Editor’s note: This is a longer version than what appears in the May 2018 magazine.
Mark Green: Can you give us some background on Louisville Forward along with its current mission and how it is approaching its tasks?
Mary Ellen Wiederwohl: Louisville Forward is a component of the Louisville Metro Government. My boss is Louisville Mayor Greg Fischer. We have here all of the city’s activity dedicated to economic development, real estate development and talent development. Across that spectrum, we can both provide a one-stop shop for businesses who are seeking to locate or grow in Louisville, as well as provide a unified vision for quality of place. Because today, it’s as much a battle for talent as it is a battle for new jobs and new companies.
You can work with our project managers in Economic Development who work on business attraction and retention and expansion projects; you can start a small business here, and we’ll help you from business planning to a loan to get started, help provide a mentor, and really get growing in your business. If you need property rezoned or to get a conditional use permit or to get a license of some kind, all of those things are here in Louisville Forward.
We work closely with KentuckianaWorks, which is the area workforce board but really functions as our region’s workforce intermediary, translating between what businesses need and what our training providers and our higher education system can put out to make sure we have the workforce we need. Workforce today is two things: It’s talent attraction and talent development.
It’s been a lot of fun to build this organization with the mayor and the team. We’re going on four years old, and we’ve had a lot of success. We’ve been named a top economic development organization by Site Selection magazine each year. And we’ve gotten to celebrate, with a lot of folks, their successes. That’s the best part. We don’t create jobs here in Metro Government; we help people create jobs, start businesses. We help make it easier. We help them navigate the processes that need to occur to get from Point A to Point B.
You work hard and deal with difficult issues every day, but you also get moments to celebrate. Whether it’s a big company ribbon-cutting or somebody’s very first store, there’s a lot of joy in that.
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MG: What’s the size of the staff and budget?
MW: We have the three major departments: Economic Development; Develop Louisville, which is all the planning and zoning areas; and the Codes & Regulations Department. Then we have three attached agencies: the Parking Authority, KentuckianaWorks, and the Air Pollution Control Board, which is local rule over our air quality.
Across those six agencies, there’s around a $30 million budget and about 400 people. A lot of those are folks in consumer-facing roles. Project managers in Economic Development, our planning and design services team has case managers who interface with folks doing major developments every day. Folks in the permitting shop on the first floor help everybody from things as small as putting on a deck all the way to building new skyscrapers; and then our license staff, too. If you are in business in Louisville, you’re intersecting with someone from Louisville Forward at some point.
MG: Louisville Forward combines economic development and community development. How common is this strategy and what are the benefits?
MW: Economic development is a very broad category. You could fit just about anything you want to get done under the broad banner of economic development, but for most folks economic development is the attraction and expansion of businesses. Community development is a much longer-term, strategically driven approach. The economic development side is driven a lot by the market and private business decisions. In community development, you’re working at a neighborhood level.
In most cases, we’re working in our more distressed neighborhoods. There are neighborhoods in Louisville that got left behind through bad policy decisions, market conditions and the accumulation of all of that in the 20th century. We spend a lot of time in West Louisville, and that includes building new housing, improving the public environments – from streets to sidewalks to trees to parks – and attracting new businesses as well as helping people grow new businesses.
A big part of community development is also wealth creation: helping people get into their first home that they own, helping somebody start their new business. Community development is much more intense. It’s like an endurance race; you’ve got to be committed to a neighborhood for a long time and putting in public investments to leverage new private investments. We’ve seen a lot of success. West Louisville right now is getting a real Renaissance under way. We won that big federal grant a couple years ago, which is leveraging up in the Russell neighborhood alone over $200 million of new investment. We’ve got Passport moving its headquarters to 18th and Broadway, new activity all around that node with the YMCA and other investments. These are long-term commitments for us, and we’re proud to be a part of that redevelopment.
MG: What are the significant trends in economic development today? Has it changed?
MW: Like any field, it continues to evolve. Some major themes right now focus around disruption, and most of that is driven by technology and innovation. You have automation taking the front seat in many of these conversations; you have robotics and artificial intelligence pervading most of the jobs in our current lexicon. We’ll see a lot of change there. So, how are we getting ready for that?
We don’t see as many large greenfield investments. Kentucky benefited from a lot of those in the 20th century. Now you see new investment entering your market through M&A activity, particularly foreign direct investment. You see foreign companies coming into the U.S. through acquiring a U.S.-based company. You’re going to see a lot of turnover, too, because you have the baby boomers reaching retirement age, and not very many have succession plans for their companies.
