Why Rochester struggles to compete

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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. 

Paul Wetenhall

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 BillionStart-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.

11 thoughts on “Why Rochester struggles to compete

  1. Pingback: Connecting the dots on ‘Connections’ - Rochester BeaconRochester Beacon

  2. A thought about the cost of education. My niece lives in Charlotte. The schools do not offer the technology components in their schools system that are common in the schools in Rochester UNLESS the parents get behind some serious fund raising to provide the computers. My niece raised over $100K in her district several years ago to get adequate computer lab in THE one elementary school that her children attended. I do not know if the other schools do such projects. However, she reports that the parents regularly fund raise large amounts to help fund the schools. I’m fairly certain that amount of fund raising does not occur in the ROC area for additions to the school that should be part of the curriculum.

    • Linda, thanks for adding your observation about the Charlotte schools. The good news in your niece’s experience is that parents raised funds to purchase computers. The bad news may be that these should have been provided by the school district to ensure that all students in all schools had access to the technology. In my original post, I noted that Monroe County current expenditures per pupil of $17,000 are substantially higher than the $8,700 in Charlotte-Mecklenburg. The higher spending likely includes a mixture of wasteful and useful items. There is certainly room for improvement in the Charlotte schools including teacher compensation. The key messages for metro Rochester are (1) your K-12 spending creates a tax burden that is a severe drag on regional competitiveness, and (2) the high K-12 spending does not produce a workforce that is more attractive to employers than the workforce found in Charlotte and other booming metros.

  3. Your comment and questions introduce the topic of how to organize public education to deliver good outcomes for all students. I wish that I could offer brilliant insight, but I don’t have the expertise to provide a definitive answer. I will make a few observations that are relevant to the topic of metro Rochester K-12 education.

    My primary message for metro Rochester is that the taxpayers, individuals and businesses, bear very high costs for public education compared to southern metros. The high tax burden is one factor that leads to negative economic outcomes for Upstate NY: 1) older residents relocate to more affordable regions and 2) weak private sector employment growth.

    It is not clear that Upstate’s expensive public education model creates a workforce that is more attractive to business than the workforce found in more cost-effective southern metros. (I recognize that K-12 education serves broader human needs than workforce preparation.)

    Upstate is stuck in a strategic trap. Taxation at uncompetitive levels to fund K-12 education does not pay off for Upstate. The lack of economic growth means that many of those expensively educated Upstate K-12 graduates pursue careers elsewhere in the U.S. It seems imperative to break that cycle. I think this problem is independent of the decision about how to organize Monroe County school districts.

    In response to your question about a Monroe County school district, I don’t have a recommendation. The northeastern U.S. is characterized by many small governmental units (villages, towns, fire districts, school districts, etc.). This is appealing because it makes decision-making more accessible to citizens. (Our children received a fine education in the Brighton school district and we appreciated the accessibility of the district.) But the small units complicate regional thinking.

    New York’s decision nearly a century ago to freeze city boundaries led to a different development model than is found in most southern states. In Rochester, the outcome has been the concentration of poverty within the city with all of the associated challenges. By comparison, the City of Charlotte has grown geographically through annexation which more closely aligns the city and county interests.

    Monroe County (657 square miles) is slightly larger than Mecklenburg County NC (546 square miles). Rochester with about 4% of Monroe County land has about 28% of the County’s population. Charlotte has grown to include 55% of Mecklenburg’s land and has 83% of the county’s population. In addition to a county-wide school district, there are some other consolidated services including the Char-Meck police force.

    A final thought on your question. The county-wide Charlotte-Mecklenburg school district began fifty years ago as a solution to dismantle the segregated schools that existed here and throughout much of the south. That was initially successful, and the district has been able to manage the challenge of rapid growth to its current 176 schools and 147,000 students.

    However, Charlotte area parents often express frustration dealing with a massive district. Some higher income parents have opted into private schools. There is evidence that housing patterns are re-segregating the school district.

