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Title: January 12, 2011


1
Restarting Private Sector Job Growth in the
Greater MSP Metro Area
January 12, 2011
2
Agenda
  • Case for Change
  • What Drives Job Growth?
  • Strategies for Greater MSP

1
3
For the past 30 years, the Twin Cities have
enjoyed steady growth
U.S. average
Twin Cities
Midwest
Real income per capita1
CAGR
2.0
1.9
1.9
2005
2000
1995
1990
1985
1980
GDP per capita1
CAGR
1.7
1.8
1.4
2005
2000
1995
1990
1985
1980
1 In 2005 dollars
4
The Twin Cities has an incredibly strong private
sector . . .
425 billion
MSP has the 3rd most Fortune 500 companies per
capita in the country
Revenue earned by Twin Cities Fortune 500
companies
22
Fortune 500 companies headquartered in the Twin
Cities
6th
Ranking among regions for most companies in the
Fortune 400 private companies list including
Cargill and Carlson
5
. . . world-class research and strong human
capital . . .
5th among all states in patents per investment
dollar
MSP has the 5th best percent of advanced degrees
among MSAs
Educational Attainment, 2007
U of M is nationally ranked 7 in patent-revenue
generating research
Population gt25 with high school diploma Percent
Population gt25 with advanced degree Percent
93
85
The Mayo Clinic ranks 2nd in the US News World
Report 2009 Americas Best Hospitals for 5th
consecutive year
U.S ave
MSP
U.S. ave
MSP
6
. . . and quality of life amenities
1
1
Volunteering rate in the nation
Local food community in the nation
2
1
Theatre seats per capita, behind NYC
Most Athletic City in the nation
1
4 Major League sports franchises
Largest mall in America
3
And the largest pond hockey tournament in the
world!
Number of museums
7
However, the region is losing ground
Difference between Twin Cities employment growth
and U.S. employment growth1
Job growth has significantly declined relative to
the U.S.
1 3-year moving average difference between Twin
Cities and the U.S. using the given year and the
previous two years
8
Our business rankings have worsened
Milken Best-Performing Cities
Forbes Best Places for Business and Careers
2003 rank
2009 rank
2003 rank
2009 rank
Austin
8
1
Raleigh-Durham
12
2
Raleigh-Durham
1
3
Sacramento
15
58
MSP
76
20
Austin
59
4
Columbus
38
24
Denver
89
44
Denver
14
34
MSP
99
123
Sacramento
119
36
Columbus
10
135
Seattle
17
89
Seattle
13
17
Chicago
71
100
Chicago
14
160
9
The Twin Cities have a challenging business
climate
10
High cost of doing business in the Twin Cities is
driven largely by tax, regulatory and labor costs
COST OF DOING BUSINESS
Initial findings
  • Minnesota ranks poorly both on business climate
    (41 of 50) and ratio of tax benefit to tax burden
    (46 of 50)
  • Minnesotas corporate tax rate of 9.8 is third
    highest in the country
  • Minnesota ranks 30th on Forbes Best states for
    doing business rankings
  • Minnesota has the most stringent health insurance
    mandates in the country
  • Twin Cities has the 8th highest labor cost (out
    of 381 cities)
  • 15.9 of workers are in unions, above 12.5
    national avg.
  • Wages for low skilled workers in the Twin Cities
    are 8.5 higher than peer regions

SOURCE McKinsey Global Institute, Forbes, Tax
Foundation, Moodys Economy.com, Firm experts
11

