Cover story: Reinventing our city: We can do this – Albuquerque Business First.


Cover story: Reinventing our city: We can do this

These cities did it. Albuquerque can do it. But it starts with us.

With Albuquerque’s economy languishing, we looked at how other cities with major economic challenges turned things around. The central ingredient: business leaders willing to step forward, come together and create a vision for reinventing their city. So, what do you want Albuquerque to be?

With Albuquerque’s economy languishing, we looked at how other cities with major economic challenges turned things around. The central ingredient: business leaders willing to step forward, come together and create a vision for reinventing their city. So, what do you want Albuquerque to be?

Dennis Domrzalski, Dan Mayfield and Damon Scott, Albuquerque Business First Reporters

For nearly 70 years, Albuquerque and its economy have fed off one industry: the federal government.

Sandia National Laboratories, the Air Force Research Laboratory and Kirtland Air Force Base have pumped billions of dollars into the economy.

But that’s changing.

Now, like so many cities before that have relied on a single industry for their jobs, growth and wealth, Albuquerque is facing the harsh reality that its main industry is shrinking. According to the Brookings Institution, discretionary spending as a percentage of the federal budget is projected to fall to 24 percent in 2023 from 36.3 percent in 2012. All of the military and Department of Energy spending at Kirtland Air Force Base and Sandia National Laboratories is discretionary.

The metro area’s job growth has been less than 1 percent in the past year, and the 373,600 jobs the area had in December 2013 was 24,400 below the employment peak of 398,000 nearly six years ago in May 2008, according to the U.S. Bureau of Labor Statistics.

But there can be hope. Other cities that faced economic obscurity or ruin reinvented themselves and are thriving. Pittsburgh, Oklahoma City, Denver, Columbus, Ohio and others have found new economies and rebuilt their economies.

Could Albuquerque do the same?

Does this city have the leadership, willpower and resources to change its economy? Or will it be satisfied with being a third-tier city and economic backwater?

Business leaders in other cities say it’s simple: The process takes leadership, consensus on a strategy and plan, execution, accountability, measurement, followup and a continuing, permanent effort.

It’s between the lines that things get more complicated.

Pittsburgh, Oklahoma City and Columbus had strong private sectors and strong financial/banking sectors that led their efforts.

But New Mexico has the weakest private sector in the nation, and in Albuquerque, 22 percent of the jobs are governemnt jobs. With the Albuquerque metropolitan area accounting for nearly half the state’s jobs, it is imperative that the city start a process to build its private sector, many business leaders here said.

Albuquerque doesn’t have a great deal of local banking and financial firepower to help lead the charge. The city’s two largest locally-owned banks — Charter Bank and First Community Bank — failed.

“The challenge we have with the leadership aspect is the lack of a private sector economy,” said David Buchholtz, a bond attorney and shareholder at the Albuquerque law firm of Brownstein Hyatt Farber Schreck. “We don’t have the banking leadership, the local business leadership, let alone the public leadership or headquarters leadership that you might be able to put together in a Pittsburgh or Austin or Columbus.

“We don’t have investment bankers. We have an absence of company headquarters and public companies, and all of those things makes the ability to put together a leadership group a real challenge.”

And that’s only one of the hurdles the city is facing.

Cities that reinvented themselves set up large committees of business and community leaders to forge and execute their strategies. Albuquerque currently has no such single overarching official group or effort in place, business leaders here said.

Economic developer Mark Lautman, of Lautman Economic Architecture, said Albuquerque is a “minor-league city” when it comes to its private sector. The service sector economy that developed to service Kirtland Air Force Base doesn’t have the personal or collective muscle to get things moving, Lautman said.

Pittsburgh and other cities whose economies collapsed had manufacturing and heavy industry titans — billionaires — who were able to put their personalities, reputations and money behind rebuilding efforts.

Those resources matter because communities must work with the resources they have, the turnaround experts said. That means Albuquerque has greater disadvantages than those other cities had.

Albuquerque has another problem: it does not have a comprehensive plan or strategy to steer its economy in a different direction, local experts said.

When asked if Albuquerque is currently doing what it needs to redirect its economy, Lautman answered, “No.”

How bad are things?

Melody Wattenbarger, president & CEO of Roadrunner Food Bank, said as New Mexico has failed to pull out of the recession, the need for food has risen from 25,000 people monthly to 40,000.

“I think there is a lack of vision,” Wattenbarger said. “What does it look like when people are thriving? It doesn’t look like 40,000 people in a food line.”

