Capitalizing on Regional Economic Development Opportunities
In the fall of 1996, New Community Corporation (NCC) in Newark and the nearby Hillside Auto Mall launched an effort to train city youth for available jobs within the region’s automotive industry. An advisory committee formed – composed of representatives from four local dealers, regional representatives from Ford Motor Company and Jaguar, Butler Fleet (one of the largest fleets in the country), Bell Atlantic, and Continental Airlines – to help NCC and its participants explore the needs of the industry and job opportunities for automotive technicians. Several months before the training ended, the advisory committee itself had hired over half the students. By the time the first class graduated in December 1997, over 75 percent of the candidates had been hired by automotive dealers.
NCC’s training initiative illustrates how community development corporations (CDCs) can link city residents to more and better jobs and increase economic resources in low-income neighborhoods by working with employers and institutions in the region. The decline of the manufacturing job base in cities, accompanied by a growth of information/technology jobs in outlying suburban areas, has made this not just a good idea but essential.
Manufacturing and production jobs, geared to people with limited educational skills, once formed the backbone of many inner-city economies. In the 1980s, however, the U.S. economy lost 16 production, transportation, and laborer jobs per thousand, while creating 27 clerical, sales, and service jobs per thousand. Newark, the largest city in New Jersey, saw its manufacturing jobs fall from 84,986 in 1955 to 17,844 in 1995, according to the New Jersey Department of Labor. Meanwhile, between 1975 and 1995, private sector jobs throughout the rest of the state increased by 36 percent.
CDCs are increasingly recognizing the need to be aware of such economic patterns and to explore regional and sectoral economic development. A sectoral strategy targets an occupation within an industry to help low-income people obtain decent employment. Sectoral strategies tend to focus within the regional economy, such as NCC’s effort to enable inner-city youth to become automotive technicians in northern New Jersey.
Youth Automotive Training Center
Youth Automotive Training Center (YATC), a joint venture between NCC and Hillside Auto Mall, the largest car dealer near Newark, aims to employ its students with car dealers, fleets, and other regional transportation entities. Richard Liebler, President of Hillside Auto Mall and now a member of the New Community Foundation (an NCC affiliate), noticed the difficulty his dealership and others had hiring and retaining automotive technicians. Newspapers were full of ads for technicians, but more importantly dealers had a hard time retaining new employees because of poor attitudes and lifeskills, and lack of educational skills. Liebler became acquainted with NCC, which had developed lifeskills and educational support programs, and an array of other services through its Center for Employment Training (CET), which is affiliated with the national CET in San Jose, California.
YATC is a sectoral strategy, since it aims to develop future automotive technicians in a growing market. NCC is able to intervene in the automotive industry by combining its lifeskills training, education remediation, and job access with a committed automotive partner, Hillside Auto Mall, which brought automotive expertise and relationships. The clear beneficiaries of this sectoral approach are the inner-city residents, primarily young males, who will be able to obtain better paying jobs from the skills and connections made in this program.
YATC began as a 15-month program with 25 at-risk youth who wanted to become automotive technicians. Hillside helped arrange the instruction, equipment, and support of the automotive industry. NCC recruited students and provided the lifeskills educational training and social supports. Each student was guaranteed employment upon successfully completing the program.
Based on the initial interest in and success of this program, NCC and its partners are expanding the initiative to include programs for high school students, short-term evening programs, and shorter daytime programs. A second YATC class, started in October 1997, has 30 full-time students. Plans are underway to start an evening training program in 1998, and the Newark public school district has signed a contract with NCC to train high school work-study students in automotive technology, since the school’s facilities are inadequate.
NCC and Hillside have set a goal to help 100 individuals annually become automotive technicians, since the industry projects it will create 60,000 new technician jobs in the next five years, not to mention existing jobs. NCC estimates it will need 50 automotive partners throughout its region to help place participants in jobs. The New Jersey Coalition of Auto Retailers (CAR), a 730-member organization, has agreed to work with NCC and Hillside to place students who have the skills to be automotive technicians. NCC also plans to use advanced technicians to mentor recent automotive graduates. The benefit of this is that advanced technicians can spend more time on diagnosis and less time doing hard physical work.
Additionally, NCC and its partners are identifying a range of general repair and tire shops that will serve as initial employment sources for students who need work experience and do not yet have the training or technical skills to become automotive technicians. NCC will continue to provide job support and additional training to participants placed in initial positions, to help them advance to their next position. This type of job mobility is crucial in meeting the objective of helping 100 individuals annually become automotive technicians.
