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Strategic Importance of
Wall Street West
Lehigh Valley Community Forum August 23, 2007
Luc M. Miron DCED Technology Investment
Office
Key Component of the Rapidly
Evolving “Innovation Economy”
Opportunity + Competitive Advantage
Strategic Importance of Wall Street West
Two (2) Components
– “Economic Development” Component (Wall Street West)• Extend synchronoussynchronous fiber optic connectivity between
Northeast PA (NEPA) and NYC
– “Workforce Development” Component (WIRED)• Federal DOL program - successful $15M grant award• Goal: Implement a transformational regional strategy
through the intersection of workforce/economic development objectives around Wall Street West remote facilities
Wall Street West / WIRED Initiative
Project Impetus
– September 11 terrorist attacks caused major interruptions– Demonstrated vulnerabilities of US financial system– Interagency Paper on Sound Practices to Strengthen the
Resilience of the U.S. Financial System (April 3, 2003)– DCED/Commonwealth commitment to implement– WIRED funding – $15 million federal DOL grant
Wall Street West: Impetus for Project
S.E.C. Recommendations (Sound Practices):1. Identify clearing and settlement activities in support of
critical financial markets
2. Determine appropriate recovery and resumption objectives for clearing and settlement activities in support of critical markets
3. Maintain sufficient geographically dispersed resources to meet recovery and resumption objectives
4. Routinely use or test recovery and resumption arrangements
Interagency Sound Practices White Paper
• Two types of data processing lead to two different requirements
1. Batch Processing - Typical of most banks, and some insurance companies (asynchronous)
• Requirement is for space, power, and bandwidth, no inherent latency limitations
2. Real Time Processing - Typical of brokerage houses and mutual funds (synchronous)
• All transactions must be mirrored in real time• This translates to maximum latency of roughly 6 milliseconds;
this latency corresponds to 125 route miles or less of fiber
Law of Physics
Attractiveness of NEPA
. NYC
Proximity to NYC –within 125 fiber miles
Separate power grid from NYC
Different water shed
Potential labor pool; fastest growing counties in PA
“Business Case”: lower realty costs, labor costs, etc
Availability of potential locations
Critical mass of back office industry peers
Pennsylvania’s Strategy Elements:
– Focus– Research & Commercialization– Capital– Workforce– Infrastructure
Focus:• IBM Global Competitiveness Report
Identified four growth-oriented industry clusters and 11 subclusters:
– Life sciences • Integrated Biopharma Manufacturing• Biotech Research• Medical Equipment and Devices
– High technology• Next Generation Electronics• Alternative Energy
– Advanced manufacturing and materials • Powdered Metals• Agro-Food Processing• Prefabricated Housing
– Business services • Creative Industries• Regional Headquarters• Financial Services/back office/transactions
Targeted Business Development
Competitive Cluster
Test Sub-sector
A. Life Sciences A1. Integrated bio-pharma manufacturing
A3. Medical equipment & devices
A2. Biotech research A4. Advanced medical devices
B. ‘High technology’ B1. Next generation electronics B5. Alternative energy-solar panels
B2. Alternative energy-wind blades B6. Alternative energy-waste coal
B3. Alternative energy-wind generators
B7. Alternative energy-bio fuel
B4. Alternative energy-wind turbines
C. Advanced manufacturing & materials
C1. Powdered metals C4. Tooling/metal fabrication
C2. Agro-food processing C5. Fine chemicals
C3. Prefabricated housing C6. Defense production
D. Business services D1. Creative industries D4. Financial services/back office
D2. Regional HQ D5. Printing/publishing
D3. Financial services/transactions
D4. Financial service backofficeTotal weighted quality scores
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Allentown-Bethlehem-
Easton,Lehigh Valley
Columbus,OH
Elkhart, IN Erie,Northwest
Harrisburg,Southcentral
Middlesex-Somerset-Hunterdon,
NJ
Orlando, FL Pittsburgh,Southwest
Raleigh, NC Reading,Southeast
Richmond,VA
Rochester,NY
Scranton-Wilkes-Barre,
Northeast
StateCollege,Central
1. General business environment 2. Local potential to recruit skilled staff 3. Presence of industry / cluster 4. Flexibility of labor & regulations 5. Infrastructure 6. Real estate 7. Living environment
D4. Financial service backofficeAnnual operating cost (million USD)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Allentown-Bethlehem-
Easton,LehighValley
Columbus,OH
Elkhart, IN Erie,Northwest
Harrisburg,Southcentral
Middlesex-Somerset-Hunterdon,
NJ
Orlando, FL Pittsburgh,Southwest
Raleigh, NC Reading,Southeast
Richmond,VA
Rochester,NY
Scranton-Wilkes-Barre,
Northeast
StateCollege,Central
Utility costs
Tax costs
Real estate costs
Labor costs
D4. Financial service backoffice
Elkhart, IN
Erie, Northwest
Allentown-Bethlehem-Easton, Lehigh Valley
Columbus, OHHarrisburg, Southcentral
Middlesex-Somerset-Hunterdon, NJ
Orlando, FL
Pittsburgh, Southwest
Raleigh, NC
Reading, Southeast
Richmond, VA
Rochester, NY
Scranton-Wilkes-Barre, Northeast
State College, Central
5.0
5.5
6.0
6.5
7.0
7.5
80859095100105110115120
Operating cost index (average = 100)
Qu
ali
tati
ve
sc
ore
(Sc
ore
fro
m 1
to
10
)Cost-Quality Ranking
Pennsylvania’s Strategy Elements:
– Focus– Research & Commercialization– Capital– Workforce– Infrastructure
Research: Economic Engine & Leverage Effect– 260 Colleges and Universities– Pennsylvania ranks fourth in academic
Research and Development and its world-class academic/research institutions garner substantial NIH funding-- $1.4 billion in 2004.