One of the things our team is now doing is working with companies and their leadership to plan. Are you going to pass on the company to a family member? Are you going to transition your structure? Are you going to look for a buyer? This is getting very real for many people right now. That’s something economic developers weren’t paying attention to a few years ago.
The other big theme throughout our industry right now is equity and inclusion. It can’t just be about attracting the new company and the high-wage jobs. It has to be about working across the spectrum of folks looking for work, or in your city and whom you need to help reach their full human potential. How can we make sure everyone prospers? Some of this attention is being driven by the growing wage gap. It used to be economic developers would celebrate over the location of jobs – jobs, jobs, jobs – and didn’t ask many questions about what kind of jobs they were. Unfortunately that wage gap has widened. You can credit some of that to technology and innovation; you have jobs accelerating up the spectrum that require a higher degree of education, and you have this other batch of jobs that are lower-skill or no-skill jobs, or service industry jobs, that require less education.
As an economic developer, you have to be very thoughtful now about where you’re spending your time. You want to make sure you’re focusing on high-wage jobs and not incentivizing low-wage jobs, which unfortunately leads to a non-virtuous cycle in your community. The other end is, you’ve got to make sure you’ve got the training programs and the other civic infrastructure you need to support folks who need to start at one end and work their way up through that. Training programs are very important, but they’re very different today than 15 or 20 years ago when Congress first passed the Workforce Investment Act.
MG: How much of a factor are incentives in recruiting and retaining business in today?
MW: I always refer to incentives as the icing on the cake. You’ve got to have a cake first, and the cake is your competitive environment and today your workforce availability. You as a city, or a state, have to make sense to this company for whatever their qualifications are. For us, that’s often location, location, location, being here in the middle of everything, being able to make things here, ship them anywhere easily. You have to have the workforce availability, and you have to be able to demonstrate to the companies not only that you have it but that you have a full pipeline to keep it or grow it. And then a generally competitive environment helps – a tax environment, things like workers’ comp, UI, those considerations that you often see debated.
And then the incentives really do tend to come toward the end. They do factor into the majority of the projects that we work. But we’ve found that Kentucky’s incentives are very competitive. There are a couple other states that have really robust front-end incentives where they will try to just ‘buy’ the business, if you will. Our incentives are performance-based, and that’s what taxpayers expect – they want to see the company actually do what they committed to do and then reap the reward. That has allowed us to be very competitive. And we’re competitive with our surrounding states, too.
MG: Many of today’s economic competitions are won or lost with regard to the qualifications of communities’ workforces. What is Louisville Forward’s strategy for enhancing and growing the workforce?
MW: Louisville Metro, under Mayor Fischer’s leadership, has had a cradle-to-career initiative for a number of years now, looking at our entire education system, from Pre-K to our public school K-12 education, to our higher education system and of course our lifelong learning; it has those four pillars. Louisville Metro has had a dedicated effort toward increasing our degree attainment for a number of years. Most folks have heard of the 55,000 Degrees initiative; that has been hugely successful. We’re not as far as we want to be, but we’re now better than the national average on our two- and four-year degrees, a basic measurement that folks use.
We’ve had a lot of success in our partnership with Jefferson County Public Schools. We’re really excited about the relationship with Marty Pollio, the new JCPS superintendent, and this Academies of Louisville concept he’s been able to implement. This is bringing work into the classroom, that true connection between the workaday world and your career while you are in high school. We now have the majority of Jefferson County high schools participating in the Academies format. We have our very successful magnet schools programs as well.
A lot of businesses now are connecting with and partnering with schools. Students will get experiential learning very early in high school. As early as freshmen, they’ll get a view into what being in a certain career might be like, and then actually have career pathing in addition to the standard curriculum that must be taught.
We’re really excited about that because we think ultimately this model will graduate more career-ready folks – more students who are ready for a two-year degree, a four-year degree or a credential. One of the areas of focus we’ve had the past few years is broadening the perspective of what happens after high school. We want as many folks as can and should to go on to college. Today’s career world requires you to have something beyond a high school diploma. And you can get that while you’re in high school: You can get a credential; some even graduate high school with associate’s degrees now.
We’ve had a very deliberate focus around expanding that perspective, partnering with KentuckianaWorks on programs like the Career Calculator, a program you can go onto as a parent, as a student, whoever, and learn about what jobs are available in the market and what it will pay if you’re going to be a plumber, an electrician, a software developer. We’re getting that information out in the hands of students and parents, sometimes mid-career changers as well, to learn what’s available in this market. We’re having a real data-driven approach, and then making this data available to the community.
