Reinventing economic development: Waiting for the bottom
By Mark Lautman
New Mexico is losing the economic development game. If you need proof, here are some numbers:
There were 4,623 economic development deals done in the U.S. last year. While down from 6,217 deals five years ago, I expected it to be much lower, given the severity of the recent recession. I figured since New Mexico has roughly .67 percent of the nation’s population, we would have gotten 30 of those deals if they had been evenly distributed based on population.
Guess what? We only got five!
In preparing for a NAIOP discussion panel last week, I asked a couple of fellow economic development consultants, Deane Foote and Jack Allston, to develop some five-year trend data on New Mexico’s economic development performance compared to surrounding states. They used Conway Data research that tracks all the expansion and location projects in the U.S. of more than 50 jobs, $1million investment and 20,000 square feet.
Among our neighbors, Oklahoma had 53 deals, Colorado 26 and Arizona 54. Texas landed 424. Besides being the only state in our region getting more than its per capita share of those deals, Texas’ numbers are so huge that it doesn’t make sense to be on the same graph with it. We might as well compare ourselves to Singapore.
What was startling was that Oklahoma, Arizona and Colorado each were able to increase both the actual numbers of deals and their respective per capita market shares through the recession, while ours plummeted.
Back in 2005, New Mexico actually had one of the strongest economic development programs in the country, thanks primarily to Gov. Bill Richardson’s deal-making acumen and a massive first-term state budget surplus. But by the end of his second term, the state’s economic development program was in a shambles, leaving Gov. Susana Martinez’s administration with arguably the weakest state economic development apparatus in 30 years.
The Economic Development Department’s budget has dropped from more than $10 million in 2008, to $6 million. Last year alone, the Department lost 25 percent of its personnel.
The New Mexico Partnership, the state’s marketing arm, has seen its budget shrivel from nearly $2 million to $550,000. This year, Arizona, who we never used to lose to, won three major economic development projects that we should have captured.
Measuring the number of transactions is far from a complete assessment of a state or local economic development effort, but it tells part of the story.
In Albuquerque, Mayor Richard Berry, with the help of the city council, spent most of his first year in office resizing city government back to scale with the city’s shrunken private-sector economy. His focus has now shifted to growing the economy again. Since Martinez took office a year after Berry did, if she is following a similar plan, we could see the state back on offense next year. And that won’t be too soon.
At the NAIOP conference last week, our panel followed a keynote address by Jerry Heare, an architect of Austin’s nationally top-ranked economic development program. He explained how, over the past seven years, Austin has created nearly 117,000 new economic-base jobs. Those were the result of 189 corporate locations, 833 prospect visits and 1,366 out-of-state sales calls. Oh, and they have nearly finished raising the $21 million they need to step up the program over the next three years. That’s just one city in one of four neighboring states.
We should probably start by overhauling New Mexico’s marketing program. After all, it’s easier to justify increased public and private commitments for economic development efforts when there is pipeline full of deals that are hanging in the balance.
The good news is that there were 4,623 deals out there last year and the national economy is starting to grow again. If New Mexico is waiting to hit bottom to start investing in economic development again, five measley deals was probably it. Things can only get better from here.