Minnesotas taxes are among the highest in the
country
MN state rank (1lowest, 51highest)
2009, Percent
9.8
Corporate Income Tax1
US Avg. 6.6
US Avg.5.086
Sales Tax
7.9
Personal Income Tax2
US Avg.5.9
Corporate Property Tax Index3
US Avg. 3.0
1 Represents the highest marginal corporate tax
rate 2 Represents the highest marginal personal
income tax rate 3 This represents the relative
ranking of corporate property taxes (0best
possible property tax ranking, 3 US average, 6
the worst possible ranking).
SOURCE Tax Foundation
12
The Twin Cities lack a coordinated business
development effort
Local Business Leaders say . . .
Site Selection Consultants say . . .
Minnesota gets dominated by almost every other
state because we have no one hit team, one
organization, in economic development. Nothings
coordinated, its a mess . . .
You probably have lost a significant amount of
corporate prospects due to a lack of regional
agency.
We have multiple organizations focused on
economic development, but no coordinated ,
regional effort . . .
13
Agenda
  • Case for Change
  • What Drives Job Growth?
  • Strategies for Greater MSP

12
14
Three Sources of Job Growth
Retain existing companies in the Twin Cities and
foster an environment for growth
Retain
Quality Job Growth
Create
Attract
Attract investment and corporate relocations from
outside Minnesota
Enable the creation of new Twin Cities firms
through a culture of innovation
15
How do you Create Job Growth?
7
Cost of Doing Business
level of taxes, incentives , regulatory and/or
permitting process
Environmental Levers
Quality of Life
lifestyle and community factors
Human Capital
quality and investment of workforce, education
and training
Infrastructure
regional transportation, airport access, telecom,
utility capabilities
Innovation and Start-up
RD capabilities, commercializing research and
ability to source capital support to entrepreneurs
Process Levers 
Economic development strategy developed and
institutionalized with main economic development
organizations
Unified Vision
Central ED Governance
A single organization coordinates economic
development efforts
Sector Focus
Explicitly target particular sectors as growth
engines for the region
Marketing Campaign
Highly visible campaigns which market regional
identity
16
Greater MSP Assessment
MSP above peers and national average
MSP around average
MSP below average
Supporting Facts
Assessment
  • Minnesotas corporate tax is third highest in the
    nation at 9.8
  • MN ranks 43rd in overall tax climate
  • MSP ranks 8th highest in wage labor rates out of
    383 MSAs

Cost of Doing Business
  • Ranked 1 on Sperlings best places, 2 on Forbes
    Best U.S. Cities to earn a living, and 2 in Next
    Cities Hotspots for young, talented workers

Quality of Life
  • 36.8 of Twin Cities residents have a bachelors
    degree relative to 27.5 nationally

Human Capital
Environmental Levers
  • MSP average commute time of 24 minutes is at the
    US average and average commute time via public
    transportation is better than US average
  • Broadband penetration of 56 is middle of the
    road relative to peers

Infrastructure
  • Ranks 22nd in number of entrepreneurs per
    thousand residents
  • At 26 deals venture deals in 2007, MSP lags top
    innovation hubs

Innovation and Start-up
15
17
Greater MSP Assessment
MSP above peers and national average
MSP around average
MSP below average
Supporting Facts
Assessment
  • Currently various economic development entities
    operate with varying visions
  • ED pursued at a sub-regional level

Unified Regional Vision
  • Currently, ED entities operate largely
    autonomously
  • Sub-regions within MSP often compete for business
    rather than coordinating efforts

Central ED Governance
Process Levers
  • Limited outreach efforts on regional basis, with
    most outreach coming from city entities such as
    Capital City Partnership
  • More to Life and Positively Minnesota efforts

Marketing Campaign
  • Historically limited coordinated cluster efforts
    but some current activities underway (e.g., RCM,
    Humphrey Institute)

Sector focus
16
18
Proposed 3 Strategic Priorities for the Region to
collectively work on
  • Address the cost of doing business
  • Develop a regional vision, strategy and approach
    for economic development
  • Enhance entrepreneurship and innovation