• More than 22,000 students received degrees in the engineering and sciences fields.
• Pennsylvania provides over $130 million to academic research projects each year.
• Job Creation – approximately 36 jobs per $1 million of research
+ Construction and service sector positions + Indirect jobs (multiplier effect)
• Increase the number of start-ups and the number of company attractions to the state through enhanced research pipeline
• Innovation in existing companies
Research is a Powerful Tool
Commercialization:
Keystone Innovation Zones– Capitalizes on the Commonwealth’s greatest asset – our young
and talented graduates and our world-class college and university system.
– Designates zones in colleges and university communities that will foster innovation and create entrepreneurial opportunities to keep young, talented graduates in Pennsylvania.
Pennsylvania Provides:
– Operational funding for public/private partnership, incubators
– “Starter Kits”: Funding for university technology transfer and key faculty hires
– Tax credits for start-ups– Capital for growth
Erie
Warren McKean Potter Tioga Bradford Susquehanna
Wayne
Pike
Monroe
Carbon
Bucks
Montgomery
Phila.
Delaware
Chester
Berks
Lancaster
YorkAdams
FranklinFultonBedfordSomersetFayetteGreene
Washington
Beaver
Allegheny
Butler
Lawrence
Mercer
Crawford
Venango
Forest
Clarion
Armstrong
Westmoreland
Indiana
Jefferson
Clearfield
Huntingdon
Centre
MifflinJuniata
Perry
Cumberland
Dauphin Lebanon
SchuylkillSnyder
Union
Lycoming
Sullivan Wyoming
LuzerneColumbia
Lackawanna
Lehigh
Northumberland
Clinton
Cameron
Northampton
Montour
Cambria Blair
Elk
•
Pennsylvania’s Strategy Elements:
– Focus– Research & Commercialization– Capital– Workforce– Infrastructure
Capital Goal is to encourage and partner with private sector to fill gaps
Early Stage– Ben Franklin Technology Partners – Venture Capital: $60 million state investment generated $240 million in new
capital. Growth Stage:
– Venture Capital: $310 million state investment will generate $900 million in new capital.
Maturity and Reinvention
– Working Capital• Second Stage Loan Guarantee + PNC’s Pennsylvania Working Capital Growth
Fund = $200 million
– Construction• PIDA + Sovereign Bank’s Pennsylvania Small Business Growth Lending
Program
– Machinery and Equipment• Core Industries + Citizens Job Bank
Pennsylvania’s Strategy Elements:
– Focus– Research & Commercialization– Capital– Workforce– Infrastructure
Workforce:
Advanced technology “knowledge workers” to retain and attract high-tech employers
• Without a highly skilled workforce, employers in life sciences, information technology, advanced manufacturing and business services are less likely to locate in Pennsylvania.
• PA needs to capitalize on a solid base of students and research activity; translating it into new “family sustaining” employment.
• Through WIRED (Workforce Innovation in Regional Economic Development) initiative, the U.S. DOL will invest $195 million in thirteen regional economies
• NEPA is one of 13 national awards in 1st cycle funding- $15 million over next 3 years (“A WIRED Wall Street West”)
• Regional transformational strategy involving economic development, workforce development and education
Workforce: WIRED Grant
Pennsylvania’s Strategy Elements:
– Focus– Research & Commercialization– Capital– Workforce– Infrastructure
Infrastructure/Sites
• More than $1 billion in infrastructure improvement funding available through the Economic Stimulus Package.
• Used for acquisition/site preparation/on-site infrastructure/construction
• Focus on brownfield sites
The Business Case •DCED IBM Global Competitiveness Study identifies
Financial Services as a key growth industry where PA has a competitive advantage
•Moran, Stahl & Boyer, LLC: 25,000 residents in Northeast PA employed in the Financial Services and Insurance Industry (Bank of America; Sallie Mae; Wachovia; Sovereign; PNC Bank;
Prudential Financial, etc.)
•U.S. Dept of Labor Financial Services Factbook 2005: Financial Services and Insurance constitute nearly 8% of PA Gross State Product ($36 B)
•U.S. Dept of Labor Financial Services Factbook 2006: Financial Services and Insurance Industry will grow by 12% to 2012
The Business Case •New York Times 12/05: “Allentown, Bethlehem and Easton drew 14,000 new residents from the New York Metro Area in 2005 -- doubling migration numbers from 1998.”
•Penn State Data Center: Pike County led all PA counties in population increase from ‘04 to ‘05, followed by Monroe County. Pike has also been the fastest growing PA county since 2000, up 21.7 %, +10,035 persons, followed by Monroe, up 17.7 %, +24,547
•Penn’s Northeast: “Locating a 500-employee business unit in Northeast PA (vs NY/NJ Metro) would
save the company $83 M over 5 years in taxes, payroll and real estate costs -- if located in a KOEZ, $165 M by 2013”
“Build It and More Will Come”
Lackawanna & Luzerne Counties
Back office operations, data center, business processes, insurance, etc
• 15,077 employees (source: Penn’s Northeast)
Lehigh Valley
Call centers, back office operations, etc • 10,016 employees (source: Lehigh Valley EDC)
Financial Services Industry in NEPA Region
Wall Street West/WIRED Key Deliverables
• 5 to 10 mid- to large-sized financial services firms establishing or growing operations in NEPA
• Creation of approximately 1,000 jobs and training 1,500+ during the WIRED grant period
• Branding NEPA as industry standard for business continuity and disaster recovery while bolstering NYC as ‘financial services capital’ of the world
• NEPA business growth in financial services and in all vendor support operations to the industry