Month: March 2015

Balanced Advice on Incentives

Incentives have long been a “Catch 22” for communities: Damn if you do and damn if you don’t. The jury remains out whether they produce more benefits than costs in the long run to communities. Although, greater evidence exists that tax incentives tend to produce greater costs than benefits for communities, and infrastructure and workforce investments tend to produce greater benefits than tax incentives for both communities and companies. In a nutshell, that is where the incentives debate sits with communities.

But how are incentives seen by companies? A recent Trade and Industry Development Magazine article provides a fairly well balanced discussion of the pros and cons of incentives. Here is a summary of the article.

  1. Incentives often distract companies from core drivers in making a site location decision. Incentives are never the most important thing, and yet many companies are overly seduced by what they wrongly see as “free money.”
  2. Incentives often mask location deficiencies (inadequate labor force, high tax rates, insufficient infrastructure, environmental constraints, etc.) that communities try to offset with tax and financial incentives.
  3. Incentives can reduce a community’s long term ability to fund good schools, infrastructure, and community amenities, which are the very assets needed to support local business and job growth.
  4. Incentives subject companies to greater public scrutiny, especially with heightened compliance reporting requirements.Trust me that these requirements will grow and not lessen in the future.
  5. Given the growing uncertainty in the economy and the world, can the company meet its job and payroll creation requirements defined in incentive requirements? The reality is it is harder to attain these requirements. And now communities are using “clawbacks” more frequently to make the company payback money it has not earned under the incentive agreement.
  6. Finally, incentives are being seen increasingly as “corporate welfare” by the public, especially at a time when wages are not growing and benefit packages are being slashed by many companies.

Is it worth it? My answer is only if companies and communities agree to use incentives very responsibly. The days of the “community candy store” offering lots of goodies to companies is over. The better way is to invest in creating a high quality workforce, infrastructure, and quality of life amenities (not necessarily tourism attractions).

Retirement Planning Advice to Millennials

Seven tips for Millennials toward achieving retirement readiness:

  1. Save for retirement. Start saving as early as possible – and as much as possible. Save consistently over time. Avoid taking loans and early withdrawals from retirement accounts.
  2. Consider retirement benefits as part of total compensation. Ask an employer for a plan if they don’t offer one.
  3. Participate in employer-sponsored retirement plans, if available. Take full advantage of matching employer contributions, and defer as much as possible.
  4. Calculate retirement savings needs, develop a retirement strategy, and write it down. Factor in living expenses, healthcare needs, government benefits and long-term care. Envision future retirement and have a backup plan in case retirement comes early due to an unforeseen circumstance.
  5. Get educated about retirement investing. Whether relying on the expertise of professional advisors or taking a more do-it-yourself approach, gain the knowledge to ask questions and make informed decisions. Learn about Social Security and government benefits, keeping in mind that benefits may change over time.
  6. Seek assistance from a professional financial advisor, if needed.
  7. Be proactive about staying competitive in the ever-changing job market. Be proactive about keeping job skills up-to-date, performing well on the job, staying current on employment trends and marketplace needs, and even going back to school to learn new skills if necessary.

Employers play a vital role in helping their employees plan and save for retirement. The survey found that Millennials, more than older generations, value retirement benefits and would even consider changing employers for better benefits. Employers should take note and consider offering competitive retirement benefits as well as providing education on the importance of starting early and saving consistently over time. Meaningful steps for employers include extending eligibility to join a 401(k) or similar plan to both full-time and part-time employees, as well as making it easy for employees to join and increase savings in the plan vis-à-vis automatic enrollment with an annual automatic escalation.

Source: Transamerica Retirement Research Center

Grand River Rubber and Plastics: Why Succession Planning Works

The Employee Stock Ownership Program (ESOP) at Kent State University (KSU) published a valuable Owner’s Guide to Business Succession Planning, which is designed to assist owners of small and medium-sized businesses as they begin to plan for ownership and management succession. As such, it contains a simple six-step process that will help business owners plan for succession, and a brief summary of some alternatives available for ownership succession. Download the guide here. Learn more about the ESOP Center at Kent State University.

Of course, Ashtabula County’s own Grand River Rubber and Plastics is a perfect living example of an ESOP. And in 2014, Rubber and Plastics News recognized former owners Ric Selip and Joe Misinec as the magazine’s Executives of the Year. This is Ric Selip’s second time to receive the award.

According to Selip, “if you look at the sales to employee ratio, we had 175 people back in 1997, and we were doing $25 million in sales. We now have 210 employees, up by not even a third, but our sales have almost doubled.”

