Feature Story: Public-Private Partnerships – An Alliance For Progress That Works
By Jenny Vickers
From the July/August 2014 issue
A new model of economic development involving public-private partnerships is helping drive economic revitalization, create jobs and transform aging central cities into vibrant, livable hubs of activity that attract new business, private investment and people.
Across the country, successful public-private partnerships (also known as PPPs or P3s) are emerging as an alternative path to economic success for traditional state-run economic development agencies and/or departments of commerce.
While PPPs vary from state to state, they typically involve public and private partners working in collaboration to leverage the funding, talents, technologies, expertise and convening power necessary to attract new business investment to the region. For local governments under fiscal restraint, they have become powerful tools to help facilitate a range of economic development projects that would not otherwise have happened without private sector investment.
However, they are not without significant challenges. Some see privatized economic development models as a public-private power grab—that they emphasize the private side to the extent that transparency and credible metrics for job creation get lost in the equation.
But when coupled with the right sets of policies and institutional environments, PPPs can be powerful catalysts for economic growth. The best public-private partnerships bring together a high-powered team of business leaders and economic development specialists who leverage the assets of a region to establish a coherent strategy for development and brand the location as a prime site for new business.
Here are some of the states that are setting the standard for best practices in this emerging economic development model.
FLORIDA: GOLD STANDARD FOR PPP
The Greater Fort Lauderdale Alliance has forged a powerhouse collection of area CEOs into a driving force for growth. Its successes have led it to be the first location to receive Business Facilities’ Economic Development Achievement Award for Public-Private Partnerships.
The CEO Council of the Greater Fort Lauderdale Alliance was formed in 2008 as a totally private sector funded association of CEOs and senior business leaders to market and promote the Greater Fort Lauderdale area as a premier location for corporate and international regional headquarters. CEO Council members each invest $50,000 or more annually to fund a headquarters marketing and recruitment initiative, now in its 6th year of operation.
This economic development model has been fruitful for the region. The CEO Council has coordinated such corporate headquarter relocations and expansions as Altadis USA, Anthem Education, Camposol USA, Emerson Latin America, Nyrstar, Parallon, Private Jet Charter, SmartWater CSI, Stemtech International and Wendy’s Latin America/Caribbean.
“I believe that Public Private Partnerships provide the requisite ‘real world’ private sector business guidance and influence that can be lacking with a totally public sector initiative, along with providing for private sector investment and leveraging of required resources in the economic development process,” said the CEO Council’s Managing Director Robin Ronne.
Its most recent high-profile initiative is the December 2013 announcement by cyber-security firm Prolexic Technologies that it will move its global headquarters and round-the-clock security operations to Fort Lauderdale. Prolexic plans to add 118 jobs at an average salary of about $100,000 per year and retain 120 jobs as part of the expansion.
The project was made possible thanks to partnerships between the CEO Council and Enterprise Florida, Inc., City of Fort Lauderdale, Workforce Florida, Workforce One Broward County, Florida Power & Light’s Office of Economic Development, Department of Economic Opportunity and Florida Power and Light Energy Services (FPL).
“It was crucial that we secured a larger, more efficient office facility to accommodate our rapid expansion and attract the highest quality employees,” said Scott Hammack, Chief Executive Officer of Prolexic Technologies, in a media release. “We’re pleased to stay in Florida and bring new jobs to Fort Lauderdale. We appreciate the efforts of Governor Rick Scott and the many other groups that made it possible.”
Another significant announcement happened in February 2013, when Emerson Latin America, a diversified global manufacturing and technology company, announced it will expand operations at its headquarters in Sunrise, Florida to support its business units serving Latin America.
In 2011, Emerson leased 18,000 square feet of space at the Sawgrass International Corporate Park with the option for an additional 9,500 square feet. The expansion made room for 20 new employees, which brought its total employment in Sunrise to more than 70.
The CEO Council also is involved with monitoring the area’s national external rankings/perceptions compared to its primary competitors to ensure continued favorability as a business location. It has been responsible for raising the external Very Positive/Positive perception ratings of Greater Fort Lauderdale by national/international site selection consultants from 48 to 84 percent, increasing those who would recommend Greater Fort Lauderdale for a corporate headquarters relocation project from 30 to 51 percent while also lowering those with negative perceptions from 17 percent to 3 percent.
The results were based on a 2011 survey of brokers/site location consultants developed by Boyette Strategic Advisors, an economic development consulting firm, which assisted the CEO council in developing a three-year Headquarters Recruitment Strategic Blueprint, as well as prepare it to compete for and win both domestic and international corporate, regional and division headquarters projects.