We are starting new credentialing programs. The Code Louisville program has been successful. Literally hundreds of people per year go through that in trying to address the growing IT challenge. The future is full of technology, and there are lots of ways we need to address that with our workforce. On the manufacturing side, for years KentuckianaWorks has run the Kentucky Manufacturing Career Center. We help support that. They offer stackable credentials for manufacturing. Manufacturing has changed so much that it’s hard to go into it with just a high school diploma.
There are wonderful opportunities in Louisville’s economy. We’re very diversified because we have strength in manufacturing that not every area got back after the decline in manufacturing. We did. Louisville’s a great place to get a family-supporting wage without a four-year degree. We’re trying to more robustly sketch out and encourage each of those tracks that people can take and welcome people into those career tracks more aggressively.
MG: What are site selectors’ top concerns today: Workforce? Physical access to markets? Tax structure and rates? Incentives? Transportation infrastructure, utilities, ultra-high-speed internet?
MW: Every project we work has two commonalities: people and place. Everything is about workforce and real estate, and then after that every project is unique.
Workforce really is at the top of everything today. That’s for two reasons: One is this increasing need for a higher-talent pool, more skill on the front end. The other big thing with workforce is just not enough people. We’re functioning at 3.5 percent unemployment. Our workforce participation rate in the Louisville area is above the national average. There aren’t many more people we’re going to pull off the sidelines into daily work. These are problems across the U.S.: It is the type of person, and it is the number of people.
And on the real estate side, everyone’s looking for the solution that works for them. If you are looking at a manufacturing facility, there’s a certain number of sites left in Jefferson County, which is largely built out. We’re not going to welcome a whole lot more manufacturing here. We’re going to have some, but it will be highly targeted at folks who really need to be here to be close to somebody in their vendor supply chain.
Another opportunity going forward is in the knowledge economy jobs. The business services cluster has the greatest opportunity for growth. That’s everything from your IT jobs to financial services to back office and shared services opportunities. With the way the world is changing, high-speed internet is critical, and it helps a lot that we’re a Google Fiber city. When you talk about the signals you send to the world, being a Google Fiber city is really important. It’s also important for us to be able to market to our clients that we have multiple high-speed providers, so they can have a choice. We’re getting to situations where folks are doing telework, working from home part- or full-time. Employers want to know their employees can get high-speed internet at home. There are very different circumstances now as we roll into this higher-tech economy.
MG: What is the status of Louisville’s five major business clusters, for each of which you have managers? Are they stable, expanding, shrinking?
MW: They’re all performing well. Advanced manufacturing is a wonderful cluster; it allows folks to make a family-supporting wage without a four-year degree – the average wage in that cluster is around $60,000. It will continue to expand but unless there’s another original equipment manufacturer in the region, that’s not going to grow dramatically.
Logistics continues to be a great strength, with UPS and our interstate system, our rail access, our river. That is the cluster we’re watching most closely in terms of change, where automation is likely to impact that dramatically. The story on automation now is not necessarily that there will be fewer jobs; there just will be different jobs. It’s going to be programming and robotics and things like that. This is another reason for us to continue to upscale in the work force. We need to get ahead of it. There will still be entry-level jobs there; you’ll just see some shift in it.
We call the Food and Beverage cluster the Fun cluster. Bourbonism is still in its very early innings of the game, and with one-third of the country’s distilling jobs here we see a lot of opportunity for growth. Scotch still has 90 percent of the global whiskey market. If we can teach more people about bourbon we’ll do just fine there. And with our restaurant chains headquartered here (KFC, Pizza Hut, Taco Bell, Papa John’s, Texas Roadhouse), this is a great place to start and grow a food and beverage company. We just hosted a big food and beverage conference (International Association of Culinary Professionals) a few weeks ago, and they had a great experience and are coming back. We’re talking to some local folks who are moving into franchising, connecting them with larger franchise operations.
The roots of that Lifelong Wellness and Aging Care cluster grew out of the talent that came out of Humana and started other companies. We’ve got this great talent cluster around aging care and the headquarters that are here. This is a place where we’re putting a lot of focus because demography is on our side; the baby boomers are getting older. Not only are they selling their business, they want to age differently. They’re going to be living longer, and the silver tsunami, as it’s called, won’t crest until more than a decade from now. Between now and then, you’re going to see this continual ramping-up of the consumer-facing side of this, how folks are going to be taken care of and what choices they’re going to make. Technology will drive a lot of this, too, because most people want to age in their homes. They want to be in a multigenerational setting. We’re going to have affordable housing issues around this, too. We want Louisville to be that innovation and thought leadership center for aging care, and because of the talent we have here, we know we can be that.