Congratulations to Ric Selip and Joe Misinec and the new ownership and leadership at Grand River Rubber and Plastics!

 

 

U.S. Manufacturing Growth Forecast

Manufacturing is expected to be one of the big drivers of U.S. economic growth over the next 10 years. Its share of output in GDP is projected to increase from 12.7 percent in 2013 to 13.7 percent in 2023. However, manufacturing employment will decline by more than half a million jobs between 2012 and 2022, according to the Bureau of Labor Statistics (BLS). Dan Levine of Oxford Economics, explains this paradox .

According to Levine, many low-skilled, labor-intensive industries will remain highly vulnerable to continued offshoring and automation, but even fast-growing advanced manufacturing industries will show modest employment declines. So how can manufacturing drive economic growth? It has one of the highest economic multipliers of any industry — i.e., each $1 of manufacturing investment results in $1.33 of “spillover” economic activity. I would add that technological advances will continue to eliminate in many industries as 3D printing and other technologies take hold.

Additionally, Levine contends that BLS employment numbers for manufacturing may not be entirely accurate because of the large number of contract or contingent workers employed at manufacturing plants. A 2014 study by Arden Partners notes that 87 percent of those companies that use contingent labor say they do so for projects that require specified, top-tier skills, and 61 percent cite the general “war for talent” as a reason for using contingent labor. And I will add that contingent labor is also used because companies want assurances that workers are drug-free and it is a way to hold down wages and benefits.

Manufacturing reality in Ashtabula County is that it represents one-third of the county’s economic output ($1.04 billion of $3.34 billion), which has decreased somewhat over the past decade, but manufacturing’s economic contribution is MANY times larger than Agriculture, Tourism, or any other industry sector represented in the county. The county lost 2,100 manufacturing jobs in 2004-2013 (from 8,650 to 6,545), which is a 24.3% loss over the decade.

Some Top Tech Companies to Watch in 2015

The DataFox Private Tech Companies To Watch Report is a curated compilation of top private companies across 16 tech sectors: ecommerce, cryptocurrency, cybersecurity, and many more. It’s an interesting read for those trying to gauge future business opportunities in emerging technology areas. We should be paying more attention to these types of companies in Ashtabula County. Download the report here: DF 2015 Tech Report

Four Indicators to Assess Local Ecosystem Vibrancy

Ashtabula County needs to strengthen its entrepreneurial support system. This is especially important as our existing industry base grows more mature. Where do we start? We begin with an assessment of our local entrepreneurial ecosystem. With the rise of entrepreneurial ecosystems – elements within a community that support firm formation and growth – how can local leaders measure success? That’s the subject of a report by the Ewing Marion Kauffman Foundation.

The report recommends several measurements within each of the four indicators:

  1. Density: density of new and young firms, defined as the number of new and young companies per 1,000 people in a geographic area; share of employment in new and young firms; and high tech (or the region’s preferred sector) density.
  2. Fluidity: population flux, or the level at which people move between cities or regions, providing a constant remixing that is key to idea generation; labor market reallocation, or people’s ability to find the right match of jobs within a region; and number of high-growth firms.
  3. Connectivity: program connectivity, or how connected entrepreneurs are with resources and each other; spinoff rates, which indicate the extent to which successive waves of new companies are created; and dealmaker networks, which inform entrepreneurial leaders about how effectively deal professionals are establishing relationships and facilitating new firm formation.
  4. Diversity: economic diversification, which ensures that a city or region is not overly reliant on a particular industry; immigration, or how effectively the ecosystem attracts and assimilates immigrants, who tend to start companies more frequently than the native born do; and income mobility, or how well the entrepreneurial ecosystem diversifies economic opportunity.

2015 Fourth Economy Index

I’m not big on ratings and rankings, but it is important to know what they say. They give a balancing perspective to local views, and at times biases. Here is one I just discovered.

The Fourth Economy Index is an independently conducted analysis intended to serve as a benchmark for community stakeholders to assess their capacity to attract and retain modern investment while also improving the resiliency of their communities in response to future economic fluctuations.

The index consists of five elements: Talent, Investment, Sustainability, Place, and Diversity. “The indicators used to represent the core elements of the Fourth Economy are chosen and weighted in order to identify communities that have a sustainable balance of all five elements” says Chrystal Alexander, a Fourth Economy Analyst working closely with this project. “Often, these are communities with plenty of access to higher education, with strong private industry investment in local talent, and a strong quality of place.” Incorporating each of these elements into community strategic planning is the key to success in the Fourth Economy.

