1 Capital Area Economic Development District Comprehensive Economic Development Strategy 2006 Annual Update Capital Area Council of Governments 2512 IH-35 South, Suite 200 Austin, TX Betty Voights, Executive Director 1
2 Table of Contents I. Background 3 i. Board of Directors 5 II. Progress Report 6 III. Regional Analysis 9 i. Key Trends 10 IV. Industry Clusters 18 V. Scope of Work for VI. Contact Information 27 October 19,
3 Background Capital Area Economic Development District (CAEDD) Capital Area Council of Governments (CAPCOG) received its first planning grant in 1983 from the U.S. Economic Development Administration (EDA) leading to the submission of its first regional plan in April In anticipation of designation by EDA as an Economic Development District, CAPCOG established the Capital Area Economic Development District, which was approved by EDA in April Roles and responsibilities: Coordinate and implement economic development activities in the District Carry out economic development research, planning, implementation and advisory functions identified in the Comprehensive Economic Development Strategy (CEDS) Coordinate the development and implementation of the CEDS with other local, state, federal, and private organizations October 19,
4 Background In 2004, the CEDS Strategy Committee was formed from CAEDD members, economic developers, and representatives of Envision Central Texas. The committee led a six-month process during 2005 that included a survey of economic and community development organizations, focus groups with the public, and strategy sessions devoted to evaluating regional strengths and weaknesses. The CEDS Strategy Committee received input from a wide range of community stakeholders, representing both rural and urban parts of the Capital Area. The feedback was captured in a plan that detailed goals, objectives, and strategies for The report can be found on the CAEDD website: October 19,
5 Background CAEDD Board of Directors James Bertram, Mayor, City of Lockhart Maurice Pitts, Commissioner, Lee County Eric Carlson, Former Mayor, City of Elgin Dave Porter, Greater Austin Chamber of Commerce Will Conley, Commissioner, Hays County Johnny Sanders, Bluebonnet Electric Coop Bill Hamilton, Bill Hamilton Associates James Satterwhite, Rural Capital Area WDB Ron Kessler, Ron Kessler Group LLC Rosa Rios Valdez, BCL of Texas Jennifer Kim, Councilmember, City of Austin Jeff Webb, Austin-San Antonio Corridor Council Chris King, Ray Marshall Center Susan Wendel, Bastrop Chamber of Commerce Shirley Knox, WorkSource Greg Marshall, Cap City African-American Chamber of Commerce Sam Martin, Hill Country EDC Mary Martinez, Greater Austin Hispanic Chamber of Commerce Ronnie McDonald, Judge, Bastrop County Alan McGraw, Mayor Pro-Tem, City of Round Rock Barbara Mink, Trustee, Austin Community College Margie Moore, Global Marketeer Group Susan Narvaiz, Mayor, San Marcos October 19,
6 Progress Report Workforce Development Created local economic reports for ten counties to support planning efforts at the Rural Capital Area Workforce Development Board Provided regional workforce agencies with data used to develop target industry and occupation lists for new training programs Business Development Organized a conference on entrepreneurship and regional competitiveness to publicize best practices from around the U.S. Published retail market studies and community trends reports to assist local agencies with business attraction and retention efforts October 19,
7 Progress Report Transportation Developed estimates for population, median household income, and employment at the traffic serial zone level for use in the Capital Area Metropolitan Planning Organization (CAMPO) 2035 Transportation Plan* Supported CAPCOG as administrative lead agency for the Capital Area Regional Transit Coordination Committee, which is creating a ten-county transit plan in response to House Bill 3588 from the 78 th Texas Legislature Housing Assisted Texas A&M's Mays Business School with development of an affordable housing model to forecast workforce housing needs in Burnet, Llano, and Blanco counties October 19, 2006 *2006 NADO Innovation Award Winner 7
