DC Economic Strategy Executive Summary 2012

7/29/2019 DC Economic Strategy Executive Summary 2012

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THE FIVE-YEAR

ECONOMIC

DEVELOPMENT

STRATEGYFOR THE DISTRICT OF COLUMBIA

EXECUTIVE SUMMARY


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THE FIVE-YEAR ECONOMIC DEVELOPMENT

STRATEGY FOR THE DISTRICT OF COLUMBIA

EXECUTIVE SUMMARY

November 14, 2012

Office of Mayor Vincent C. Gray

The District of Columbia


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The Five-Year economic DevelopmenT STraTegY For The DiSTricT oF columbia

The Need or aStrategic Direction

When Mayor Vincent C. Gray took ofce in January 2011, the nation was struggling through the worst

economic crisis since the Great Depression. With a double-digit unemployment rate, the District

o Columbias economy was signifcantly impacted. However, in the last two years the District has

bounced back. Over the last 15 months the District gained an average o 1,000 jobs per month, with

unemployment alling rom 11.3 percent in June 2011 to 8.7 percent in September 2012.1 In the

next fve years the District will generate thousands o additional jobs through projects totaling more

than $17 billion in development value. With a 2.7 percent increase in population rom 2010 to 2011,

Washington, DC, boasts aster population growth rate than any state in the nation.2 Tourists are also

coming to the District in swelling numbers, with a record-breaking 17.9 million arriving in 2011.3 The

District was recently listed as one o the top fve cities in the nation or technology startups4 and one o

the three biggest global real estate investment markets.5

By all measures, DCs recovery in the last two years has been strong. But the citys economy is changing,

with traditional anchors like the ederal sector under pressure while emerging sectors, like technology,

rapidly expand. To continue creating jobs and building the tax base, the District needs a coherent strat-

egy that recognizes how ar it has come, but also how much room there is to grow.

The Five-Year Economic Development Strategyis the Districts frst strategic roadmap or sustained,

sector-driven economic development. This plan contains the visions, goals, and initiatives that will

transorm the District by cg 100,000 jb and gg $1 bll x to

support city services over the next fve years.

1. Economy at a Glance, District o Columbia, Bureau o Labor Statistics. www.bls.gov/eag/eag.dc.htm

2. Population Estimates Release, news release, US Census Bureau. http://www.census.gov/newsroom/releases/archives/population/cb11-215.html

3. Washington, DC Tourism Statistics, Destination DC. http://washington.org/planning/press-room/corporate-and-convention-ino/research-and-statistics

4. Graham, Jeerson, Top Cities or Technology Startups, USA Today, Aug. 24, 2012.

5. Foreign R.E. Investors: Buying but Seeking Improved Fundamentals and FIRPTA Reform, Associations o Foreign Investors, Jan. 12, 2012.


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4 executive summary

Bold Visions or DC:

Diversiying the Economy and Preparing the Workorce

The Five-Year Economic Development Strategyhas sought to build on the Districts unique intellec-

tual capital. Four local graduate schools o business collaborated to conduct the analysis that drove

the strategy. Led by a coalition o the Districts business, academic and government leaders, select

teams o MBA candidates conducted in-depth interviews with business and civic leaders across seven

economic sectors. The data, insights and ideas collected during the course o those interviews were

synthesized into strategic initiatives, many o which have been analyzed or economic impact using a

new Economic Impact Model, a business analysis tool that allows the District to evaluate and prioritize

competing projects.

Findings rom research and stakeholder interviews confrmed the need to grow and diversiy the

Districts economy while preparing the workorce or new employment opportunities. These two guid-

ing principles build on the goals set orth in One City Action Plan, Mayor Grays visionary program to

create a prosperous, equitable and sustainable District. Growing and diversiying the economy, along

with preparing the workorce, became the strategic drivers that led to the creation ox bld

DC.

...leading to the creation osix bold visions or DC...

...to be implemented throughtactical strategic initiatives

...confrmed the need todiversiy the economy andprepare the workorce...

Research & interviewfndings...

Grow & DiversifyDCs eConomy

eDuCate & preparethe workforCe for

a new eConomy

+

Most business-riendly economyin the nation1

End o retail leakage4

Largest technology center on theEast Coast2

Best-in-class global medicalcenter5

Nations destination o choice3

100,000 jb and$1 b x

Top North American destinationor oreign investors, businessesand tourists

6


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1. m b-dlc

2. Lg clg c e C

3. n d cc

4. ed l lg

5. B--cl glbldcl c

6. t n acd g, b d

Otcome:

100,000 New Jobs, $1 Bllon n New Tax Revene

Realizing these six bold visions will generate 100,000 jb and $1 bll x over

the next fve years. For context, this number o new employment opportunities100,000is more than

triple the current number o unemployed District residents.6

An additional $1 billion in tax income represents a 17 percent increase in the Districts current revenue

and would allow or additional investments in health care, public saety, education, inrastructure and

other vital services.