The Fourth Economy Communities Index has been expanded for 2015, adding new quantitative and qualitative measures, including factors pertaining to overall economic resiliency of the communities, new data on micropreneurs, and more. Throughout 2015, additional segments of the FEC Index will be released to include mid-, small- and micro-sized communities. Fourth Economy released its mega-sized communities index in December of 2014.

The top 10 Large-Sized Communities for 2015 are:

Chittenden County, Vermont
Hampshire County, Massachusetts
Minnehaha County, South Dakota
Clackamas County, Oregon
Washtenaw County, Michigan
Cumberland County, Maine
Lancaster County, Nebraska
Forsyth County, North Carolina
Boone County, Missouri
Stearns County, Minnesota

In past indices, two Ohio counties have made the list: Wood and Greene Counties.

Read more here.

2015 Area Development Magazine Site Selection Outlook

Each year Area Development Magazine publishes an industry site selection outlook report that talks about drivers and trends in industry site location. It’s always informative, but at times plays like a broken record on the same issues, such as the importance of a trained workforce and high quality sites and buildings are factors influencing facility location decisions. So here is a series of graphics from the most recent survey. Read the whole report here at Area Development online.

Not much commentary here except to say that I find it interesting that more projects are taking place in the Midwest (including Ohio) and that is good news. Why? Because Ohio has many untapped advantages that the “growth belt states” have exhausted. Ashtabula County could position itself for new business investments in the years ahead by improving its sites and buildings, workforce (higher skills) and quality of life (housing, schools, amenities). Each is a challenge that takes time and money, but our county can improve its competitive position if it gets things done in each of these three areas.

To enlarge the images, click on them.

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More Milliennials Choosing Burbs Over Central Cities

Here’s the usual media narrative: Millennials prefer cities to suburbs. They love renting lofts and disdain single-family homes; they ride the subway (or take an Uber) because they barely know how to drive. Where their parents wanted green lawns and cul-de-sacs, today’s young Americans want walkable neighborhoods and local bars with plenty of craft beers on draft.

The numbers tell a different story. Whether by choice or economic circumstance, young Americans are still more likely to leave the city for the suburbs than the other way around.

According to U.S. Census Bureau data released this week, 529,000 Americans ages 25 to 29 moved from cities out to the suburbs in 2014; only 426,000 moved in the other direction. Among younger millennials, those in their early 20s, the trend was even starker: 721,000 moved out of the city, compared with 554,000 who moved in.1 Somewhat more people in both age groups currently live in the suburbs than in the city.

Indeed, for all the talk of the rebirth of American cities, the draw of the suburbs remains powerful. Across all ages, races, incomes and education groups, more Americans are still moving out of cities than in. (Urban populations are still growing, but because of births and immigration, not internal migration.)

Read more from trends article.

Ashtabula County needs to both retain and attract people to live in the county. Our county has seen a slow and steady outward trickle for the past couple decades. And the population remaining is aging; not unlike other places, but it needs to grow. To grow, we need to build new housing that appeals to the existing population – young and old. We need to hold onto our Milliennial base and grow it in the future.

Ari Steinberg on How Travel and Tourism Will Change in the Future

By Ari Steinberg, Founder of Vamo, a travel startup

Forbes link.

People will spend less time planning in advance. For some adventurous travelers, they can already just show up in a destination and figure out a hotel at the last minute with apps like Hotel Tonight. Not everyone will go to this extreme – some people need the peace of mind of knowing that there is a bed waiting for them. But even those people will increasingly rely on mobile apps for last minute decisions about things to do.That being said, some planning will always need to be done in advance, but that planning will get easier and take less time as next-generation travel planning tools become available.

Improved booking tools will allow people to hone in on more efficient itineraries. Increased transit connectivity (more flight routes, high speed trains, etc.) and an expanding matrix of ancillary services have opened up more options and created more confusion for travelers. The hospitality side is also expanding quickly with the help of services like Airbnb. But improved tools will make it easier to sort through all these options and find an itinerary that is reasonably priced and minimizes wasted time. Travelers will go beyond traditional boundaries.

Today, lots of trips are planned with the help of a prepackaged tour, or a guidebook focusing on a particular country. But travelers are busier than ever, and want to squeeze in as many amazing memories as they can without being constrained by these boundaries. The borders between many countries have become easier to cross, and new economies are emerging that make new places seem more accessible than ever. Travelers will not want to be limited by a pre-printed book or a preconfigured package, they will instead take advantage of new interactive planning tools that are flexible enough to handle their myriad interests.

In short, next generation planning tools will help people waste less time and money and take more unique, fulfilling trips.

Is Ashtabula County ready for these future trends? How do we step up our readiness for these trends?