8 Progress Report EDA Grant Application Assistance Austin Community Development Corp (now PeopleFund) City of Austin Mexican American Culture Center Southwest Key Program Other Projects Built a Planning Map Viewer on the CAPCOG website that provides free access to data, maps, and aerial imagery useful for economic and community development work Created a quarterly newsletter to provide economic developers and other stakeholders with the latest information on regional trends October 19,
9 Regional Analysis According to EDA guidelines, a CEDS must provide regional analysis that can be used to guide strategic planning efforts, establish priorities, and set the stage for creating regional partnerships. The regional analysis must address issues such as population change, workforce, and industry clusters. Staff monitors numerous data sources and collaborates with state, regional, and local analysts throughout the year to ensure that CAEDD members and the public are informed about emerging issues affecting economic and community development. October 19,
10 Regional Analysis Key Trends Population growth is accelerating Out-of-state migration to the Capital Area is creating challenges and opportunities Income gap between urban and rural areas is closing Female, minority business ownership is expanding Capital Area s leading industry clusters are retaining top national rankings October 19,
11 Regional Analysis Population growth is accelerating again Population in the Capital Area is growing 3x faster than the U.S. Fastest growing counties in the last five years were Williamson (31%), Hays (26%), Burnet (21%), and Bastrop (20%). The Capital Area is now expected to reach two million people in 2020, which is roughly equivalent to doubling the total number of people living in Bastrop and Williamson counties today. 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Annual Population Growth Capital Area Texas U.S Source: U.S. Census Bureau, Texas State Data Center, REMI. Capital Area includes Bastrop, Blanco, Burnet, October 19, Caldwell, Fayette, Hays, Lee, Llano, Travis, and Williamson counties.
12 Regional Analysis Capital Area s reputation is attracting more people from out-of-state Capital Area s lower cost of living and strong economy are attracting people from Phoenix, San Diego, and other higher-cost regions. More than 27,000 people on average moved here from out-ofstate annually during 2000 to Population growth creates challenges, especially in rural areas. For example, the 2,000+ people who moved to Burnet County from outside Texas during 2000 to 2004 had 76% higher incomes on average than existing residents. Rising land and housing prices will need to be watched carefully to avoid affordability problems. Many of these new residents are recent retirees, semi-retired professionals, and partial-year residents with higher incomes that can benefit local entrepreneurship initiatives, such as angel investment groups. New residents can also help connect to other regions and share best practices. For example, San Diego s experience with medical devices may be useful for guiding the development of bio related industries in the Capital Area. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 76% 28% Income differences between people moving in from out-of-state and existing residents, % 20% 12% 11% Burnet Llano Hays Fayette Travis Blanco Out-of-State Migration to Austin-Round Rock MSA in People Avg HH Income California 14,729 $74,588 Florida 4,101 $52,304 Illinois 3,688 $61,326 Colorado 3,551 $55,541 Arizona 3,671 $58,788 New York 2,772 $62,561 Source: Internal Revenue Service. Exemptions reported on tax returns are used as a proxy for number of people. Average October 19, household income is estimated by dividing total income by number of tax returns.
