The Fourth Economy team publishes a regular, semi-monthly eNewsletter, entitled Economic Architecture, which provides news, editorial insights, and stories of innovation, collaboration, economic & community development, and other drivers of the fourth economy.

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Opportunity Zones: Beyond the Basics

Opportunity Zones are getting a lot of hype these days, and for good reason. They are designed to funnel $6.1 trillion into distressed communities through encouraging investment of capital gains and can be used to fund real estate investment as well as investment in businesses. Oh, and these investments need to happen by December 22, 2019 to realize the full benefit the program. (If you need a quick refresher on Opportunity Zones, check out the Economic Innovation Group’s FAQs).

Since being signed into law with the 2017 Tax Act, Opportunity Zones have already been used to fund real estate development projects. While investors have been quick to implement, the rest of us are still trying to figure out what Opportunity Zones mean for communities. Below, I explain important aspects of Opportunity Zones that you can take into your next meeting with investors.

New Regulations Create a Better Deal for Business Investing

Unlike many other federal economic development programs, Opportunity Zones are not being run through the Department of Commerce or the Department of Housing and Urban Development. Because they are, essentially, a tax break, the Internal Revenue Service is responsible for their administration. The IRS has been taking suggestions from leading experts in Washington and beyond to develop the guiding regulations for Opportunity Zones, and recently released the second tranche of regulations.

Of particular interest is that the so-called 50% rule has been changed. In an effort to prevent shell companies from exploiting tax breaks, regulators previously required that businesses receive half of their gross income from within their Opportunity Zone. While this may have worked for a grocery store, it would not support businesses that were hoping to manufacture a product to be sold widely.

But that has changed. According to Bisnow,

“Under the new set of regulations, a business funded by a qualified opportunity fund and located in an opportunity zone, could qualify for the tax incentives if it meets one of three “safe harbors”: at least 50% of the hours the employees or contractors work are spent within the opportunity zone, half of the company’s services are within the area or if the management and operations are based in the designated zones.”

The new regulations also clarify that investors will be allowed to invest in and sell a business as long as the proceeds are reinvested into another Opportunity Zone, and that real estate investors will be allowed to lease and refinance their properties.

Unfortunately, this round of regulations did not address critics’ concerns for more oversight, and did not introduce any ways for tracking investment in the Zones, or how to measure positive impacts for populations currently living in Opportunity Zones.

Opportunity Zones and Economic Development Administration Funds

Adjacent government agencies are also determining how their programs will interact with Opportunity Zones. The Economic Development Administration (EDA) has taken the step to open EDA funds to eligible entities within Qualified Opportunity Zones. This means that entities in Opportunity Zones applying for EDA funds via the 2018 Notice of Funding Opportunity for Public Works and Economic Adjustment Assistance Programs have an increased level of eligibility. According to a recent EDA blog post,  since FY 2018, EDA has invested more than $13 million in 22 projects in Opportunity Zones to help communities and regions build the capacity for economic development.

If an Opportunity Zone in your area is facing a significant infrastructure challenge, EDA funds may be able to help. For example, EDA recently funded a $2.5 million replacement of flood infrastructure in an Opportunity Zone in the city of Dubuque, Iowa.

Marketing Your Opportunity Zones

Opportunity Zones are invested in by Opportunity Funds, which are run by investors, banks, and special interest firms. Targeting this wide ranging group requires a combination of collaborative strategic planning, marketing, and policy alignment.

A community driven strategic plan will help ensure that the current population’s needs and preferences are considered in the development of an Opportunity Zone. Fourth Economy has developed a planning process focused on community engagement; our Market Cards allow community members to take on the role of the developer or business owner, which leads to feasible, collaboratively designed strategic plans. This process results in a list of potential projects that have been vetted by both the community, and are financially feasible, thus forming a prospectus of investment that can be shared with Opportunity Fund investors.  

Marketing for Opportunity Zones should happen on the city, region, or state level. So far, the most success in Opportunity Zone development has been through these larger entities promoting the Zones in their jurisdiction. For example, Colorado and Alabama have set up specific website that connects investors with properties and businesses in Opportunity Zones; Co-Invest, and Opportunity Alabama. Another best practice is to hire a coordinator specifically to oversee Opportunity Zones, as the City of Baltimore has done.

