Building a Healthy, Sustainable Economy
Imagine a city whose heart throbs with life, surrounded by stable neighborhoods. A city where construction cranes dot the landscape, attesting to a building boom. Where a vibrant port and airport serve domestic and international markets. Where an offshore wind farm powers and empowers, marking the region as a hotbed for research, development, and manufacture of 21st-century technologies.
That’s the Cleveland we’d all like to see – a core city emblematic of a revitalized Northeast Ohio. It’s captured in the vision that guides the Cleveland Foundation’s economic development strategy: Cleveland as a thriving and sustainable economy that is globally connected and known for innovation.
To realize this vision, we’ve invested heavily in economic transformation efforts that are closely linked, and worked toward a healthy, sustainable economy. We could tackle none of these priorities without our generous donors, who make this work possible.
In the early 1900s, Cleveland was one of the largest cities in America. It was a thriving urban center, known for its civic reforms and progressive government. Cleveland was also emerging as a manufacturing powerhouse with inventors and entrepreneurs pioneering new technologies in electricity, chemicals, metals, paints, and machining. The city was also undergoing a building boom and giving rise to major cultural and civic institutions, everything from the Cleveland Museum of Art, the Cleveland Orchestra, and the Cleveland Museum of Natural History, to the City Club of Cleveland, the forerunner of the Urban League of Greater Cleveland, and the Jewish Federation. Cleveland in the early 20th century was progressive, innovative, and growing. One historian called it a “big, brawling, smelly, alive town, where commerce is king…and the population keeps skyrocketing.”
About 10 years ago, the Cleveland Foundation board came to the realization that if we didn’t take a more active role in re-charging Cleveland’s economy, it wouldn’t matter how much attention we dedicated to other areas. Cleveland’s economic strength had diminished, and the foundation decided it needed to take an active role in helping the city regain its peak strength. Since then, the foundation has been driven by a vision of Cleveland’s economy as thriving, sustainable, globally connected, and known for innovation, and that vision has become a guide for shaping the foundation’s economic development work. This work has evolved organically, focusing on the biggest gaps and opportunities presented by the community.
The foundation originally adopted five priorities designed to stabilize and diversify the economy as well as rebuild a culture of entrepreneurship and innovation. Those priorities included innovation and entrepreneurship, business growth, promotion of identified industry clusters, globalization, and healthy core cities. These priorities were pursued through focused leadership and intensive grantmaking. While the majority of the foundation’s grantmaking involves Cleveland and Cuyahoga County, in economic transformation, there was more of a sweeping focus, recognizing that the city and county are part of a larger economic system that needed to build regional capacity.
The foundation focused on creating and nurturing economic development intermediaries that could support Cleveland locally and regionally in each area of our priority areas. Over the past 10 years, we have given $50 million in startup and other funding to cutting-edge nonprofits. They include BioEnterprise, for health care and biosciences; JumpStart, for entrepreneurship; NorTech, for cluster building; Team NEO, for business attraction; Magnet, for manufacturing innovation; WireNet, for manufacturing supply chain and business growth; and Global Cleveland, for attracting newcomers.
In essence, the Cleveland Foundation has helped shape and support a whole new economic development ecosystem for our region. Many of the organizations in this ecosystem are now considered national leaders in their respective areas of work..
After following this approach for the last decade, the foundation felt it needed to assess its progress, with an eye toward planning future work. In late 2012, the foundation undertook a strategic review of its efforts, using an independent consultant with an understanding of philanthropy and economic development issues and best practices.
The assessment came back mostly positive, showing real successes in capital, innovation, and job growth on a regional basis. Thanks in part to the network of economic intermediaries, Northeast Ohio has experienced a turnaround in industry mix and business performance. In other words, at the regional level, our strategy is beginning to pay off.
However, at the city level, the assessment showed a different story. Serious challenges still face the city itself. For starters, population and employment losses in the City of Cleveland have been dramatic. If these trends continue, they will put great pressure on the city’s fiscal and other systems. What’s more, any progress seems to have bypassed significant parts of the population. There is a 19 percent unemployment rate and a 32 percent poverty rate for African-Americans in Northeast Ohio. Local minority-owned firms are underperforming nationally and are concentrated in low-growth sectors of the economy. Furthermore, high school graduates and two-year degree holders have relatively high poverty rates in Cleveland compared to other regions. Furthermore, poverty and unemployment rates are three times higher in the city than in the rest of the Cleveland metropolitan area. Nearly half of all children in the city of Cleveland – its future workforce – are living in poverty today. In short, a healthier region is not translating into a healthier core city. This harsh reality has caused a proposed a shift in the foundation’s priority areas.