Grow & Diversiy DCseConomy

sg 1:Grow existing sectors

sg 2:Attract, nurture and grow newinnovative sectors

sg 3:Promote opportunities inneighborhoods

eDuCate & preparethe workorCe or

a new eConomy

sg 1:Educate our youth or theeconomy o tomorrow

sg 2:Align residents job skills withour growing economy tolower unemployment

siX BoLD visions ora transormeD DC

+ =

100,000 jband

$1 b x

outcome

6. 31,200 preliminary estimates, Monthly Labor Review: September 2012, Bureau o Labor Statistics.


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6 executive summary

A Sector-Led Approac

The Districts Five-Year Economic Development Strategyhas ocused on seven major sectors: ederal

government and contractors, proessional services, technology, hospitality, retail, education and health

care, and real estate and construction. These sectors include traditional anchors currently under tremen-

dous pressure to reduce costs, such as the ederal government and legal services.

Neighboring jurisdictions are actively recruiting cost-concerned businesses to move across borders,

depriving the District o tax revenue and employment opportunities. Without growth rom these sectors,

the Districts economy must diversiy in order to generate new jobs and tax base. Fortunately, DCs

high quality o lie, dynamic neighborhoods and growing population are poised to drive expansion in

sectors such as retail, technology and hospitality. Many o these emerging sectors also have potential

to expand in neighborhoods that have not been traditional business hubs.

The Five-Year Economic Development Strategyidentifes tactical initiatives to strengthen both traditional

and emerging sectors o the Districts economy.


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100,000 New Jobs and $1 Bllon n New Tax Revene:

Attanable Otcomes

Creating 100,000 new jobs will require the District to grow employment at an average annual rate o

2.5 percent over the next fve years. For context, the citys median annual growth rate since 1950 has

been about 0.85 percent.7 While certainly ambitious, this goal is attainable with targeted investment

and improved government services that expand each o the sectors targeted in the Five Year Economic

Development Strategy.

rl e d Cc:

Employment in this sector is already the highest in 22 years, and it is poised to grow more as

major projects such as Saint Elizabeths, McMillan and Southwest Waterront break ground.8

An estimated 55,000 jobs will come rom this sector.

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The technology sector has experienced a 50 percent job growth rate in the last 10 years.9

With greater private and public investment, eective marketing, and support or nascent entre-

preneurs, the District can double employment in the next fve years, creating 20,000 new jobs.

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Development o a medical hub at the McMillan Reservoir site alone will add 5,000 new jobs to the

higher education and health care sector in the next fve years.

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Eliminating the estimated $1 billion in annual retail leakage can create 2,500 new jobs in the city.10

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The Districts upcoming development projects provide a strong base or ofce and hotel growth.

Expanding the citys business attraction and marketing eorts can attract the tenants necessary to

fll new buildings, creating an estimated 17,500 new jobs.

7. Metropolitan Area Employment and Unemployment, Bureau o Labor Statistics.

8. The Economic Impact of Construction in the United States and District of Columbia, Sept. 2012, The Associated General Contractors o America.

9. National High-Tech Industry, Jones Lang LaSalle, Fall 2011.

10. Social Compact, Washington DC Neighborhood Market DrillDown, May 2008.


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8 executive summary

Takng Steps Toward te Ftre

The Gray administration has made economic development and job creation or DC residents one

o its top priorities. Projects totaling more than $8 billion in development value are currently under

construction; these range rom the transormative development o Saint Elizabeths in Ward 8 to the

premier CityCenterDC project in the heart o downtown. Over the next fve years, the District has

planned additional projects worth $8.7 billion in development value that will spark urther economic

growth and job creation. At the same time, the city has invested in new business tools that allow local

employers to expand. The Gray administrations notable milestones include:

Launching o $2 billion worth o long-stalled development projects, creating 4,600 construction

and 7,600 temporary jobs

Placing more than 5,000 DC residents in jobs at 800 companies through intiatives like One City

One Hire

Establishing the DC-China Center in Shanghai to promote international trade and investment

Enacting legislation that allowed or the construction o a new DC headquarters or LivingSocial

(one o the Districts leading technology frms)