The final cluster is Business Services, which projections show has the greatest upside. It’s a very broad cluster. We’ve had some wonderful success stories the last couple of years, including Computershare, which moved its back office operation here; they’re now over 600 employees, on their way to 1,000. A couple other shared-services operations that we’ve won here, include Ernst & Young and Hogan Lovells. This is just proving to be a great place for that type of office space activity. We’ve got a good, educated workforce. Our hospitable nature helps make this a nice cultural fit for many companies. And functioning in the Eastern Time Zone helps in the financial market work.
MG: What impacts has Louisville Forward seen from completion of the Ohio River Bridges Project?
MW: There are two big ones. First off is that we now have that connectivity. We don’t have a choke point; that would be the worst possible thing we could have when selling a logistics cluster. But the other side is that we’ve proven we can get big projects done. The joke around here is how long it took, but when it got to decision point, that project was on track and finished early. This is a place that gets business done. To have completed what was at the time one of the largest infrastructure projects in the country, on time, under budget, is a great signal to send to the world.
MG: You’ve worked in Frankfort, where Louisville, the state’s economic driver, traditionally has not been the state’s top priority. Now there’s a Louisville governor for the first time in at least a century. How would you characterize Louisville’s relationship with state government?
MW: We have a great working relationship with our colleagues in Frankfort. They understand business, we understand business, and we get business done together. Secretary Terry Gill and Executive Officer Vivek Sarin at the Cabinet for Economic Development are wonderful partners. Everything we do in the economic development space is a partnership.
When we work on a project together there’s a Louisville Forward case manager and a state case manager. We’ve worked closely on the Kentucky Opportunity Zone Initiative coming out of the federal tax reform package last fall, this opportunity for investment in distressed census tracts, on the airline issue, increasing the number of direct flights out of Louisville, and the list goes on.
We have a great working relationship with KYTC and its District 5 office. Louisville’s roads are city roads and state roads; as you come in and around town, you don’t know whether you’re riding on a state road or a city road. The Tourism Cabinet is a great partner; our downtown convention center is going to be brand-new and open in August. Workforce Development, another great area, is very interconnected. It’s necessary for us to work together and show that united front to folks. That’s what businesses want to see, what site selectors want to see, and what winning communities have.
MG: Amazon’s feedback to Louisville’s bid for that company’s second headquarters was that there is not enough young tech workers here, and you’ve made comments saying Louisville is not large enough to be all things to everyone. What do you see as the city’s best target sectors for growth and recruitment?
MW: We’re a mid-sized city in Middle America. Our region is getting up towards a million and a half people. We’re not New York, L.A., Miami, Chicago. We don’t want to be. We’re going to be the best Louisville that we can be. We’re big enough to be globally relevant, we’re small enough to get work done, and we’ve got to focus on those areas where we can be best.
That’s why we have a cluster strategy. We focus on those five areas because we either are or can be best in class, best in the world, at this. With other mid-sized cities, you’ll often see a similar cluster strategy built around their strengths. Our strengths are somewhat historic, when you look at geography and the long history of manufacturing we have in this community and the more recent history of development of the aging-care cluster. Food and beverage has a long history here. Business services is a more recent add to our cluster strategy as companies look to Middle America to reduce their cost structure. It does not make sense to have a back office or shared services function on a coast; you’re just going to pay more.
In the game of cities, size does matter. Cincinnati is over 2 million metro; Indy and Nashville are around 2 million. We’re 1.5 million. Continuing to grow as a city is extremely important to us. We are growing, and we don’t have a brain drain, we have a brain gain. But we’d like to grow about twice as much as we are per year. We grow half a percentage point to a percentage point a year, and we’d like to be closer to 2 percent per year. We need to grow more organically, but it’s really got to come from attraction.
MG: To grow, you need housing. All over the country, there is low housing inventory, especially affordable housing. What are Louisville Forward’s current goals for community development?
MW: Our real estate market right now is very hot and very tight. Some of that is from the Great Recession, in which there wasn’t enough inventory added. And unfortunately, a lot of home builders went out of business, too. We’re seeing single-family pick back up and a lot of new construction in multifamily, which has been 95 percent-plus occupancy in recent years. We’ll have a lot of new apartments come online, particularly in downtown and the edge neighborhoods, where there’s a lot of folks looking for walkable neighborhoods.