The Cleveland Foundation is currently exploring a new strategy for economic development work and investments in the next five to 10 years. While it is still early in the planning process, this strategy will be guided by a major goal: to ensure that the growth Cleveland achieves is inclusive and that it generates economic opportunities for all its residents. As presently envisioned, to achieve this, the foundation will focus on two priority areas, where the need is high and the foundation’s involvement can be critical in changing the status quo. The first is realizing aggressive job growth in the city, and the second is balancing the supply side, or human capital, side of the equation.
Realizing aggressive job growth in the city
The city has a disproportionate share of the region’s employment and population loss. To achieve inclusive growth, the foundation will need to support minority entrepreneurship and employment. One example of this is the “Evergreen” strategy in the city of Cleveland, which is described within the Greater University Circle Initiative example below. Another example is micro-lending, where the Cleveland Foundation was instrumental in identifying the demand/supply gap for micro loans and subsequently brought the Economic and Community Development Institute (ECDI) to Cleveland in July 2012. ECDI brings capital training and technical assistance to neighborhood businesses, and has already established a track record of supporting minority companies, including women-owned firms.
The foundation will also need to support the growth of key industry clusters. Cleveland has the potential to host a series of thriving, high-tech, high-growth clusters as well as local, nontraditional clusters that hold potential for job creation in the near term. Some possibilities include biomed, health IT, manufacturing, food processing, film, and business-to-business. To encourage growth of regional or local clusters in the city, the foundation will need to plug capital gaps and help the city meet the land and building needs of target companies. One promising approach is to encourage the development of clusters along RTA’s public transit systems so people can get to the jobs being created.
A perfect example is occurring in the Health Tech Corridor in the MidTown district.
Launched in 2010, the Health Tech Corridor has been a focused effort to provide ample, affordable space for the new biotechnology companies that are spinning off research efforts at Cleveland State, Case Western Reserve University, University Hospitals and the Cleveland Clinic, as well as non-biotech companies that want to locate near University Circle. The corridor is linked to both University Circle and downtown by Greater Cleveland RTA’s HealthLine. Currently, the area offers 500,000 square feet of flexible, ready-to-occupy space, giving businesses a place to anchor for their entire lifecycle, from incubator to developed company. Occupancy levels are at or near capacity, and land values are rapidly escalating as development occurs.
In these and other ways, the foundation will work to build up what is considered the demand side of the equation, generating jobs and demand for workers in the core city.
Balancing the supply side, or human capital part, of the equation
Unfortunately, Cleveland fares worse than the rest of the country on many important indicators, including labor force participation, employment rates, educational attainment levels, and poverty rates. One of the most disturbing findings is that even those Clevelanders who have post-secondary education are experiencing high rates of poverty, with African-American men most at-risk.
To address these challenges, the city needs to align the area’s education and training offerings with job opportunities, both current and future, so residents will get a return on their investment in terms of wages earned. In effect, a new career and technical education system is required. Cleveland has successful examples of targeted workforce development and can take these efforts even further. Consider the NewBridge Cleveland Center for Arts and Technology:
The Cleveland Foundation launched NewBridge in 2010 with University Hospitals, Cleveland Clinic, KeyBank, and the Kelvin and Eleanor Smith Foundation. Patterned after the successful Pittsburgh-based Manchester Bidwell model of training centers, NewBridge provides adult vocational training based on the hiring needs of local institutions. It also offers soft skills training to remove obstacles to employment. Its initial vocational tracks are phlebotomy and pharmacy technology, fields identified by UH and the Clinic as having a large number of available positions. NewBridge also offers after-school programs for youth, giving them encouragement to stay in school as well as exposure to adult role models and opportunities for future employment. Applications for both the adult and youth programs far exceed available spaces, and almost all graduates of the vocational program have gained employment in their chosen fields.