Finally, all city, state, and federal policies should be aligned. If your state has a capital gains tax, and does not allow for deferment in Opportunity Zones, that could dissuade investors. Novogradac has posted a map of state tax code conformity. On a local level, cities should aim for quick permitting, and instigate policies that will protect those already living in Opportunity Zones. For example, in an effort to slow rapid neighborhood change, Philadelphia freezes taxes for residents who have lived in their homes for more than ten years.

The Blunt Truth About Marijuana Legalization

As Pennsylvania was preparing to legalize medical marijuana back in 2017, I posted a blog about the Economic Impacts of Marijuana Legalization. A lot has changed in the legal landscape since then and we have had more time to reflect on the experiences of the states blazing the legal trail, Colorado and Washington.

Colorado

In October of 2018, The Colorado Division of Criminal Justice Office of Research and Statistics released “Impacts on Marijuana Legalization in Colorado,” a report that compiles and analyzes data on marijuana-related topics.

The Denver Post summarized the positive findings of the report as follows:

  • Five years after Colorado legalized marijuana, young people are not smoking more pot than they used to, organized crime is on the rise and it’s a mixed bag as to whether legal weed has led to more dangerous driving conditions.
  • Marijuana has not impacted graduation rates or dropout rates in Colorado. Graduation rates have increased while dropout rates have decreased since 2012.

The state report did report a number of negative findings as well:

  • The number of fatalities where a driver tested positive for any cannabinoid (Delta 9 or any other metabolite) increased from 55 (11% of all fatalities) in 2013 to 139 (21% of all fatalities) in 2017.
  • Rates of hospitalization with possible marijuana exposures increased steadily from 2000 through 2015.

Other findings in the state report are mixed:

  • Felony marijuana court case filings (conspiracy, manufacturing, distribution, and possession with intent to sell) declined from 2008 to 2014, but increased from 2015 through 2017. However, felony filings in 2017 (907) were still below 2008 filings (1,431).
  • Filings in organized-crime cases followed a similar pattern, with a dip in 2012 and 2013 followed by a significant increase since 2014. There were 31 organized crime case filings in 2012 and 119 in 2017.

Colorado originally anticipated $70 million in marijuana tax collections per year, but it hit $130 million in 2015, went over $190 million in calendar year 2016 and topped $266 million in 2018.1 A 2016 estimate put the economic impact for the state of Colorado at $2.4 billion, when revenues were half of the 2018 total.

Updated April 2019: https://www.colorado.gov/pacific/revenue/colorado-marijuana-tax-data

Image result for washington state flag

Washington

In Washington, the legalization was expected to generate an estimated $388 million annually. The revenues, however, have been slow to materialize but have grown rapidly with the excise tax revenues from marijuana starting at $62 million in FY 2015, and then more than doubling to $134 million in FY 2016. In FY 2017, Washington state collected $319 million in legal marijuana income and license fees, an increase of 238 percent. While this amount is still short of the original estimates, the marijuana revenues exceed revenues from liquor by more than $113 million.2

The Washington State Caseload Forecast Council conducted an analysis of the impacts from the legalization of recreational marijuana:  

  • Between June 2008 and December 2009, the analysis showed, there were 1,312 offenses committed that resulted in felony sentences for the manufacture, delivery or possession with the intent to deliver marijuana.
  • By contrast, during an 18 month period following the opening of recreational cannabis stores in 2014, there were just 147 marijuana-related crimes that resulted in felony level sentences — a nearly 90 percent decrease.

As reported in Seattle’s Child, the 2016 Washington State Healthy Youth Survey found that “Rates of teen marijuana use have not increased since 2014, despite the changing landscape.”3

The 2016 Washington State Marijuana Impact Report found that since legalization, marijuana use in the state is higher than the national average, which is no surprise: “Washington State young adults (18-25) past-year marijuana use was 6% higher than the nation’s in 2012-2013 – Washington adults (26+) were 5% higher.”4 The report also noted an increase in fatal accidents, however the absolute number remains small: “Drivers with active THC in their blood involved in a fatal driving accidents have increased 122.2% from 2010 (16) to 2014 (23) according to the Washington State Traffic Safety Commission.”5 Finally, the report noted a small number of marijuana-related crimes reported to the Spokane Valley Police Department for January to August of 2015: possession (21), theft (14), and harassment (11).6

Conclusion

Partisans will still find enough evidence to support their positions, but at this point, the scales seem to be tipping in favor of the marijuana legalization advocates. The worst fears of the legalization opponents have not materialized, at least in terms of any chronic, long-term economic impacts. A robust debate continues regarding the health impacts of marijuana legalization, but that is another story.

