Dean Barber

Erie on the Edge

In Corporate Site Selection and Economic Development on July 29, 2018 at 9:14 pm

The Texan accepted his job transfer to Erie, Pa., knowing it was the best way to rise in the company ranks. He arrived in late spring.

Soon thereafter he found a nice and surprisingly affordable house in Millcreek Township, just four miles west of the city. As his neighborhood was near Presque Isle State Park, a seven-mile long peninsula jutting out into Lake Erie, he made a habit of running in the park after work.

He found the views of the Presque Isle Bay stunning. And the summers were far more tolerable than back in Texas.

He took up fishing and began learning the ways of walleye, perch, smallmouth bass, and steelhead trout. He was amazed by the clarity of Lake Erie’s water.

But winter was coming and with it the famous “lake effect” snow. Just got to buck up, he told himself. Texans got grit.

The first snow came in November during the night. The next morning, he was up early in his pajamas and slippers, staring outside at the blanket of whiteness. Maybe I’ll get to work today, he thought. Maybe not. He shuffled back into the kitchen for another cup of coffee. The idea of a leisure morning at home was appealing.

But then he heard scraping sounds outside. Looking out his front window, he saw his neighbors, some in suits, digging out their driveways with snow shovels. Some were already in their vehicles backing out into the street. “Damn, these people got grit.”

Minutes later, he too, was out in his driveway with shovel in hand. And he got to work on time.

My Mission

Full disclosure. I was hired by Emerge 2040, a group funded by public and private monies, to come to Erie and give my assessment in terms of economic development. They wanted me not only to speak to stakeholders about my impressions, but also write about them in my blog.

I said I would, so long as everyone understood that I would tell it like I saw it. You won’t be getting a “puff” piece from me. They agreed, and I made the trip last week, arriving on a Sunday, leaving on a Wednesday. Not a lot of time, to be sure, but enough time to get a feel for the place.

Also, it should be noted that I did not see much of Erie County. I did travel about 20 miles northeast of the city to see some of the 12,000 acres of vineyards within the county. Many are within eye-shot of Lake Erie.

During my stay, I met a lot of very nice people, saw and heard a lot of things. Some good, some not so good. Being that I am a glass half-full kind of guy, let’s start with the good.

Almost an Island, Almost a Dump

Erie, Pennsylvania’s only Great Lakes port, is located on the southeast shore of Lake Erie in a natural bay formed and sheltered by the aforementioned Presque Isle Peninsula, a recurving sand spit. Presque Isle means “almost an island” in French, and the peninsula has been a real island at least four times since 1819 when waves have broken through the neck to isolate the main section of the spit.

Not too long ago, Erie’s bayfront was a rather nasty place. It was used solely for industrial purposes and as a dumping ground. People would throw their junk — including old refrigerators and stoves — from the top of a bluff into a ravine below. Industrial waste and sewage found their way into the bay.

Said one long-time resident, “The bay area had a kind of a funky smell back then.”

Transforming the Bayfront

That all began to change with water (cleanup) remediation in the 1980s, the building of the Bayfront Parkway and Bicentennial Tower in the 1990s, followed by the $44 million, 145,000-square-foot Bayfront Convention Center in 2007.

Surrounded by water on three sides, the Center spawned a $60 million, 200-room Sheraton Erie Bayfront Hotel in 2008, and a $54 million, 192-room Courtyard Marriott Erie Bayfront Hotel in 2016. Both hotels are waterfront properties that connect to the convention center.

And more commercial development is in the works for the bayfront. An eight-story Hampton Inn & Suites is now under construction, part of $150 million development that will likely include (more) restaurants, offices, residential units, an indoor market, parking, bicycle trails, parks and green space.

Tourism has become a major and relatively new industry in Erie, employing 16,000 during the summer, 12,000 in the winter, with about $1 billion in direct visitor spending. The jobs and the development happening are all due to the transformation of the bayfront.

Every evening I sat outside on the patio of my hotel and watched the sunsets over the bay. During those tranquil moments, I also came to appreciate Erie Brewing Company’s Railbender Ale as a regional asset. A community without craft beer is not entirely civilized in my eyes.

However, the bay is not just a recreational playground for boaters and fishermen. The Port of Erie is a working industrial port serving ocean-going freighters that traverse the Great Lakes and the Saint Lawrence Seaway. Donjon Shipbuilding and Repair, capable of dry docking 1,000-foot vessels, occupies a 44-acre site at the port with 4,000 feet of pier space.

Focusing on Downtown

From the bayfront, it’s only a 10-minute walk up State Street to Erie’s downtown which sits on a higher elevation. There I saw a 346,000-square-foot office building under construction. It is an expansion of the corporate headquarters for Erie Insurance, a home-grown, publicly-held company that provides property and casualty insurance.

Erie Insurance, the dominant employer and force in the community with 3,500 workers, has been has been acquiring and developing properties to enlarge its campus footprint in the downtown area.

About 1,200 employees will work in the new building, 500 existing employees with another 700 to be hired. CEO Timothy NeCastro says the company will likely create 1,000 new jobs over the next several years.