Creating a fve-person business development team within the Mayors Ofce that is responsible

or attracting Fortiy.vc to the District and or launching the HUBDC initiative to help local busi-

nesses get ederal contracts

Attracting more than 1 million square eet o retail, including national retailers

Completing Saint Elizabeths and Walter Reed master plans (Saint Elizabeths will be breaking

ground in early 2013 and solicitation or Walter Reeds master developer will be submitted by

the end o 2012)

Construction o approximately 1,428 units o aordable housing since January 2011, with an

additional 1,655 units under construction

Fostering a regulatory environmentFor Businesses to ProsPer

The regulatory environment in Washington, DC, plays a critical role in supporting the business commu-

nity and the Districts overall economy. Strategic initiatives or growing our economy and strengthening

our workorce cannot be implemented without a air, simple and accessible regulatory system. While

The Five-Year Economic Development Strategydoes not address specifc regulatory reorms, Mayor

Gray will be orming a Business Regulatory Task Force in the coming months to review and streamline

the Districts business regulations.


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9The Five-Year economic DevelopmenT STraTegY For The DiSTricT oF columbia

Insights and FindingsThe strategic initiatives outlined in The Five-Year Economic Development Strategywere based on

analyses o the seven core sectors and interviews conducted with 185 civic, business and institutional

leaders in the District. While the specifc challenges and opportunities vary rom sector to sector,

the interview fndings highlighted overarching themes that have shaped each strategic initiative.

key stakehoLDers intervieweD

IndustryFederal

GovernmentDC

Government

Business& Trade

AssociationLeaders

Nonproft& Civic

LeadersAcademic

Experts Total

Federal Government and

Federal Government ContraCtors6 3 6 2 2 19

ProFessional serviCes - 2 23 4 1 30

HiGHer eduCation and HealtH Care - 6 - 6 7 19

HosPitality 1 1 22 10 3 37

teCHnoloGy - - 12 - 4 16

retaiL - 2 12 5 1 20

real estate and ConstruCtion - 4 17 4 2 27

Cross-CuttinG issues - 7 1 7 2 17

total 7 25 93 38 22 185


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10 executive summary

Findings highlight need for:

Economic Growth & DivErsification

Federal Government

Presence

emerGinG markets &

neiGhborhoods

cost & sPace

constraintsProcess imProvements

1 Federal procurementspending has driven theregions growth over thepast 20 years.

1 Existing contracting pre-erence programs providea mechanism to increaseederal procurementdollars owing to DCsmall businesses and helpbuild the local economy.

1 In response to the reces-sion and other globaltrends, proessional ser-vices frms are changingtheir business models tofnd greater cost savings.

1 Hospitals, universities andthe District would beneftrom better communica-tion regarding develop-ment projects.

2 Federal government leas-ing has a high impact onDCs ofce space market.

2 Expansion o the CentralEmployment Area bringsederal tenants to emerg-ing areas.

2 High rents, disjointedretail blocks and mis-matched co-tenancies arekey weaknesses or theDistricts retail sector.

2 Developers and retailerswould like to see moreregulatory coordinationbetween District agencies.

3 Entry-level ederal employ-ees struggle with the costo DC housing. They otenend up living outside the

District.

3 There is growing trend todevelop more residentialunits in DC.

3 Difculty in fndingaordable ofce spacewithin the tech sector is asignifcant challenge.

3 Developers and construc-tion companies recognizethe need or First Sourceand Certifed Business

Enterprise requirements,but eel regulations arehard to satisy.

4 Proessional services frmsare driven by the growtho their client base. ForDC this means ederalgovernment and globalcompanies.

4 Retail sector in emergingareas still has room orgrowth.

4 The District is constrainedby both a small land areaand height limits.

4 The process o setting up abusiness in DC is perceivedto be time consuming andburdensome.

5 Real estate and construc-tion companies recognizethe ederal governmentsability to spark devel-opment in traditionallyunderutilized areas.

5 Anchor institutions likeuniversities and hospitalscan have a prooundeect on local employ-ment through theirprocurement practices.

5 Small hospitality business-es do not have the timeand resources to keepabreast o incentives andregulatory changes.


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Findings highlight need for:

eConomiC GrowtH & diversiFiCation

TEChNOLOGy SECTORGROWTh

BRANDiNG &PROMOTiON

REGiONAL COMPETiTiONiNTEREST iN uRBAN

CENTERS

1 There are divergentviews regarding venturefnancing or DC tech frms.Some stated there areadequate unds whileothers claimed the Districtsinvestor community needsto be more active. Entre-

preneurs also stated thatDC investors ask or largerequity stake in companiesthan West Coast investors.

1 There is a need or morelarge-scale events withhigh economic potentialduring low-visitationperiods.

1 The District has high-er capital gains taxrates than Virginia andMaryland. This impedesgrowth in the technologyindustry and encouragessuccessul tech companyounders and investors

to move to neighboringstates and channel theirunds to frms outside theDistrict.