For advertising guru and author Steve McKee, president of McKee Wallwork & Co., Albuquerque’s economy has the four hallmarks of companies whose growth has stalled or are failing:

  • a lack of alignment among key players about what to do
  • lack of focus
  • lack of nerves or guts
  • inconsistency

“The first thing we need is a coherent voice and a singular focused objective,” McKee said.

McKee likens Albuquerque’s economy and its 70-year dependency on the federal government to that of a teenager suddenly realizing his inheritance is disappearing.

“We have been living on someone else’s largesse — the federal government and the extractive industries — and it’s not unlike a kid living off his father’s inheritance,” McKee said. “Now that that largesse is being compromised, the beneficiary sees it as a crisis.”

Like the kid, “Albuquerque has to go out and get a job,” McKee said.

While Albuquerque’s main industry hasn’t collapsed and the city is in better shape than were Pittsburgh and Oklahoma City, that could also be a disadvantage, experts said, because it took a crisis to eventually spur those cities into action to reinvent themselves.

Without the crisis of the federal government shrinking quickly in the city, Albuquerque could muddle along, oblivious to the damage to its economy and the urgent need to change.

“Other metros have never had the severity of the bust that Pittsburgh had, so they never had to come to grips with having to retool,” said Bill Flanagan, executive vice president of corporate relations for the Allegheny Conference on Community Development.

“If the federal government [in Albuquerque] turns into a slow bleed, you never have the crisis or moment in time when people have to stand up. You just have a slow bleed.”

Said Buchholtz: “A crisis isn’t so bad because sometimes a crisis brings out the best in people.”

By the numbers

  • 21.5 – Percentage of government jobs in ABQ MSA
  • 16.7 – Percentage of government jobs in U.S.
  • Source: U.S. Bureau of Labor Statistics
  • 36.3 – Percentage of government spending that is discretionary*, 2013
  • 24 – Percentage of government spending projected to be discretionary, 2023
  • *All military and Department of Energy spending at Sandia National Laboratories and Kirtland Air Force Base is discretionary.
  • Source: Brookings Institution

Building a new city, step by step

A city can turn itself and its economy around through volition, or willpower and planning, and a host of American cities have done so — Pittsburgh; Oklahoma City; Columbus, Ohio; Denver and others. We asked leaders in those cities how the turnarounds happened. Those interviews revealed the steps that are absolutely necessary for a city or region to take control of its destiny, redefine its identity, create high-paying jobs and keep its youth, talent and energy from leaving. Here they are, distilled from people who’ve done just that.

  • Believe your community can change its course on purpose – Economic development, except in rare cases, doesn’t happen by accident anymore. Cities that have redefined themselves and their economies have done so on purpose and through hard work. For reinvention to work, community leaders have to believe they have some control over the area’s destiny. Without that belief, the effort will never get started, or if it does, will fail.
  • Leadership – An individual, or a group of people, has to take charge and get the planning/change process started. In many cases, their first task will be to shake their colleagues out of denial and convince them, as in the case of Pittsburgh, that the steel mills won’t come back and the old economy is gone. The second task might be to convince their peers that the community can change on purpose. Leaders must educate their colleagues about how economies work, demographics and other metrics. Leadership groups in other cities have come from a combination of private industry, government and universities and colleges. Leaders organize the planning process, delegate authority and responsibility, set timeframes and deadlines for action for those things that are critical to the process. They also must convince players to move beyond business and political rivalries. Accountability is key. If individual names, jobs or reputations aren’t on the line, there won’t be any accountability and things won’t get done.
  • Develop a strategy/plan/definition – The plan, whatever it might be, must be developed through consensus and based on a community’s assets and abilities, including its private sector and financial firepower. Plans need several components, including real estate, finance (where is the money going to come from?), workforce development (education), and an economic development component. Oklahoma City, for instance, decided to concentrate entirely on quality-of-life issues and focused on making the city a place where people wanted to live. Whatever the plan is, it must have complete buy-in from the community’s leaders. That means many ideas brought up during the strategizing process will be jettisoned. Those whose ideas are shelved, or set aside for a later date, can’t sulk and walk out. Once a strategy and plan are developed, the community must speak in one voice in implementing them. The strategy and plan should be regional in scope and must transcend the terms of any mayor, city council member or business leader. The process must be ongoing and permanent.
  • Set goals – Setting goals breeds action and accountability. Those goals can include the number of new jobs wanted in a given timeframe, increasing per capita income to a certain level, attracting certain industries, increasing the high school graduation rate to a certain percentage and more. In 2010, Oklahoma City set a goal of creating 150,000 net new jobs within 10 years. The area has already created 50,000 net new jobs. Experts in turnaround cities say communities should set short and-long-term goals. Short-term goals create a sense of urgency and get action started immediately. Long-term goals keep the process in place and outlive individuals.
  • Execute – Goals won’t be reached and strategies won’t come to fruition unless action is taken on them. When it comes to community reinvention and economic development, execution and action mean people and money. Pittsburgh funds its economic development efforts with $6 million in private and public money. Oklahoma City has taxed itself and its residents more than $2 billion in the past two decades to build more than a dozen quality-of-life projects. Economic development agencies and efforts must be funded at greater levels than ever before because economic development deals are harder to come by, and that means more competition from other communities. Execution means telling the world, including your community, about your plan and community. “You can draw up value propositions all day long, but you do have to leave the building” and tell the world about them, said Kenny McDonald, chief economic officer for Columbus 2020, an 11-county economic development agency.
  • Benchmark, follow through and never stop – Once execution begins, measure yourself against your goals and against other cities and regions. Competition for economic development is an unrelenting and neverending game. Pittsburgh, for instance, benchmarks itself against 15 other cities on a variety of metrics. Later this year, the area will send 100 people to Denver to study what’s going on there. In October, Denver sent a delegation of more than 100 people to Pittsburgh. Your community can learn from other areas, but it is also in competition with them for talent and jobs.
  • Have a sense of urgency but be patient – The process of reinvention must begin immediately, but it won’t happen overnight. It took Pittsburgh 10 years to even accept the idea that its steel industry wouldn’t return. The city’s real turnaround began in the early 1990s, and it’s still ongoing. Oklahoma has spent the last 20 years reinventing itself, and it’s not done.