Affordable housing is one of the big policy topics for our country for the next several years. We have a shortage of everything in the housing category. We’re starting to fix some of that, but the cost of construction has gone up so much that many people are just being priced out of the market. That’s why this administration, over the last three years, put $29 million into new affordable housing supports and proposed spending another $12 million for FY19. We’ve funded our Affordable Housing Trust Fund, we’ve started a new loan program to support affordable housing development called Louisville CARES, and you’ll see this administration continue to make investments in affordable housing.
We heavily supported the preservation of tax credits and tax-exempt bonds during the tax reform debate last fall. That would have been devastating if we had lost the private activity bonds that were on the chopping block. We’re excited that Congress actually increased the number of low-income housing tax credits that they’re going to grant this year.
So all of these pieces are important in our proverbial toolbox for affordable housing development, because when you build a house or a multifamily unit, it costs X. You’ve got to have a supplement – whether it’s some type of tax credit, tax exempt bond, low-interest loan, a forgivable loan left behind in the project – to support that so the rent or the mortgage can be kept at an affordable rate.
MG: Does Louisville Forward get involved in public private partnership projects/activities?
MW: We are very much involved in P3. P3 is a broad umbrella. A lot of these TIF projects we’ve done we would certainly consider P3s. The Omni project and all that it represents is certainly a P3; we own the land and then worked with them on the development. There are certain things we wanted out of that development and certain things they wanted, so you work in partnership between a public entity and a private entity.
We’re currently working with the Louisville Urban League on a track and field facility in the Russell neighborhood. That will be a great P3 partnership that we’ll be wrapping up the details on very soon. And we’re working on another one up in the Paristown neighborhood, where we have two different developments going on there to create new opportunities for the city.
MG: What trends, statistics or metrics do you watch most closely and think are important to Louisville?
MW: The biggest thing we track is wages. We are trying to raise our median wage, because it is indicative of a more prosperous community. Ultimately, all of the socioeconomic statistics connect to each other: educational attainment connected to wage connected to health outcomes. We are also tracking our creation of high-wage jobs in the professional, technical and managerial spaces, and we compare ourselves against our peer cities. That’s how we measure. Durable goods is a good marker to watch; we make a lot of durable goods here in Louisville.
Globally, we watch the trends around automation, technology and innovation, and always keep an eye on general economic trends. The way the whole global economy has responded after the Great Recession is not similar to cycles past. Everybody in a role like mine these days is kind of holding their breath to try to figure out when this business cycle ends and what that will look like. Most prognosticators still give us another couple of years of runway on this cycle, and the general feeling is that whatever’s at the end of it, whatever downturn there is, won’t be as significant as the last one, because this upturn hasn’t been nearly as significant as prior. At least that’s what we’re hoping for. The peaks and valleys of growth and recession in this economy have performed very differently in the last 10 years.
MG: What should local business operators be doing or thinking about to help improve the economy?
MW: Investing in their employees. Without fail, nearly every time our team meets with an employer upset about their ability to attract and retain workforce, by the time you get into the conversation about what they pay or what their work environment is like, you can generally tell why they’re having trouble. And it’s not just pay. Pay is very important; pay is the number one driver. You’ve got to have a competitive wage, you’ve got to have a nice benefit structure. But with the millennials now becoming the largest portion of our workforce, they’re demanding different things. They want more flexibility, whether it’s blue collar or white collar. As an employer, you’ve got to be ready to set a different culture and invest in your employees. And that’s not just dollars and cents; it’s also flexibility and being family-friendly.
MG: Do you have a closing comment?
MW: I’ll mention one other tool and hit on the theme of local control. One of the things that we, along with cities and counties across the commonwealth, pursued for several years was a local option sales tax. As we go forward into what appears to maybe be a second chapter on tax reform in Kentucky – the legislature has formed a committee to talk more about what that should look like – we need to give cities and counties more control.
If Frankfort’s going to continue to be strapped by the pension obligations, and that is a reality – and we’ve got to pay in for our portion of that obligation, and that’s our reality – then you’ve got to give the localities more control. Whether that’s the local option sales tax as originally envisioned or a different version of it, let us control our own destiny. We’re happy to work with Frankfort, we’ve got a great working relationship, but the government closest to the people tends to be the one that knows best for her people. And we just want to be able to serve.
Mark Green is executive editor of The Lane Report. He can be reached at [email protected]