit of time this summer to sneak in some “good-for-the-soul” reading, I would suggest Why This Work Matters, a compilation of stories from people “who are making communities better.” It’s a quick read compiled by fellow economic developer Della Rucker. The passages tell stories of community development work being done across the country, and if you are anything like me, you will find yourself smiling and nodding right along with the storytellers. It is upbeat and positive and will leave you inspired to continue to do good work.

 

Why This Work Matters: Wisdom from the People Who Are Making Communities Better edited by Della Rucker

 

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Christa’s Summer Read: Startup Communities: Building an Entrepreneurial Ecosystem in Your City

by Christa Franzi 16. July 2014 15:01

Last summer, a client handed me a copy of Startup Communities by Brad Feld, and I’ve been carrying it around since. Finally, last week while camping on the shores of Sacandaga Lake in the little Adirondack community of Speculator, I cracked it open and immediately regretted not taking it on sooner.

 

Feld walks through a common sense framework for successful entrepreneurial ecosystems based on his experience in Boulder, Colorado, and across the U.S. The “Boulder Thesis” has four key principals:

 

1. Entrepreneurs must lead the startup community.

This is the most critical aspect of a startup community. There are many important and necessary individuals involved in any startup community, but only entrepreneurs can lead it successfully.

 

2. Leaders must make a long-term commitment.

We’re talking a minimum of 20 years. Not just 20 years from today, but a 20-year commitment from tomorrow, next year, in 5 years…. This long-term view is vital for a startup community’s resiliency through economic ebbs and flows.

 

3. The startup community must be inclusive of anyone who wants to participate.

This is probably the most difficult component of the framework, particularly the philosophy that leaders must be willing to have more leaders involved. However, as Feld puts it, “Building a startup community is not a zero-sum game in which there are winners and losers; if everyone engages, they and the entire community can all be winners.”

 

4. The startup community must have continual activities that engage the entrepreneurial stack.

The key here, again, is to include everyone in the startup community in regular, focused activities. This includes aspiring entrepreneurs, mentors, investors, serial entrepreneurs, employees of startups, and anyone else who is interested in being involved. Events might be regular meetups that last for decades or one-off events over the course of a weekend. Feld covers the emergence of hack-athons, new tech meetups, open coffee clubs, startup weekends, and accelerators in detail.

 

Field’s take-home message is best summarized in the last chapter: “My favorite thing about startups is that they don’t require anyone’s permission. Great entrepreneurs just start doing things.”

 

Startup Communities: Building an Entrepreneurial Ecosystem in Your City by Brad Feld

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Ian’s Summer Read: “Goodbye Silicon Valley, Hello Silicon Cities”

by Ian Flatt 16. July 2014 14:59

In December 2013, Bruce Katz of the Brookings Institute discussed the “remarkable shift” in the “spatial geography of innovation” from suburban corporate campuses to urban innovation districts in his blog post Goodbye Silicon Valley, Hello Silicon Cities for LinkedIn’s “Big Ideas of 2014” series. In June 2014, Bruce further explored this subject in a Brookings Institute report on The Rise of Innovation Districts, co-authored with Julie Wagner. Many major cities have created innovation districts to respond to the desires of both workers and companies for dense urban space that brings together advanced institutions (e.g. universities or medical centers), cutting-edge firms, supportive and spinoff companies, and business incubators in walkable and bikeable communities with urban amenities (mixed residential, transportation infrastructure, retail, restaurants, and recreation opportunities). These districts are designed to cluster innovative businesses and entrepreneurs into a small geographic location to increase collaboration and innovation and create opportunities for the cross-pollination of ideas.

While this blog post and subsequent report focus on innovation districts in major cities, rural communities and small towns should also understand and capitalize on the trends that are encouraging the growth of these districts. While smaller communities may not have a major university or medical center to anchor an innovation district, a community can still successfully create a space to foster innovation and collaboration. For example, a community could convert vacant space in a small downtown area into a district of offices with collaborative space, business resources, and mentorship opportunities from experienced business owners. The district could host networking events, pitch competitions, and lectures —anything to encourage the sharing of ideas and entrepreneurship. A great example of a small community encouraging business innovation can be found in the Schodack Central School District, where extra space at a middle school is rented to startup companies. The presence of the startups has led to partnerships with teachers and classrooms, and opportunities for students to work or intern.

Innovation districts are a physical representation of some major trends in economic development: communities leveraging entrepreneurship and business retention to create new economic opportunities and businesses relying on innovation and collaboration to grow. Large or small, communities will need to foster spaces that encourage collaboration among local innovators to attract and retain companies and talent and provide a hospitable environment for sustainable economic success.