Cities that built new economies – rebuild, reinvest, reinvent

Pittsburgh’s steel industry

Pittsburgh’s steel industry began to collapse in the late 1970s, the victim of old mills and foreign competition with more efficient ways of making steel.

When the collapse was complete in the early 1980s, the area had lost the major driver of its economy.

“We lost 250,000 people and 250,000 jobs in two or three years. In the five or six-county metro area, unemployment was 19 percent,” said Bill Flanagan, executive vice president of corporate relations for the Allegheny Conference on Community Development. “The collapse left the region with nowhere to go and nothing to fall back on.”

After the implosion, the city was in denial for 10 years, with many believing the downturn was cyclical. After all, the mills had always come back, people rationalized.

But the mills didn’t return, and Pittsburgh had to decide whether to continue down the road of economic oblivion or reinvent itself.

It chose reinvention, but it wasn’t easy.

The area commissioned a study by the head of Carnigie Mellon University. When the study said the area was dysfunctional and had no long-term strategy or plan, people attacked the study and its author, Flanagan said.

Wiser heads prevailed and the area set up a committee that set goals and benchmarked the city against other metro areas.

Now Pittsburgh is known as a health sciences and entertainment center, and it has 200,000 more jobs than it had at the height of the steel industry, Flanagan said.

The $2 billion Oklahoma City rebirth

The recession of the late 1980s hammered Oklahoma and Oklahoma City. The state had 100 bank failures, and its construction and financial industries were decimated as a result of a collapse in energy prices.

Oklahoma City bore the brunt of the collapse, but it didn’t quit. City leaders put together an incentive package they hoped would convince United Airlines to build a huge maintenance facility there that would employ thousands. City voters approved a $100 million sales tax increase for the project.

But in 1993, the facility went to Indianapolis instead.

During a debriefing with United officials, Oklahoma City Mayor Ron Norick asked why they took a pass.

“They said that Oklahoma City had the best offer, but that they couldn’t see their employees living in Oklahoma City,” said Roy Williams, president and CEO of the Greater Oklahoma City Chamber.

“After picking himself up off the ground,” Norick and city business leaders got to work and decided on a singular economic development strategy, and that was to make the city a place where people wanted to live, Williams said.

Since 1993, city residents have taxed themselves more than $2 billion to build arenas and performing arts centers, refill a Downtown river with water and other quality-of-life projects. That has led to $5 billion in other projects and the city now has thriving tourism, energy, biotech and aerospace sectors.

Columbus who? Now they know

Don’t think planning can work? Well, ask the people of Columbus, Ohio, and they’ll tell you it can.

