As a former Rochester resident with a long-standing interest in economic development, I was pleased to read Richard Glaser’s recent thought-provoking, actionable Rochester Beacon article (“Economic development: time for radical change”). I generally agree with his assessment and can offer perspective from my work, since 2008, in the entrepreneurial and economic development scene of fast-growing Charlotte, N.C.
Glaser’s article makes a strong case for redefining the economic development roles of business and government. My Rochester experience was that economic initiatives began with an effort to obtain financial support from the state, followed by private-sector support. That is the opposite of what happens in Charlotte, where the business community takes the lead with local and state government in supporting roles. Additionally, the New York environment often seems to create a “business vs. government” dynamic. In Charlotte and the Carolinas, the relationship between business and government is generally collaborative.
The New York model of high taxation for all and state-directed subsidies for a few (I am thinking of Buffalo Billion, Start-Up NY , and other state economic development “investments”) will not be easily changed since it is intertwined with political power. A good start will be for a broad coalition of Rochester private-sector leaders to assert its leadership. The inclusion of emerging firms with new perspectives, as suggested in Glaser’s article, will be vitally important.
The suggestions for a software czar (“catalyst” is probably a better descriptor of the role) and someone to foster collaboration with area research universities are good. I recall the creation of Rochester’s Software Executives Group in the 1980s and subsequent efforts such as Digital Rochester (now TechRochester) that led to meaningful programs and networks that supported the formation and growth of new ventures. A software catalyst, suitably empowered and supported, could leverage the region’s talent.
The importance of RIT and UR to the region’s future economic health cannot be overstated. Companies such as iCardiac have their foundation in the intellectual property and talent associated with those institutions. The distinctive strengths of these institutions (such as UR’s unique competency in optics and medicine) can provide Rochester businesses with global competitive advantages. In the past decade, both institutions have developed national reputations for entrepreneurship, innovation, and lab-to-market expertise.
I might argue that the quality of Rochester and Upstate New York’s higher education institutions is the distinctive economic development asset along with the region’s advanced manufacturing expertise.
The suggestion that the Thruway corridor cities of Buffalo, Rochester, and Syracuse should coordinate economic development is worthwhile, but I am skeptical that it can be implemented. In my Rochester days, we worked on a National Science Foundation-supported Partnership for Innovation between Buffalo and Rochester higher education and communities. Long-lasting connections were established, but substantive outcomes were modest. An upstate curse is that these three cities are too far apart for easy face-to-face collaboration. It is wise to seek collaborative opportunities with Buffalo and Syracuse (and Ithaca), but have modest expectations.
How Rochester and Charlotte compare
When I moved to Rochester in 1975 to join Xerox, both Rochester and Charlotte had metro areas of about 1 million people. Since then, the Rochester metro area has barely grown to 1.1 million while Charlotte’s population has surged to 2.5 million.
Relative to rapidly growing metros such as Charlotte, Austin, Nashville and Raleigh, Rochesterians need to be realistic about the community’s advantages and disadvantages. A recent Brookings Institution study of 2012-2017 migration identified Rochester (and Buffalo) for substantial out-migration of residents aged 25 to 34 and 55+. Charlotte was one of the top in-migration metros for both age groups. There are many factors driving these outcomes, so I will not attempt in-depth comments.
Charlotte is arguably a more diverse, integrated community that is very welcoming to newcomers. There are few things that Rochester offers (culture, outdoors, food, housing, entertainment) that are not offered in Charlotte. With the recent Charlotte arrival of an Abbott’s frozen custard store, the list is even shorter! In brief, I encourage Rochesterians to be introspectively honest and not overstate quality-of-life advantages. Rochester must become a magnet for early career (25-34) talent.
Second, Rochester has two interrelated, competitive deficiencies. These political nightmares are the biggest barriers to a Rochester resurgence.
The overall New York tax and regulatory environment handicaps the competitiveness of Rochester companies and residents. Until New York acts upon the reality that upstate cannot bear the burden that is acceptable in New York City, this will negatively offset good local economic development strategies. New York taxes are certainly a factor in the loss of older (55+) Rochester residents.
Rochester-area residents, and all New Yorkers, are taxed for K-12 education at uncompetitive levels. Although suburban districts can demonstrate quality outcomes for the spending, the city school district performance is a tragedy for many of its students. This adversely affects workforce readiness and Rochester’s attractiveness to potential employers and residents.
Monroe County educates about 110,000 students. It costs the taxpayers $660 million more to educate those students than it would if the students were enrolled in public schools in booming southern metros. I’ll explain using National Center for Education Statistics 2013-14 data.
Current expenditures per pupil for Rochester City were $19,193. The suburban districts were somewhat less costly ($16,000) yielding a Monroe County cost per pupil of $17,000.
Many southern metros operate with countywide school districts. The Charlotte-Mecklenburg district educates 145,000 students at a current expenditure of $8,700 per pupil. I calculated an average of $11,000 for a sample of booming Southern metros (Atlanta, Austin, Charlotte, Nashville, Raleigh).
Each of these communities is thriving, growing, and benefiting from relocation of national businesses that find the local workforces attractive. Their public schools operate at a per-pupil cost that is an astounding $6,000 less than Monroe County. That $660 million cost penalty is absorbed by Monroe County and New York taxpayers.
Rochester is a wonderful community with substantial assets. We enjoyed living in Rochester and Brighton for more than 30 years and return annually for the Jazz Festival. The growing success of the community’s entrepreneurs is gratifying.
But Rochester and upstate will continue to lose human talent and private-sector employment until the uncompetitive costs of excessive local and state government are eliminated.
Paul Wetenhall has been an entrepreneur, corporate manager, university lecturer, and leader of entrepreneurial support organizations in Rochester and Charlotte and currently resides in Davidson, N.C. Before he left the Rochester area, he was president of High Tech Rochester, now NextCorps.