NeCastro is also the chairman of the newly formed Erie Downtown Development Corp. Modeled on the Cincinnati Center City Development Corp., the EDDC aims to use money from local investors to undertake large-scale projects. To date, more than $25 million has gone into the EDDC’s Erie Equity Fund for downtown redevelopment.

The EDDC has engaged the Urban Land Institute, based in Washington, D.C., to make land-use recommendations on a street-by-street, corner-by-corner basis. One key goal is to establish housing and amenities downtown that will make it attractive to young professionals, like those Erie Insurance plans to hire.

Of course, the EDDC is an evolving story, but it’s good to see local businesses investing in the downtown core. That’s putting your money where your mouth is. That’s a vote of confidence.

The Little Engine That Could

The best business stories are of home-grown companies doing the “impossible.” The Lake Erie College of Osteopathic Medicine (LECOM), sitting on a 53-acre campus, is such a story.

When sister and brother Silvia and John Ferretti launched LECOM in 1992, self-preservation was the motivating factor. “The best way to survive was to train the physicians we needed,” said John Ferretti, president LECOM Health.

At the time, it was the first newly-created medical school in the country in 25 years, Ferretti said. LECOM’s medical school is now the largest in the U.S., with campuses in Erie, Greensburg and Bradenton, Fla., graduating more than 530 students per year. (The average medical school graduates about 100 students per year.)

LECOM has also become one of the larger employers in Erie County with more than 2,000 employees, with 3,500 indirect jobs created. The financial impact to the community was estimated at $186.million in 2016. Nationwide, it’s more than $1 billion.

In addition to the medical school, LECOM also confers degrees in pharmacy, dentistry, health services administration, and biomedical sciences.

LECOM was the little engine that could. But today, it is not so little and is making a big impact on the Erie area.

Healthcare and Education Grows

In some ways, Erie resembles a mini-Pittsburgh in that the healthcare sector has become a dominant employer. The area has seven hospitals. Of a labor force of 128,000, about 29,000 people are employed in education and health services, making it the largest job sector.

In the fourth quarter of 2017, the Pennsylvania Department of Labor & Industry identified UPMC Hamot and Saint Vincent Health Center as the No. 3 and No. 4 largest employers respectively in Erie County. UPMC Hamot, a 424-bed hospital, employs about 3,300 while Saint Vincent employs about 3,000 people.

Erie County has four universities — Penn State Behrend, Gannon, Mercyhurst and Edinboro — which combined employ about 3,000. During my three days in Erie, I visited Mercyhurst University, where work underway on a $1 million cybersecurity lab. Made possible by a donation from the Cleveland-based tech company MCPc, the lab will be part of an expansion of Mercyhurst’s cybersecurity program.

To say that cybersecurity is a growth industry is an understatement. Watch for spinoff companies in the community as a result of the Mercyhurst program. This is another stay-tuned story.

Place Your Bets

Without a doubt, my most positive and inspirational meeting was at Radius CoWork, a 24/7/365 facility full of tech talent, designers, and young entrepreneurs located in an older office building downtown. It is “where Erie’s freelancers, startups, & remote workers share a community driven space to get work done and have fun doing it.”

Again, these were young entrepreneurs, mostly “techies,” who embody the attitude of “lead, follow, or get the hell out of the way.” They are committed to the city’s future and making their businesses go. Older people, including yours truly, could actually learn from them.

A common theme to their remarks was that Erie was big enough to offer the cultural amenities that they liked, but small enough to not get lost in the crowd. It was easier to make friends and connections here, and the cost of living and doing business was much lower than big cities where tech reigns.

These young people are the next generation of Erie’s business leadership. I would bet on them in a big way.

Not All is Peaches and Cream

But just as there were many good things that I saw and picked up on Erie, there are certain weaknesses, even bad things, that must be addressed.

The good news is that all of these things are fixable. It’s not all peaches and cream in Erie, which is an understatement, but improvements can and will come if the focus is on daily progress rather than end results.

Erie sits in the heart of what has been pejoratively called the “Rust Belt” but rebranded of late as the “Trust Belt.” This region, more so than any part of the country, took a beating with the loss of millions of manufacturing jobs and only now is recovering in the aftermath.

That said, manufacturing still plays a prominent part in Erie’s economy, accounting for 22 percent of the local GDP, but its largest manufacturing employer, General Electric, continues to lose jobs in dribs and drabs. GE employment in Erie now stands at about 2,500, whereas back in the 1950s, it hovered between 15,000 and 20,000.

With the loss of manufacturing jobs has come a loss in population. As of July 1, 2017, the city’s population was estimated to be 97,369, down from 98,289 a year earlier, a decline of about 1 percent. But the big takeaway is that Erie’s population has been falling for the past five decades, from a high of 138,000 in 1960.

Jobs are what draw people to a city and if the jobs aren’t there, well, they go elsewhere. It boils down to economic opportunity, which has historically been a downward trajectory in Erie for a long, long time.

That has left its mark on the people. I think it would be too much to call it self-loathing, but several residents referred to a “scarcity mindset,” characterized by a loss of confidence and resentment.