While Columbus never suffered the economic meltdown and loss of its main industry as Pittsburgh did, it had no image at all, and no one outside of the area knew what it did, saidKenny McDonald, chief economic officer for Columbus 2020, an 11-county economic development agency.

Columbus had always been a financial, academic and fashion center, but no one really knew it.

“A lot of people didn’t even know that Ohio State [University, with 68,000 students in the city] was in Columbus,” McDonald said. “And they certainly didn’t know that we have so many companies with headquarters here. So we had to go out and brand ourselves and educate the world about what we have to offer.

“You can draw up value propositions all day long, but you do have to leave the building” and tell the world about them, McDonald said.

In 2010, Columbus 2020 set a goal of creating 150,000 net new jobs for the area in 10 years, and area leaders went to work trying to get them.

Since then, the area has added 50,000 net new jobs and those have led to $3 billion in new capital investment in the area, McDonald said.

“The recession was a wake-up call for us and told us we needed to control our own destiny,” McDonald said.

Moving toward a new ABQ

Albuquerque businesspeople are beginning to use a very strong word to describe the city’s economic situation: “crisis.”

“I have never before in Albuquerque heard people use the word ‘crisis’ as much as in the last six months, and I think that’s a good thing,” said Debbie Johnson, the head of economic development at Central New Mexico Community College. “I think that word — crisis — has motivated people.”

“We are in a crisis and burying our head in the sand will not get us out,” said Gary Goodman, CEO of Goodman Realty Group and developer at Winrock Town Center. “We rank at or near the bottom of almost any economic indicator, and put together, I would maintain we are in the worst economic condition of any major market in the nation. I am on the front lines, witnessing the flight of capital from this state. It is a statistic no one is measuring and it is truly frightening.”

Now what?

“I want to see the business community at large work on a plan,” said U.S. Rep. Michelle Lujan Grisham, D-Albuquerque. “The negative population growth and the lack of economic development is an alarm we should be sounding. Instead of talking about it, we should be doing something about it.”

Many in the business community agree the city needs a large-scale push to reinvent its economy.

Many business leaders express hope about Innovate ABQ, a collaboration between theUniversity of New Mexico and local government, and associated efforts to create an “innovation corridor” along Central Avenue, including bus rapid transit.

Gary Oppedahl, Albuquerque’s director of economic development, and many others say the city needs to put its force behind tech commercialization. But some say Albuquerque’s efforts to pursue that so far haven’t paid off like they could have.

“What we have failed to do is ever figure out how to take advantage of the opportunity for true technology commercialization,” said Sherman McCorkle, CEO of Sandia Science and Technology Park Development Corp.

Most leaders, though, say the city needs to address more than tech transfer.

“It comes down to leadership,” said Jim Hinton, president and CEO of Presbyterian Healthcare Services. “We have to have a group of community leaders to decide what we want to be and engage this community in getting there. We don’t do that very well here. I think we have to stand up and say we don’t accept where we are and there is a new path.”

How would that work? Goodman says the city needs to rally around critical areas.

“There are five critical communities for getting the economy moving: political, business, research, education and not-for-profit. I don’t think there is anywhere else in the country where these five groups operate so independently of each other,” Goodman said. “Leaders of these communities need to sit in a room and figure out how to create a long-term vision for sustainable, inclusive prosperity. This is the goal, and vision is sorely lacking. There are just 2 million people in this state, and we need to shun anything that separates us and pull together towards our goal.”

The will is there, said Melody Wattenbarger, president and CEO of the Roadrunner Food Bank, to create a grand plan: “We have to think that we can make it better, and that we can work across sectors, which is an important thing. Siloing our sectors is not serving us well. That doesn’t serve us well because you never know where the synergy is going to happen for an idea.”

Some say Albuquerque should focus on bringing in a new population, and keeping our young, educated workforce here.

“We need to reinvent ourselves as a Mecca for the millennials — a demographic cohort of 80 million individuals who will dominate American society for the next 40 years,” said Paul Silverman, CEO of Geltmore LLC, which is developing several properties. “Our greatest potential is to create a millennial haven along the Innovation Corridor. We can only get there by having a coordinated plan.”

Among leaders ABF spoke with, there was no single prevailing idea about what a reinvention plan should include. Technology, tourism, research, manufacturing and medicine all came up.

“We need to think big,” said University of New Mexico professor and former Cabinet secretary Fred Mondragon. “I see ourselves continuing to become a medical, technological mecca for investment and job development. The private sector needs to wake up.”

That means the city must draw on its strengths.