 

“Goodbye Silicon Valley, Hello Silicon Cities” by Bruce Katz of the Brookings Institute

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Tom’s Summer Read: The Economy of Cities

by Tom Dworetsky 16. July 2014 14:56

As economic development consultants, we are exposed to incredibly different communities with vastly different histories, challenges, and prospects for the future. Whether it’s a rural county with a deep-rooted history of farming that needs to compete in the global agriculture market, a rust-belt city struggling to repurpose itself in the post-manufacturing economy, a small town intent on reviving its long-forgotten downtown, or a region reliant on tourism dollars for its ongoing economic health, all of these communities— despite their not insignificant differences—are subject to the same economic forces that will ultimately determine their success, or failure.

 

When working in these distressed communities, I often find myself asking, “Why does this place exist where it does? What were the economic forces that drove its settlement and subsequent growth? And what changed that ultimately turned the tide toward decline?” I have found that understanding the history of places can offer insight into how to make them viable in the future.

 

This brings me to my summer reading recommendation, The Economy of Cities, Jane Jacobs’ 1969 book. Though Jacobs is better known for her 1961 classic, The Death and Life of Great American Cities, I found The Economy of Cities to be equally insightful and thought-provoking. This oldie-but-goodie theorizes on how and why cities come to be, and what causes them to grow or die.

Essentially, Jacobs’ argument is that cities (and not rural areas) are the drivers of economic growth. All cities grow first through the production and import of goods for their own needs. These imports are then slowly replaced by local production as entrepreneurs innovate and gain the capacity to make products themselves, which are then exported to other cities. This influx of wealth from exports in turn enables the city to import new, more novel goods. This increasing demand for innovative products creates new types of jobs by incentivizing people to experiment and find opportunities to sell new products, further fueling exports and growth.

Jacobs touts entrepreneurship and diversification as the key elements to the success of cities, while (quite controversially) discounting the economic influences of location, natural resources, climate, transportation, workforce skills, wages, and government policy. She also confronts the notion that cities were built upon a rural economic base, arguing that the reverse is true: that agriculture is reliant on urban innovation, and that the world’s first cities preceded the origins of agriculture.

While many of Jacobs’ points are rather contentious, The Economy of Cities encourages the reader to question why cities exist and what contributes to their success. Moreover, it provides a lens through which economic developers can look at the communities we are tasked with assisting. This is an enjoyable read that anyone with an interest in economic development should consider.

The Economy of Cities by Jane Jacobs

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Business Improvement Districts: A Primer

by Guest Author 17. June 2014 10:43

Thanks to Susan Hopkins & Laura Fox of Bergmann Associates for contributing the following article.

What is a BID?

A Business Improvement District (BID) is a public/private partnership in which property and business owners elect to make a collective contribution to the maintenance, development and promotion of their commercial district. Unlike a Merchants’ Association where contribution is voluntary, BIDs provide a steady and reliable source of funding because legislation requires that property owners pay assessments once the BID is approved.   The BID movement began as a property owner response to limited public resources and deteriorating commercial districts. BIDs give property owners in commercial districts control over how funds are spent to improve their shared public space. BIDs are similar to common area maintenance fees in suburban shopping centers, where fees paid by tenants are used to provide services that enhance the appearance of common areas, security, and marketing. Unlike a mall, however, a BID contains multiple property owners iwho collectively agree to pay an assessment for these services.

BIDs have several advantages:

·         a cleaner, safer and more attractive business district

·         a steady and reliable funding source for supplemental services and programs

·         the ability to respond quickly to changing needs of the business community

·         the potential to increase property values, improve sales and decrease commercial vacancy rates

·         a district that is better able to compete with nearby retail and business centers[1]

What can a BID do?

BIDs are designed to be able to deliver a range of supplemental services in coordination with municipal services. The services and improvements made to the district are voted on by the property owners and can include, but are not limited to:

·         sidewalk/street cleaning

·         special events and promotional materials

·         planting trees/flowers

·         fundraising

·         marketing

·         security

How is a BID formed?

A BID is a non-profit organization initiated and formed by the property owners in the district and approved by  the municipality. A vote by the majority of property owners, as defined below, is required to form a BID:

·         At least 51% of the owners of real property within the area of the proposed BID must vote in favor of forming the BID.

and

·         At least 51% of the assessed value of all taxable real property within the boundaries of the proposed BID district

How is a BID funded?

