CEOs: Next Delaware governor needs jobs growth plan

• The Delaware Business Roundtable released a report on job creation and the economy.
• The organization made 19 recommendations, which it says the next governor should examine.
• Proposals include encouraging tech startups and marketing companies to venture capital firms.

With less than four months before the general election, a coalition of the state's most powerful business leaders is hoping to convince Delaware’s next governor to rethink the state’s strategy for growing the economy and creating jobs.

The state can no longer count on the heavy manufacturing and corporate headquarters jobs that have long sustained the local economy, the Delaware Business Roundtable argues in a report released Wednesday.

Instead, the group said, future jobs will depend on the state’s ability to create fertile ground for entrepreneurs, involve the private sector in economic development decisions and ease bureaucracy that hampers new investment.

“The economic landscape, the jobs landscape has changed significantly. Blue-collar, middle-class jobs aren't what they used to be,” said Mark Turner, chief executive officer of WSFS Bank and Roundtable chairman. “Doing what we used to do and doing it a little better isn't going to be enough. We have to identify a new path.”

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The 45-page report, called the "Delaware Growth Agenda," includes a slew of policy prescriptions for pursuing that approach – a roadmap that touches on such things as land use, environmental law, public education and quality-of-life enhancements.

“If I could choose two people to read this report, focus on it and talk about it, John Carney and Colin Bonini would be very high on my list,” Roundtable Executive Director Robert Perkins said, referencing the two parties’ leading candidates for governor.

The report lays out 19 recommendations, including proposals to amend the Coastal Zone Act to allow for redevelopment along the Delaware River; overhaul state and county land use policies; encourage private business to invest in economic development; create an "innovation district" that would offer incentives for startups; and increase state funding to higher education, particularly the University of Delaware.

Some of the proposals simply call for unifying existing efforts to encourage Delaware’s nascent tech startup community and market companies to venture capital firms. Others call for a regional approach to economic development, expansion of the Port of Wilmington and greater emphasis on promoting entrepreneurship to Delaware students.

It was significant that the call for a different approach came the same day shareholders of the DuPont Co., long the backbone of the state's economy, voted to approve a merger with the Dow Chemical Co., said Charles Riordan, deputy provost for research and scholarship at UD. The deal, announced months ago and expected to be official at the end of the year, will combine the century-old companies then divide them into three parts, with one based near Wilmington.

"I think the ground is incredibly fertile for these types of changes," Riordan said. "I think there's a full appreciation that the way we do business in Delaware is going to be different in the future."

Perhaps the most controversial recommendation is a pitch to amend the Delaware Coastal Zone Act, a 45-year-old state law that forbids new heavy industrial development along a 150-mile strip that extends 2 miles west of the state’s coastline. A grandfathering provision allowed companies in place at the time, such as the Delaware City Refinery, to continue operating.

The Delaware State Chamber of Commerce has championed a proposal in recent months, now backed by the roundtable, that would allow new companies to redevelop those former industrial sites in exchange for cleaning up environmental contamination left behind by predecessors.

“Don’t you want the brownfields cleaned up?” Perkins asked. “I think it is a blight up and down our coast when we have the opportunity to change the law and allow for some development there with the requirement that they clean up the site.”

The report also urges state and county leaders – particularly those in New Castle County – to overhaul development codes and Delaware Department of Transportation regulations long cited as impediments to new development.

Some advocates are skeptical of trimming back regulations they say are necessary. David Carter, the former president of the Delaware Audobon Society, said the kind of heavy industrial development barred by the Coastal Zone Act would create exactly the kind of jobs that are fading out of the new economy.

"It's going to go backward to an economic structure that no longer exists," Carter said. "We do have skilled laborers who are hurting, but I think it's disingenuous to just say to them that we can just make the same kinds of jobs come back."

And while he said some small tweaks to county zoning codes could be useful, Carter thinks it would be a bad idea to just start cutting regulations in the interest of making it easier to develop.

"What you may end up doing is making the big owner of that company at the very top make a lot more money, but it doesn't distribute to the rest of the staff," he said. "And you don't balance these projects with the larger social need."

The roundtable also wants to create a public-private organization, called the “Delaware Prosperity Partnership.” The independent board would include representatives from government agencies, such as the Delaware Economic Development Office, and private firms willing to supply expertise and funding to help attract new businesses to the state – something DEDO does now with the help of state taxpayer grants and loans.

