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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Separating Regional Economic Development Fact From Fiction

Comments (17)

Today I read the following headline in the Boulder Daily Camera: “Phillips 66 to sell 432-acre campus in Louisville.” This was quite a reversal from the headline in the Denver Post 4.5 years ago titled “Conoco deal fuels optimism.” For anyone who drives up and down Highway 36 between Boulder and Denver (or from Boulder to DIA) we regularly see this huge, empty, relatively ugly former StorageTek headquarters site which has been sitting “about ready to be developed any day we promise” by Conoco Phillips. As of today, this is no ambiguity that Conoco Phillips (now Phillips 66) won’t be developing anything on the site.

Here are some snippets from the article in the Denver Post on 2/21/08.

“Touting his vision for a new energy economy and ending months of speculation, Gov. Bill Ritter on Wednesday revealed that ConocoPhillips has purchased the former StorageTek campus in Louisville.”

“This will push the new energy economy for Colorado,” Ritter said. “This will provide economic security, environmental security and energy security.”

“While the number of jobs the region will gain is still in question, the company will bring thousands of employees to the training center each year.”

“It’s a perfect example of Colorado’s new energy economy, and we are very much looking forward to welcoming ConocoPhillips to Colorado,” said Matt Cheroutes, director of communications and external affairs for the state Office of Economic Development and International Trade. “This will lend to our ability to attract companies to Colorado’s new energy economy. This certainly could mean opportunities for significant job growth in the state.”

“It certainly reinforces the great work that Gov. Ritter has been doing to grow this renewable-energy cluster,” said Joe Blake, president of the Metro Denver Economic Development Corp. “This just signals to me that Colorado is at the center of this right now on a worldwide basis.”

There’s plenty more but the summary is that in 2008 government leaders declared victory when the land was purchased and asserted all kinds of validation and economic development as a result of it. Of course, we now know that none of it happened and the land – which was supposed to be fully developed by 2012 – is still vacant.

I see this all the time in my travels around the US with regard to economic development activities. There is this incredible focus by government on attracting big business projects, headquarters projects, and speculative development projects. Sometimes major financial incentives, usually in the form of tax relief, is offered as a sweeter. In the situations where this works, I can imagine a long term economic benefit to a region.

However, the sale of a piece of property doesn’t signal anything. And, like many other economic development victories, it’s a total non-event until something is done. Yet politicians and their economic development folks assert that amazing things will happen as a result. These aren’t hypotheses (e.g. “if they actually develop this project amazing things will happen”) they are statement of facts about how they will happen. If you read the article as well as look at the development that has occurred immediately adjacent to the site (apartments and a hotel) you can see how the speculators show up right away.

It’s all very arbitrary feeling to me and doesn’t surprise me at all. When the land was purchased and everyone in state and local government raved about how amazing it would be for the Boulder area, most of the entrepreneurs I know barely noticed it. And four years later it hasn’t had any impact on the Boulder startup scene, positive or negative, that I’m aware of.

It’s another example of what I talk about in Startup Communities as the disconnect between government and the startup community.

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  • http://www.samedaydr.com/ Rich Weisberger

    There seems to be two or three economies in the US. The ones where the money flows into  1) DC, NY,BS,SF  are insulated from the anemic economy. With your travel to the 2nd and 3rd tier economies, can you speak what their state of affairs?

    • http://www.feld.com bfeld

      It varies dramatically but I’m seeing a consistent pattern of strong positive activity in startup communities throughout the US. While the local economy may be weak, the section that is around startups is vibrant in many of these cities.

      • http://www.pointsandfigures.com pointsnfigures

        what scares me is they have no other choice. friend of mine that has been in the VC biz since 1968 (yes, he is a true deal junkie) says that he worries people are starting companies simply to get money to survive for a couple of years on the hope that the broader economy can get better-then they will fold up the business and get “real jobs”.

        • http://www.feld.com bfeld

          While that’s a particularly cynical attitude, I’m sure it’s true in some cases. But I don’t think it’s the broader theme.

  • http://yoavlurie.com/ Yoav Lurie

    Top-down economic development often fails to fulfill its promises — see Olympics, major convention centers, stadiums, tax-exempt factories — large is the cemetary of concrete assets put in place by governments to “spark” a local renaissance. But, communities are built of people, not of concrete.

