Upstate economic development to shift from focus on incentives

The upstate chairman of the Empire State Development Corp. is focused on the fundamentals of economic development, he said, referring to them as the "Five I's."

"Incentives is not one of the Five I's," Daniel Gundersen said Friday after meeting with government and business leaders at the RIT Inn & Conference Center in Henrietta.

The Five I's are infrastructure, intellectual capital, innovation, investment and international engagement, he said. Gunderson was here to participate in one of seven "regional blueprint" meetings - including the one in Henrietta - throughout Upstate New York.

"The reason we have been referring to it as blueprints is because we need details," Gundersen said. "A blueprint connotes details. Without the details, and without the state saying we understand it and are in alignment with it, we're not going to get an over-arching strategy that everyone can buy into.

"In the past, it was Albany knows best. One size fits all, and what'll work in Rochester will work in Plattsburgh and will work in Binghamton. It doesn't work that way. Economic development is integrated and needs to be carried out in a collaborative process."

The Rochester session was not open to the public. Gundersen and Empire State Development representatives declined to provide details on the most pressing concerns of area leaders.

Empire State Development representatives will review the information collected durndersen ing the sessions, which began Sept. 24 in Utica and ended Thursday in Schenectady. Gov. Eliot Spitzer and his executive team will analyze and implement the findings, Gundersen said.

"As we prepare our next budget, we look toward better-aligning our resources and how we deploy these resources with what we know the regions need," he said.

Gundersen was appointed upstate chairman by Spitzer in January. He has yet to be confirmed by the state Senate. He previously worked as executive deputy secretary of Pennsylvania's Department of Community and Economic Development and before that as assistant secretary at the Maryland Department of Business and Economic Development.

In an interview with the Rochester Business Journal, Gundersen talked about challenges facing the upstate economy and hopes for finding solutions. The first part of an edited transcript of the interview follows:

ROCHESTER BUSINESS JOURNAL: What is your assessment of the regional blueprint session in Rochester?

DANIEL GUNDERSEN: From my perspective, today was successful. It was absolutely critical in being able to develop a credible upstate strategy. It's all about bringing together the practitioners, the leaders, those who have seen it and done it before. They have talked about what the needs are and then seen different administrations come and go, and the needs remain. Over (the last) eight months, we have listened.

I've traveled 28,000 upstate miles, meeting with businesses and organizations, getting their ideas. Sometimes it's verbal. Sometimes it's in written form. Maybe it's a strategic plan developed by a city or a county, or in some cases even regional plans or ideas. That's been provided to me. I share it with staff, and we've been cataloguing this.

Region by region

RBJ: What have you learned so far?

GUNDERSEN: We need to understand that upstate is made up of seven different regional economies. We have to address them with regional strategies. We will have a blueprint for each region.

As these piles grew, the staff was placing the ideas into the Five I's of fundamental economic development. What is required is for us to look at the root causes of the problem. It's easy to say it's the business climate, that it's the taxes and the regulations that keep us down. There's no doubt (the taxes are) high. We're working on that. Today was not to deal with that.

Secondly, there's the silver bullet school of thought. If only we had Renaissance Square or Midtown Plaza or what have you. If only we did this, things would change. It's important to focus on our core cities, and it's important to prioritize these projects. We're doing that as well. But today we weren't going to discuss that.

Today was about focusing on the fundamentals, the Five I's. Incentives is not one of the Five I's. We've used incentives in this state as a way to buy down the high cost of business, but it's not helping our competitive position. We've taken the issues in these five I's and the proposed solutions that I have heard from the community. To-day is about validating this. Does this look like the Finger Lakes? Does the state truly understand where this region is headed, and what it thinks needs to be done?

Today the largest drivers of this economy are the universities, all across upstate, but in particular Rochester. Our incentives are industrial-based incentives. That's why incentives can't possibly be one of the Five I's of our future. Incentives will be there, actually. But they'll be in a different form. It will be to incent the commercialization of product, to have collaboration amongst entities, to ensure that our services and products get exported to the fastest-growing markets around the world.

It's not just one company when we're thinking about assisting an industry. It's looking at all the supply chain to make sure they all are where they need to be.

It's not going to be just about jobs. Many of our companies, particularly in the Finger Lakes, are small and entrepreneurial. You may only have three or five people on staff and the need is capital-intensive high technology to get them to the next step. It may not result in a doubling (of jobs), but it could very well result in a tripling of the product, and thus the wealth creation within the region.

Jobs, jobs, jobs

RBJ: In Rochester, though, it is about jobs. This area not only trails most of the rest of the country, it trails most of upstate in job creation.

GUNDERSEN: Rochester's come out of the tailspin. Rochester for decades has had that woe-are-we complex of the big companies continuing to shed jobs. That's still occurring, but what is news is that all of the smaller firms throughout the region - they're almost invisible to people, but they're high-tech - are beginning to create more jobs than are being lost. That's a sign that we're turning the corner.

I was assistant secretary for business development (in Maryland) and began to recognize a pattern. I commissioned a genealogy of new tech-based companies to find out where everybody was coming from. As the old businesses cut back, their executives were seeding the future. That makes sense. It's the cyclical nature of the world: Some things die and some things grow.

In Rochester, you have the large companies going through this restructuring. But if you look at the faster-growing companies that are employing people today and making the headlines for tomorrow, a lot of times it's coming from the past. People have carried their talent into new directions. That is definitely Rochester. That's what's so exciting.