“Based on the results of the survey, Greater Fort Lauderdale has moved the needle significantly as a headquarters location and the recent corporate headquarters announcements substantiate even more the opinions of the survey respondents,” said Del Boyette of Boyette Strategic Advisors in a media release.
The CEO Council’s achievements were recently honored by CoreNet Global, the world’s leading association of corporate real estate (CRE) executives and workplace professionals, service providers and economic developers with over 8,000 members that include 70 percent of the Fortune 100 and Forbes Global 2000.
In May 2014, CoreNet selected the Greater Fort Lauderdale Alliance’s “CEO Council Successful HQ Marketing Plan” as a finalist for the H. Bruce Russell Global Innovator’s Award, the organizations ultimate and most prestigious, recognizing innovation at the highest level. The overall winner will be announced in October 2015.
This successful marketing plan included a 2012 national TV ad blitz which promoted the region’s strong business value proposition. The campaign, built on the tagline of “Life. Less Taxing,” aired for six months in the NY/NJ/CT, Boston and Chicago markets. Key to the new marketing initiative was a CEO Council-sponsored hosting event for leading corporate and real estate executives, site selection consultants and media outlets, which included a reception at Nova Southeastern University’s new $50-million Oceanographic Center.
ENTERPRISE FLORIDA: TWO DECADES OF PPP SUCCESS
Enterprise Florida Inc. (EFI), the state’s primary economic development agency, is another excellent example of a public-private partnership between business and government that was created back in the mid 1990s.
In addition to the CEO Council and EFI, the FL Sports Foundation, which was the state’s first PPP, and two other PPPs—Visit Florida and CareerSource Florida, have been equally successful in meeting the needs of their customers and in positively impacting the state’s economy.
“I believe that the trend in Florida is to create more PPPs, which have proven to be very effective,” said Ronne.
EFI has operated under Florida statute since 1996 when it became the first state in the country to adopt such a model and has been implemented by many states since then. EFI works closely with a statewide network of economic development partners and is funded both by the State of Florida and by private-sector businesses.
Since 2010, the state has seen a dramatic increase in competitive jobs projects won, private-sector jobs created and capital investment. In fiscal year 2013-2014, the state: won 164 projects, a 28 percent increase over 124 projects in 2010; saw $2.77 billion in capital investment, a 101 percent increase over $900 million in capital investment in 2010; and created 864 new jobs, a 70 percent increase over 11,398 new jobs contracted in 2010.
EFI has assisted in several game-changing wins for Florida such as Northrop Grumman, Verizon, Actavis, Inc., Navy Federal Credit Union, Bristol-Myers Squibb and Deutsche Bank. Its most recent high profile announcement happened in May 2013, when Fortune 300 company Hertz announced it will move its worldwide headquarters from Park Ridge, New Jersey to Estero, Florida, creating 700 new jobs and $68.75 million in capital investment.
“This is an incredibly important accomplishment for Southwest Florida as well as the entire state,” said Secretary of Commerce and president and CEO of Enterprise Florida, Inc. Gray Swoope, in a media release. “When a Fortune 300 company chooses to move its headquarters to a state and create so many high-wage jobs, it shows confidence in the state’s ability to compete.”
MEDC: LEADING INNOVATOR IN ECONOMIC DEVELOPMENT
The Michigan Economic Development Corporation (MEDC) is helping to transform the Michigan economy by growing and attracting business, keeping talented residents in the state and revitalizing urban centers.
The MEDC was created as a public body corporate in 1999 through an Interlocal Agreement between the Michigan Strategic Fund and public agencies across Michigan. It is steered by a 20-member Executive Committee with diverse backgrounds and various leadership positions in the private sector, local government, higher education and economic development.
“Since its inception, MEDC has been an innovator in economic development and a model for other states to follow,” said MEDC President and CEO Michael Finney. “For example, the federal State Small Business Credit Initiative was based on an MEDC program.”
Finney said other examples include the Community Ventures program, a groundbreaking public-private partnership between the state, employers and non-profit organizations, providing real employment opportunities for structurally unemployed individuals, and Public Spaces Community Places, a first-of-its-kind effort in the country where communities, nonprofits and businesses can apply for a crowdfunding campaign to raise funding for a public project and receive a matching grant from the state.
MEDC touts recent projects such as Whirlpool, Two Men and a Truck, Stik.com and the creation of an urban innovation district in downtown Detroit as examples of its growing success.
In January 2013, the Michigan Strategic Fund approved state incentives to support 14 business expansions that are expected to generate more than $1.1 billion in investments and add 4,590 jobs in Michigan.
