A String of Positive Job Announcements Concentrated in the Energy Sector

The core function and primary concern of economic development is attracting jobs, investments, corporate operations and head offices to a region. Over the past several weeks, since the ConocoPhillips announcement, the Denver region has had an excellent string of successes in this area.

Many of the incoming jobs are in the energy or alternative energy sectors which appear poised for substantial future economic growth. RES-Americas, a wind energy company is relocating its headquarters to Broomfield from Austin, Texas. Its notable that, like the ConocoPhillips decision, this relocation did not require state economic development incentives to occur. Instead it appears to be based on the region's emerging status as a green energy cluster.

An executive at wind-turbine manufacturer Vestas said that the Front Range of Colorado is one of the finalist locations for siting a research and development hub. Vestas, of course, recently opened a turbine manufacturing plant in Windsor, Colorado. Littleton-based Ascent Solar Technologies will be expanding its production capacity with an injection of capital from Norwegian aluminum giant, Norsk Hydro ASA. AVA Solar, which makes thin film photovoltaic technology, recently decided to site its first manufacturing plant in Longmont.

Berry Petroleum, a traditional oil company, announced it is relocating its corporate headquarters to Denver from Bakersfield, California. Gas and oil companies continue to have a huge presence in the Colorado economy. According to a recently released study sponsored by the Colorado Oil and Gas Association titled Real Estate Market Impacts of Oil and Gas Industry in Metro Denver:

• 1,1519 oil and gas firms occupy almost 11 million square feet of metro area real estate.
  
• The market value of this property is $483 million with annual rents of $171 million.
• Almost $26 million in annual local tax revenue is generated by these operations.
  
• At least 26,000 workers are employed in the oil and gas sector.
  

However, thankfully, since the 1980s, the Denver regional economy has diversified into other areas in addition to energy, oil and gas. In the financial services sector, Charles Schwab is planning to bring about 500 new jobs to Denver from its headquarters in San Francisco and its operations in Phoenix.

It will be interesting to see if the Metro Denver Economy is able to continue this string of success in coming months in spite of the current overall U.S. economic downturn.

The Widom of the Union Station Developer Selection Decision: The Conservative Choice was the Right Choice

I live in the New York Metro Area where there are more than a dozen sorely needed massive infrastructure projects in various stages of planning and execution. As the economy weakens, many of these projects, which are public private partnerships, are beginning to be scaled back or indefinitely postponed.

Figure I: Rendering of the Proposed Moynihan Station in New York, First Proposed in 1993 and Likely to be Delayed and Scaled Back (Image from www.moynihanstation.org).

The Hudson Yards on the far west side of mid-town Manhattan, The Atlantic Yards in Brooklyn and Moynihan Station (the proposed new Penn Station and Madison Square Garden-see Figure I to the left) are likely to be delayed and/or reduced in scope. When projects of this magnitude and complexity get delayed or postponed, they frequently languish for years or even decades without regenerating enough momentum to be restarted. Many big infrastructure projects like the channel tunnel, which connects England and France by rail, run massively over budget.

Closer to home for Denver residents, the Auraria Campus Science Building had its State of Colorado funding eliminated due to budgetary shortfalls despite the fact that construction has already started. There is a gaping hole in the ground at the Downtown Denver Campus and a great deal of uncertainty about when and if it will be "filled in" with a new science center.

This leads me to the most important public private partnership going in Metro Denver today - the Union Station redevelopment. I have blogged previously about this project suggesting the use of green design ideas, discussing changes in the station design, and the need to integrate commercial bus service on site at Union Station.

Many people were disappointed that Union Station Partners (USPs) lost out to Continuum Partners/East West Partners (CPEWPs) on the contract to be master developer for Union Station. USPs proposed a denser development at Union Station which was closer to the original vision for the site with all of the transportation elements (bus, light rail, commuter rail, Amtrack) located underground in close proximity to each other.

CPEWPs proposed a less costly design with only the bus and commuter rail underground and the light rail above ground a couple of blocks away from the station terminal building. Critics felt this design was too much of a compromise from the original vision, complaining that it would not provide a "world class" solution for the region and that the intermodal transit connections would be inconveniently spread out. These are, of course, legitimate concerns.

This CPEWPs design has subsequently been changed again to move the commuter rail above ground for both budgetary and safety reasons, resulting in even less density at the site and further complaints from critics.

At the time the master developer selection decision was made in November 2006, the project's public leadership argued that level of density needed to pay for the higher costs associated with building the transportation infrastructure underground was very risky. Basically the public sector would be required to make upfront infrastructure investments partially financed by municipal bonds and would have to hope that market conditions would allow for the very dense real estate development to be successfully financed and absorbed to generate enough new property and sales tax revenue to pay off the public sector debt via a process known as tax increment financing (TIF). If economic, real estate or financial market conditions changed between the time the public sector investment was made and the real estate was developed and leased, the public sector could be "on the hook" for millions of dollars in debt without an adequate revenue stream to service the bonds.

According to a Rocky Mountain News Article featuring extensive quotes from then Denver Director of Economic Development John Huggins:

"[USPs], Huggins explained, needed almost every dollar of income projected from private development to pay off the public bonds that will fund a state-of-the-art travel hub. 'If the projected private development isn't there,' Huggins said, 'or if it comes late or if it isn't as valuable, there won't be enough money to pay back the loans. It was like a balloon inflated to the bursting point. One sharp edge and the thing would pop.'"