Sources

1 Source: https://www.colorado.gov/pacific/revenue/colorado-marijuana-tax-data
2 Source: https://www.tre.wa.gov/portfolio-item/washington-state-marijuana-revenues-and-health/
3 Source: http://www.seattleschild.com/Washington-state-legalized-pot-how-has-that-affected-kids/ /
4 Source: http://www.riag.ri.gov/documents/NWHIDTAMarijuanaImpactReportVolume1.pdf, page 9.
5 Source: http://www.riag.ri.gov/documents/NWHIDTAMarijuanaImpactReportVolume1.pdf, page 9.
6 Source: http://www.riag.ri.gov/documents/NWHIDTAMarijuanaImpactReportVolume1.pdf, page 9.

The Inequitable Roots of Home Ownership: Systemic Racism & the Wealth Gap

In March, I was lucky enough to attend a two day Racial Equity Institute workshop. The workshop was dense – covering the creation of the concept of race, implicit bias, and systemic/ institutional racism and how it contributes to the inequitable outcomes we see today. In a future blog post, I will share some things I learned about systemic racism as it pertains to access to work, but today I’d like to focus on home ownership.

One statistic is particularly striking in revealing the scale of inequality impacting people of color today. According to the Census Bureau, in 2014 the median net worth of a white household was $102,800, versus only $9,590 for a black household. Equity in a home comprises the majority of the wealth; excluding equity in a home, the median net worth of a white household is only $33,570, and that a black household drops to $3,339. Hispanic families fare only marginally better, with a median net worth of $17,530, which drops to $6,253 absent home equity.

The history that the Racial Equity Institute covered illuminates how largely our government policies have led to that situation. This is important history to keep in mind as we work to develop new programs and policies to create economic opportunity, and as we try to explain to stakeholders why we have an obligation to redress the impacts of these policies. While the history is vast, here are three key points.

1. It all starts with land, and all of the major programs to initially settle our country were off-limits to people of color.

The 1785 Land Ordinance Act, which offered 640 acres at $1 per acre, was only available to white people. The nearly 100,000 white people who came to California after the end of the Mexican-American War were allowed to claim and own “free soil”, while slaves and free black people were banned from doing so. Additionally, the 1862 Homestead Act, which gave citizens 160 acres of land for free if they would farm it for five years, was not available for Blacks and Native Americans. According to Lui et al. in The Color of Wealth, an estimated 46 million Americans living today are descendants of Homestead Act beneficiaries.

2. The housing programs that fueled post-war wealth generation, were also largely inaccessible to people of color.

Of the approximately $120 billion in new housing financed by the VA and FHA by 1962, 98 percent of it went to white home owners. In part, this was because beginning in 1933 with redlining and continuing with racially restrictive covenants (outlawed in 1968, but still in some cases on the books), people of color were restricted to certain neighborhoods – neighborhoods in which banks would not lend. If you haven’t looked at the redlining map of your city to compare it to present-day conditions, check this out.

3. Systemic racism continues to influence access to homeownership and wealth.

The Recession disproportionately impacted people of color. In December 2011 the US Department of Justice announced a $335 million settlement with Bank of America/ Countrywide for its predatory practices that targeted black and Latino households. The settlement noted that between 2004 and 2008 roughly 200,000 African American and Latino borrowers were charged more for their mortgages than were similarly qualified white borrowers.

Of course, the picture is much more complex than this blog post can convey. If you want to learn more, PBS has compiled a list of resources on race.

And we are always interested in learning more, ourselves! So please reach out with thoughts, resources, or questions: engage@fourtheconomy.com.

What does the federal government have to do with local economic development? A lot.

