Economic metamorphosis – Spokane tries to reform development strategy to captialize on economy in new millennium

After an Army tour in Vietnam, Spokane native Jim West returned home in late 1974 just as the city was winding down the World’s Fair.

Tom Sowa
Staff writer Spokesman Review

The 23-year-old West found a city with an energy he hadn’t seen before. After hosting several hundred thousand visitors in a renovated downtown, Spokane civic and business leaders saw themselves on the cusp of a prosperous new era.

Today, West is amazed at what’s happened to Spokane since 1974.

"If you look around, we’ve been just left behind by everyone else," said West, who has served in the state Legislature for more than 20 years, and is now running for Spokane mayor.

A stinging series of low rankings by outside observers, such as Forbes magazine, plus severe downturns in large private employers like Telect and Kaiser, have hurt the region’s economy. The slowdown has led community leaders and business executives to look for new ways to spur economic development.

Those who track the area’s economy and history agree in general that the region is enduring a difficult metamorphosis into another kind of economy.

Without mining, forestry and agriculture to lead the way, "it’s clear we’re going through a transition in the economy," said Steven Jordan, president of Eastern Washington University.

At stake, according to many, is Spokane’s ability to create enough good jobs to reverse an exodus of young talent and brainpower.

"Our biggest export is trained kids who leave the area after graduating to get jobs elsewhere," West said.

The shift from a natural resource-based economy to something else is forcing area leaders to search for collaborative solutions, despite a history here of groups going their own way and choosing sides based on geographic boundaries. In a recent development, Spokane Regional Chamber of Commerce President Rich Hadley advocates the merger of his organization with the Spokane Area Economic Development Council.

"The good news is there’s really an effort going on among area groups to fix the problems we’ve had," said Jim Simmons, president of ICM Asset Management.

The groups and agencies involved in regional economic development — ranging in size from more than a dozen employees to those with just a handful — said they’ve learned from past mistakes. Rather than search for quick fixes, they are focused on building on the region’s strengths and assets. Rather than imitate the success of technology centers like Colorado Springs or Boise, and the biotech growth of Seattle, Spokane needs to find its own way, said area officials.

"Everybody, including us, wanted to become a tech center for awhile," Simmons said. "Now we have to truly determine our strengths objectively.

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Many leaders interviewed for this article agreed the collective energy that brought the World’s Fair to Spokane 30 years ago is needed again if the region is to retain and grow jobs.

The first step is for the region’s main economic development organizations to overcome turf battles over money and mission and work together, many argue.

There are a host of possible programs and initiatives in the pipeline that would benefit the region, but few of them have been widely embraced except for plans to develop a medical research institute in Spokane and a University District east of downtown.

What other strategies are used depend on who is asked the question.

Some leaders advocate an economic summit to galvanize discussion and create a new "vision" or mission for growth.

Others, like West and several business owners like Bill Williams, founder of Telect Inc. in Liberty Lake, believe the first step is to simplify the state’s taxes and regulations.

"It’s like a polluted salmon stream. After a while you have to remove the debris that’s keeping growth from occurring," West said of the need for business reform.

West is certain to make economic development an issue in his mayoral campaign. Current Mayor John Powers said he’s made growth one of his priorities by creating a full-time economic development position at City Hall.

The other mayoral candidates — Steve Corker, Sheri Barnard and Tom Grant — are also expected to talk about the economy as the campaign proceeds.

Low on the list

Economic transformation has been on the minds of most Spokane-area leaders since Forbes magazine’s first business climate ranking in 1999.

That year, Spokane finished 161 out of 162 cities. The impact was a resounding shudder across the region’s business community, said Bill Gray, who headed WSU’s Spokane programs for more than 12 years.

In this year’s ranking — which covers 2002 — Spokane came in at No. 100 out of 200 U.

S. metros surveyed for the quality of their business climates.

Robert Schwartz, co-director of entrepreneurial programs at EWU, likened the region to a struggling tennis player who is losing more games than he wins.

"You don’t just tweak what you’re doing. You change your whole game," said Schwartz.

The angst felt by many Spokane-area economic development experts is exacerbated by the seeming success of North Idaho.

Kootenai County, for instance, gained about 1,700 jobs in 2001 and 2002, despite job losses at timber and wood products companies. Most of the increase was tied to population growth, a strong construction market, and tourism.

In the same time period, Spokane County lost about 750 nonfarm jobs, according to Washington state officials.

"We’re not hearing a conversation in North Idaho about transforming our economy," said Jonathan Coe, president of the Coeur d’Alene Chamber of Commerce. The North Idaho strategy, he said, is essentially the same now as it was five years ago — diversifying the area’s economy by building a variety of industries.

Failed efforts to combine Spokane and Kootenai counties last year into a joint statistical area based on Census Bureau standards shows that turf battles among groups and governments continues, according to many.

Coeur d’Alene and Post Falls chamber members opposed the proposal. Chamber leaders in Spokane supported the plan as a way to reflect the growing connection between the economies of the two regions. The designation was touted as a way to attract the attention of companies looking to relocate to larger metropolitan areas.