1 Dense, walkable neigh-borhoods and mixed-usedevelopment centered onmass transit are increas-ingly important or retailgrowth.

2 Opportunities to bettercommercialize researchexist.

2 Destination DC has ewerresources than touristbureaus in competingcities.

2 The regions politicalleaders compete toattract businesses to their

jurisdictions.

2 Consumers in the Districtare showing more interestin local mom-and-popstores.

3 The Saint Elizabethscampus has potential tobecome a tech center.

3 Hospitality establish-ments appreciateincreased visibility rom

visits by DC ofcials andcelebrities.

3 Intense regional competi-tion threatens DCs posi-tion as a prized location

or business.

3 City centers are gainingpopularity among retailersand consumers. The District

is a big benefciary o thistrend as retailers shit romsuburban neighborboods.

4 DC is not known nationallyas a tech hub, and has nomarketing or public rela-tions campaign to positionthe city as such.

4 DCs brand as the ederalcity overshadows itscreative economy andworld-class hospitalityestablishments.

4 Retailers are concernedabout parking access orshoppers.

5 International tourists

outspend domestic ones.There is an opportunityto attract tourists romemerging-marketcountries.

6 District hospitals haveindividual strengths but

joint marketing eorts areminimal.


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Findings highlight need to:

EducatE & prEparE thE workforcE

talent pool skills development academic communitY

1 Contractors want proxim-ity to ederal clients andaccess to the areas highlyeducated talent pool.

1 The ederal governmentaces a serious skills gapin the coming years.

1 Incubator launches andco-working space orstartups could be providedthrough universities.

2 Colleges and universitiesprovide jobs and othersignifcant economicbenefts to the District.

2 Many District residentsseeking hospitality jobslack customer-serviceskills, and hospitalitytraining programs do notmeet the demand.

2 Greater engagementbetween the tech commu-nity, local universities, theDC Community Collegeand District students isneeded.

3 Few bridges exist betweentech entrepreneurs andDCs high-net-worth indi-viduals who have seldom

made tech investments inthe past.

3 Blanket student enrollmentcaps limit both undergrad-uate and graduate studentpopulations in DC.


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Strategic InitiativesSix bd visins and supprting gs were crated based on the fndings rom key stakeholder inter-

views and background research and analyses. A set otctic strtegic inititives supports each goal.

While some initiatives are execution-ready, others require pending resources. The resources and assets

o both the public and private sectors are essential in order to implement these initiatives successully.

GoalS:

1 Invest in services tht simpify the prcess fr unching nd perting business in the District

2 Mintin we-prepred wrkfrce tht meets the needs nd demnds f empyers crss themjr sectrs

Market DC as a place to do business at major national conerences like CoreNet and SXSW.

Relax building height restrictions in underutilized, non-core areas o the District.

Help small businesses obtain ederal contracts through HUBZone and 8(a) certifcation.

Establish ambassador service programs, modeled on the program within the DC Department o Consumerand Regulatory Aairs (DCRA), to help developers expeditiously obtain building permits.

Establish a regular mechanism to oster communication between the ederal government and private sectorreal estate leaders regarding ofce space to be vacated.

Encourage proximity clauses in ederal contracts.

Launch a shuttle to serve DC-based contractors who need requent access to the Pentagon, Saint Elizabethsor Bolling Air Force Base.

Expand the Districts Central Employment Area (CEA) to emerging areas where ederal ofces could sparkdevelopment.

Bring ederal real estate sta to emerging business areas o the city to showcase amenities and developmentopportunities.

Place all relevant job openings or universities and hospitals on the DC Department o Employment Services(DOES) website.

Encourage attendees at District conventions to invest long term in the city.

Actively market the District nationally as a compelling place to do business.

Celebrate businesses that employ District residents, especially through One City One Hire.

Inorm brokers, accountants and lawyers about DC tax law, incentives and business services.

Proactively identiy and recruit businesses with expiring leases that can beneft rom locating in DC.

Establish an early review process or environmental regulations.

Create a robust team within DSLBD to monitor compliance by Certifed Business Enterprises (CBEs) andCBE-related projects.

Examine high-perorming TIF bond-unded economic development projects and, whenever possible,repay the bonds early in order to ree up District debt capacity or other high priority investments.

VISIoN:

Establish the most business-friendly economy in the nation1


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Simpliy the application process or hosting special events in DC.

Create a und to help creative economy organizations establish a presence along emerging corridors.

Organize a campaign showcasing well-known ofcials and celebrities patronizing their avorite DC places.