At Fourth Economy, our focus is on helping communities develop strategies that will make a big impact. For major projects, that often means identifying and assisting in applying for federal assistance. The federal landscape can be confusing, especially when trying to keep up with the news out of Washington. We can help sort through the thicket of regulations to find opportunities that align with your communities plans by leveraging our experience with federal programs and our engagement with national trade groups.

One of the best groups to keep up to date with opportunities in Washington is the International Economic Development Council (IEDC).  Matt Mullin, IEDC’s Vice President of Policy & Communications heads up their policy efforts, so I reached out to him for an overview of the federal role in local community and economic development.

One of the best groups to keep up to date with opportunities in Washington is the International Economic Development Council (IEDC).  Matt Mullin, IEDC’s Vice President of Policy & Communications heads up their policy efforts, so I reached out to him for an overview of the federal role in local community and economic development.

Emily: Why do economic developers need to know what is happening on a national policy level? Don’t they have enough to deal with in their own communities?

Matt: The federal government, whether functioning well, or not, plays a significant role in what happens at the local and regional level on both a macro and micro scale.

On the macro scale, the rhetoric coming out of Washington influences the international economy. When a president is talking about trade with China it impacts business decisions that are being made about future supply chains, distribution and other factors.

On a micro level, the federal government is still spending money. While the administration is not supportive of economic development programs in their budget, congress has ignored them and has pumped more money into our key programs. These federal resources make direct impacts on the local level.

I understand that seeking federal aid in this climate can be exhausting, especially for small communities where it is hard to find the time and resources to apply for and report on grants. It is easy to make a decision to ignore the federal government during this time. That’s unfortunate, because those that are persistent have a real opportunity to get resources that have not been available in the past.

Emily: What resources does IEDC provide for economic developers to learn more about public policy and federal resources?

Matt: We provide research analysis and advocacy resources to help members remain engaged in DC. Last year, we published a guide that outlines investments in local economic development projects from different agencies is available for free download on the IEDC website. We provide federal updates in our newsletter, legislative alerts when key pieces are under consideration, and updates at key moments in legislative calendar.

We also advocate on the behalf of the profession, to the administration, to federal agencies and to congress. Furthermore, IEDC has a Public Policy Advisory Committee that informs our board on policy and legislation. This is the general membership’s voice to the IEDC board on public policy.

Emily: This administration certainly has an unconventional approach to economic development! What are some of the changes you have seen?

Matt: Their agenda for economic policy seems to be largely grounded in trade policy; tariffs, trade negotiations, NAFTA, China. Early on they had suggested they would drop multinational trade agreements in favor of bi-national. That has largely fallen on the wayside. Now they are focused on China and Canada and Mexico through revising NAFTA. Outside of that, not clear what major initiatives that they will engage in.

Previously, administrations would create focus areas. For example, the last administration took on the Investing in Manufacturing Communities Partnership. That was not a funded initiative but it put a spotlight on regional strategies for manufacturing. Programs like those do not exist currently.

Emily: What about Opportunity Zones?

Matt: Opportunity Zones are a program that was included in the 2017 tax bill. The program was something that had been worked on for some time by Economic Innovation Group in collaboration with Senators Cory Booker and Tim Scott. This is the first tax credit program since New Markets Tax Credits, which are over 10 years old. The program is under the purview of the Department of Treasury. They collaborated with the CDFI Fund to get the ball rolling, and now the Internal Revenue Service is taking it over.

It came as a bit of a surprise, and there has been some scrambling, but now all zones are identified and the regulations are being completed. No more zones will be identified for this round, but it is possible that, if all goes well, there may be future iterations. This is a bright spot in an otherwise uncertain climate for economic development and the administration has thankfully embraced it.

Emily: Are there any programs that most economic developers don’t know about that you feel are particularly useful and important?

Matt: According to the Government Accountability Office (GAO), there are 120 federal economic development programs. GAO needs to revisit this because while there are many programs that have the ability to improve the economy through investment, not all are specifically economic development oriented.

In terms of economic development programs, I think EDA is deserving of greater attention because it is the only federal agency specifically and exclusively designed to engage in economic development actions. It’s only purpose is to help local communities experiencing economic distress through investments in infrastructure, planning, and technical assistance. In fact, EDA is the lead agency for economic recovery following disaster at the federal level because it is precisely the type of work it does on a daily basis. They are the experts in economic recovery and resiliency.