Since the selection of CPEWPs was made back in November of 2006, two things have happened. First, the costs of building the transportation infrastructure and refurbishing Union Station have escalated and the resulting design has been scaled back. Second, economic conditions have deteriorated. If the more expensive USPs plan had been selected, I beleive the whole project might have become economically infeasible jeopardizing the overall FasTracks Plan or causing large scale delays to the project timetable.

With the benefit of a few months of hindsight, the decision to select CPEWPs as the master developer was clearly the correct choice. Underground transportation infrastructure and greater density is a good thing for a transit-oriented development like Union Station but its an even better thing to have a transit hub that actually gets built and provides benefits to the region. A theoretically great design that never gets built or gets delayed for years or decades or that bankrupts the public purse would not be an acceptable outcome for the Denver Region.

The Wisdom of FasTracks

The FasTracks program is working its way from planning to implementation stages along the various transit corridors. A range of issues and challenges are emerging from cost overruns and service cut backs, to engineering challenges and community opposition to the noise and disruptions associated with rail service, to the fear and pain experienced by individual property and business owners whose land is in the rights-of-way which will be acquired to build the transportation network. In the face of all these issues, it is very easy to forget the long term region-wide benefits of building such an extensive public transport system.

In the age of $100 per barrel oil and gas prices approaching $4 a gallon, growing concerns about global warming, and ever increasing world-wide economic competition among metro areas, the FasTracks investment looks wise indeed. I found this article about the growing use of public transportation based on a study by the American Public Transit Association to be a powerful reminder of the foresight of metropolitan Denver voters in approving the plan.

The Denver Region in Richard Florida's "Who is Your City?"

I mentioned Richard Florida in two recent blog posts (here and here). Florida, currently a Professor of Business and Creativity at the Rotman School of Management at the University of Toronto, is a well known public intellectual who specializes in issues of economic competitiveness and the role of social and demographic trends in place-making and economic development.

He has a new book titled Who's Your City? which delves into how people make location decisions. Part economic development tome and part self-help guide, this book and its associated web site, take Florida's academic work and makes it applicable and useful for everyday Americans thinking about a relocation decision.

The Who's Your City? web site has several very interesting features including a "Best Cities" section and a series of graphic maps. In the Best Cities section among small regions, Boulder is ranked as a top 5 city for young singles, mid-career professionals, families with children and empty-nesters and Denver is ranked as a top 5 large region for mid-career professionals.

The maps are also very interesting, showing how real estate prices, economic activity, innovation, personality types, gender distribution, population and other factors are spread across geography. Its very interesting to see how the Denver Metropolitan Region appears on these maps. Collectively they convey how the region is a relatively remote island of activity surrounded by economically sparse parts of the country.

FasTracks Spurring Development at the Denver Federal Center

The Denver Post has an interesting article about the new Federal Center Master Plan and Preferred Development Alternative. This new plan provides further evidence that FasTracks is spurring Transit Oriented Development, real estate redevelopment, region-wide economic development and helping to change land use patterns, even before the tracks are laid and the trains are operating.

Image taken from Denver Federal Center Website.

ConocoPhillips is Mystery Buyer of StorageTek Campus in Louisville

The Metro Denver Area received a tremendous economic development boost when Governor Ritter announced that ConocoPhillips was the mystery buyer who purchased the former StorageTek Campus in Louisville for more than $55 million. The energy giant plans to build a Global Technology and Corporate Training Center which will focus on the development of new technologies for renewable energy and consolidate world-wide employee training. It is appropriate that this announcement was made by Governor Ritter who has made alternative energy a keystone of his early governorship.

Despite the complaints of skeptics that this is not bringing a new corporate headquarters to Metro Denver, this is a huge boon for the Colorado economy for a number of reasons. It will provide new jobs and it will also lead thousands of people each year to visit the area to attend training classes, boosting local travel, hospitality and leisure spending. More importantly it will provide a key piece of the puzzle for the emerging green portion of the energy cluster in Colorado.

For a technology-based economic cluster to succeed, a region needs a critical mass of vertically-related producers, suppliers, distributers, sellers and consumers and researchers. The presence of ConocoPhillips will add serious financial muscle and prestige to the local green energy cluster. When a cluster reaches a critical mass, the economic power of the whole becomes greater than the sum of its parts, creating a strong positive economic externality drawing other related companies and investments to the region - ConocoPhillips will help make this a reality for Metro Denver.

Additionally, the presence of an energy company in the U.S. 36 Corridor will help diversify the commercial real estate market and local tax base in Broomfield/Louisville which is dominated by technology and telecommunications companies.

This is a fascinating case study in site selection decision-making. Although the energy sector is one of six areas targeted for recruitment by the MDEDC, senior economic development officials such as Tom Clark at the MDEDC and Don Elliman at the Colorado Office of Economic Development were not even aware that ConocoPhillips was considering this site and public speculation on the identity of the site's buyer centered on internet and computer companies. ConocoPhillips apparently made this decision entirely on its own without receiving tax credits or other economic development incentives or lobbying. This is great news for Metro Denver because it means we are competitive without needing to spend public funds to land jobs.