BID programs and services are funded by an assessment, which is based on the assessed value of the property and paid by property owners within the district. In New York State, the total annual assessment levied in a BID cannot exceed 20% of the total annual property tax paid in the area (roughly 2% of the total assessed valuation of the district). During the BID formation process, the amount paid by each property owner is determined by a formula that each BID creates based on factors such as property size , frontage,  value and others (or a combination).

Many leases allow property owners to pass the BID assessment onto their tenants. Typically, different properties pay different assessments: occupied commercial or industrial properties are all assessed and pay the commercial rate; not-for-profit owned and occupied properties as well as government occupied properties do not pay assessments; residential and vacant properties generally pay reduced assessments.

Success Stories

BIDs have proven to be popular and successful solutions for improving urban commercial districts. While New York City has nearly 70 BIDs currently in operation, BIDs have also been implemented in smaller New York State communities including, but not limited to, the Village of Webster, downtown Elmira and downtown Troy. 

One such BID that can serve as a model of success is the Elmira Downtown BID whose staff and Board of Directors work closely with the business community, economic development partners, service organizations, city staff, city schools and the arts community to improve the business climate and experience of being downtown. The BID’s goal is to provide the downtown business area with the resources to develop a strong marketing campaign, increase public awareness of downtown Elmira and beautification projects in partnership with the city of Elmira. Since 1990 the Elmira BID has sponsored and managed special events including concerts, festivals and farmers markets in addition to its responsibilities as a central point of communication between city government officials and downtown constituents.

 

[1] New York City Department of Small Business Development, “Starting a Business Improvement District Step-by-Step Guide” 

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Get started on your brownfield planning grant proposal now!

by Christa Franzi 17. June 2014 09:15

Funding soon to be announced and some advice on brownfield redevelopment…

If you work in the Northeast you've got em…old, underutilized, corroded, former industrial sites that we aptly refer to as "brownfields".  These relics of our former industrial economy pose a special sort of redevelopment challenge that's fit only for the strongest, fiercest, iron-willed, bullet proof…you get the picture, brownfield redevelopment is H-A-R-D!

City of Rochester, NY: Vacuum Oil Brownfield Opportunity Area (BOA)

The good news is that the U.S. Environmental Protection Agency (EPA) and many state and local governments recognize the challenges and opportunities of redeveloping brownfields and there are lots of federal, state, and local funding sources available for planning, training, cleanup, etc. EPA recently announced that it will be issuing a Request for Proposals (RFP) this summer for the 2015 round of funding for the Brownfields Area-Wide Planning Program.

We're not sure exactly what the 2015 program will look like yet, but the 2013 program broke down like this:

·         Total funding available: $4,000,000

·         Max per applicant: $200,000

·         Project period: 24-months

·         Number of Projects selected: +/- 20 projects

Funding was used for research, technical assistance, and training for area-wide planning designated to identify reuses for brownfields that will meet community health, environmental, and economic development goals. 

It is always helpful to see what projects received funding in the past. That list can be found here: http://www.epa.gov/brownfields/pdfs/2013-awp-project-summaries.pdf

At Camoin Associates, we have worked on over 20 brownfield redevelopment-planning projects. We're typically members of a full redevelopment team that includes planners, engineers, environmental scientists, government officials, neighborhood residents, and others. Our role is to conduct market opportunity studies and financial feasibility analyses to give the communities we're working in realistic parameters on which to formulate their redevelopment strategy.

One piece of advice we can offer you when approaching brownfield redevelopment: collaboration is key. Whether seeking funding this round or in the future, success lies in the team effort. Start by building the best team possible with knowledgeable, creative, leaders that understand the value in and are committed to seeing redevelopment of our urban cores.  As you develop your team, find a champion. Every brownfield redevelopment project needs someone to push team members to explore all options, think outside the box, and keep the project moving forward. You need a hero.

Additional information on what you can do to get a head start planning your brownfield planning grant proposal while we wait for the official announcement can be found here: http://www.epa.gov/brownfields/pdfs/preparing-BF-AWP-proposal-in-advance-FY15-RFP.pdf

Cue Bonnie Tyler: Holding out for a Hero!

  

Image Source: Virgin Media Blogs: 
http://blogs.virginmedia.com/music/blogs/bonnie-tyler-interview-can-she-win-eurovision

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Potential Economic Impact of EPA’s Carbon Pollution Emission Guidelines on Existing Electric Utility Generating Units (Article 2 of 3)

by Rob Camoin 16. June 2014 16:32

This article is the second in a series of three intended to shed light on the EPA’s proposed carbon emission regulations for new and existing fossil fuel­–powered electric generation units (EGUs) and how these new rules may impact state, regional, and local economies. I will first summarize the proposed “guidelines” (EPA calls them guidelines, but they are regulations) just released by the EPA on June 2, 2014, and conclude with a summary of a recent economic and fiscal study conducted for the Cayuga Operating Company. The study was designed to calculate the impact of the Cayuga Operating Company on the New York State economy and local taxing jurisdictions in order to illustrate the contribution that affected power facilities have on our economies.