EDA was created through the Public Works and Economic Development Act of 1965 (PWEDA).  Reading over the signing statement made by President Lyndon Johnson over 50 years ago reveals the relevancy of the agency to this day.

Emily: Aren’t you putting on a conference soon?

Matt: Yes. The Federal Economic Development (FED) Forum is the only annual conference of its kind. While there are lots of legislative conferences, this is the only one focused on federal economic development programs and policies. You will typically see two dozen or more agencies on our program and usually the person participating is the lead program director. At this conference, the connections that you make can translate into getting a grant, getting answers, getting assistance on bureaucratic issues that you would not otherwise have.

These are the people you want to know and form relationships with, because, even in this environment, there are still many career civil servants who believe in the work they do and want to help you.

One of the speakers I am most excited about is Fran Seegal who is the Executive Director of the U.S. Impact Investing Alliance, which is being incubated at the Ford Foundation. She will be talking about their work in standards and best practices for communities in Opportunity Zones, especially advancing community development in sync with economic development. We’ll also be welcoming the newly-confirmed head of EDA, Dr. John Fleming.

Plus, it is springtime in Washington!

Solving the Labor Shortage: Workforce Reanimation

Photo by Chad Hurst

Everywhere I turn, people are complaining about the inability to find workers for many of the open jobs in their community. We continue to identify best practices and work with communities to replicate and implement to fit their needs. What if the solution was right in front of us (or I should say under us) the whole time. Inspired by the remaking of Pet Semetary and the dozens of Zombie shows on TV, we may want to look into Worker Reanimation. Yes, can we bring back the talent that has left us and get them back at the desk, factory floor, or driving delivery vehicles!

Reanimation Training Academy

In most cases, the reanimated will probably need some job skill upgrades and maybe even some life skills updates. A training academy can be established to prescreen, support intensive training and get them back in action. Haven’t held a job/been alive since the 1800s? No problem. We’ll catch you up on what computers are in no time.

Reanimated Professionals Group

We can imagine that the reanimated may want to share experiences with their peers. Their pre-life work relationships may not align any longer with their current views and activities outside the workplace. They will want to share their pre- and post-life thoughts with people who really understand them.

Ok, so maybe I got a bit carried away, but I do think I have a story idea to pitch for the next big AMC series.

We do take the issue of labor force shortages and skill needs of residents seriously and are working with several communities to address these situations. We will make sure to share some of this exciting work – when it’s not April Fools Day.  

Housing’s “Missing Middle” in Greater Newport, RI

In the Greater Newport region (covering Newport and Bristol counties in Rhode Island) the  “missing middle” is missing housing for the middle class.Due to high costs and limited availability of denser housing options in the region:

  • 73% of households cannot afford the median home price of $347,500;
  • 28% of homeowners and 49% of renters spend more than 30% of their income on housing, defined as “cost burdened”; and
  • Some owners and many renters have to seek out housing that is not affordable at their income level

In a positive step in advancing solutions to these problems, Fourth Economy and Connect Greater Newport partnered with HousingWorks Rhode Island and the Aquidneck Island Planning Commission to host the 2019 Housing Forum.

Participants gather at the 2019 Housing Forum. Photo by Claire Nelson

The 2019 Housing Forum featured three panels of experts discussing the state of housing in the region. The afternoon break-out sessions allowed for a productive discussion between residents, business owners, elected officials, and community members interested in the future of housing for the region. Solutions proposed during the break out sessions included:

  • Addressing short term and seasonal rentals;
  • Improving public perceptions of affordable and workforce housing;
  • Improving infrastructure to support denser housing;
  • Examining zoning ordinances to allow for denser development; and
  • Leveraging private public partnerships that engage major employers in the region

The needs of regional employers are clear: in order to support the growth of existing businesses and attract new companies to the region, the region must develop housing suitable for the workforce. According to an ongoing survey, 85% of respondents say housing is an issue affecting employers in the region. More than three quarters said that cost of homeownership and renting was a “significant” or “very significant” barrier for their employees.

Connect Greater Newport will build off the success of the 2019 Housing Forum and continue to address the central issues of Greater Newport’s business community.