There are several factors which drove this decision. According to Perry Pearce, manager of state government affairs in Colorado for Conoco Phillips as quoted in the Rocky Mountain News, regional academic and research institutions were a key reason for this site selection:

"When you look at the institutions here — the National Renewable Energy
Laboratory, Colorado School of Mines, CU, CSU and DU — those sorts of central
research and educational centers contributed to the attractiveness of this
site."

These institutions are linked together by the Colorado Energy Collabaratory which is a research partnership "dedicated to performing world class research to develop new energy technologies and to transfer these advances as rapidly as possible to the private sector."

There is a rapidly growing base of private renewable energy companies involved in wind, bio-fuels, solar and other green energy areas in Metro Denver. This presence is indicative of a highly qualified local labor pool and potential collaborators and partners for ConocoPhillips.

The excellent transportation links at this campus probably also played a huge role in the site selection decision. The campus location on Highway 36 between Denver and Boulder provides easy access to the super-quick and uncongested Northwest Parkway and E470 toll roads which connect to DIA making it very easy for people from around the world to get to/from the campus on training visits.

With oil in the $100 a barrel price range, developing countries like China and India using ever larger amounts of energy resources and increasing concerns about the impact of carbon emitting energy sources on global warning, investment in and use of alternative energies is becoming increasingly financially viable and socially critical. If Metro Denver can establish itself as a core location for the green energy cluster, it is likely to bring long-term economic growth to the region. This could well be a sector which is poised for huge long-term growth capable of creating wealth on a scale similar to the development and commercialization of the internet.

Although this is a big win for the region, Metro Denver has many strong competitors who want to build green energy clusters. According to an Economist article from May 24, 2007, Silicon Valley, Boston, and Austin have all had more venture capital invested in clean technology companies than Metro Denver. Other places such as New Jersey, Arizona, Toledo, and Seattle also are trying to establish clean-tech clusters. It will take continuing political support, aggressive efforts by regional economic development officials and wise public investments in education and regional infrastructure to keep attracting further investment in green energy to the Denver Metro Area.

Metro Denver should also come up with a clever and memorable nickname for the region's renewable energy cluster like "GreenFoothills"or "Renewable Prairie" to keep the region in the "front of the mind" for green entrepreneurs and corporate decision-makers.

Ranking Denver Using Florida's Technology, Talent and Tolerance Criteria

In my recent blog entry about Metro Denver's historical connection to the Beat Generation and ongoing concentration of Bohemians, I discussed Richard Florida's work on what he calls the creative class. Florida defines this group as:

"engaged in science and engineering, research and development, and the
technology-based industries, in arts, music, culture, and aesthetic and design
work, or in the knowledge-based professions of health care,
finance and the law." (Cities and the Creative Class, p. 3)

Additionally, Florida theorizes that three interdependent factors help explain why some economic regions have been successful in the new knowledge-based economy and others have not.

"The key to understanding the new geography of creativity and its effects on
economic outcomes lies in what I call the 3 T's of economic
development: Technology, Talent, and Tolerance. Creativity and the members of the
Creative Class take root in places that posses all three of these critical
factors. Each is a necessary, but by itself insufficient, condition. To attract
creative people, generate innovation, and stimulate economic development, a
place must have all three. I define tolerance as openness, inclusiveness, and
diversity to all ethnicities, races and walks of life. Talent is defined as
those with a bachelor's degree and above. And technology is a function of both
innovation and high technology concentrations in a region." (Cities and the
Creative Class, p37)."

This raises the obvious question of “How does Metro Denver compare to other regions in the United States?”

The table taken below is from the Appendix in Florida’s book Cities and the Creative Class which was published in 2005 and some of the indices are likely substantially older than that. However despite the age of the data, it does provide a recent historical reference point from which to analyze Denver's economic position from a Floridian perspective.

The Tech-Pole Ranking comes from the Milken Institute and is based on a region's location quotient of high tech output. According to the Tech-Pole Index, Denver is the 13th ranked high tech region in the United States. Denver's ranking on the Tech-Growth Index (10) and Gay Index (8) are higher than its Tech-Pole Ranking but its rankings on the Composite Diversity (17) and Melting Pot (29) indices are below its Tech-Pole Rankings. Its Bohemian Index rank of 14 is very close to its Tech-Pole Index rank. These rankings seem to fit pretty well with my anecdotal understanding of Metro Denver's demographics. As an inland city, away from the coasts, Denver has a relatively small percentage of foreign-born residents.

This data also got me thinking that the college town of Boulder (also my hometown), probably plays a key role in contributing to the region's strong Tech-Pole, Tech Growth and Bohemian rankings but relatively lower diversity rankings. Boulder is part of the Denver Metro Region and is home to several national laboratories and the State of Colorado's flagship university. It also has a relatively ethnically homogenous population with a large percentage of tech companies and workers and long-standing ties to counter-cultural movements.


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Anticipating Wild Card Events in Planning for the 2008 Denver Democratic National Convention

As everyone knows, Metro Denver is preparing to host the Democratic National Convention (http://www.demconvention.com/) from August 25 to 28 2008. Back in July 2007 I blogged about the opportunities and risks for Metro Denver of hosting this event (http://aviewoftherockies.blogspot.com/2007/07/con.html).