One of those fourteen expansions includes the world’s largest home appliance company located in Michiana. Whirlpool plans to relocate refrigeration research and development operations from Evansville, IN to a former Whirlpool manufacturing facility in the city of Benton Harbor.
Whirlpool plans to invest $18.9 million and create 180 jobs, resulting in a $2.4 million Michigan Business Development Program performance-based grant. Michigan was chosen over competing sites in Iowa and Mexico. The city of Benton Harbor is offering 12-year tax abatements valued at $1.85 million.
In February 2013, homegrown company Two Men and a Truck announced it will be expanding its international headquarters where it all began, in Lansing, MI. The expansion will create 125 jobs locally, which will lead to the creation of 7,000 jobs nationally.
The expansion announcement builds upon the momentum the company has recently enjoyed, growing more than 50 percent over the past three years in addition to the international growth the company has had since it started in 1981.
“With every passing day, the business climate in Michigan grows stronger and stronger, and I’m happy our company is part of that progress through the addition of more jobs to the Lansing area,” said Brig Sorber, CEO of Two Men and a Truck in a media statement.
For the founders of Stik.com, a service that helps companies collect and showcase customer reviews, true success didn’t coincide with their arrival in Silicon Valley. More accurately, it came with their departure from Silicon Valley and a return to Detroit.
In March 2013, Stik.com was one of six growing technology companies to receive funding through the Pure Michigan Venture Match Fund.
The program uses a market-driven approach to co-invest alongside qualified venture capital firms in early stage technology companies that are based in Michigan. The program can also match investments from both in-state and out-of-state venture funds.
From the total of $5 million that was initially available for this round of funding, the MSF has approved $2,762,500 in matching investment dollars into six companies: Amplifinity, Gema Diagnostics, Livio Radio, nanoRETE, Stik and Tissue Regeneration Systems. The MSF matching funds leverage $7,275,000 in private investment dollars.
“One of these companies, Stik, just announced it has closed a $2.3 million Series A financing round, and we’re excited to be a part of this round of investment with Stik,” said Finney. “This is a perfect example of why we are willing to co-invest through our Pure Michigan Venture Match Fund alongside venture capital funds in our promising companies.”
MEDC also is leading the charge in helping to develop an urban “innovation district” in downtown Detroit. Innovation districts consist of office space, residential buildings and mixed-use retail that converge with start-ups, business incubators, mass transit and university-based research to become the new centers of urban economies.
According to a report by Washington, DC-based think tank Brookings Institution, Detroit is among the cities leading the way.
“This tells us we’re on the right course and presents a defining moment in the economic reinvention of Detroit,” said Finney. “Investors and those doing business—or thinking about investing or locating—in Detroit should be encouraged about the possibilities of a city and state on the rise.”
Since 2011, the state of Michigan, through economic development programs administered by the MEDC, has allocated $86 million in strategic investments in a blend of new projects in downtown Detroit. In turn, these projects have generated $507 million in private investment and are projected to bring 2,434 jobs to the new model urban innovation district.
Tying it all together, a new M-1 Rail line, an 11-stop electric-battery transit line, will carry residents and visitors from shopping districts to the entertainment and sports hub to the central business district and riverfront. The streetcar system is considered the long-sought economic catalyst for the Woodward corridor with a multiplier effect from the mass transit generating as much as $2 billion, according to M-1 RAIL.
With a $10-million loan approved by the MSF in March, the M-1 Rail is on track to connect Downtown Detroit to Midtown, and possibly the initial piece of a regional transit strategy to link the city of Detroit with the suburbs.
“We are very excited about all the positive things that have been happening in the city for quite some time now,” Finney said. “These commitments are just a further indication of the level of support that we have for the city of Detroit and its resurgence.”
The M-1 Rail line is expected to open mid-2016.
WEDC: OPERATING AT THE SPEED OF TODAY’S BUSINESS
The Wisconsin Economic Development Corporation (WEDC) was created in July 2011 as a quasi-public organization to more quickly meet the needs of the Wisconsin business community. Prior to that, business attraction and retention efforts were administered by the Wisconsin Department of Commerce—a traditional state agency that also had numerous regulatory responsibilities and other duties.
WEDC focuses primarily on helping businesses start up, expand or relocate in Wisconsin. The agency is overseen by a bipartisan Board of Directors that includes the governor, legislators from both parties and business leaders. In fiscal year 2013, WEDC provided more than $330 million in awards and its efforts—along with its partners—are expected to result in the retention or creation of more than 37,000 jobs.
“Unlike a state agency, WEDC has the flexibility to make quick strategic decisions and to spearhead initiatives that would not have been possible with the former Department of Commerce,” said Reed Hall, secretary and CEO of WEDC.