Increase resources allocated to marketing and promoting the District.

Create District-wide Wi-Fi system.

Gain commitments rom major employers to collaborate with the Workorce Intermediary.

Develop a hospitality program at the DC Community College.

Establish a culinary incubator that provides business and job training opportunities or DC residents.

Launch a orum or the Metropolitan Police Department (MPD) and developers to discuss and mitigatepotential crime issues rom development projects.

Repurpose vacant or underutilized properties or use by local artists and other members o the creativeeconomy.

Create an inrastructure investment und.

Build an academic village or university students in an accessible area o the city.

VISION:

Become the nations destination of choice

GOALS:

1 Invest in and build a nationally recognized inrastructure system

2 Attract and retain talent by leveraging the convenience and excitement o living in DC

3 Rival marketing eorts o the nations top destinations in promoting tourism

4 Become renowned or delivering the highest standards in hospitality and service

3

Create a collaborative space or technology frms, universities and hospitals to build an innovation hub atSaint Elizabeths.

Encourage angel investment by lowering the capital gains tax rate or investments in local tech companies.

Leverage accelerators and inormal networks to grow angel investor communities.

Develop a program to provide aordable ofce space to early-stage tech entrepreneurs.

Connect tech entrepreneurs with established corporate leaders who can guide the tech sector towardhigh-value innovations and potentially purchase services.

Launch a marketing campaign to showcase the District as a national tech hub to attract talent.

Inorm technology entrepreneurs, nonprofts and universities about philanthropic and ederal grant opportunities.

Support local entrepreneurs with meeting space and mentorship opportunities.

Support investment in tech transer and hard-skills education at local universities.

Create a DC-sponsored venture capital program.

Connect District youth, DC Public Schools and the DC Community College with local tech companies.

VISION:

Create the largest technology center on the East Coast

GOALS:1 Double the number o tech jobs in DC within fve years

2 Double the amount o capital invested in DC tech companies within fve years

3 Attract the best academic institutions to contribute to an innovation ecosystem

2


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Conduct a retail demand analysis to determine the amount o retail leakage or the city and or neighborhoods.

Bring retailers and brokers to DCs emerging retail areas that may be unamiliar.

Promote DC as a premiere destination or retailers at national conerences like ICSC.

Adopt zoning that eliminates non-retail uses o the retail streetsape, especially on corner locations o aretail corridor.

vision:

End retal leakage

GoaLs:1 m l d Dc gbd

2 ac l l jb c d x b x

3 m l Dc l d dl l-d c

4

Develop the McMillan Reservoir site as a medical ofce hub.

Initiate regular communication among the Deputy Mayor o Planning and Economic Development (DMPED),universities, hospitals and local developers to keep them abreast o each others new projects.

Begin a process to assist small businesses in obtaining procurement contracts at hospitals and universities.

vision:

Bld a best-n-class global medcal center

GoaLs:

1 ebl dcl b bg g l d c

2 tg dl dcl d c d cl dl

3 Lg c dcl gg b lcl c

5

vision:

Become te top Nort Amercan destnaton for foregn nvestors, bsnesses and torsts

GoaLs:1 ebl 200 DC b bc c g f

2 ac l $500 ll g f

3 Dbl b C f

Develop and market the District as an attractive location or oreign direct investment (FDI).

Focus on attracting oreign technology frms or FDI.

Leverage the DC-China Center to support small businesses entering the Chinese market

Market DC to tourists in targeted international markets, especially China.

6


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Moving Forward

These 50 strategic initiatives vary in scope, cost and complexity. Some will be implemented in months,

while others will take yearsand signifcant investment rom our local universities and businesses.

But all o these initiatives are aligned toward two common goals: creating local jobs and growing the

tax base. Over fve years, their implementation will generate 100,000 jb and $1 bll

x or the District o Columbia.

To reach its economic potential, the District must look beyond its regional neighbors and compare

itsel to the worlds most dynamic urban areas. Global cities such as London, New York and Hong Kong

have diversifed economies that provide a wide array o job opportunities or their residents and a

cushion during recessions.

With TheFive-Year Economic Development Strategy, the District can and will compete on a global

playing feld by growing dynamic businesses and attracting the talented workorce it needs to expand.

DCs population is rising aster than any other state in the nation, its real estate market is the envy o the

country, and its hotels are attracting more visitors than ever beore. Now is the time to build a brighter

economic uture or the nations capital.


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ofc D m plg d ecc Dl

1350 Pennsylvania Ave, NW, Suite 317

Washington, DC 20004

For urther inormation, please visit:

www.dcbiz.dc.gov

Please email your questions to:[email protected]

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