Since my blog entry back then, as the campaign season has evolved, several ideas have come into clearer focus for me. The convention will be a historic and exciting event and, for the reasons discussed below, is likely to attract more than a normal convention's share of global attention. With the certainty that the Democrats will nominate either the first female or first African American major party candidate for President of the United States, the campaign season is shaping up to have a landmark, historic atmosphere. Voter turnout in Democratic primaries and caucuses has been tremendously high.

The competition between Barack Obama and Hillary Clinton for the nomination is intense and is very likely to be closely fought until late into the primary season. There is a strong chance that neither candidate will have enough pledged delegates from primary and caucus results to obtain a majority of total delegates and decide the nomination. This means that votes from super delegates, party officials and grandees who are not chosen by the primary voters, would be required for either candidate to achieve a majority of total delegates and secure the nomination. This could lead to a tense and acrimonious convention. There is even the remote possibility of a brokered convention where neither candidate has enough support to clinch the nomination in the first round of voting. These types of scenarios would drive interest in the convention even higher and could lead thousands more people to descend on Denver than are currently being planned for.

Already there are large contingents of anarchists, antiglobalization advocates and other similar groups with names like "Recreate 68" and "Unconventional Action" who are planning to stage protests, demonstrations and disruptions in Denver. See for example this article in Westword (http://www.westword.com/2008-01-24/news/anarchists-stalk-democratic-convention).

Given the very high profile nature of this convention and the likely accompanying street level theatrics surrounding the event, the stakes and risks are unbelievably high and growing for Metro Denver. The region has to "thread the needle" by staging a safe, secure and exciting convention that allows the Democratic Nominee to shine and that showcases Metro Denver to the world in positive light while at the same time making sure that security enforcement and police action are not too heavy-handed and do not trample legitimate free speech. This excellent blog entry from Colorado Confidential (http://coloradoconfidential.com/showDiary.do;jsessionid=05CFFC53FD194861C44651A13BFC01FC?diaryId=3338) discusses the approaches taken by Boston and New York for the 2004 Republican and Democratic National Conventions. Denver clearly has less historical experience than New York or Boston in hosting these types of high profile events.

I understand that the City of Denver is reaching out to near-by police jurisdictions for help providing extra police officers during the convention. (http://cbs4denver.com/local/police.denver.convention.2.560924.html). Securing extra police is a great first step. But the city needs to make sure that it adequately forecasts all possible risks and contingencies by engaging top level law enforcement officials, intelligence agencies, security experts and risk planners. In addition to high probability scenarios, officials need to brainstorm possible wild cards which can be defined as "low probability high-impact events which happen quickly" (See Out of the Blue How to Anticipate Big Future Surprises by John L Peterson, p. 4). Examples of possible wild cards include acts of nature, civil unrest, infrastructure sabotage or terrorist attacks. By their very nature, wild cards are extremely difficult to anticipate and plan for.

Planning miscalculations, lack of contingency options or failures to respond with nimbleness to rapidly evolving events during the convention could have catastrophic consequences for the perception of Denver by people around the world. This convention is a once-in-a-lifetime opportunity for the Denver Metro Area and planners have to ensure that it has a positive impact on the global perception of the region.

On the Road in Denver: Beatniks, Bohemians, the Creative Class and the Economic Geography of Talent

I recently visited the New York Public Library’s exhibit on Jack Kerouac and his seminal 1957 novel On the Road and it reminded me that the City of Denver is one of the important stops on the in the legendary journeys chronicled in the novel and that Metro Denver has its own unique connection to the history of the Beat Generation.

Figure I: Cover of On the Road by Jack Kerouac

Figure II below is a map from Kerouac’s journal of the 1947 road trip that ultimately inspired him to write On the Road.













Figure II: Hand Sketched Map from Kerouac’s Personal Journal of the 1947 Road Trip Which Inspired On the Road

Note that Figure II to the left could just as easily be a partial map of important cross country rail networks, or of internet backbone routes. On the Road implicitly points out that Denver has long been an important economic, cultural and transportation junction in the middle of the United States.

In On the Road, Sal Paradise, Dean Moriarty and the gang make stops in Denver as they are traveling between New York and the west coast. The Denver portrayed in the novel is urban, ethnically diverse and alive with energy. The descriptions of Denver’s historic African American District, Five Points, are vivid and memorable.

In real life, Denver also played an important role in the development of the Beat Generation. Neal Cassady lived in Denver for many years and was responsible for brining Jack Kerouac and Allen Ginsberg to Colorado. They all spent time in Denver listening to jazz at places like the legendary El Chapultepec and at clubs in Five Points. For a great introduction to Denver’s role in the history of the Beat Generation visit Denver’s Beat Poetry Driving Tour written by beat historian Andrew Burnett (http://www.denvergov.org/aboutdenver/today_driving_beat.asp). Many figures from the Beat Movement had long standing connections in Metro Denver and Colorado including Allen Ginsberg who was affiliated with Naropa University in Boulder.

This is all very interesting but how does it apply to economic development which is the theme of this blog?