For example, WEDC was instrumental in the creation of the Global Water Center in Milwaukee, which opened its doors in September 2013. WEDC worked with The Water Council and other entities to develop the seven-story, 98,000-square-foot building that houses water-related research facilities for universities, existing water-related companies and accelerator space for new, emerging water-related companies.
“The facility is a venue for attracting and creating new businesses in the water industry, and is attracting worldwide attention as it positions Wisconsin as the global leader in water technology,” said Hall.
Last year, WEDC and The Water Council created the “BREW”—a first-of-its-kind accelerator for water technology startups. Funding is provided in part by WEDC in $50,000 investments for up to six startups with commercialization potential, and matched by industry representatives and The Water Council. Round I startups included H2Oscore, Microbe Detectives, New Works, Noah Technologies and Vegetal Innovation & Development and Round II participants will be announced this summer.
“This accelerator program provides a great opportunity for emerging water-technology companies to take the next step in their development by utilizing the many services offered by The Water Council and by working side by side with others in the industry, as well as university experts,” said Hall.
WEDC also is a key partner in the Energy Innovation Center, a facility that will accelerate the development of innovative technology in the energy, power and control industry. Much like the Global Water Center, the $9.6 million facility will bring together industry and academic scientists, engineers and business leaders to conduct joint research, jump-start innovative technologies, transition prototype products to the commercial stage and nurture startup companies in the energy industry.
Both the Energy Innovation Center and Global Water Center are initiatives spearheaded by WEDC’s Business and Industry Development Division, which works with industry leaders, organizations and companies to ensure long-term success for Wisconsin’s key driver industries.
“For the first time, an entire division is devoted to cluster and sector development, which enables Wisconsin to focus on our competitive advantages over other states,” said Hall. “WEDC also has been able to redeploy its resources from underutilized programs to programs with higher demand—even creating new programs to meet needs expressed by economic developers and private businesses.”
Since its inception, WEDC has developed several innovative programs to provide incentives to companies considering starting up, expanding or relocating in Wisconsin.
One such program is the $2 million Ideadvance Seed Fund launched in February 2014 by WEDC and University of Wisconsin (UW). Ideadvance provides up to $75,000 in two stages to support entrepreneurs as they evaluate product or service ideas, explore key markets, validate demand and develop strategies for investment sources. Unlike most early stage funding, the Ideadvance Seed Fund encourages ideas from all disciplines, including the humanities, social sciences and liberal arts.
In May, 12 UW faculty, staff, students and affiliated companies were selected to receive up to $25,000 each through the fund. The awardees include four students, three faculty, two staff and three companies licensing technologies from the WiSys Technology Foundation or the UW-Milwaukee Research Foundation. Teams that complete this first stage of Ideadvance activities will be eligible for stage two funding, which offers grants up to $50,000.
The WEDC also has partnered with the Wisconsin Technology Innovation Initiative (Wi2) to establish a $1 million seed fund to support commercialization of medical technology developed by the UW School of Medicine and Public Health.
To help revitalize large industrial properties around the state that have been vacant for years, WEDC in 2013 created the Idle Industrial Sites program, which provides communities with grants of up to $1 million to revitalize and develop industrial sites that have been abandoned or require extensive improvements.
“Redeveloped idle industrial sites can again become generators for economic development and an improved quality of life for the cities and communities where they are located,” said Hall. “This new program is structured to further the marketability of sites that have been neglected, with preference given to sites that are located in high-density urban areas or in central business districts.”
BNE: $8-BILLION WORTH OF INVESTMENTS AND COUNTING
In the Buffalo Niagara region, business and community development are fueled by wind, water and more than $8.1 billion in public and private investment over the last five years.
A driving catalyst behind this growth has been the Buffalo Niagara Enterprise (BNE), a nonprofit private business development and regional marketing organization. BNE has grown from a startup initiative in 1999 to an innovative regional economic development powerhouse that has secured more than 300 successful project wins, representing $3.43 billion in investment in the Greater Buffalo-Niagara region, and amounting to more than 40,000 jobs created and/or retained.
BNE is made up of a team of local investors, a board of directors, economic development partners and professional staff that work to draw new business to the region and brand it as a prime venue for development. Lately, BNE has been focusing on talent attraction and telling Buffalo Niagara’s great quality of life story through its talent attraction website www.wherelifeworks.com. Its latest video “Are you right for Buffalo?” has received more than 30,000 views. BNE is located in downtown Buffalo, New York, the largest city, and the heart of the eight counties in Western New York that comprise the Buffalo Niagara region.