13 Regional Analysis Out-migration from Travis County is a key driver of regional population trends. An average of 21,600 people move each year from Travis County to other parts of the Capital Area. Ninety-five percent of those people relocate to metro (MSA) counties, with 60% going to Williamson County. Housing affordability in Austin is certainly influencing outmigration, but other factors are at play. From 2000 to 2004, people who moved out of Travis County to other MSA counties had an average income of $20,561. People who moved out of Travis County to the non-msa (rural) counties had a much higher average income of $27,015.* But suburbanization does not tell the whole story either. An average of 12,600 people move to Travis County each year from the rest of the Capital Area, and that figure has increased 5% annually since MSA counties: Bastrop, Caldwell, Hays, Travis, Williamson Non-MSA counties: Blanco, Burnet, Fayette, Lee, Llano What could all this mean? Housing and migration trends are creating challenges and opportunities. It is evident that rising home values in Austin are pricing some people out of the market, which will likely increase commuting from the surrounding MSA counties. Rising home values are also encouraging some higher-income people to cash out and relocate to rural areas because expanded broadband access, new roads, and other factors have reduced the traditional urban vs. rural trade-offs. However, Austin s thus-far resilient housing market will inevitably slow down. Monitoring these trends will help us prepare for the changes that will follow. * Difference is statistically significant at α =.05. Source: Internal Revenue Service. Average income is calculated by dividing total income by number of exemptions. Income figures are used here for comparison and should not be interpreted as precise. An October 19, explanation of data limitations can be found on the IRS website at
14 Regional Analysis Regional income has fallen behind the U.S., but rural areas are catching up Per capita income in the Austin-Round Rock MSA has fallen behind the U.S. average for the first time since But many rural parts of the Capital Area are finally playing catch up. Broadband services, transportation improvements, and other factors are flattening the region. More people now have the option to enjoy rural lifestyles and fully participate in the global economy. Welcoming the positive aspects of these changes while also protecting the qualities that are drawing new residents to less urban areas of the region will be crucial for regional development. Economic diversity will largely determine whether or not we can sustain this positive momentum. Retail, tourism, and other low-paying industries need to be balanced with higher value-added activities to produce meaningful gains in living standards. For example, despite all the recent growth, per capita income in Williamson County is down 9% since The recession s effect on Dellionaire fortunes is partially responsible, but not the whole story. $35 $33 $31 $29 $27 $25 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Per Capita Income, $Thousands Austin-Round Rock MSA U.S. Texas Per Capita Income Growth, % 15% 14% Regional average 11% 10% 7% Fayette Blanco Burnet Lee Llano Caldwell October 19, 2006 Source: Bureau of Economic Analysis 14
15 Regional Analysis Unemployment and poverty are low compared to state, U.S. Unemployment rates in the Capital Area have been lower than the U.S. and Texas in recent years, and the gap appears to be widening. Low unemployment is a strength right now for the entire ten-county region, with little difference between urban and rural areas. Caldwell (4.9%) and Bastrop (4.6%) had the highest unemployment rates in the region during 2005, but they were still lower than the state and U.S., as well as below historical averages. Despite the low unemployment rate, poverty in the Capital Area has not improved much recently compared to the U.S. average. However, the region is performing well compared to the rest of Texas. The Austin-Round Rock MSA poverty rate was 12.8% in 2004, which was secondlowest behind Dallas-Fort Worth (12.6%) among the largest metropolitan areas in Texas Unemployment Rate, % Texas U.S. Austin-Round Rock MSA Poverty Rate, % Texas U.S. Austin-Round Rock MSA Source: U.S. Census Bureau. Poverty rate is defined as the % of people whose income in the past 12 months was below the poverty level. October 19,
16 Regional Analysis Fostering diversity among entrepreneurs will enhance regional competitiveness Female and minority entrepreneurs are playing an increasingly vital role in the Capital Area s regional economy. The Austin-Round Rock MSA was home to 33,387 female-owned firms in Collectively, female-owned businesses accounted for 30,188 employees, $850 million in payroll, and more than $4 billion in annual sales in The number of female-owned firms in Austin grew by 29% during % 70% Business Ownership Statistics for Austin-Round Rock MSA 2002 Economic Census Firms Sales (Thous) Female 33,387 $4,005,269 Hispanic or Latino 13,888 $2,157,874 Black or African American 4,409 $368,806 Asian* 4,348 $1,082,903 American Indian and Alaska Native 952 $164,465 % change, number of firms, % Minority-owned firms made similar gains. The total number of minority-owned firms in the Austin-Round Rock MSA grew by 40% during Total sales grew by 59%, which was more than five times the national average for all U.S. minority-owned firms. Notably, sales at African American-owned firms nearly doubled, reaching $369 million in % 50% 40% 30% 20% 10% 0% Austin 29% 20% U.S. 25% 31% 45% Female Hispanic or Latino Black or African American 60% Asian* 21% * The 1997 Economic Census grouped Asians with Pacific Islanders, so data from the 1997 and 2002 surveys are not directly October 19, comparable. Complete data from 2002 Economic Census is not yet available. Source: U.S. Census Bureau.