The foundation is also studying successful workforce development models in Europe, particularly the apprenticeship systems that are effectively training youths who are not on the college track. In addition, we are looking at how we can strengthen connections between residents and career opportunities. Sometimes, residents simply don’t have the networks they need to access jobs in the community and build careers. One way to balance the human capital equation might be to better link economic development intermediaries to workforce organizations, such as grantee organization Towards Employment.
Another way might to solve this problem may also be to identify and partner with employers who are committed to hiring city residents. As examples, Audible, an Amazon company, is committed to hiring residents in Newark, New Jersey, where the company is headquartered, and University Hospitals is piloting the same effort in Greater University Circle here in Cleveland.
The foundation’s Greater University Circle Initiative provides a great bridge from recent efforts to new efforts in Economic Transformation. Its successes show how the foundation and its partners can catalyze and sustain new ventures that lead to the kind of inclusive growth the community needs.
Seven years ago, the foundation convened the area’s major anchor institutions around a collective vision to stimulate reinvestment in six struggling neighborhoods that surround the medical, cultural and educational jewel we know as University Circle.
The leaders of the area’s anchors – the Clinic, UH, Case Western Reserve University, the Greater Cleveland Regional Transit Authority, and others – were eager to get involved. They and a coalition of public, private, and nonprofit partners have invested in a sweeping range of projects to spur dramatic and transformational physical development.
In addition to physical development, we knew we had to invest in human capital by creating jobs for local residents. So we launched a series of for-profit, employee-owned companies called the Evergreen Cooperatives. These companies were built around the needs of the anchor institutions for goods and services. The Greater University Circle anchor institutions mentioned above spend $3 billion in goods and services, and there was opportunity to capture a portion of that for the benefit of local businesses, neighborhoods and residents.
These co-ops include the Evergreen Cooperative Laundry, a commercial-scale laundry focused on health care bed linens; Evergreen Energy Solutions, a clean energy and weatherization company that installs, owns, and maintains solar generators on the roofs of the city’s health and education buildings; and Green City Growers, one of the nation’s largest urban hydroponic greenhouses. These three businesses, and others to come, are part of the “buy-local” movement and are giving jobs and ownership opportunities to approximately 80 residents currently. These individuals went from being unemployed, and in some cases incarcerated, to becoming worker-owners! They have been given a second chance – as well as a voice – and they are making a huge contribution to their neighborhoods and to Cleveland.
Neighborhoods cannot succeed unless the people living there are valued and empowered. Greater University Circle is making great progress and has even become a model for other cities across the country.
The Cleveland Foundation is planning to build on the approaches outlined above for a broader economic development initiative, and will be driven by the same measure of success: not just growth, but inclusive growth that benefits residents throughout the community.
An Example of an Economic Priority in Action
The Cleveland Foundation believes Greater Cleveland can claim a position of leadership in the emerging advanced energy industry, spurring the creation of thousands of jobs while also improving our local energy future. We’re working with a number of partners to accelerate advanced energy activity in our region. Our grants in advanced energy span a wide range of projects, from the Great Lakes Energy Institute at Case Western Reserve University to the formation of Evergreen Energy Solutions in Greater University Circle.
Focus: The Cleveland Foundation supports and promotes efforts to develop an advanced energy industry in Ohio though research, grantmaking, and public advocacy.
What we’re doing: Educating and informing the public and key decision makers.
The foundation’s board granted $200,000 to the Cuyahoga County Commissioners to help fund a feasibility study around the installation of electricity-producing wind turbines in Lake Erie. The project was proposed by the Cuyahoga Regional Energy Development Task Force.
Advanced Energy Research
Electric vehicle/PHEV study
A Cleveland Foundation-commissioned study, conducted by the Electric Power Research Institute, concluded that with a substantial increase in the use of electrically powered vehicles nationwide and a retooling of its manufacturing base to support production of these vehicles, Northeast Ohio could potentially gain more than 10,000 new jobs and increase its annual economic output by billions of dollars. Download four different documents related to the study:
Renewable energy portfolio study
The Cleveland Foundation commissioned the consulting firm ICF International to study the potential impact of a advanced energy portfolio standard (AEPS) on electricity prices in Ohio. An AEPS would require utilities in the state to produce a certain percentage of electricity through renewable sources such as solar or wind power. The study projected an almost-negligible impact on the price individuals and businesses would pay for electricity if an AEPS similar to the one in effect in Pennsylvania were adopted in Ohio.