19
Agenda
  • Case for Change
  • What Drives Job Growth?
  • Strategies for Greater MSP

20
Where those findings led us Itasca Job Growth
Initiatives
Objective Fuel Quality Job Growth
  • Launch a Regional Economic Development
    Partnership (REDP)
  • Private - public partnership
  • 13 county MSA definition
  • Scope of Activities
  • Regions ED vision and strategy
  • Branding and marketing
  • Retention and expansion
  • Attraction
  • Support and enhance the productivity of the
    regions entrepreneurship ecosystem
  • Establish a Business Bridge
  • Institutionalize working relationships between
    the University of Minnesota and the Private Sector

21
MSP REDP Launch Status
Hire a CEO
Secure Year 1 Investment
1
2
  • Engaged national executive search firm
  • Currently in final stages of interviews
  • New CEO in place in Q1
  • Nearing Year 1 Goal 2.8M
  • Public Sector 6 counties 14 cities contribute
    over 900K
  • Private Sector 1.5M pledged, 1.0M outstanding
    asks

Initiate Legal Incorporation
Draft Rules of Engagement
3
4
  • Incorporating as a 501c3
  • Creating board governance concepts documents
  • Selecting initial board members
  • Engaging economic development leaders throughout
    region
  • Formalizing operating protocol between REDP and
    other ED organizations
  • 20
  • 20

22
Appendix
23
Active Minneapolis-Saint Paul Regional Economic
Development Efforts
Regional Economic Development Activities
Transportation/ Land Use
Entrepreneurship/ Innovation
Strategy and Growth
Talent
Green
  • 4FRONT
  • TheLineMedia.com
  • Living Cities Corridors of Opportunity
  • HUD Sustainable Communities
  • Integrated transit/ROI planning
  • Central Corridors Funders Collaborative
  • Entrepreneurial Accelerator
  • Business Bridge
  • Minnesota Showcase
  • Supplier Library
  • REDP Regional Economic Development Partnership
  • Brookings Metropolitan Business Plan
  • Regional Competitiveness Project
  • Destination 2025
  • MetroMSP.org
  • Thinc.GreenMSP

Funded/Confirmed programs and efforts with
individuals actively working to positively impact
regional economic development in the greater
Minneapolis Saint Paul metro area
  • 22

24
Where those findings led us Job Growth
Initiatives
Objective Fuel Quality Job Growth
Key Itasca Initiatives
  • Support and enhance the productivity of the
    regions entrepreneurship ecosystem
  • Establish a Business Bridge
  • Institutionalize working relationships between
    the University of Minnesota and the Private Sector
  • Launch a Regional Economic Development
    Partnership (REDP)
  • Private - public partnership
  • Scope of Activities
  • Regions ED vision and strategy
  • Branding and marketing
  • Retention and expansion
  • Attraction

Rationale
  • Regions entrepreneurial activity slowing in
    recent years
  • Prominent and critical gaps in funding
    availability, entrepreneurship culture,
    and regulations
  • Opportunity to bundle and promote core assets
  • Other regions are aggressively competing for
    jobs, while Twin Cities frequently not in
    consideration set

25
Itasca Project History (2003 2009)


Ideas, Innovation, and Business Climate
Talent/Workforce
Retaining and Growing Leading Employers/Grow MN!
Creating a World-class K-12 Education System in MN
Strengthening University-Business Relations
Supporting the Strategic Redirection of
Minneapolis Public Schools
Supporting the Growth of Small Business /
GetGoMN.org
Supporting Early Childhood Development
Quality of Life
Infrastructure
Advancing a Comprehensive Transportation Plan
Financially Fit Minnesota
Twin Cities Compass
Understanding and Addressing Socio-economic
Disparities/Close the Gap
26

Retaining and growing Twin Cities-based
establishments is a significant opportunity
Employment loss
Employment gain
Twin Cities average gross employment flows
Average annual percent change of employment,
2002-2007
Retain
Create
Attract
18-22
1-3
1-3
(3-6)
(17-21)
Gains from creation of new firms4
Gains from attracting new establishments5
Gains from existing MN firms3
Loss from establish-ment closings2
Loss from contraction1
SOURCE Bureau of Labor Statistics, Dunn
Bradstreet, Economy.com, McKinsey analysis
27
Small employers account for approximately 76 of
job growth