Richard Florida, an urban economic theorist, has written several well known books about the creative class and its growing importance in the contemporary knowledge-based economy. One of Florida’s ideas is that places that are open, diverse, and tolerant will be able to attract well-educated and creative workers who are the key input into knowledge-based businesses such as software, internet and biotechology companies, leading to sustained economic prosperity for those places. Florida argues that places with “Bohemian Culture,” large gay populations, ethnic diversity and other indictors of tolerance and opportunity will be home to tech industry clusters. Florida defines Bohemians, using U.S. Census Bureau data, as people with creative occupations such as authors, designers, actors and directors, musicians and composers, photographers, craft-makers, dancers and perfumers.

Figure III below, taken from Florida’s book, Cities and the Creative Class, shows the high concentration of Bohemians in Metro Denver. Notice the large dark circles on the three maps below representing Denver's large absolute number of Bohemians, high concentration ofBohemians per 1000 people and high score on the Bohemian index. It is interesting to note the spatial isolation of Denver from other Bohemian centers and to compare the maps in Figure III below with the road trip route in Figure II above. If you horizontally connect the largest dots on the maps below you get a route that is pretty similar to Kerouac's 1947 road trip.


Figure III: Bohemia and Economic Geography, from Florida’s Cities and Creative Class


Denver’s role in the history of the Beat Generation is solid evidence of the region’s long-standing ability to attract creative and talented people. However, Denver’s association with the Beat Generation is less widely known than that of cities like New York and San Francisco. The online Beat Generation Driving Tour should be further developed into an actual self guided tour with historic markers, descriptive plaques and related cultural events to promote and celebrate this side of Denver’s personality to local residents and visitors alike and to help attract even more creative people to the Denver Metro Area.

Spire: A Bellwether for Continuing Growth in Downtown Denver

There was a very positive development for the Denver Metro Region recently when it was announced that construction on Spire (http://www.spiredenver.com/), a 41-story residential condominium with ground floor retail will be resuming shortly. Work on the tower, located at 891 14th Street in Downtown Denver, was halted last year after the primary construction lender, a U.S. based subsidiary of a German financial institution, backed out of its loan commitment. I first blogged about this situation back in September 2007 (http://aviewoftherockies.blogspot.com/2007/09/global-credit-squeeze-and-metro-denver.html)

In my recent blog on 10 Metro Denver Economic Development Issues to Watch For in 2008 ( http://aviewoftherockies.blogspot.com/2007/12/10-metro-denver-economic-development.html ) I called Spire "a key signpost indicating whether the local downtown residential construction boom will continue or tail off in the face of economic and credit market headwinds." Spire is a well conceived project, targeting the ripe segment of young professionals who want to live in Downtown Denver with moderately priced units starting at around $200,000. Spire's developer Randy Nichols has a strong reputation backed by substantial experience. If Spire had withered on the vine it would have been a powerful signal that the current residential expansion in Central Denver was slowing and confidence in Metro Denver was diminishing.

Spire, and other similar projects are helping to transform Denver into a more urban city with the possibility of 24 hour life and improved amenities. This transformation will play a key role in Denver's future economic development because it will help attract, young, educated workers who can power a knowledge-based economy. The fact that Spire will be financed in spite of the global credit market turmoil and fears of a U.S. recession shows that the financial markets are still willing to invest in Denver's economic future.

The rendering of Spire in this blog entry is from the Rocky Mountain News website.

Airline Developments and the Denver Regional Aviation Cluster

If you are a regular reader of this blog you will probably notice that I frequently discuss developments in the airline industry and at Denver International Airport. The reason for this emphasis is this industry serves a dual economic role in Denver. It is part of the local economic base, employing a higher than national average concentration of workers in Denver (See my blog from July 4, 2007 for a discussion of the Metro Denver economic base http://aviewoftherockies.blogspot.com/2007/07/analyzing-metro-denver-economic-base.html) and air transport is a vital part of the regional transportation infrastructure impacting the area’s overall economic competitiveness. Air transportation is particularly critical to Metro Denver given its spatial isolation from other large metropolitan areas and its lack of a water port. The aviation cluster, has been identified as a sector targeted for recruitment efforts by the Metro Denver Economic Development Corporation (MDEDC http://www.metrodenver.org/industries-companies/industries/aviation.html). According to the MDEDC, the cluster contains 240 companies which employ more than 14,000 workers in the nine county Denver Metro Area.

I want to blog about a couple of recent airline developments which could have big impacts on economic development in Metro Denver. Southwest Airlines announced over the next few months it will be adding18 new daily flights to six new destinations from DIA: Los Angeles; San Jose; St. Louis; Philadelphia; Raleigh-Durham; and San Antonio. This will bring the total number of Southwest flights in Denver to 79 from 0 a few years ago. On balance this should have a positive economic impact for the region as it will increase connectivity to important national business centers, help drive down travel costs for businesses and consumers and add new jobs.

However, Southwest’s expansion has put competitive pressure on Denver-based carrier Frontier Airlines. It would be an economic development loss for Denver if Dallas-based Southwest drove Frontier totally out of business, costing Metro Denver a corporate headquarters in the aviation sector. Additionally, the new Southwest fights do appear to validate DIA’s facilities expansion plans discussed in my blog from July 30, 2007 (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html ).

