November 3, 2017
In today's fast-paced global economy, metropolitan regions -- rather than just countries -- compete with one another. With its unparalleled transportation system, talented workforce, and concentrations of numerous industries, the Chicago region is well positioned to compete. However, the region and state could foster stronger and more sustained economic growth by reorienting economic development policies and practices, prioritizing investments, and leveraging strengths.
GO TO 2040 recommended that the Chicago region develop strategies to better nurture economic growth. Subsequently, CMAP analyzed several national examples of innovative economic development strategies and published the results in the 2014 report Reorienting State and Regional Economic Development: Lessons Learned from National Examples. The report highlighted the State of New York for taking a novel approach to support diverse regional economies throughout the state, prioritizing and coordinating investments, and incorporating workforce development and infrastructure in core economic development work.
This CMAP Policy Update takes a deeper look at the evolution of New York's Regional Economic Development Council (REDC) initiative, including relevant findings for metropolitan Chicago. Understanding the challenges and opportunities of the New York initiative will inform the development and implementation of ON TO 2050, metropolitan Chicago's next comprehensive regional plan slated for adoption in October 2018.
Strategies to leverage unique regional strengths across New York State
In 2011, New York Governor Andrew Cuomo devised the REDC initiative in response to years of sluggish economic growth statewide. To promote reinvestment and stimulate job growth, the initiative established 10 distinct regional economic development councils, each co-chaired by a business and academic leader in their respective region. Each council's charge was to create a comprehensive and holistic regional plan that would identify the region's unique assets, establish priorities for growth, identify key projects ready for investment, and provide clear metrics to evaluate the success of the strategies.
Like Illinois, New York spans a large geographic area and supports economies ranging from agricultural and industrial to cosmopolitan. The regional approach linked communities with similar strengths and challenges, enabling each council to develop unique economic development strategies to build on their region's particular assets.
Realigned state funding to support regions
To put limited state resources to better use, the Cuomo administration streamlined and expedited funding for the regional councils through the Consolidated Funding Application (CFA). Prior to 2011, state agencies that administered different types of economic development funds operated largely in silos. This limited the coordination and prioritization of funds between agencies and required applicants to submit separately to each state agency. The CFA allows applicants to access multiple funding sources for a project through a unified process. Regional councils then review and rank all CFA applications and endorse projects that align with their strategic regional vision. The state agencies consider this feedback in funding decisions.
Regional councils also compete annually for a newly established pool of approximately $200 million in Empire State Development (ESD) funds, bringing the total state resources for economic development to over $800 million per year. Comprehensive regional plans and state priorities inform funding decisions. In the first year of the REDC, councils received competitive funds based on the strength of each region's initial strategic plan, and in subsequent years on each region's annual progress reports.
Through the progress reports, regions update their strategic plans, identify new priority projects, and track the status of previously funded projects. This process holds each region accountable for implementing its vision, promotes realistic goalsetting, and provides the flexibility to make changes when needed. Perhaps most important, the process supports implementation of plans.
Industry cluster-based economic development
In 2015, the Cuomo administration introduced the Economic Development Cluster Initiative requiring each regional council to identify a single existing or emerging industry cluster that could catalyze economic growth. An industry cluster is made up of interdependent firms and related institutions that benefit from their proximity by generating economies of scale for supplies and relevant services, deep talent pools, and interactions among businesses and workers.
Each regional council surveyed stakeholders, inventoried existing assets, and analyzed industry trend data to identify a single cluster. The New York City region focused on the "Smart Cities" cluster, which aims to use technology and big data to help cities efficiently respond to unprecedented growth, antiquated infrastructure systems, and tight fiscal conditions. This cluster leverages the many universities and private sector firms in the region conducting research in urban analytics and urban informatics. As a result, the State awarded the New York regional council an ESD grant to help finance the Smart Cities Innovation Center at the New Lab in Brooklyn Navy Yard. This urban tech hub at New Lab provides accelerator services including mentoring, access to specialized equipment, and assistance with securing capital to new companies that are creating products and services to make cities more sustainable, resilient, and livable.
Comprehensive approach to workforce development
In 2015, regions also competed for $500 million in funds, to be allocated in $100 million increments over five years, as part of the Upstate Revitalization Initiative to stimulate job growth. Several plans developed multifaceted approaches to poverty reduction, skills development, and job placement. For example, the Finger Lakes region's successful application identified the region's high poverty rates as a major barrier to economic growth. The region's workforce development program is a partner of the Rochester-Monroe Anti-Poverty Initiative (RMAPI). RMAPI aims to reduce poverty in Rochester and surrounding Monroe County by 50 percent over the next 15 years. Along with other partners, the region has funded many services that can augment workforce development efforts including adult mentoring, expanded child care, and summer learning programs for preschoolers.
Even regions that were not awarded funding were able to benefit from the process of applying. The Mid-Hudson regional council collaborated with the Hudson Valley Educational Consortium to produce a gap analysis study that identifies the occupations with the largest gap between the demand and supply of capable workers. Educators and workforce developers used this information to create and revise curricula and training programs.
Investment in freight infrastructure
Many of the regions recognized the importance of transportation for economic growth. The Capital region, for example, is within a day's drive to more than half of the purchasing power in the U.S. and Canada, and is less than a three-hour drive from New York, Boston, and Montreal. The region's multimodal plan prioritized this advantage and received ESD funding to construct a heavy lift cargo operations building in a secure marine terminal at the Port of Albany, and subsequent U.S. DOT Transportation Investment Generating Economic Recovery (TIGER) funding to construct a roll-on and roll-off barge slip.
Critiques, competition, and cooperation
Like most policy changes, the REDC initiative in New York has some critics. A number have argued for regulatory changes as opposed to the grant-based funding incentives that the REDC provides. Others have expressed concern about potential conflicts of interest because many regional council members are closely tied to universities and businesses vying for and receiving state funding.
Some critics have argued that the cost of pitting regions against each other outweighs the benefits of increased collaboration among communities within a region. However, others have observed that the REDC initiative has spurred regional collaboration. For example, when four regions identified Life Sciences as their industry of focus, they banded together to make the state of New York a world-renowned life sciences leader. The regions have already received $650 million to support the cluster.
Regional economic development opportunities in Chicago
Like New York, the Chicago region faces a unique set of challenges and assets that must be prioritized when devising economic development policies. For example, Illinois has the highest number of governmental units in the country, which multiplies the challenges of regional collaboration.
Metropolitan Chicago can learn from New York's cluster work to develop strategies for supporting our own region's industry clusters. CMAP has already identified the manufacturing and transportation & logistics clusters as strong players in the region, and along with the region's deep bench of research institutions including newer efforts like UI Labs, the region is well positioned for future innovation. CMAP will continue to identify the clusters that can best catalyze economic growth, as well as identify opportunities to support clusters.
CMAP recognizes that a key regional asset is our population—yet many residents live in economically disconnected areas, receive inadequate education and training or experience limited access to economic opportunities, and live beneath the poverty line. These challenges are a drag on the region's economic potential. The Upstate Revitalization Initiative provides valuable lessons for the Chicago region about the successes and challenges of taking a more holistic approach to workforce development by coordinating support services.
CMAP will follow the progress of these projects, and continue to identify other regions implementing innovative economic development strategies to further guide recommendations for ON TO 2050.