Small (1-20 employees)
Medium (21-499 employees)
Large (500 employees)
Total employment in Minnesota , Employment growth
by enterprise size1 Percent, 2003-2006
Percent of employment growth, US Percent,
2003-2006
Small
17
Medium
34
76
77
21
Large
49
2
24
Percent of Employment Growth2
Percent of Employment
SOURCE US Census Statistics of US Businesses,
McKinsey analysis
28
A small group of sectors has driven the majority
of job creation

Twin Cities Job Creation by Sector (2002
2007) Percent
Employment Growth Difference MSP-US
Employment Growth CAGR Twin Cities
Food/Drinking Places
11.1
-0.3
Hospitals
11.0
3.3
Social Assistance
10.5
3.0
Ambulatory Health Care
10.3
0.6
Educational Services1
7.8
3.7
Administrative Services
7.2
-0.2
1.4
Professional Services
-1.5
6.2
4.0
1.1
-0.3
General Merchandise Stores
Other
31.8
Job Creation
SOURCE Bureau of Economic Analysis, Bureau of
labor statistics, Moodys economy.com, McKinsey
analysis
29
Best practice regions employ varying mixes of
levers but several emerge as consistent across
regions
Key area of focus of economic development effort
Secondary area of focus of economic development
effort
Not an area of focus of economic development
effort
Consistent lever across regions
Raleigh-Durham
Ireland
Singapore
Nashville
Austin
Pittsburgh
Cost of doing business
?
Quality of life
Environmental levers
?
Human capital
Infrastructure
Innovation and start-up
?
Unified vision
?
Central ED governance
Process levers
Sector focus
?
External marketing campaign
30
The Twin Cities compare well against peers in
civic engagement and leisure amenities

QUALITY OF LIFE
Leisure and entertainment rank, 2007 Score based
on multiple metrics1
1 Rank compiles data on dining, shopping,
entertainment, outdoor activities, media,
performing arts, and museums
SOURCE Corporation for National Community
Service Cities Ranked Rated Trust for Public
Land
31
The Twin Cities have a highly educated population
7
HUMAN CAPITAL
Population over 25 with high school
diploma Percent, 2007
MSP
Seattle
Columbus, OH
Denver
Raleigh-Durham
Sacramento
Austin
Baltimore
San Diego
Chicago
US Average 84.5
SOURCE US Census American Community Survey,
McKinsey analysis
32
Twin Cities residents have reasonable commute
times relative to peers

INFRASTRUCTURE
Average commute time by car, truck, or van
alone Minutes, 2007
Austin
Columbus, OH
MSP
Sacramento
Raleigh-Durham
San Diego
Denver
Seattle
Chicago
Baltimore
US Average 25
SOURCE US Census Bureau, American Community
Survey
33
The Twin Cities VC market is less robust than
its peers
3
INNOVATION
Venture capital investments
Total venture capital deals
Average annual investment, 2004-2007 per capita
Total, 2004- 2007Number of deals
Denver
Denver
San Diego
San Diego
Austin
Austin
Seattle
Seattle
Raleigh
Raleigh
Baltimore
Baltimore
MSP
MSP
Sacramento
Sacramento
Chicago
Chicago
Columbus
Columbus
SOURCE Capital IQ
34
Minnesota has competitive levels of
entrepreneurial activity
0
INNOVATION
Entrepreneurial activity1, 2007 Number of
entrepreneurs per 100,000 people
State rank 1highest
California
Colorado
North Carolina
Maryland
Minnesota
Texas
Illinois
Washington
Ohio
US Average 300
1 Using Census Current Population Survey data,
the study tracks the change in the number of
non-business owners who become business owners
month-to-month
SOURCE Kauffman Foundation Index of
Entrepreneurial Activity
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