17 Regional Analysis Workforce: Maintaining education edge is critical Educated workforce is the foundation of the Capital Area s competitive advantage. Access to talent is the top priority for most successful companies, and the Capital Area continues to stand out among U.S. regions. The percentage of people age 25+ in the MSA with at least a bachelor s degree was 39% in 2005, compared to 27% nationally. While the Capital Area overall ranks highly, greater diffusion of college grads throughout the region would be beneficial. Williamson County increased its percentage of people age 25+ with at least a bachelor s degree from 34% in 2000 to 38% in 2005, and Hays County is improving as well. By contrast, Bastrop County has stagnated around 16%. Many regions have addressed human capital challenges in creative ways, such as using homecoming programs to reconnect with former residents who moved away to attend college or take jobs, but may be interested in returning to work at local companies or start new businesses.* * For examples, see Homecoming Spokane at Come Home Montana at October 19, Raleigh Austin Denver Albany Albuquerque Phoenix and 40 Below in Upstate NY at Data source: U.S. Census Bureau % of population age 25+ with a bachelor's degree or higher,
18 Industry Clusters Capital Area s economic drivers are retaining competitive edge over other U.S. metropolitan areas Information Technology Jewelry and Precious Metals Analytical Instruments Business Services Distribution Services Biopharmaceuticals Construction Materials Education and Knowledge Creation Medical Devices Communications Equipment Thousands of Employees, National rank among 318 metropolitan areas 25 Top Subclusters Rank Computers 3 Specialized Pumps 3 Semiconductors 5 Instruments 7 Soil Prep Services 7 Elec Components 10 Software 10 Mobile Homes 12 Research Orgs 13 Lighting Fixtures 14 Cut/Crushed Stone 16 Biopharm Products 17 Merch Wholesaling 20 Comp Programming 23 Online Info Services 23 Facilities Support 24 Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Copyright 2006 by the President and Fellows of Harvard College. October 19, All rights reserved. For cluster definitions, see
19 Industry Clusters What can we do to improve, and how can the CAEDD help? Cluster strategies can be found in virtually every U.S. metropolitan area that is actively engaged in economic development. In Texas, a statewide cluster strategy is led by the Office of the Governor and the Texas Workforce Commission.* In Austin, regional strategies are led by various groups, such as chambers of commerce, economic development corporations, and others. The CAEDD can offer valuable support to those efforts in the following ways: Benchmarking Track performance of the Capital Area s clusters at the national level Highlight competitive advantages to support regional marketing Regional Analysis Identify emerging trends and critical issues Prioritize opportunities Technical Assistance Work with regional partners to develop recommendations and action plans Expand scope of activities to include rural, non-msa counties October 19, 2006 For information on the Texas Industry Cluster Initiative, see 19
20 Industry Clusters Example: Medical Devices Cluster Step #1: Benchmarking Why medical devices? Increasing demand for health care services and growing number of medical facilities in the Capital Area are creating opportunities. How are we doing? Capital Area s medical device cluster currently ranks 37 th among 318 U.S. metropolitan areas. We were ranked 57 th in Where can we improve? Biological products (17 th ) and diagnostic substances (28 th ) are performing above average compared to national employment patterns. Surgical instruments (36 th ) is growing as expected. Medical equipment (51 st ), dental instruments (51 st ), and ophthalmic goods (83 rd ) are trailing.* * Employment is not the only way to assess industry performance, but is used here because it is consistent with Porter s October 19, 2006 methodology for ranking regional economies. Other factors, such as productivity, output, exports, and wages, should be 20 analyzed as well to get a more complete picture of industry competitiveness.