Enterprise Growth Center
NCC is also tapping into the regional economy with its plans for a large business incubator, or Enterprise Growth Center (EGC). The incubator will offer flexible space, shared support services, and specialized technical services, with the purpose of growing businesses in Newark. The EGC will be housed in a 117,000-square-foot facility, several blocks from downtown Newark and one block from interstate highway I-280.
NCC’s experience suggests that regional institutions are supportive of strong local economic development initiatives like the EGC, which promises business growth, job creation, and revitalization of a 5.5 acre site. The EGC’s marketing plan – done in conjunction with SPEDD Inc, the largest incubator firm in the U.S. – shows that the EGC has the potential to create 150 jobs within the first three years. To help the EGC achieve this, NCC has formed an advisory committee composed of representatives from small business organizations, financial institutions, universities, and regional corporations. NCC has structured the advisory committee to include both regional and local representatives. Regional members have helped identify technical services needed. For example, the New Jersey Small Business Development Center, once open, will station business specialists at the EGC several days a week and Bell Atlantic’s Office of Procurement is providing assistance through its small business mentoring program and procurement services.
In addition, NCC plans to create a development deal review committee, modeled on the SPEDD experience. This committee will draw from law firms, accounting firms, and investment firms with strong regional relationships to identify and attract both local businesses and promising business prospects from surrounding communities. Financial institutions will also help identify prospective businesses from Newark and surrounding communities that could benefit from the customized services of an incubator. Several of NCC’s financial partners and corporations, including Seal Air Corporation, a large firm in the plastic industry, and Citibank of New Jersey, have also made small grants to the EGC.
Though the EGC is not purely a sectoral strategy, NCC and its partners are working to identify “clusters” of businesses to locate in the incubator. This concept is becoming more popular in incubator development throughout the U.S. The notion behind clusters is to identify a business sector that is a strong player in a regional economy. The role of an incubator is to tailor technical services (management, marketing, sales) to help a cluster, or clusters, of businesses in a similar sector pursue common opportunities. NCC has identified a number of small arts and entertainment businesses, predominantly minority, with which to develop a cluster. These include stagecraft, sound and light operations, ceramics, fashion design, and calendars and publicity. The recently-opened New Jersey Performing Arts Center, other regional cultural institutions, and New York City are within 15 miles of the incubator. A shared management and marketing strategy can help small minority businesses grow in the EGC. Accessing regional technical and financial resources is essential for making the clustering strategy succeed within the EGC.
Regional Strategies for CDCs
Designing and implementing regional economic development strategies such as NCC’s automotive training program and business incubator requires time and resources on the part of a CDC. In pursuing their own regional strategies, CDCs should be aware of the following major concepts:
Researching and learning about the regional economy. Michael Porter of Harvard Business School argues that inner-city neighborhoods have “competitive advantages” within a regional economy. Urban centers such as Newark have extensive transportation networks and high surrounding population density – important economic considerations. By reading and analyzing information and consulting with economists, planners, and business experts at universities, banks, and the Federal Reserve, among other institutions, CDCs can become aware of such advantages and key industries/occupations that offer mobility and growth. Major sectors in New Jersey, for example, include pharmaceuticals, back office/temporary services, and transportation. Occupational growth is projected for health aides and adjustment clerks, along with automotive repair technicians, while openings for typists, general office clerks, and bank tellers are declining. Nationally, there has been a huge growth in temporary jobs, from 400,000 to over 2,300,000 between 1975 and 1995, according to the Center for Community Change. This type of information has helped NCC identify back office/temporary services, along with automotive technicians, as occupations that local residents can pursue.
Building relationships and networks at the regional level. As place-based organizations, CDCs have tended to focus on developing strong relationships and networks within their communities. As low-income communities become increasingly isolated, CDCs need to expand relationships and networks from the neighborhood to the region. A first step is to identify individuals and institutions that can provide regional contacts and relationships. Good sources for regional networks include, again, regional economists, along with regional planning associations, retired executives, small business development centers, and financial institutions.
Formalizing relationships and networks. The next step is for CDCs to formalize some of the relationships and networks they have developed. CDCs can invite some of these individuals to serve on boards, advisory committees or project-based task forces. The national Center for Employment and Training encourages its affiliates to form industrial advisory boards, composed of senior human resources and training executives who have knowledge and influence in hiring individuals. The New Community Foundation’s advisory board is composed of over 50 influential individuals from corporations, foundations, academia, and the public sector throughout Northern New Jersey and New York. These people provide information, technical assistance, and financial resources, and a number of them devote a significant amount of time to NCC initiatives. CDCs also sometimes find it helpful to form project-based advisory committees, composed of banks, small business technical providers, corporations, and community leaders. The committee for NCC’s business incubator helps market to businesses throughout the region, while placing a priority on growing local Newark businesses within the EGC.