 

Let’s start with the proposed regulations. Unlike the regulations released last year which establish emission limits for new EGUs, the guidelines released on June 2nd establish separate emission limits by state. These state guidelines do not establish emission thresholds for EGUs, but instead establish emission targets that states must achieve. How each state decides to meet its emissions guidelines will be the subject of each state’s plan, which must be developed and submitted to the EPA over the next two to three years. It remains to be seen if states will establish their own EGU emission restrictions to achieve their overall goal. Over a fifteen-year plan implementation period the EPA anticipates these emission reduction strategies will likely include:

  • Improvements in efficiency at fossil fuel power plants;
  • Programs that enhance the dispatch priority of, and spur private investments in, low-emitting and renewable power sources; and
  • Programs that help homes and businesses use electricity more efficiently.

Clearly, both the regulations established for new plants and the guidelines proposed for states will reduce the amount of electricity produced by coal and other high emission sources. Existing coal-fired facilities will be under pressure as states develop plans to reduce CO2 emissions in which energy reduction and renewable sources will not be enough to both comply and meet power demands. The outcome is likely to be the conversion of existing coal-generated EGUs to gas-generated EGUs, or the closure of coal-source facilities altogether. Coal and non-renewable energy production–intensive states may need to look to other, out-of-state suppliers. For those states and communities that experience the closure of existing power facilities, the impact could be significant. To illustrate the economic role power generation has on a state economy and local taxing jurisdictions, let’s explore one facility where the threat of closure is real.

 

The Case of the Cayuga Operating Company

The Cayuga Operating Company, LLC (“COC”), is owner and operator of a 350 MW coal-fired power plant located in the rural community of Lansing, New York. In June of 2012, COC looked at its financial projections and determined that it was no longer financially feasible to operate and maintain the Cayuga coal-fired power plant and filed a mothball notice to the New York State Public Service Commission (“PSC”) to close the plant. While a study conducted by New York State Energy and Gas Corporation (NYSEG) indicated that the repowering of the plant from coal to gas was one alternative for continuing reliable power to its users, NYSEG was exploring an alternative investment (preferable to NYSEG) in transmission that would allow for the purchase of out-of-state power while still providing the necessary reliability. The study conducted for COC was intended to explore the economic impact of repowering the COC from coal to gas and examined the ongoing operation, in which direct and indirect employment, as well as revenue to the various local taxing jurisdictions, would be lost.

 

The COC employs 30 people, paying wages totaling $5M, and has electric power sales of $29M annually. The COC’s payroll, vendor, and earnings expenditures spent in New York State results in additional jobs, wages, and sales for other businesses and residents. This is referred to as the indirect impact of the COC, which added another 86 jobs, $5.1M in earnings, and $14.6M in sales. Combined, the COC’s direct and indirect economic contribution to the State of New York totals 166 jobs, $10.1M in wages, and $44.4M in business sales, annually. Additionally, the facility contributes $2.5M in total tax payments to Tompkins County, the Town of Lansing, the Lansing Central School District, and the Lansing Fire District, annually. According to assessment records, closure of the COC will result in an estimated $450 reduction in tax revenue per household to local taxing entities.

 

While the risk of closure was not the direct effect of the anticipated emission regulations, the economic and fiscal impact of the COC facility shutdown does provide insight into the economic and fiscal implications that states, communities, and taxing jurisdictions around the country may experience if and when the new emission guidelines result in similar facility closures.

So what are economic development officials to do? Well, once we get a chance to pour through the 350 pages of EPA guidelines, look for next month’s third and final article for some of our thoughts. In the meantime, we would like to hear from you. Do you have a coal source EGU in your region? Are the owners of the facility considering closure or conversion in advance of the state plans? If so, how significant might the economic and fiscal impact of its closure be to future electric power rates and your state and community economy?

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About Camoin Associates

Camoin Associates is a professional service firm that utilizes its understanding of the public and private sector investment process to assist businesses and developers in capitalizing on funding, financing and tax programs established to encourage private investment. We also specialize in advising economic development organizations and municipalities in creating strategies, policies and programs that support investment and job creation.   [Click Here for More]

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