What are your thoughts? Is housing an issue for your company? If you live in the Greater Newport region – share your thoughts here or contact Connect Greater Newport. Not in Newport? Share your thoughts with us here.

About Connect Greater Newport

Connect Greater Newport is a regional economic development initiative launched in 2018 by the Newport County Chamber of Commerce to serve the region’s business community. Connect Greater Newport’s mission is to support the growth of Greater Newport’s existing businesses and serve as a resource to attract new companies to the region.

Should We Fight or Embrace the Robot Invasion?

A daily stream of headlines fill my inbox, describing technology advancements as a growing number of researchers, economic developers, and political candidates are discussing the future of work and our new robot coworkers. We’ve reached a tipping point in the understanding of how robots and artificial intelligence are impacting and will impact our lives.

This summer, FedEx will demo their same day delivery robots in Memphis, TN. What may be news to many is that this is not the first autonomous delivery demo, as several other communities are already hosting demos delivering everything from pizza to toilet paper.

Our friends at the Brookings Institution have noted a few compelling facts to consider:

  • “Almost no occupation will be unaffected by the adoption of currently available technologies.
  • Approximately 25 percent of U.S. employment (36 million jobs in 2016) will face high exposure to automation in the coming decades (with greater than 70 percent of current task content at risk of substitution).
  • At the same time, some 36 percent of U.S. employment (52 million jobs in 2016) will experience medium exposure to automation by 2030, while another 39 percent (57 million jobs) will experience low exposure.”

The Fourth Economy team is working with a number of communities to more directly assess the impending impacts and in some cases we have noted that the Brookings estimates are very conservative. The question is, will the businesses in these communities embrace the transformation or be forced to when the economics of legacy systems become unsustainable?

In less urban and smaller communities the economic development and political leadership must start helping their employers transition through the integration of new technology. From training to retooling, companies including manufacturing, logistics, service industries, and really anywhere there is repetition of tasks should be ready for the transformation. Progressive firms will transition, while those slower to respond will be disrupted. This could mean countless jobs lost in communities that need them most.

Some are fighting against the robot invasion, hoping to slow the inevitable progression of the use of technology to improve the economics of business. In doing so, they are putting their communities at risk of the negative impacts that will be experienced from lack of investment to a lack of interest by talent and companies looking to be hosted in a more advanced community. Local leaders must also consider the governance systems impact in their communities. How fast can an autonomous delivery robot travel while on our sidewalks? Does our community’s broadband infrastructure support connectivity? What if someone purposely damages a robot delivery vehicle – do our criminal codes cover this? There is work to be done in figuring out how to manage the future impacts.

You can fight the robot invasion or you can embrace it and plan accordingly. What you can not do is say that you didn’t see it coming. The future of work is being implemented now and I welcome it for these three reasons:

  • Robots and AI will continue to make life better and safer.A primary benefit from the adoption of robotic technology will be the reduction of repetitive tasks, many of which are dangerous and will allow workers to add value rather than burn time. In industries where indoor air quality issues or other environmental impacts are felt by employees, robot technology can take on tasks. For example the auto industry uses robotic arm paint sprayers to coat vehicle versus a small furniture manufacturer employee using a hand sprayer to coat a finishing on a new table.
  • Robots are the bridge to economies of scale. Communities are struggling to find cost effective ways to evolve legacy transit systems to the new realities of where the jobs are verses where people live. Optimized autonomous vehicle networks will be able to lower the cost of the home-work commute and reduce overhead to balance out the cost issues associated with lower density and fewer trips. In addition, autonomous and drone robotic delivery of purchases, including fresh food, medicine and more, can expand the access for both rural and disconnected urban communities.
  • Labor force shortages will drive more investment and quicken the pace of technology adoption. This is where some communities will see great benefits as their companies invest, increase productivity and reap the benefits of their new labor force. We need to plan and training for a transitional labor force rather than waiting for the disruption. Living in Pittsburgh, I hope we all have learned from the previous technology revolutions and be more proactive and progressive in how we approach the advance of this one.

We are at a time where we have a vast amount of information and resources to see what the near term future holds and dream about what is beyond that horizon. We should use the clarity we now have to embrace the transition of our economy, communities and our jobs. I am hopeful that we can use this time to make sure the negative impacts are minimized and we define new opportunities for all to benefit.