    In summary, my observation is that both the southern and the Upstate approaches to school districts have associated benefits and problems. I don’t think school district structural changes can resolve underlying societal issues that affect student readiness and performance. Rochester/Monroe County must address uncompetitive K-12 costs, regardless of how the districts are organized.

  4. You’ve hit several nails on the head here. Most important being the disproportionate tax burdens imposed on NY residents and businesses—especially when the state is “picking winners” with many of their programs. Foster a level playing field, and the competitive market will do the rest.

    As for identifying a reason WHY businesses and individuals should choose to make Rochester home, you state that we can not lean on quality of life alone, as many competitive cities can offer similar benefits. We certainly can brag (justifiably) about the low housing costs, short commutes, incredible cultural scene, and frankly our beautiful natural surroundings. But we need to develop an X factor if we are to attract people to our region. Cities must now be brands, because anyone can live anywhere… easier than ever before. Let’s pick a bold and sustainable identity—A Unique Selling Proposition—and run hard with it. We can complain about taxes and weather, and neither will change much. But there are other ways we can stand out and offer value that other cities/regions are not able to offer.

    • Michael, thanks for adding your insights and offering actionable suggestions. I agree that the Rochester area has distinctive advantages including short commutes, natural surroundings, and, I might add, water resources. It is true that housing prices are low in metro Rochester, but it less clear that total cost of ownership is low. Our Davidson, NC property taxes are about one-quarter of our taxes for similar property that we owned in Brighton. Rochester does have a great cultural scene (Eastman School, GEVA, museums, etc.) and we were sad to leave that behind. However, it is important to recognize that the cultural scene in boomtowns such as Charlotte is strong and, with increasing community wealth, has eliminated (or diminished) any Rochester cultural advantage. I agree completely that Rochester needs to emphasize its distinctive identity and advantages. The density of high-quality higher education and research (especially UR and RIT) is distinctive and unmatched in Charlotte (although also found in Atlanta, Austin, Raleigh-Durham).

  5. Hi Paul, nice to see you weighing in! I’m curious when you last visited? We’re in the midst of a major change downtown, with a doubling of the population within the old Inner Loop boundary and major repurposing and building all over downtown. Virtually every major building is being reimagined as residential and modern office space and amenities are gradually filling in. Unfortunately the core educational and poverty gaps problems are not being dealt with on any scale due to politics, especially with our dysfunctional and in-denial school board.
    I am optimistic but I don’t underestimate the problems.

    • Martin, good to hear from you. Although we moved to the Charlotte area in 2008, we have returned at least once every year, most recently in June 2018. We are regular visitors for the Jazz Festival and always stay in Main Street and East Avenue hotels. The transformation downtown, including the Sibley Building, has been wonderful. The Rochester community’s resilience and entrepreneurial energy is evident. If the issues mentioned in your reply and my original post could be resolved, the innovation and entrepreneurial talent could lead to more progress. It is an urgent issue since other metros are experiencing rapid growth in their city centers. For instance, Charlotte now has 32,000 residents and 116,000 workers in its Center City. A vibrant downtown is increasingly important to the retention and attraction of younger, highly educated workers. Thanks for your long-time commitment to Rochester revitalization!

  6. You state many southern booming communities operate a county wide school district. In Rochester we don’t. Do you favor a “Monroe County School district” where all children can go to any school in the county of Monroe? Or will RCSD students continue to be excluded/segregated?

    • David, my response to your post does not show up immediately below your comment. Operator error on my part! My reply is shown below beginning with “Your comment and questions introduce the topic of how to organize public education to deliver good outcomes for all students.”

      • Hi Paul I agree with your comments about taxes in Upstate NY making business unattractive. However it is mote cost effective to breakup segregation than concentrate poverty and pay for prisons. If education was socialized nationally and we could escape racism we would be better off fiscally and as a society in general.We,need to level the playing field for the poor.How about allowing section 8 housing in Brighton and Pittsford so the,poor of color can move there and let their kids get a great education? Right now local laws forbid section 8 housing.Isn’t this institutional racism that hurts our fiscal bottom line?

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