The other big airline-related piece of news is the continued speculation about a merger between United and Delta airlines. Denver is United’s second largest hub after Chicago-O’Hare but Delta uses Salt Lake City as its regional hub. If the merger goes forward, the key economic development question for Denver will be - “Can the 'Mile High City' maintain its hub status, concentration of flights and number of employees post merger?” Given the Denver Metro Areas’ central geographic location, high quality airport facilities and population size, I am guessing the answer to that question would be “yes” but anytime a merger occurs it opens up the risk of a negative outcome. If the merged Delta/United, reduced its presence in Denver and Salt Lake City took over Denver's hub role, that would be a serious blow to the Metro Denver economy.

Photos provided courtesy of Denver International Airport.

Third Annual Colorado Competitiveness Study Released

The Metro Denver Economic Development Corporation (MDEDC ) released its third competitiveness study - Toward A More Competitive Colorado - which benchmarks competitive factors related to economic growth and job creation (http://www.metrodenver.org/files/documents/news-center/research-reports/TMCC_III_FullStudy.pdf). This impressive report presents a comprehensive series of rankings showing Colorado versus the highest and lowest performing states and Colorado versus competitor states. Factors assessed include: economic vitality, productivity, innovation, taxes, business costs, livability, K-12 education, higher education, health, health care, quality of life, and infrastructure.

The report describes Colorado in the following way:

"In 2007, Colorado remained a competitive state for new job growth. The
state's citizens are healthy, productive, and innovative. Colorado is one
of the most highly educated states in the nation. Our natural environment,
and our willingness to retain it, lends itself to healthy lifestyles and out
ability to attract highly educated workers."(p. 10)

"Colorado is an affluent 'Island' in the middle of the country,
geographically distant from major trading regions. Ranked eighth in
the country in per capita income, Colorado is surrounded by states
that have lower wages and, often, lower business costs...To compete against
these lower- cost markets, Colorado must foster greater productivity and
innovation - creating jobs that pay higher wages but produce higher value
goods and services."(p. 10).

I would say the overall tone of the report is one of concern that the competitiveness of Colorado in the knowledge based economic sectors is at risk of slipping.

"We remain concerned with mediocre high school graduation rates, the
disconnection between the requirements of our high-technology employment
clusters and low funding levels provided for citizens to acquire these
skills. We remain particularly concerned with the ongoing low levels of
funding for higher education." (p.12)

"This year we are not certain that public sector investments in education
(particularly higher education), transportation, and our citizens' health
are sufficient to ensure our economy's long term competitiveness"(p. 13)

The report cited the Colorado Competitiveness Council, the Metro Denver WIRED Initiative, and the Metro Denver Health and Wellness Commission as tools to help address the concerns cited above.

The report profiles the MDEDC's six industry clusters targeted for recruitment efforts:

• Aerospace
• Aviation
• Bioscience
• Energy
• Financial Services
• Information Technology - Software

The report also profiles the MDEDC's three industry clusters targeted for retention and expansion:

• Beverage Production
• Broadcasting and Telecommunications
• Information Technology - Hardware

The competitor states used in the report were Texas, Georgia, Arizona and New Mexico. According to the report, Texas and Arizona are Colorado's most frequent economic development competitors. However, I would have liked to have seen a more detailed discussion of why all four of the competitor states were chosen. Based on recent competition with Chicago for aviation related headquarters (Boeing and United) and Milwaukee for the MillerCoors headquarters, I am thinking it would also be useful to have a mid-western state (Illinois or Wisconsin) on the list of competitor states.

Another methodological question that I would be interested in learning more about is why the ranking were done on the state level instead of the metro area level. It seems to me that the metro area as opposed to the state is the more appropriate unit of analysis for an assessment of economic development competitiveness.

The Aerotropolis and Global Competitiveness

Happy New Year.

I just spent 10 days in Metro Denver and really enjoyed the seasonal cheer and winter weather.

For my first blog entry in 2008, I wanted to provide a link to an article in Fast Company magazine from the July/August 2007 issue written by Greg Lindsay titled "Rise of the Aerotropolis" (www.fastcompany.com/magazine/107/aerotropolis.html ).

"In the relatively obscure world of urban planning, [John] Kasarda, a professor at the University of North Carolina's Kenan-Flagler Business School, has made a name
for himself over the past decade with his radical (some might say bone-chilling)
vision of the future: Rather than banish airports to the edges of cities and
then do our best to avoid them, he argues, we should move them to the center and
build our cities around them. Kasarda's research has laid bare the invisible
plexus of air-cargo networks that have shrunk the globe (much as railroads did
for the American West). " (Lindsay, Fast Company).

The importance of Denver International Airport (DIA) to Metro Denver's global competitiveness is an ongoing theme of this blog so I found this article very interesting. Lindsay does a nice job of describing the myriad economic benefits that flow from airport connections. He also summarizes the development of multibillion dollar "airport cities" in places like Hong Kong, Beijing, Soul, Bangkok and Dubai, pointing out that, for the most part, U.S. metro areas have not made new investments on the scale of these Asian cities.