Thoughts? Drop us a line… engage@fourtheconomy.com.

What’s so Smart about Smart Cities?

“Smart Cities: Transforming Cities for a New Era” was the theme of the 10th Annual Sustainability Conference, hosted by the Pittsburgh Section of the American Society of Civil Engineers, the Pittsburgh Chapter of the Environmental and Water Resources Institute, Carnegie Mellon University’s Metro 21 Smart Cities Institute, and Sustainable Pittsburgh.

The day-long summit, which took place at the August Wilson Center in Downtown Pittsburgh, explored our unique, local approach to planning for our future as a smarter, more livable and connected city. Speakers highlighted a variety of topics but ultimately circled around a central question –  How do we leverage data and technology to improve quality of life for the people who live in our region?

Major themes discussed throughout the day included:

  • Transportation – How can we build complete, networked transit systems that include first and last mile solutions?
  • Energy – How can we manage resources by implementing efficiency technologies, alternatives, and behavior change to reduce emissions on a large scale?
  • Infrastructure – From wifi networks to utilities, how do we ensure the needs of residents are addressed in effective, reliable ways?
  • Land Use – How do we design and develop the built environment with a mix of residential, industrial, and public space that people actually like to use?
  • Climate Change – How do we address serious climate stressors like increased rainfall and stormwater management before they become potentially deadly shocks like flooding and landslides?
  • Workforce – How can we ensure we are adequately and equitably training workers for a future economy that includes automation and rising advanced industries?
  • Data, Surveillance and Privacy – How do we balance the inherent tension between data collection for the purposes of increased security and connectivity with our right to privacy?

Technology, no matter how advanced, must be used as a tool and instrument of building an equitable, high-functioning lived environment that responds to the needs of the population who call it home.

Throughout the day ran a central idea – that though technology is better than it’s ever been, and indeed is a growing staple of our regional economy, the future of Smart Cities cannot be about tech for tech’s sake. As seductive as the allure is of a completely integrated web of devices answering our every whim, the essential question planners must ask before anything else is “what kind of spaces do we want to live, work, and play in?” Once that vision is established, technologies and innovations can be sourced to enable that vision. Technology, no matter how advanced, must be used as a tool and instrument of building an equitable, high-functioning lived environment that responds to the needs of the population who call it home.

We must guarantee that our future Smart City development is incremental, deliberate, and, most of all, people-centric.

We are lucky to have bright thinkers in our region like those who spoke throughout the day to help ensure that Smart City technology integration is driven by the will and desire of people in our communities. We will certainly apply this critical thinking in our work in communities like Lewiston, Maine, where over the next nine months we will examine opportunities for enhancing and investing in new smart city assets – things like smart streetlights, traffic signals, parking kiosks, wifi-hotspots, Electric Vehicle (EV) charging stations, distributed energy generation units, shared multi-modal units (bike or scooter shares), and fiber assets – to increase public health, digital equity and public safety.

In short, “Smart Cities” has the potential to improve our lives by connecting, monitoring, and optimizing city services like transit, utilities, and public safety resources. However, in order to make sure that it actually achieves the impact we want, we must guarantee that our future Smart City development is incremental, deliberate, and, most of all, people-centric.

How We Got 350 Farmers to Help Us Shape the Future of WV’s Agriculture Economy

Okay, not all 350 of them were actually farmers, but they were all related to the agriculture economy in some way: managers of farmers markets and farm-to-school programs, backyard gardeners with big dreams, and folks who run processing and distribution businesses.

The WV Department of Agriculture and WVU Extension knew that for their strategic plan to be successful they needed to engage stakeholders across the state’s 14 conservation districts in defining the agriculture economy’s challenges and developing solutions. They also recognized that the timeline and budget constraints that would make that level of engagement a challenge presented an opportunity: agency staff were craving the chance to enhance their facilitation skills.

Over the years, Fourth Economy has refined our approach to “Build Sessions”. Borrowing from the human-centered design method, stakeholders brainstorm, prioritize, and build strategies to address the challenges identified through the process. In order to deploy Build Sessions across 14 community meetings in 2 weeks, Fourth Economy developed a facilitation training for 25 staff of various ag-serving agencies and institutions.