One of BNE’s most recent success stories is Sentient Science, an Idaho-based software and sensor company that opened an advanced manufacturing, material genome and cutting-edge computational testing laboratory in Buffalo last year. Founded in 2000, the company invented a testing technology that replaces the physical testing of materials and components used in the manufacture of helicopters, bridges, medical devices, wind turbines and other products.
After years of research, Sentient was ready to commercialize its technology and relocate to a new community offering a large qualified workforce, specifically PhD and Masters Graduates in engineering, software development and materials science.
To secure the project, BNE worked with Sentient officials since October 2011 on everything from site selection to access to incentives. Its work on the project included coordination of Sentient Science’s partnership with the University of Buffalo (UB) and other state agencies, and helped to secure the company’s relocation to Buffalo.
“Sentient is a prototypical example of the kind of company whose emerging science will create the high-technology jobs of the future,” said BNE President & CEO Thomas Kucharski. “The company’s science offers tremendous potential for partnerships with research institutions in our community, and their decision to locate and grow here is further validation that Buffalo Niagara can, and will, be a destination for the kind of companies that will serve as the foundation of our innovation economy.”
Sentient Science’s move from Idaho to Western New York further strengthens the region’s expanding material sciences sector. Through Round I of New York State Gov. Andrew Cuomo’s Regional Economic Development Councils, Sentient was awarded $811,534 in Excelsior tax credits to support its relocation and purchase of production machinery and equipment. Sentient will invest more than $10.5 million and create 86 new, full-time positions in the region.
“We believe we can make more money faster, we can grow faster, we can hire people—and we can participate in the economy—faster by being here in Buffalo than any other city in the country,” said Ward Thomas, President and CEO of Sentient Science in a media release.
Another BNE success story is FedEx Trade Networks’ (FTN), the freight forwarding and customs brokerage arm of global shipping giant FedEx Corp., decision to stay in the Buffalo Niagara region instead of moving some of its operations out of state.
To secure the project, BNE partnered with local regional stakeholders to demonstrate to FTN that Buffalo Niagara was the most competitive place to expand its operations. After facilitating an attractive incentive package and assisting in location advice for the Riverview Solar Technology Park in Tonawanda, FTN decided to stay.
In May 2013, FTN broke ground at Riverview, a high-tech green business park which also is helping the company achieve its goal of environmental sustainability. The project is a huge win for the region, representing a total investment of $10.2 million, the creation of 82 new jobs and retention of 926 existing jobs.
BNE also is leveraging new opportunities from two initiatives: the Buffalo Billion Investment Development Plan, a billion dollar economic development plan announced by Gov. Cuomo in 2012, and Start-Up NY, a statewide program that provides tax breaks for qualified companies sited on or near college campuses.
Since the Buffalo Billion plan was announced, the region has seen vigorous development and unprecedented job growth, including over $300 million awarded to businesses, higher education and research, and special projects that enhance quality of life and increase tourism and that will produce thousands of jobs in life sciences, clean energy, digital arts and sciences, and more.
The Buffalo Billion plan has helped to create a new Advanced Manufacturing Institute, which will provide process improvement, training and education around high-skill jobs; 43North, a global business plan competition (nearing the end of round one judging with more than 2,600 applications for the $5 million prize money); and RiverBend, a $225 million advanced manufacturing hub which is helping to grow and attract 21st century businesses built around clean energy and cutting-edge technology.
In June 2014, Gov. Cuomo announced the first wave of companies accepted into the Start-Up NY program. Of the 12 companies accepted, eight of them are based in Western New York and sponsored through the University of Buffalo. The 12 new businesses are projected to invest about $50 million and create nearly 400 jobs.
The program “takes New York’s number one liability—our tax capital reputation—and turns it on its head by offering companies zero taxes for 10 years, as well as access to all the assets of the Empire State, particularly the talent and research capabilities of our world-class universities,” Cuomo said.
Accepted companies can operate tax-free for 10 years as long as they meet stated goals such as job creation. The Buffalo-based companies accepted into the program have pledged a total of 204 new jobs. They include: AESKU NY Inc., Lineagen Inc., ClearViewSocial Inc., CoachMePlus, Decision Pace, Heads Up Display Inc., Nupur Technologies LLC and Sinapis Pharma Inc.
Overall, PPPs have had significant success in Western New York, reinforcing why the model is effective and should remain in place moving forward.
“State and local governments are continuing to face great pressure to provide more and better services despite shrinking revenue sources,” Kucharski said. “The most promising and rational solution going forward is to continue sustaining and advocating for PPPs to better leverage all resources and community assets. Buffalo Niagara Enterprise’s success in upstate New York is validation for not only our region but communities all across North America.”