    I’m inspired by what’s going on down in Aurora; where the city is promoting local ethnic restaurants and investing in the human capital. As the social scientist in this NPR story says: it’s the bottoms-up approach that may just work: http://m.npr.org/story/161885219?url=/2012/09/27/161885219/aurora-colo-tries-to-capitalize-on-its-ethnic-riches

  • http://byJess.net/ Jess Bachman

    Well, you have to take the wins before election season… wait too long and you could cede them to the next guy/gal in office. The losses are much more sticky, just ask GWB.

  • Doug

    Maybe the county can buy it as open space. That way the folks at Phillips 66 can get a big bundle of boondoggle money, and it can be left for the prairie dogs.
    I am glad it has not been developed. There is a huge amount of empty office space in Interlocken, and Boulder/Longmont too. The new Sun campus is practically empty, right across the highway. I still can’t figure out why the Tech Stars companies are all right next to the Perl St. Mall.
    As I look out across the park in Prospect at the fall colors, I know in my heart, it is cheaper out here in the sticks.

    • http://www.feld.com bfeld

      We are seeing the same phenomenon all over the country which is that entrepreneurs want to be in a concentrated area in a downtown city. 60 years ago the rise of the suburbs created the office park. It’s now an uninteresting place format entrepreneurs. You are even seeing this in the Bay Area with the incredible shift of startup activity to downtown San Francisco.

      • http://petegrif.tumblr.com/ Pete Griffiths

        Definitely.

  • http://about.me/paulsullivan Paul Sullivan

    Recently the city of Lexington & state of KY celebrated the news that an international law firm would be consolidating its support operations and relocating staff to our city. http://migration.kentucky.gov/newsroom/governor/20120912firm.htm While it’s great that we are adding 250+ consumers and taxpayers to the local economy, this strikes me as a zero-sum game. Our gain is at the expense of other US communities. I was dismayed at the number of soundbites and headlines proclaiming 250 new jobs created, when in fact, the net to the national economy will likely be zero at best. Factor in the tax concessions and other relocation incentives, the ultimate winners are the partners in the law firm.

    Let’s focus on net new jobs… a la startups. It’s time for some metrics for pirate-politicians AARRR! (Brad, this should be fodder for your upcoming visit!)

    • http://www.feld.com bfeld

      Consider it fodder!

  • http://www.engag.io/Abdallah Abdallah Al-Hakim

    ‘optics’ are very important for government and these are the type of news stories they like to propagate. I used to work in the academic biomedical research in Ontario (Canada) and always read about how big pharmaceuticals are going to expand their research to Ontario and how many jobs this will create, blah blah blah……..I can tell you for a fact that no tangible biotechnology related jobs were created during my years there!

  • http://www.charliecrystle.com Charlie Crystle

    Great post.

    In Lancaster, PA, they spent $170 million on a convention center and hotel in the center of town. My question at the time was this: what question does this answer? Because it wasn’t economic development, or whether we should have a convention center, because even if convention centers were good for small cities (they aren’t), you wouldn’t locate it in the middle of town where there’s little parking and large trucks can’t get to without police intervention.

    That’s 170 million dollar loans to small business. or 1700 seed investments. Or 5 small venture funds, with a $70 million investment in STEM education.

    I’ve been pushing the message that business can be the vehicle to achieve out highest aspirations–improving education, reducing poverty, strengthening the local, interdependent economic ecosystems. We don’t need large-scale tax-free govt-sponsored mega projects.

  • Terry

    Spent 30 years between a parent and myself working at STC/StorageTek.
    It was a vibrant company not without it’s problems, you worked hard,
    were trained well and as large as it was it somehow still maintained a
    sense of family. Not the like of the early years with it’s founder
    Jesse Aweida. Sad to see the buildings including the not too old
    recreation center which cost a small fortune.. all turned to dilapidated
    parking lots and dirt where the original building footings were. Many
    of us spent more time there than with our actual families. Eh, the
    buildings are gone, but the memories are still there. I was proud to be
    an employee there. All things eventually do come to and end. I hope
    the old place is re-purposed well.

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