You Blew It

I wrote a story for Site Selection Magazine, published in May of 2011, detailing the intricacies of General Electric selecting Fort Worth, Texas, for a new $100 million plant to manufacture locomotives. Prior to that announcement, all GE locomotives had been built in Erie, and I contend the same would hold true today were it not for the stubborn refusal of a union to make concessions to GE management.

The truth is the United Electrical, Radio and Machine Workers of America dug in its heals and company called their hand. Those great manufacturing jobs went to Fort Worth, because of a 1950s mentality and when the country was still reeling from the Great Recession. Last year, GE said it would move all locomotive production from Erie to Fort Worth. So there you go.

“You blew it,” I said in a meeting with Erie officials last week. I could detect physical discomfort, squirming, in the room.

Sadly, certain public officials still cater and court organized labor. Coming off the heels of other Great Lake states, Michigan, Indiana and Wisconsin, becoming right to work states, I would tell them to wake up and smell the coffee. This is not your father’s manufacturing climate anymore and clinging to the past will not impress companies that would consider Erie and the surrounding area for corporate investment.

Just saying.

Connecting People to Resources

It is heartening to know that Erie celebrates diversity and welcomes immigrants trying to build a new life in this country. The American Dream is rooted in immigration and opportunity for a better life. In the past five years, nearly 1,900 people in Erie County have become U.S. citizens, hailing from 74 different countries.

But the fact remains that a sizable segment of Erie’s African-American community feels disenfranchised and alienated, as if they do not have a voice.

Lower incomes, educational attainment, and home ownership among black Americans, as well as higher poverty, unemployment, incarceration, and mortality all contribute to racial inequality. We know this to be true. The numbers show it.

Last year, 24/7 Wall Street, a financial news and commentary web site, compiled a list of worst cities for black Americans. Not surprising to some, Erie ranked No. 1, the absolute worst. USA Today published the story on Nov. 7, 2017.

To their credit, the first meeting that my hosts took me to in Erie was with Marcus Atkinson, an African-American minister and executive director of ServErie, which according to its website has the mission of “Restoring communities by connecting people in need to resources.” Much of the work is spearheaded by local churches.

Rev. Atkinson took me to a poor section that his group was targeting, East Side Eagles Neighborhood, where he said there was frequent “activity” – drug dealing, prostitution, shootings. While some of the homes were in decent condition, others were in states of decay.

I learned that Mayor Joe Schember, a former banker who took office in January and viewed by many as the visionary leader that Erie needs, has been knocking on doors trying to make connections with residents in some of these challenged neighborhoods. No doubt, they were surprised to see him as little attention has been shown their way in the past.

Despite the good works and good intentions, much remains to be done to bring Erie’s underclass into the wellspring. I hope the churches and the city continue this mission to make a difference in people’s lives, because it is the right thing to do.

I’m going to end my blog on Erie focusing on three fundamental aspects of economic development. And this holds particularly true when it comes to business/industry recruitment. In each area, Erie falls painfully short.

Vocational Training a Must

The first is vocational training. A skilled workforce is an absolute must for companies and that need transcends all industry sectors. In short, companies need people that can do the work and they will go to places where that is offered.

In the past few decades, community colleges have taken on the role of training people for the jobs that they may take. Some community colleges are very good at this, some not so good. But the fact is that many companies are now expecting that community colleges will do the bulk of their vocational training for them.

Incredibly, Erie does not have a community college offering workforce training. That is especially puzzling because of its manufacturing tradition. Unless or until the city ups the ante on providing jobs skills to its people, economic growth will be inhibited. It’s really that simple.

And So Are Buildings and Sites

Also, you cannot get around the fact that there is a real estate component to economic development. If companies are to grow and expand, they need buildings and/or sites. Without them, they are going elsewhere because they have little other choice.

In short, Erie needs to develop an inventory of buildings and sites, preferably with standalone industrial/business parks to be built near good transportation infrastructure. Public/private partnerships may be the best route to get this started.

Pay to Play

Economic development is a pay-to-play operation. If you are not devoting money to it, you are not in the game. One reason why Texas does so well in economic development is because it is well funded on the local level.

Look, the state can only do so much. Ultimately, it is up to the local community to command the necessary funds on a sustainable basis if it wants to compete in the economic development arena. This is your story to tell. Nobody else’s.

The Japanese have a saying: “Business is war.” It’s all about fighting for finite business resources and investment. You cannot fight without ammunition.

The bottom line is that funding economic development is a necessity to compete and win. You cannot do this on the cheap.

A Coming Together

Erie is on the edge of something greater. It is quite evident that good things are happening. Just look at the activity along the bayfront and downtown.

There is a certain optimism in the air, a turn-the-corner feel as if the community is finally coming together. Mind you, much work remains to be done, but it can be done, and I expect will be done, because these people have, well, grit.

I’ll see you down the road.

Dean Barber is the principal of Barber Business Advisors, LLC, an economic development and corporate location consulting firm based in Dallas. Dean is available as a keynote speaker and can be reached at dbarber@barberadvisors.com. Visit us at www.barberadvisors.com to learn more.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: