Gray sets out solid vision for economic development
Yesterday, Mayor Gray released an economic development strategy for DC, to create 100,000 jobs over the next 5 years and beyond. The mayor deserves kudos for a strong and thoughtful report.
The administration partnered with DC's strong academic sector on the plan. Instead of paying millions of dollars to consultants, they reached out to the business schools of Georgetown, George Washington, American, and Howard Universities.
That paid off with report that doesn't simply rehash the same old ideas that one might have found equally in a 1965 plan for suburban Atlanta. For example, it says that in interviews with area businesses, it's clear that the future of the District is in walkable, transit-oriented commercial and office areas.
On retail, for example, the report says that "Most interviewees stated that the District has great potential to become a model for the future: a vibrant and walkable city. The majority said traffic congestion will become less relevant to the retail sector in the future." (page 78)
This is a refreshing change from the tired trope from the economic development transition team, which we still hear today from some business groups, who say that one of the most important steps they want DC to take is to time all of the traffic lights to make streets high-speed for cars into the District in the morning and out at night.
Plan is sector-specific
Some jurisdictions try to build jobs by indiscriminately throwing money at any company in any sector that is willing to come into town for a tax break. It's far more effective to develop clusters of related companies. That makes the city a generally attractive place for someone in that field, and the strong supply of labor in the field then attracts employers in a mutually-reinforcing cycle.
This plan seriously analyses key clusters that DC can reasonably hope to developed: technology, hospitality and retail, professional services and government contracting, real estate and construction, higher education, and health care. It lays out strategies for each that consider the particular needs of that sector. We commended Gray's emphasis on sector-specific economic development in an article earlier this year.
For example, this plan envisions a world-class medical center at the McMillan Sand Filtration Site, which is right next to a cluster of hospitals. The job growth in health care and higher education has exceeded all other sectors in DC in the past decade.
Here are some of the many recommendations which jumped out:
Build a tech hub at Saint Elizabeths. The plan calls for creating a technology center at the Saint Elizabet's campus. It also recommends finding ways to offer tech startups lower-cost office space and connecting tech entrepreneurs with established leaders in their sector. These are all recommendations from the letter from tech executives, which we organized with InTheCapital.
Strategically relax height restrictions. While Mayor Gray emphasized at today's press conference that he's not counting on any changes to federal law, the plan contemplates raising height limits near the Anacostia River. This is similar to Paris's approach to their height limit, and is a good compromise between the economic value of more growth and federal aesthetic concerns.
Change zoning to allow retail in more areas. Commercial space in most parts of the District is very limited. This makes retail space more expensive and contributes to "retail leakage" to the suburbs, which is where many residents leave the District to spend their shopping dollars.
The plan calls for expanding the supply of low-cost retail space while respecting residential impacts and allowing residents to walk for as many of their shopping needs as possible. In particular, it suggests making retail more continuous along commercial corridors. When there are gaps of residential zoning, especially at prominent corners, it stops many shoppers from continuing along the street.
Promote hospitality and tourism. The proposal for the hospitality sector is particularly thoughtful and detailed. The plan envisions "delivering the highest standards in hospitality and service," creating a Hospitality Program at DC Community College, setting up a culinary incubator, and expanding tourism. These will all grow service sector jobs, and good service sector jobs are one of the best paths to the middle class in today's economy.
On the other hand, a few elements of the plan miss the mark or could go farther.
No new workforce development initiatives. Who will fill these 100,000 new jobs? Only 27% of DC jobs go to by DC residents, so adding more jobs won't address the unemployment rate east of the Anacostia river, which is one of the plan's stated goals. There isn't much in the way of new workforce programs beyond the administration's existing initiatives, One City One Hire and the Workforce Intermediary.
The only new initiative in the plan is to post new university and health care jobs on the DOES web site. What the District needs to do is use data-driven methods to steer the $100 million that DC spends on job training where it will do the most good, at training providers that produce validated results.
Tech tax incentives still lack focus. The report continues to promote Gray's plan for broad tax breaks for tech investment. An incentive for new angel investors in technology is a good idea, but any tax break needs to specifically target the District's goals of building a strong base of tech firms that actually create new technology and workers with software development and other skills.
DMPED could work with all stakeholders to properly design this tax break, but instead is choosing to shut out discussions of how to best tailor it. On LivingSocial's $32 million tax break, DMPED and LivingSocial mutually agreed not to negotiate on any terms ahead of time, the Washington City Paper learned.
The mayor wants to pass a tax break for tech investors, which the Council removed from a recent bill. DMPED refused to negotiate with opponents on that bill as well. That left the tax break's primary Council advocate, David Catania, bewildered that there was no discussion of a smaller reduction, which he would have gladly agreed to.
If DMPED can seriously think about what it needs to achieve and tailor the break to those goals with a spirit of collaboration, instead of letting tech executives and investors design their own tax cuts, it should be able to devise something that can win broad support.
Hospitality job growth significantly underestimated. Hospitality jobs are the 2nd fastest growing job segment in the District, having grown at a 28% clip and added 14,200 new jobs in the past 10 years. But they are only a small fragment of the 100,000 new jobs projected in the plan, which forecasts only an 8% growth in hospitality jobs from 2008 to 2018.
That disconnect resulted from the misuse of DOES labor market data by the report's authors, according to DOES Chief Economist Dr James Moore. The labor market data and projections used by the report's authors are not meant for economic development analysis, as they fail to factor many drivers of job growth and thus understate job growth.
This plan includes some of the best initiatives for improving hospitality jobs and workforce readiness in the nation, but it must be grounded in accurate data on job growth in the sector and its sub-sectors.
There's much more in the 116-page document. It shows that, as with the sustainability strategy, one legacy of the Gray administration will be a set of excellent plans that can guide the District through the rest of his mayoralty and beyond.
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