He briefly mentions the decommissioning of Denver's Stapleton Airport as an example of how local politics in the U.S. hinder the expansion of existing U.S. airport facilities. Of course, I think he is misses the more important point that the closure of Stapleton coincided with the launch of DIA (http://www.flydenver.com/) as one of the few new airports built from the ground up in North America in the last 20 years and one of the few airports in the U.S. with space for runway and terminal expansion. At 54 square miles, DIA covers more land area than all of Manhattan or the City and County of San Francisco.

After reading this article, I am even more convinced that the upcoming expansions at DIA (FasTracks commuter rail to the Union Station, a new terminal, on-site hotel, expanded gates and a commuter jet facility) mentioned in my blog from July 30, 2007 (http://aviewoftherockies.blogspot.com/2007/07/dia-expansion-fullfilling-vision.html) are critically important investments in Denver's international competitiveness.

Another interesting topic covered by Lindsay was the plans for expanding Detroit Metro Airport (http://www.metroairport.com/) into a fully fledged Aerotropolis. Detroit has thousands of acres of woods and greenfields surrounding the airport making it one of the few U.S. airports beside DIA with ample room for expansion. I wonder if the expansion of Metro Airport posses a long term competitive threat to DIA?

Finally, see Figure 1 below taken from the Fast Company website which shows Detroit, Memphis, Dallas-Fort Worth, Ontario and Denver airports as "planned" or "rudimentary" Aerotropolis facilities in the U.S.

Figure 1: "The Aerotropolis Goes Global" from Fast Company (http://www.fastcompany.com/magazine/107/aerotropolis.html)

10 Economic Development Issues, Events, Trends and Questions to Watch for in Denver in 2008

2008 promises to be another exciting year for economic development in the Denver Region. Here are 10 issues, events, trends and questions to watch for:

1) Democratic National Convention. Will the convention go off smoothly? Can Metro Denver capitalize on the convention and raise the area’s profile as an international business and leisure destination? How much will the event contribute directly to Denver’s economy in 2008?

2) FasTracks & Union Station. The design and construction of the FasTracks system and its central hub, Union Station, is a key event in the economic history of Metro Denver and 2008 will be an important year for this massive infrastructure project. The Union Station final design, approval, and commencement of construction are scheduled to occur in 2008. Planning and construction on the West Corridor light rail line from Union Station to Jefferson County will accelerate in 2008 and planning for other corridors will continue.

3) Downtown Denver Construction Boom. Can the downtown construction boom in residential, hotel and office properties continue in the face of uncertain macro economic conditions and the credit squeeze?

a) Condo Projects. The fate of the Spire project (http://www.spiredenver/), a well conceived, nicely located condo building, targeting an under served niche - young, middle income buyers - will be a key signpost indicating whether the local downtown residential construction boom will continue or tail off in the face of economic and credit market headwinds. Construction started at the Spire site near the convention center but was suddenly halted in September when the German construction lender suddenly pulled out. The Great Gulf Group’s 1401 Lawrence Street (1401lawrence.com) , a 51 story luxury condo tower with a is another bellwether downtown residential project. If these two developments move forward it will be a powerful indication that Denver’s downtown residential boom can survive the current economic conditions.

b) Office Properties. There have been almost no new speculative office towers built in the Central Business District (CBD) of Denver since the 1980s oil bust. In recent years Denver’s office vacancy rates have been moving steadily downward in as the regional economy finally grows into the existing inventory. Another factor which should support office sector expansion in Metro Denver is the boom in oil and natural gas prices (see number 4 below) which is leading to increased employment in this sector. However, given the recent turbulence in real estate lending markets, the possibility of a recession, prospective increases in cap rates and other factors which could potentially reduce demand for and the value of commercial real estate, a cloud of uncertainty hangs over new office construction in many parts of the United States. Currently, there are several high rise office projects in Denver’s CBD which are in the pre-construction stages. If projects like Tabor Center II (www.callahancp.com/taborII.htm) at 17th and Larimer Streets are able to move forward it will be a key milestone in Denver’s economic recovery from the 1980s commercial real estate downturn.

4) The Price of and Demand for Oil, Natural Gas and Other Resources. The price of oil, natural gas and other resources has several effects on Metro Denver economic development. High oil prices could lead to inflation and a slow down in the U.S. economy by forcing the Federal Reserve to raise interest rates which could reduce overall U.S. economic growth. However, as oil and natural gas prices increase, regionally-based extractive companies, which are highly concentrated in Denver relative to the U.S as a whole, are likely to increase their operations and the metro area economy will get a boost from this increase in activity. As a point of reference, the oil and gas extraction sector employs more than 3,000 people in Metro Denver and is the second most highly concentrated industry cluster in Denver (see my July 4, 2007 blog entry for more information http://aviewoftherockies.blogspot.com/2007/07/analyzing-metro-denver-economic-base.html).

