Convening Anchors Citywide: Joining Forces for Greater Economic Impact

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1 Council on Metro Economies and the New American City THE INITIATIVE FOR A COMPETITIVE INNER CITY AND THE U.S. CONFERENCE OF MAYORS COUNCIL ON METRO ECONOMIES AND THE NEW AMERICAN CITY ARE PARTNERING TO ENCOURAGE BUSINESS INVESTMENT IN URBAN AREAS. USING ICIC S RESEARCH, THE COUNCIL AND ICIC WILL TACKLE SEVERAL ECONOMIC DEVELOPMENT ISSUES WITHIN CITIES, INCLUDING ANCHOR INSTITUTIONS, CAPITAL INVESTMENT AND INDUSTRIAL JOB CREATION. Local Officials Convening Anchors Citywide: Joining Forces for Greater Economic Impact INTRODUCTION Anchor institutions have long been important to cities and their regional economies. These anchors, typically educational, medical or cultural institutions, are deeply rooted in their local geographies and offer significant opportunities to spur urban economic development. As the nation seeks for ways to mitigate the effect of the most recent economic downturn, mayors should look to their anchors to spur growth in inner cities the geographies in particular need of support. Often, anchors are located in or adjacent to inner city neighborhoods. Though U.S. inner cities comprise only 0.1% of U.S. land area, some 925 colleges and universities, or roughly one in eight, are based in the inner city. About 350 hospitals, or roughly one in 15 of the nation s largest hospitals, call an inner city home. [continued]

2 Anchors depend on a healthy community to provide positive environments for employees and a strong business community to support their operations. Engagement with the community also improves an anchor s reputation, community relations and applied learning opportunities. Just as anchors rely on their neighborhoods, neighborhoods rely on their anchors. Anchors contribute to the vitality of their communities by providing jobs, purchasing local goods and services, improving local infrastructure and supporting its education, health and social needs. Cumulatively, this mutual dependence is referred to as shared value. Shared value, writes ICIC Founder and Harvard Business School Professor Michael Porter, is defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value is not social responsibility, philanthropy or even sustainability, but a new way to achieve economic success. Dr. michael E. Porter, ICIC Founder and chairman With anchors shifting from social responsibility to shared value, mayors and their economic development teams should identify ways to harness the power of their anchor institutions. It is undeniable that individual anchors can have a significant impact on their community; however, anchors have the greatest impact on their cities when they join forces to invest in the local economy. Uptown Consortium Cincinnati Cincinnati s business district, known as Uptown, was blighted and crime-ridden from years of disinvestment. Uptown is a collection of racially diverse neighborhoods with a total population just over 50,000 and a poverty rate consistently above 20%. Because Uptown is located just outside of the University of Cincinnati s campus, the school made a concerted effort to direct resources to the neighborhood to make it more vibrant for students, faculty and residents alike. In particular, the lack of viable student housing served as an impetus for the University to invest in the Uptown area. In 2003, the University of Cincinnati convened leaders from the city s other major anchor institutions the Cincinnati Children s Hospital Medical Center, Cincinnati Zoo & Botanical Garden, Health Alliance of Greater Cincinnati (now UC Health) and TriHealth, Inc. The organization of these five nonprofits, all located within a half mile of each other, became known as the Uptown Consortium. Collectively, these anchors employ 40,000 people in Cincinnati. Initially, the executives from the Consortium met on an informal basis to discuss priorities and opportunities to pool resources. Soon after, they hired a consultant to help assess the anchors shared needs and determine how the needs aligned with community interests. Three summits were held in the Consortium s infancy stages to engage local residents and address their concerns. After a plan of action was created, the Consortium needed to raise capital to finance the project. Each anchor pledged to invest $75 million: Children s Hospital, the University and Health Alliance committed capital funds, and Tri- Health and the Zoo provided financing for operating expenses. Combined with New Market Tax Credits, the anchors committed to invest nearly $500 million in the Uptown district. 1 By securing money up front in most cases through the anchors endowments the Consortium gained credibility, and the City began working closely with the Consortium on economic development plans. Less than a decade after its launch, the Consortium has funneled $400 million in to the Uptown district, primarily in the form of real estate development. Uptown has experienced an 8.2% decline in the number of Index (property and violent) Crimes. Housing permits for nearly 200 new housing units were issued between 2002 and 2008, mostly for new, adequate student housing. New office and retail space has been built in strategic locations to bridge gaps and generate more foot traffic between the anchors and their surrounding neighborhoods. ANCHORS HAVE THE GREATEST IMPACT ON THEIR CITIES WHEN THEY JOIN FORCES TO INVEST IN THE LOCAL ECONOMY. 1 p USCM/ICIC 2012