Creating partnerships. Creating partnerships involves building upon the relationships CDCs have developed. Some economic development venture partnerships can be developed with larger regionally-based commercial enterprises. An example is the partnership between NCC and Supermarket General, the parent of Pathmark. These organizations formed a joint partnership to build a Pathmark supermarket in the Central Ward of Newark. The advantage of working with a regional commercial enterprise is that the local enterprise is connected into a regional management network with regional buying power and advertising capacity.
Intervening in the regional economy. CDCs need to develop their own strategies for intervening in the regional economy. Welfare reform has brought increased attention to helping people find and retain jobs. CDCs and other nonprofits can play the role of occupation/job brokerage by training and identifying candidates for major job sectors in their regions that have difficulty filling positions. CDCs can also help participants in training and placement programs retain their jobs by providing or finding job counseling and human services support systems. Project Quest of San Antonio, founded by an affiliate of the Industrial Areas Foundation (IAF), provides training and job brokerage services to businesses specializing in medical, business systems services, and environmental technologies, and has been able to place over 400 individuals in jobs in these fields.
Another strategy for intervening in a regional economy is emphasizing sectoral development, as business incubators are doing increasingly. For example, NCC, because of its location, has decided to market partly to arts and entertainment related businesses. Other incubators are biomedical and technology based, and some specialize in fiber optics, woodworking, food processing, and other fields. Cleveland Bank Development Corporation, an affiliate of ShoreBank, has collaborated with the business incubator firm SPEDD Inc. on several incubators with a focus on supporting plastic molding and small foundry businesses – a major sector in Cleveland. Incubators provide an environment for these businesses to expand within their regional economy.
A third strategy is to bring regional financial and technical assistance resources to the neighborhood. This can occur in a variety of different ways. NCC designed a small business loan fund in the form of a multi-bank CDC that was capitalized by eight financial institutions that receive CRA credit. In its first year the loan fund lent to seven minority businesses in Essex County, New Jersey, that could not access commercial financing, since small business lenders are mostly located in regional headquarters. PSE&G, a northern New Jersey utility company, has taken the lead in organizing a comprehensive revitalization strategy for a portion of Newark’s South Ward.
Influencing regional decisions. An underlying assumption of community economic development is that CBOs have the ability to change and influence community and external institutions. Focus Hope, a CDC in Detroit, has developed a series of machinist training programs for precision machining and metalworking that have served as an employment ladder for hundreds of African-Americans, which can help influence industry hiring practices. Coastal Enterprises of Wiscasset, Maine, has influenced the fishing industry in Maine through providing financing, building storage facilities, and most importantly opening a fish export company capable of exporting Maine fish. Both Focus Hope and Coastal Enterprises have significantly influenced a part of their regional economy.
Large CDCs or coalitions of CDCs with experience linking human services, workforce development, and economic development are uniquely qualified to initiate a regional economic development strategy. A growing number of local intermediaries, such as the Delaware Valley Reinvestment Fund in Philadelphia and the Chicago Association of Neighborhood Development Organizations (CANDO), are pursuing and assisting CDCs with regional economic development strategies that connect residents to jobs. Systems such as Center for Employment Training (CET) or similar job training and skill building entities are also involved in this work, along with universities that perform research and make available talented students and faculty, and Small Business Development Centers that provide financing and technical support.
Not all CDCs, however, should become directly involved in regional economic development. This work requires a considerable investment of time, expertise, and resources, and CDCs should not view this commitment lightly. Because regional economies are diverse, CBOs involved in employment initiatives must be prepared to specialize in either a particular industry, business sector, or economic development strategy, whether it be through a workforce program, business incubator, or small business financing strategy. A regional economic development strategy must be placed in the context of a CDC’s experience and economic development objectives. It might make sense for a CDC to focus on a particular initiative in the neighborhood before expanding.
Organizations that have the capacity to make jobs and income a high priority should consider partnering with other organizations to explore a regional or sectoral strategy for job access and job creation. By linking with these efforts, CDCs and other nonprofits can enhance their ability to attract regional resources to cities while helping residents access a growing number of jobs and career opportunities in the regions outside their cities.