Held in September, the half-day training covered general facilitation best practices such as neutrality, consensus, active listening, summarizing, staying on task, and transforming conflict, as well as exercises to practice facilitating a Build Session. The trainings were a big success. After the training, one participant was so excited to try out her new skills that she actually moved her vacation to be able to facilitate one of the community meetings!

Across the state, meetings were held in churches, fire halls, and fairground buildings. Agency staff were amazed at the number and diversity of folks who showed up to participate in the process. The Build Sessions generated lots of conversation and great ideas, and ultimately fed directly into the creation of the strategy. Last month we met with the WV Agricultural Advisory Board to present the strategy and they commented that the sessions sparked a whole new level of collaboration among stakeholders across the state. To us, that is a testament to the power of a truly participatory process.

If you are looking to do something similar, here are our top three tips:

Help participants be prepared to generate good ideas.

Overall there were 10 topic areas that we were looking for stakeholders to help us develop strategies around, but we could only facilitate Build Sessions around 3 topics at each meeting. Therefore we had participants vote on what they wanted to discuss as part of their RSVP. Even if their topic wasn’t selected, they were coming to the meeting with a clearer idea of the specific topics at hand. For each topic area our team prepared a white paper detailing what we already knew about the issue. Each Build Session started by reviewing the white paper so that all participants were on the same page. Finally, we designed the facilitation materials to help prompt participants to think of different types of interventions.

It doesn’t matter how good you are a facilitating if you don’t capture people’s ideas.

Ensuring that you have adequate capacity to serve as a scribe and/or a process for participants to capture their ideas on paper is key. Especially if your facilitators are relatively inexperienced, you can’t expect them to also be taking notes. What’s more, you need an efficient process of compiling all of the notes from a session so that they can be easily translated into a strategy document.

Don’t forget to share.

After the meetings, meeting notes were shared on a public website that we designed specifically for the planning process. Throughout the process we used the website to advertise opportunities to engage and share what we had learned. We also had great support from the communication and marketing departments of all of the agencies involved. This was critical to the transparency of the process, as well as to stimulating ongoing conversation and collaboration.  

Capital Limits: The State of Small Business Finance

It is very difficult to track capital for small businesses in any rigorous fashion. The Census Bureau and the Kauffman Foundation partnered to conduct the Annual Survey of Entrepreneurs (ASE), with the first survey covering 2014. Additional surveys covered 2015 and 2016. These surveys provide a nationwide baseline for investment data for small businesses and entrepreneurs, but the data is only available by state and for the fifty largest metropolitan areas.

The most common sources of business financing for young firms are the personal assets of the owner and the owner’s family. The reliances on these sources limits entrepreneurship to the wealthy. Since we do not know which opportunities will create value, it is important to increase the pool of risk capital beyond the small amount that the market provides, which can create opportunities for those without family resources.

Sources of Capital for Startups (less than 2 years old)

Source: Annual Survey of Entrepreneurs, 2014

A small percentage of firms are able to tap resources beyond their personal assets. For startups less than two years only, only 12 percent (120 out of 1,000) are able to access traditional bank financing and seven percent establish a credit account for their business. Five out of 100 firms are able to get a loan or investment from family or friends. State and local governments operate a number of business loan programs, but these are often out of reach for startup businesses where their only collateral is intellectual property. As a result, for firms less than two years old, 17 out of 1,000 access a government guaranteed business loan and only four out of 1,000 businesses are able to access a direct government loan. This leaves a lot of businesses out of the capital markets.

The Small Business Administration (SBA) publishes information on the lending activity they support through their programs. The SBA 7(a) Program provides loans for small businesses of up to $5 million to fund startup costs, buy equipment and more. Here’s what else you can do with 7(a) funds:

  • Purchase new land (including construction costs)
  • Repair existing capital
  • Purchase or expand an existing business
  • Refine existing debt
  • Purchase machinery, furniture, fixtures, supplies or materials

The Geography of Small Business Finance in Pennsylvania

Using the SBA data, we can dive deeper into what businesses are accessing these loans, where they are located, and what banks are involved. As an example, Fourth Economy created an interactive workbook that presents the SBA 7a loans in the state of Pennsylvania from 2010 through April of 2018. You can explore the maps and data by county.