3 Detroit Woodward Corridor Initiative The Detroit story is recognized by economic development practitioners across the country. Once a booming industrial city, Detroit faces population loss and wealth depletion as a result of the auto industry s decline. To revitalize the Woodward Corridor along the Midtown, North End and New Center neighborhoods, Detroit s three leading anchors have come together to lead the Woodward Corridor Initiative. Midtown Detroit, Inc., a longtime community development organization in Detroit, hired a consulting firm to cultivate a collective anchor strategy for Detroit Medical Center, Henry Ford Health System and Wayne State University. With support from the Kresge, Skillman and Hudson-Webber Foundations, the Woodward Corridor Initiative has raised $2.5 million in grants, $4 million in program-related investments and $15 million in low-cost commercial loans. The hallmarks of the Initiative are the Live Local, Hire Local, and Buy Local campaigns. 2 Launched in 2011, the campaigns are designed to funnel investment into the local Woodward neighborhood. The Live Local campaign offers incentives to anchor employees who live in the Midtown neighborhood. New renters are eligible for up to $3,500 over two years toward apartment costs; existing renters were given $1,000 if they renewed their leases in The anchors credited new homeowners $20,000 toward the purchase of a primary residence in Midtown; existing homeowners received up to $10,000 for their home improvement projects. Since the program s inception in January 2011, over 200 families have taken part in the Live Local program. Hire Local tries to fill the nearly 3,000 new annual job openings at the anchors with local residents. This program is still in its early stages. Consultants are collaborating with the Detroit Workforce Development Department and HFHS to create a pilot hiring program to implement in But perhaps the anchors can have the most impact on the local economy through purchasing. Nationally, anchors spend over $200 billion on goods, services and pay each year. In Detroit, the three anchors spend a combined $1.7 billion annually on goods and services. The Buy Local campaign harnesses the anchors purchasing power by encouraging the anchors to contract with local vendors. In May 2011, over 300 local businesses attended the first annual Buy in Detroit Fair, where businesses met with the anchors procurement officers to learn about doing business with them. Many small businesses have already secured contracts with the anchors, such as Milano Bakery which locked in $260,000 worth of new business with the anchors after the fair. In turn, the company has been able to create new jobs for Detroit residents. The second annual Buy in Detroit Fair is scheduled for July New York City University Convening Anchors do not come together by their own volition without someone taking the lead. To create the Uptown Consortium, the University of Cincinnati cultivated the partnership. Midtown Detroit, Inc. drew the hospitals and university together. Recently, the New York City Department of Small Business Services (SBS) convened its universities and colleges to begin a discussion of how the anchors could jointly create jobs and spur business growth in their neighborhoods. Universities and colleges are already a driving force of NYC s economy. Over 100 colleges and universities host over 550,000 students they employ 3.3% of NYC s entire workforce and collectively they spend $17 billion annually on goods and services. Almost 70% of these institutions are located in or within one mile of an inner city neighborhood, and their ability to affect change in these communities is profound. SBS engaged ICIC as consultants to analyze the existing strengths of universities to create shared value in their local communities. ICIC found strong examples of impact: Columbia University s Corporate Alliance Program, run in conjunction with SBS, sets a goal of 35% of construction spending with local, minority- and women-owned businesses, Pratt Institute is revitalizing Myrtle Avenue through real estate investment, LaGuardia Community College is using Workforce1 Career Centers to address local workforce needs and SUNY Downstate is cultivating the local biotech cluster through its new Advanced Biotechnology Incubator and BioBAT facilities. 2 LOCAL OFFICIALS CONVENING ANCHORS CITYWIDE: JOINING FORCES FOR GREATER ECONOMIC IMPACT 3