“My view, we have the science, the artistic community, the spirit here, and a great community here that attracts people to us,” said Lisa Kuuttila, the CEO of STC.UNM and the University of New Mexico’s chief economic development officer.

Many echo Kuuttila’s thoughts.

“Albuquerque has 90 percent of the ‘triple helix’ in place: the melding of private enterprise, government spending and academia,” said Brian McCarthy, co-owner of Abrazo Homes. “When all three ingredients are fully present, that should create the perfect formula for innovation, research, investment and economic growth. We really need to bolster each of these three pillars, and then build bridges between them to encourage cross-pollination of ideas, technology and new business.”

But, still, most say the potential can only be achieved by working together.

“We need to have more than Innovate [ABQ],” University of New Mexico President Bob Frank said. “We need much more of the private sector there, I need the County Commission there, and the mayor to tell me how to get there.”

Some see plenty of reason for hope.

“I have never felt renewed energy like I have in the last 90 days,” Johnson said. “I thought there was a leadership void, and I think some are stepping into that.”

Leaders begin coalescing around Innovate ABQ

On Gary Oppedahl’s coffee table, on the 11th floor of City Hall, he has a map of Albuquerque.

For Oppedahl, Albuquerque’s recently hired director of economic development, this map is the start of his plans.

In the center of the map is one big red box: It’s Innovate ABQ, a public-private business incubator near Downtown.

Innovate ABQ is a collaboration among the University of New Mexico, local government and business. It’s designed to house labs, startup companies, educators and living space. It is, Oppedahl said, the linchpin of his development plan for the city. He sees it as potentially the biggest economic engine the city has ever seen. From Innovate ABQ, the colors on his map radiate out along the city’s newly-designated Innovation Corridor.

Some economists say New Mexico needs to create 160,000 economic base jobs in the next several years, and Oppedahl says Innovate ABQ will be key to making that happen.

“If you get base hits, and get that flywheel turning, that’s how we’ll get anywhere close to 160,000 jobs,” he said. “Or we keep doing what we’re doing. We have to take some chances.”

Lisa Kuuttila, the CEO of STC.UNM and UNM’s chief economic development officer, said she’s trying to do that with Innovate ABQ and technology commercialization in the Downtown core.

Stuart Rose of The BioScience Center has said he will soon open Fat Pipe ABQ across the street from Innovate ABQ, where high-speed Internet will give software firms a leg up.

“We have always agreed that the future of Albuquerque is the future of UNM, and that’s why Innovate ABQ came into play,” said UNM president Bob Frank. “Knowledge jobs create a crescendo of traditional jobs.”

The Innovation Corridor, he said, will spur that among young talent: “That is a snowball. Then we will be a jobs Mecca. Rocket scientists and artists, that’s what this state is about, and that’s what we have to bring to Innovate ABQ.”

These leaders are among those ready to step up and reinvent our city

Pittsburgh, Oklahoma City and other cities that have reinvented their economies formed large committees of business and community leaders to develop strategies. No such effort exists in Albuquerque. But we asked a number of local leaders whether they’d be willing to serve if such an effort were to be started. Here are some of the people who said yes.

  • Dale Dekker
  • Principal
  • Dekker/Perich/Sabatini
  • (505) 761-9700
  • Mark Lautman
  • Owner
  • Lautman Economic Architecture
  • (505) 818-8218
  • David Buchholtz
  • Shareholder
  • Brownstein Hyatt Farber Schreck LLP
  • (505) 724-9565
  • Gary Goodman
  • CEO
  • Goodman Realty Group
  • (505) 881-0100 x101
  • Paul Silverman
  • Manager & CEO
  • Geltmore LLC
  • (505) 294-8625
  • John Garcia
  • Executive vice president
  • Home Builders Association of Central New Mexico
  • 505-344-3294
  • Gary Oppedahl
  • Director
  • Albuquerque Economic Development Dept.
  • (505) 768-3270
  • Bob Frank
  • President
  • University of New Mexico
  • (505) 277-2626
  • Lisa Kuuttila
  • President and CEO
  • (505) 272-7900
  • Jim Hinton
  • President and CEO
  • Presbyterian Healthcare Services
  • (505) 923-6333
  • Sherman McCorkle
  • CEO
  • Sandia Science & Technology Park Development Corp.
  • (505) 235-8719
  • Debbie Johnson
  • Office of Education, Entrepreneurship and Economic Development
  • Central New Mexico Community College
  • (505) 224-4000