FY09 Priorities

Sent: Monday, September 24, 2007 12:08:45 PM
To: Select Board
Subject: comments for priorities discussion

Hi all,

I thought I would send along a summary of my comments from last Thursday night's priorities discussion:

1. We need to stop looking at % of revenue from residences and businesses and look instead at the bottom line - dollars. If we have a $1.5M gap, how will we close it?

2. We have a couple of examples in town that can give us a glimpse of how we might generate more revenues. Veridian Village, the seniors-focused development going up at Hampshire College, is projected to bring in $700k in annual tax revenues. The JPI taxable student housing complex that was proposed for North Amherst was estimated to
bring in $500k in annual tax revenues. Maybe we could still do something like this, siting it in a different location if necessary. Anyway, that's $1.2M right there.

3. There was a column in the Gazette a couple of months ago [below] that noted that companies in Boston are having trouble getting workers because they can't afford to buy housing there. Our housing costs aren't great, but they're more affordable than Boston. We could recruit a company or two from the Boston area to set up a research-based shop here, consistent with our values and the higher ed strengths we have here - say alternative energy or software development.

The point is, there are real projects that can generate real dollars. I don't know all the details on this, and I would say most of us don't. But we have people on staff in our town who could do the research, crunch the numbers, and give us some options. Maybe we should ask them to do that.

Andy C

[Originally published in Daily Hampshire Gazette on: Friday, June 15, 2007]

The knowledge economy: How our region can help end the state's brain drain
BY WILLIAM POHL

'Attracting and retaining recent college graduates in an effort to create a knowledge-based economy is one of the hottest trends in economic development today," says Rob DeRocker, executive vice president of Development Counsellors International, a New York firm that helps companies relocate.

In the same June 11 article in The Wall Street Journal entitled "Stopping the Brain Drain," Lauren Tara LaCapra notes that "a large pool of well-educated young people can be just as important to creating a vibrant economy as big employers and real-estate development. But for that to happen, competitive jobs must be available, as well as vibrant nightlife and other forms of entertainment."

Reading this, I couldn't help making comparisons to our Five College community. We have vibrant culture coupled with a high quality of life in a pleasant rural setting. We have easy access to Springfield, Providence, Hartford and Boston. We have decent transportation infrastructure including Route 91 and the Mass Pike, a freight railroad, and Westover and Bradley International Airports. And we have a supply of affordable housing with acreage and superb school systems available for a fraction of the cost of a free-standing home in Boston, which today costs from $650,000 to $2 million.

Given all these local amenities, why don't more graduates of our colleges remain in our region? The answer is simple. It's jobs. According to LaCapra, research indicates that most college graduates choose to remain in the towns where they graduate, assuming they can get decent jobs that take advantage of an increasingly expensive education. But when it comes to the creation of decent-paying knowledge-based jobs that tend to raise living standards for all area workers, our community is largely missing the boat.

Consider the numbers. UMass-Amherst boasts "a distinguished faculty that has achieved a reputation for excellence earning national and international recognition in fields ranging from computer science, business, nanotechnology, polymer science and engineering." It educates some 25,000 students a year, including an impressive number of MBAs from the Isenberg School of Management. Add to that 20,000 more students annually from Smith, Amherst, Hampshire and Mount Holyoke, plus kids from local community colleges and trade schools, and you have a powerful degree factory capable of churning out America's future innovators at an impressive rate.

So, again, one asks, where are the cutting-edge jobs for graduates of our own knowledge industry? The short answer is: not here! Despite our brain trust, most positions in the local classifieds advertise unskilled or old-economy jobs that average from $15,000 to $25,000 in annual wages. No way are you going to entice a UMass grad student with a Ph.D. in nanotechnology to stay on in the area if the best job available is to be a big box cashier or a forklift operator. That graduate leaves, and the monetary benefits of his higher education go with him to places like New York and Boston.

Now, in fairness, there are some bright spots in our area, including the Renewable Resource Energy Lab (RERL) at UMass, which focuses on creating wind energy, a handful of start-ups like Vegetable Energy Group LLC, and a growing health services sector anchored by excellent hospitals like Bay State Medical Center. We have chambers of commerce, a Western Massachusetts Economic Development Council and various research and industrial liaison offices at the university.

Still, it's the larger picture that is troubling. Given the huge scope of our academic community, knowledge-job creation here remains anemic and underwhelming relative to other parts of the country. We continue to be a net exporter of talent to intellectual centers like Route 128 and Cambridge with thriving biotech and high-tech knowledge jobs. Most of our local graduates are forced to take their diplomas and leave.

Given that our community's major industry - education - is tax-exempt, our selectmen and mayors and our college faculty and administrators should redouble their efforts to expand the tax base and remove an increasingly onerous tax burden on residential property owners. Amherst and Northampton in particular should think out of the box and become far more business-friendly. Understand that knowledge jobs at major tech companies bring in an average of $1.5 million of annual revenue per worker. (With a more diversified tax base, communities that host such companies are not voting on tax overrides to pay for basic services like police officers and teachers.) Furthermore, our towns should acknowledge that new economy growth need not be to the exclusion of existing small businesses: our farms, schools, museums, tourist industry or the arts and entertainment sector. Indeed, these very assets make our region a more attractive knowledge-economy candidate than many other college areas.

We can make excuses for the brain drain in the Five College region but while our area languishes, other academic communities are thriving. Over the past 20 years in New Jersey, Rutgers and Princeton have attracted companies from Merrill Lynch and Forrester Research to Bristol-Meyers Squibb and Tyco - concerns that employ thousands of local grads, which, in turn, generate millions of tax dollars that flow back to that community.

The same is true in the Raleigh-Durham collegiate area of North Carolina - an area comparable in size to the Pioneer Valley. Since the 1980s these pro-business towns have used tax incentives and other means to lure anchor companies like IBM to their academic communities. In a short time, they have created a virtuous cycle of knowledge businesses that has resulted in many high-paying jobs staffed by graduates and faculty of Duke and UNC, as well as people from our own area and the rest of the world.

Perhaps the most successful college town of all is Palo Alto in California. Just 50 years ago it resembled Amherst: a bucolic university town surrounded by fruit orchards and just a little closer to San Francisco as we are to Boston. Like UMass, its resident university, Stanford, found itself with vast tracts of land adjacent to its campus. It reserved this land for growing start-up companies that became the headquarters for world-class companies like Hewlett-Packard and Xerox Research PARC, and more recently Apple and Google down the road. The university fostered a vibrant entrepreneurial culture that attracted venture capitalists and the result today is Silicon Valley.

Contrast this with UMass. Business growth in the past decade adjacent to our university campus consists of a large horse farm, a new church, University Avenue sports bars, a few banks and professional offices, and a shopping center with some gas stations, a CVS and a Big Y. Is this the best use of real estate right next to a major research center? Why is there not a single solid knowledge-company in our area that could serve as a magnet to attract more business?

It's time for Western Massachusetts to stop playing second-fiddle to Boston or any other university community when we could be creating a more vibrant and healthier economy. Our towns, academic leaders, and the Isenberg school of business should emulate successful places like Palo Alto, and find more supportive and efficient ways to proactively identify promising entrepreneurs and emerging technologies, connect them with capital, and speed them to market.

We can be defensive or take offense at these suggestions and fall even further behind or we can take this as a rallying call to keep more of our considerable intellectual talent home where it belongs, to the benefit of our academic institutions, our students and ourselves. The choice is ours.

William Pohl was a speechwriter and communications adviser to the CEOs of IBM and other Fortune 50 companies.