21 Industry Clusters Example: Medical Devices Cluster Step #2: Regional Analysis How competitive are we? Capital Area s medical devices cluster is relatively small with 29 establishments and 2,328 employees, but it has increased its share of national employment by 59% since Are we creating jobs? Medical device companies in the Capital Area created 1,145 jobs during , which was more than four times the number of new jobs expected based on the national growth rate. Are salaries competitive? Average wage for the medical devices cluster in the Capital Area is $59,949, which is 13% higher than the national average. Are we innovating? Capital Area s medical devices cluster exceeded the national average of patents per employee in all but three years during Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Copyright 2006 by the President and Fellows of Harvard College. All rights reserved. October 19,
22 Industry Clusters Example: Medical Devices Cluster Step #3: Technical Assistance What is our strategy? Identify U.S. regions with declining shares of national cluster employment and market the Capital Area as an alternative location. Which regions should we target? Of the top ten regions for the medical devices cluster, Los Angeles (#1), New York (#4), Chicago (#6), and San Diego (#7) are losing national share. Minneapolis (#3) and San Jose (#5) are gaining. Possible Action Items: 1. Partner with workforce development boards to investigate employment and training needs at local medical devices companies 2. Assist chambers of commerce and EDCs with creating marketing materials that highlight the Capital Area s competitive advantages 3. Get creative about urban-rural strategies. Company expansions and relocations to rural areas are rare, but the recent migration of out-of-state residents to the Capital Area can be leveraged. More than 22,000 people with total income of $860 million moved here recently from states with declining shares of the national medical devices industry. Most people relocated to Travis County, but many are now living full-time or part-time in the Capital Area s less-populated areas. These new residents are a human capital asset that should be tapped for knowledge of best practices and connections to companies and talent working in medical devices clusters in other U.S. regions. October 19,
23 Scope of Work for 2007 The CEDS is a living document and can be revised on an ongoing basis to address emerging issues and new priorities. The 2005 strategic plan outlined a wide range of goals and activities, and the CAEDD successfully met all of its performance measures leading up to Summer The CAPCOG Executive Committee nominated a new CAEDD Board of Directors in May 2006 to comply with revised membership guidelines from EDA. The group s first meeting was held in July During the next few months the CAEDD will be identifying strategic priorities and action items based on the 2005 plan as well as any emerging issues of regional significance. Following is a suggested scope of work for 2007 based on continuing activities from 2006 and preliminary recommendations from staff. October 19,
24 Scope of Work for 2007 Business Development Develop standard economic competitiveness indicators to benchmark the Capital Area s performance against other U.S. regions Create an action plan for supporting entrepreneurship throughout the region Provide information and support to regional groups engaged in cluster development strategies Assist local communities with analyzing community trends, identifying economic development assets, and communicating information to stakeholders Identify data sources that could be used to construct city or county level cost of living indices Workforce Development Provide support to workforce development boards for maintaining targeted industry and occupation lists Monitor cluster trends and industry statistics in order to help workforce agencies anticipate how emerging issues will impact employment conditions October 19,
25 Scope of Work for 2007 Housing Identify sources of funding for affordable housing programs and publicize opportunities in CAPCOG s monthly Grant Alert newsletter Publish information on best practices during the annual Fair Housing Month in April Maintain up-to-date housing statistics to support grant applications and other local community development efforts Transportation Continue supporting the Regional Transit Coordination Committee (RTCC) in its efforts to create a comprehensive, seamless transit plan for the Capital Area Work with Capital Area Metropolitan Planning Organization (CAMPO) to ensure that economic development factors are accounted for during transportation planning October 19,
26 Scope of Work for 2007 Environment Support the expansion of county land use authority at the 80 th Texas Legislature Participate in CAPCOG s upcoming study of market-based recycling solutions for addressing regional solid waste management Other Projects Continue development of the Planning Map Viewer to include new functionality and data sets, such as a customized tool for planning in the State Highway 130 corridor Support CAMPO s long-term planning for integrated transportation and land use modeling for the Capital Area October 19,
27 Contact Information Capital Area Council of Governments 2512 IH 35 South, Suite 200 Austin, TX CAPCOG will be moving to the Bergstrom Technology Center at 6800 Burleson Road in November Betty Voights Executive Director Brian Kelsey Assistant Director, CRD October 19,