Back in November 2018, America experienced the excitement of Announcement Eve. Mayors, economic development leaders and residents felt the anticipation levels of kids at Christmastime: Would our city be selected for Amazon’s second headquarters?
Thousands of public officials nationwide had dedicated countless taxpayer-funded hours to the HQ2 sweepstakes. Each bid included a treasure trove of information on strategies for workforce development, transportation, housing, education and infrastructure. But the real winner that day was Amazon. It now has intimate knowledge of 238 communities’ development plans, which it acquired nearly effortlessly and for free.
The data in the HQ2 proposals was amazingly powerful. But that doesn’t mean that the effort that went into collecting it was for naught for the communities that lost out in the HQ2 competition. Building on that trove of data can inform and enrich economic development efforts going forward — efforts that should focus less on luring one big employer and more on supporting the real engine of job growth, entrepreneurship.
Many communities will never totally comprehend Amazon’s Great Data Caper. But Cleveland’s residents do: Thanks to an investigative reporter who filed a lawsuit, a court disclosed that city’s glossy 220-page document offering $3.5 billion in incentives. What Amazon pulled off was Shakespearean. Cleveland poured resources into an unachievable dream with a glorious pitch — a tale told by a consultant, full of data made pretty, signifying nothing.
Cleveland’s extravagant proposal was hardly unique, of course. Economic developers habitually chase corporate behemoths with massive incentives, even though small businesses create nearly all net new jobs. Despite frequent paeans to American innovation, the red carpet is most often rolled out (and red tape is cut) for today’s Amazon, not tomorrow’s.
The fact is, U.S. entrepreneurial activity is nearing a 40-year low, and the post-recession recovery has not been evenly distributed nationwide. Most places between the coasts never felt substantial gains. Since 2011, nearly 60 percent of new businesses were formed in only 25 percent of the most prosperous ZIP codes. Everywhere else, there are more companies shutting down than being started.
Months before the HQ2 bid, the Economic Innovation Group (EIG) named Cleveland as America’s most economically distressed big city and deemed the decade since 2008 “the startup-less recovery.” This research informed EIG’s work on the federal Opportunity Zones incentive, which passed with bipartisan support in December 2017 as part of the Tax Cuts and Jobs Act.
Many early Opportunity Zone investors have focused on low-risk real-estate deals (which likely would have happened anyway). But there is so much more potential for impact, as many local leaders have already realized. Through my research, I have identified 63 OZ prospectuses prepared by American cities, totaling 2,147 pages and showcasing 857 deals. It’s no surprise that Cleveland’s all-in OZ approach rises to the top. Reminiscent of its HQ2 bid, the city has created a new coalition, Opportunity CLE, which boldly calls itself “a cohesive economic development ecosystem unlike any other in the nation.” As someone who studies public-private partnerships and entrepreneurship for a living, I can attest that it truly is.
Leaders across Cuyahoga County have bought into a new cross-sector vision for community investment backed by local housing and economic development organizations, major foundations and funds, and an array of community partners. It’s a great start. But bringing together various leaders, organizing sundry efforts and collaborating in common cause — the same approach taken during HQ2 — should be just the start.
We can invert the Amazon paradigm for Opportunity Zones by using and creating data that benefits communities, as the companies participating in the U.S. Census’ Opportunity Project Sprint have done. At the Census demo day in December, for example, Citi launched City Builder, which maps the characteristics of each OZ with population, demographic, education, mobility score and other data. Mastercard debuted its Inclusive Growth Map with aggregated and anonymized purchasing in OZs. And Public Democracy Inc. (whose board I chair) announced the results of its partnership with Birmingham, Ala.: Mayor Randall Woodfin’s team reached over half of the city’s OZ residents via email, generating hundreds of survey responses and opening up communication lines among residents, government and investors.
As a result of these efforts, businesses and fund managers can now begin shifting plans to better meet the community’s needs — not out of some charitable inclination but because they now have data showing they could make money doing so. Equipped with better insights on community behavior and market demand, city leaders can also go beyond the federal incentive by layering on additional programs and incentives to advance local priorities. Such OZ investments could become even more profitable than shovel-ready real-estate projects.
Think about what the $3.5 billion that Cleveland offered to Amazon could have meant for small businesses and other local priorities. For that sum, the city could have made equity investments, provided low-interest loans or even given straight-up grants of over $6,500 to every single new business in the entire state of Ohio on a yearly basis for the next quarter century.
In their efforts to land HQ2, business and civic leaders proved their ability to go beyond individual interests and truly collaborate. What resulted was the privatization of all their data and plans by a single company. Now they should put those resources and data to work for entrepreneurs and other community priorities.