4 The Role of Anchors in Community Revitalization: Strategic Framework Core Product or Service Tailoring core products/ services to serve the community Real Estate Developer Using real estate development to anchor local economic growth Community Infrastructure Builder Providing resources and expertise to build local community capacity Community and Economic Vitality TM Purchaser Directing institutional purchasing toward local business Cluster Anchor Stimulating growth of related businesses and institutions in the community Employer Offering employment opportunities to local residents Workforce Developer Addressing workforce needs of the cluster While many anchors are already engaging their local communities, ICIC revealed that few anchors are working collaboratively or comprehensively across the anchor framework. At the anchor convening, NYC s colleges and universities were benchmarked versus national best practices to determine the greatest areas of opportunity. By bringing together the heads of universities and the City s top economic development professionals, the town and gown barrier was sidelined and each was able to learn from the others. Anchors had frank conversations with City officials about what the City needs to be doing to support anchors efforts. The dialogue included the need for improved processes, infrastructure improvements and better availability of data. The anchor convening also revealed three of the strongest opportunities for collaboration among NYC s universities. First, they can collaborate on local procurement. For example, anchors can identify the highest categories of procurement spending and then work together to develop a buy local strategy among those categories of spending. SBS already has a Corporate Alliance program that can be built upon to strengthen these capacities. Second, the colleges and universities can share data surrounding future hiring and workforce needs to allow for the development of curricula around high-growth sectors. The City can use its employer connections and job placement programs to match graduating students to available jobs. Finally, neighboring anchors can create multi-anchor collaborations focused on specific community needs. Together, they can work with community groups to improve the physical environment and enhance the local economy through activities such as local housing, safety and business development. The City can support these efforts by convening interested anchors with business improvement districts, not-for-profit organizations and foundations that have similar interests. The City can provide support on real estate, especially by connecting anchors to city-owned space. Advice for Mayors on Convening Anchors The cases above represent three ways that anchors are joining forces to produce greater impact within their local economies than each could do alone. In the Cincinnati and Detroit cases, the City was not the primary convener. However the New York example highlights that Mayors and their economic development teams can be the catalyst for future anchor-led economic, community and business development. When undertaking an initiative of this scope, Mayors should consider the following advice: j Prep work, while time-consuming, is vital. Before convening anchors, conduct thorough background research: have individual conversations with the head of each anchor in order to understand its strengths and business needs. j After conversations with individual anchors, identify overlapping interests. Bring clear ideas and vision to the anchors convening. This will serve as the launching point for collaborative efforts and generate momentum among the anchors. j If anchors agree to pool resources and share ideas, secure a capital commitment from each anchor up front. This gives the collaboration credibility among peers, city officials and residents alike. j Approach anchor collaborations with business acumen. Determine which anchors have strengths in which areas, to establish what is feasible for the partnership. This will prevent over-expectations from the community. 4 USCM/ICIC 2012

5 j Make the intentions of the City and each anchor transparent from the very beginning. Doing so creates a culture of collaboration and trust, which is necessary in order for large-scale projects to move forward efficiently and effectively. Conclusion Across the nation, cities and anchors alike are spearheading economic development initiatives to improve their local communities. The synergistic effect of combining these forces and establishing partnerships within the anchor communities results in a tremendous positive impact on the local job market, inner city businesses and overall community revitalization. INITIATIVE FOR A COMPETITIVE INNER CITY The Initiative for a Competitive Inner City is a nonprofit research and strategy organization and the leading authority on U.S. inner city economies and business development. Founded in 1994 by Harvard Business School Professor Michael Porter, ICIC supports public and private sector decision makers with analysis and programs that lead to urban investment, jobs and growth. U.S. Conference of Mayors The U.S. Conference of Mayors nationally represents cities with populations over 30,000. Within the Conference, the Council on the Metro Economies and the New American City develops strategies to increase investment in cities and their neighborhoods through sustainable development, financial empowerment, and 21st Century technologies. ICIC S MISSION IS TO DRIVE ECONOMIC PROSPERITY IN AMERICA S INNER CITIES THROUGH PRIVATE SECTOR INVESTMENT TO CREATE JOBS, INCOME AND WEALTH FOR LOCAL RESIDENTS. Initiative for a Competitive Inner City 200 High Street, Third Floor j Boston, MA j j twitter:@icic.org