5) The Development of a Renewable Energy Cluster in Metro Denver and Colorado. The high energy prices (mentioned above in number 4) provide a strong market incentive for continuing investments in the alternative energy sector which is also well represented in Metro Denver and Colorado. The region has public facilities like the Natural Renewable Energy Laboratory (http://www.nrel.gov/) in Jefferson County, the University of Colorado and the Colorado School of Mines and private companies like Danish wind-blade manufacturer, Vestas (http://www.vestas.com/), in Weld County and Denver based ethanol producer BioFuel Energy Corp (http://www.bfenergy.com/). With these types of resources, the Metro Area is poised to attract additional alternative energy businesses. However, despite having a supportive governor who sponsored a helpful package of state legislation in the Spring of 2007 to promote renewable energy, competition is fierce to host green energy clusters. In addition to Metro Denver, Boston, Austin, Silicon Valley, New Jersey, Arizona and Toledo, are all working to attract these businesses. Right now Denver is behind several of these other regions.



6) Who is Buying the Former Storage Technology Headquarters in Louisville from Sun Microsystems? It was announced in November 2007 that the former Storage Technology headquarter campus is under contract to be purchased for $60 million by a closely held “mystery” buyer. Rumors include Google (who purchased Boulder’s @Last Software in 2006), Apple, or E-bay. An acquisition of this strategic property by any of these technology heavy-hitters would be huge news and a boon to Metro Denver’s technology cluster.

7) Merger Questions: Will the U.S. corporate headquarters of MillerCoors, the joint venture of Molson Coors (http://www.molsoncoors.com/) and SABMiller to be finalized in 2008, be located in Denver or Milwaukee? Will the potential tie-up between United Airlines and Delta be consummated and how will it impact United’s Denver hub? Is AT&T going to acquire Englewood-based EchoStar Communications Corp? What other mergers are out there that will impact Metro Denver headquarters and jobs.?

8) Progress on Museums. As the Clifford Still Museum design and planning process ramps up for its 2010 opening we should get more detailed information on the building next year. Additionally, there should be a final decision in 2008 on the new location for the Colorado History Museum, currently proposed to be sited in the city-owned McNichols Building in Denver's Civic Center Park.

9) Spending City and County of Denver Infrastructure Property Taxes and Bond Revenue from November Election. The recent successful passage of Questions 1-A through H for the City and Country of Denver will raise millions of dollars in public funds which will help boost infrastructure and promote economic activity in Denver. The city and county should begin to spending some of this revenue in 2008. Over time these funds will go toward maintaining, repairing and upgrading city parks, buildings, roads, libraries, health and human services facilities, and cultural facilities (such as the Botanic Gardens, Boettcher Concert Hall, the Museum of Science and Nature).

10) NCAA Mens Hockey Frozen Four. In 2008 Denver will host the NCAA Men’s Division I Hockey National Championship. This event is a natural fit for Denver given its status as a prominent hockey town with the University of Denver’s national powerhouse hockey program and the NHL's Colorado Avalanche. This event is being heavily promoted by the Metro Denver Sports Commission (http://www.denver.org/FrozenFour/default.htm).

The images in this blog entry are from the Callahan Capital Partners, National Renewable Energy Laboratory, Molson Coors, and the Denver Sports Commission web sites as referenced above in the text. The image of Union Station is from the Wikepedia entry on the station. All Rights Reserved.

A Green Rail Platform Canopy for Union Station

This blog entry is a follow up to my most recent entry from November 25, 2007 on the proposed design changes to the Union Station transit hub (http://aviewoftherockies.blogspot.com/2007/11/big-changes-to-union-station-design.html).

The Friends of Union Station have released a good outline of the new proposed design of Union Station (www.friendsofunionstation.org/news) which I highly recommend interested parties review to better understand the revisions. [Update from December 9, 2007. For a set of drawings showing the new Union Station design see the presentation from the December 5 Union Station Advisory Committee meeting visit the following link: http://denverunionstation.org/pdfs/meetings/USAC_Presentation_120507.pdf)]

I am still assessing the pros and cons of this new design compared to other options and don't have much more to say about this topic yet.

However, assuming that the basic premise of the new design won't be changing, I think the above grade commuter rail and Amtrak station does present some interesting opportunities for creating a landmark canopy to cover the rail passenger platforms at Union Station.

One idea which I find appealing (which I first saw suggested in the skyscraper page forum http://forum.skyscraperpage.com/showthread.php?t=127820&page=11) is to follow the motif established by Denver International Airport's (DIA's) Jeppesen Terminal roof. Said to remind viewers of the snow-capped peaks of the Rocky Mountains, the translucent, teflon-coated fiberglass fabric covering at the airport has become emblematic of transportation in Colorado. Including this motif from DIA at Union Station will help to symbolically tie these two transportation hubs together just as they are physically being connected by the electric commuter rail FasTracks East Corridor. (http://www.rtd-fastracks.com/ec_1). Additionally, a white peaked roof with masts poking through could help tie Union Station to the surrounding Central Platte Valley and Highland neighborhoods by evoking the colors and lines used in the Millennium, Platte River and Highland pedestrian bridges.

The Union Station rail canopy should be designed to combine the DIA motif with green building features such as interspersed solar electric panels and a system for collecting and recycling rain water at Union Station. This combination would create a regional icon which embodies civic virtues like public transportation, commercial vitality, and environmentally sustainable economic development.


The photograph above of the roof of DIA used in this blog is from the DIA web site "photo provided courtesy of Denver International Airport." The photograph to the right of the Millennium Bridge is from the Wikepedia entry on the bridge.