Red Hat: L
Wins and losses. That’s what economic development looks like when cities and states get sucked into playing what I call the headquarters relocation game. We won General Electric, with a package of about $145 million in local and state tax breaks and grants. We lost the insurer Aetna, which chose New York, and also the software company Red Hat, which decided to stay in Raleigh, N.C. Amazon is the latest HQ that’s up for grabs, with as many as 50,000 new jobs.
The HQ relocation game is expensive. It’s like assembling a Formula One team. And most of the research on it says that it doesn’t pay off in the long-term. To stick with the sports metaphor, I wish our city and state governments were playing more games of pick-up basketball on neighborhood courts — running lots more inexpensive and experimental programs to help businesses start and grow all around the state.
Unfortunately, politicians get more high-fives and headlines when they lure an HQ to town, versus helping a family business expand its manufacturing plant.
If you asked most Massachusetts residents about the wins that matter most to their work lives, as employees or business owners, the list would include:
■ Public transit that gets people to work on time
■ Great public schools, vocational training programs, community colleges, and public universities
■ Main streets without empty storefronts
■ Modern, affordable housing
■ More hiring and companies setting up shop outside of Route 128
■ And the perennial: less red tape and government-related form-filling
What can be frustrating about the HQ relocation game is that it doesn’t address any of those issues — at least when a company opts to set up shop in Boston or Cambridge, as GE and Alexion — a Connecticut biotech company — did.
Teresa Lynch of the Cambridge research and consulting firm Mass Economics, lobs an interesting question about chasing corporate HQs: “Instead of assuming that Amazon’s HQ would be a good thing, I’d ask: what problem does Boston’s regional economy have that Amazon’s HQ would solve?”
In other words, do you believe that winning the contest for Amazon’s new HQ will get politicians focused on grappling with those six issues above? Or will it distract from them? Is it like attracting the Olympics, where it would be followed by a multiyear marathon of construction and infrastructure upgrades?
Massachusetts spends about $1 billion of taxpayer money every year on an array of special tax breaks and incentives for businesses, says Noah Berger, president of the Massachusetts Budget and Policy Center, a nonpartisan policy research organization.
Most of those deals, he says, “have been in place for a long time, and there’s no evidence that they work. Is this the best way we could spend $1 billion, or is it better spent on education infrastructure, improving communities outside the Boston area, or transportation?” On that last topic, Berger adds, “There’s no reason we shouldn’t have a world-class public transportation system and well-maintained roads.”
While we in Boston like to boast about all of the “top 10” rankings we have for education and entrepreneurship, we’re also in the top 10 least affordable cities for housing, according to the real estate site Redfin. The site has found that the number of affordable homes on the market in Boston — defined as being within reach to a family earning $75,000 a year — fell by more than half between 2014 and 2016.
“Our No. 1 resource in Massachusetts is our talent — our brainpower,” says Jesse Mermell, president of the business group Alliance for Business Leadership. “And we are losing the brains because people can’t afford to live here.”
I’d like to see city and state economic development officials lay out a big vision around retaining more of that talent; helping existing Massachusetts businesses grow; and elevating the quality of life for people who already work here.
The vision would be supported by a fusillade of experiments. What would happen if businesses and community college administrators got together more regularly to discuss hiring needs and whether new courses should be developed to match them? Are there incentives that might persuade startups in Boston working on physical products (rather than software) to occupy empty mill space in Holyoke or Lawrence? Can we test ferry service up and down the Charles River? Could a city government bring together tech consultancies and “brick and mortar” businesses to forge partnerships or conduct learning events that might help the latter avoid disruption by the likes of Amazon?
One example of a constructive experiment already underway is the Fields Corner Collab in Dorchester; it is offering six months of free rent, plus business coaching, to a female entrepreneur or entrepreneur of color who wants to launch a business in a vacant storefront. What neighborhood doesn’t have an empty storefront that could be used to help incubate an independent business that would eventually “ladder up” to paying market-rate rent?
When I asked Jay Ash, the state’s secretary of housing and economic development, where he’s putting his time and what he would want more time and resources to focus on, he had two answers. One was workforce training and development. Another was spurring the creation of more “development-ready sites around the state,” where smaller parcels of land get combined into a larger parcel and most of the permitting is in place for a business to start building.
But Ash did acknowledge that “it’s easy to get caught up in the shiny company of the day” that is looking to relocate.
The big economic development story of late 2017 or early 2018 will be which city Amazon chooses for its new North American headquarters. (And perhaps a second story will be about whether GE, now executing cutbacks under its new chief executive, will live up to the job creation commitments it made to the city and state.) But if we’re focused on playing the right game — neighborhood hoops instead of Formula One — we can win over the long run, even if we lose out on Amazon.Scott Kirsner can be reached at email@example.com. Follow him on Twitter @ScottKirsner.