Kootenai County leaders balked at the proposal, believing their identity as a smaller, rural center would be lost in the joint status, said Coe.

The disagreement over the Census Bureau designation is one in a number of turf battles among area economic development groups.

Mark Turner, who is about to leave as president and CEO of the Spokane Area Economic Development Council, identifies the problem as "fighting over scraps.

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Spokane is not the only region with such conflict, said Turner, who resigned his post after five years to move back to New York state.

"If we all had the resources we needed, our organizations would view themselves as less competitive and more capable of achieving mission alignment," offered Turner.

Turner believes in the need to redefine the meaning of "economic development.

" In years past it meant what was called "smokestack chasing" — recruiting companies to move to the area.

The pitch, by groups like the EDC and Jobs Plus in Kootenai County, included promises of cheap labor, cheap power and affordable cost of living.

But Turner and others contend that economic development goes beyond recruitment to "macro" strategies that boost the quality of life as well as create jobs.

One vision

The new "organic" view of development relies on nurturing young companies, transferring technology from universities to entrepreneurs, and the creation of highly skilled workers for technical and tech-based service jobs.

Scott Morris, president of Avista Utilities and a member of the Washington Economic Development Commission, said creating a common vision of the future is one way to end turf battles.

"Our region needs a strong vision the way the city of Tacoma several years ago defined itself as the Most Wired City in the Country," said Morris.

Tacoma, once considered by many a boring and tattered southern neighbor of Seattle, has turned a corner economically. Last year, Tacoma was the only large Washington city to enjoy job growth in the sluggish economy.

Much of Tacoma’s revitalization stems from the collaboration of civic and business leaders on a set of short-term efforts, said Juli Wilkerson, director of Tacoma’s economic development commission.

A key step was improving and saving Tacoma’s waterfront, she said.

"We all agreed that every great city has a great waterfront," Wilkerson said.

Beyond finding a clearer notion of what Spokane’s next economy should look like, many said there are several major hurdles to first overcome.

Gray, who is taking a sabbatical from WSU, said Spokane leaders have a history of pegging hopes on the latest economic development fad.

"We tried and failed to be a smaller version of Silicon Valley. And we don’t have any realistic chance of becoming another biotech center," said Gray.

Past economic development strategies here included:

•Momentum and Focus 21. Starting in 1987, business leaders invested several million dollars in strategic campaigns to recruit more family-wage jobs, improve business growth and create a stronger economy.

After 10 years, Momentum evolved into Focus 21, which ended in 2002 after five years. Focus 21’s primary goal of attracting 5,000 new jobs was accomplished, said its leaders.

•SIRTI. After heavy lobbying from Spokane, state legislators approved the creation of the Spokane Intercollegiate Research and Technology Institute in 1989. SIRTI is a state-funded facility initially planned to transfer cutting-edge research from area schools to companies developing new products. It had minimal success with that strategy, but has refocused as a business incubator, which emphasizes helping startups sharpen their marketing and sales efforts and finding financing.

•Symposium Series. In 1999, Spokane business leaders initiated a community forum series to ask why the region was struggling to develop biotech and technology jobs. The series of forums led to a study by David Kolzow, a Southern Mississippi University analyst. Kolzow concluded the region needed a centralized agency to organize development efforts.

Few of the study’s suggestions have been adopted. There is currently no centralized planning agency for Spokane or the Inland Northwest.

•Biotechnology. Starting in 2000, some area leaders concluded the region had a cluster of biotechnology companies that might grow into a mini-Boston or San Diego.

The jury is out on whether Eastern Washington will develop real job growth in the biotechnology industry.

•West Plains projects. In recent years, inexpensive land close to the Spokane airport made the West Plains an ideal site for growing new businesses. A proposed Pacific Northwest Technology Park on Highway 2 was promoted as a way to galvanize that growth. Business and government leaders hope the West Plains can develop into a regional transportation and distribution hub. So far, however, no distribution center has been launched and the technology park has stalled due to the economy.

Gray said nearly all those past strategies were flawed for ignoring what the community’s natural strengths and qualities are. "The one exception," he said, "is the distribution center idea.

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On the other hand, said Gray and others, a Medical Research Institute and the concept of a University District in downtown Spokane could be big successes.

The MRI plan, backed by area educators and business leaders, envisions Spokane attracting federal and corporate research dollars for studies on treating diseases or health problems.

The University District proposal is based on the concept of further linking area colleges, nearby downtown hospitals and an anticipated increase in small companies.

Schwartz, at EWU’s entrepreneurship program, said the key is getting private business, government and area schools to work together.

"If you’re smart enough and work on things together in the community, something good will happen," Schwartz said.

But planning sometimes requires an added element, something EWU’s Schwartz called good luck and economic opportunism.

"It’s the other ingredient any successful company has — being open to change," he said.

"You have to be flexible and ready to move when the next opportunity comes at you."

•Business writer Tom Sowa can be reached at (509) 459-5492 or at [email protected]

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