The roundtable has proposed bolstering that effort with expertise and about $2 million in funding from the private sector.

“The benefit and knowledge the private sector can bring to this process are immense,” Perkins said. “However, to do that, the private sector ought to have skin in the game.”

Another major recommendation calls for the creation of an urban “innovation district” that would provide co-working space for startups and access to ultra-high-speed internet, along with tax incentives and relaxed land use regulations, to attract entrepreneurs and startups. Riordan said the Univeristy of Delaware's STAR Campus is a good example of how such districts can work.

Dan Freeman, director of UD's Horn Program in Entrepreneurship, said he hopes reports like this can keep state leaders focused on long-term economic strategy, which can be politically difficult.

"When it comes to the kind of investments we're talking about, there's not a huge, headline-making win on day one,"  Freeman said. "Some of the investments may not work out as well as you hoped."

But while providing incentives for big businesses to bring many jobs at once may be a more satisfying short-term victory, Freeman argues creating fertile ground for many smaller, more innovative and nimble companies is less risky in the long term.

While the report is clear that a new path is needed, Perkins said it is not an indictment of the Markell administration’s economic development policies during the Great Recession. Gov. Jack Markell, who is term-limited, is leaving office in January.

“I think the governor and [the Delaware Economic Development Office] did everything within their power to lower the unemployment rate and bring businesses here,” he said. “This is, however, is an opportunity to reflect on the future and think about where we ought to go on a long-term basis.”

Bonini, a Republican state senator from Dover, says the call for a change of strategy is necessary because the approach Democrats have taken isn't working.

"This is another extraordinarily important example that we've got to change course," he said. "For 24 years we've had Democrats in the governor's office and, to be honest, things aren't great. The expectation that another Democratic governor is going to be able to make the changes necessary is naive."

Carney said Delaware has planted seeds for the kind of innovation the roundtable is calling for under Markell, citing projects like the Mill, a co-working space for startup entrepreneurs in Wilmington, or UD's STAR Campus.

"The job of the next governor is to cultivate those seeds of innovation," Carney said. "Look, these are changes that every state in the nation is dealing with. And the competition is really fierce to be the state that's best positioned."

Though he wants to dig deeper into the details, Carney said the broad themes of the report match closely with his own ideas for where the state needs to go.

Jonathon Dworkin, a spokesman for Markell in a statement said, "We hope that some of these recommendations will help the state build on efforts that have strengthened our infrastructure, improved our schools, expanded exports and reformed our tax code."

Dworkin said the state is on the right track, pointing to stats like job growth that is outpacing nearby states and strong labor force participation rates.

The Delaware Growth Agenda was developed over eight months and prepared by TIP Strategies, a consulting firm with offices in Austin and Seattle. Perkins said the consultant was paid about $200,000 for the research, which included collecting statistical data that compared Delaware’s economic performance and interviewing about 100 employers, public officials, industry and interest groups.

The report is the second major policy paper put forward by the roundtable, a group of about 50 CEOs whose companies reportedly employ more than 75,000 people in Delaware.

The group in September issued a report calling for lawmakers to make systemic budget reforms curbing rapidly growing costs of things like employee health care and public education while finding revenues that are more stable.

That study got a cool reception from some elected officials and lawmakers ultimately chose not to make any major reforms in the legislative session that ended July 1.

Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel. Contact Matthew Albright at malbright@delawareonline.com, (302) 324-2428 or on Twitter @TNJ_malbright. 

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Delaware economic report 

In its report, the Delaware Business Roundtable listed strengths and weaknesses it sees in the state's economy:

Strengths

• Large base of scientific talent
• Delaware judiciary/body of corporate Law
• External business brand and corporate database
• University of Delaware, Delaware Technical Community College, Delaware State University and other higher education institutions
• Low-cost of living state in a high-cost region
• Presence of Dover Air Force Base
• Transportation infrastructure and linkages (highway, seaport, rail, air)
• Location in the heart of eastern corridor
• Nascent entrepreneurship and innovation assets
• Zip Code Wilmington and TechHire Initiative
• STAR Campus
• Horn Program in Entrepreneurship at UD
• Silicon Valley East

Weaknesses 

• Current status of economic development
• Lack of private-sector engagement
• A limited state economic development strategy
• Silver bullet mindset
• NIMBY attitudes
• An onerous development process that intensifies perception of an unfriendly business climate
• Available skilled workforce to fill demand for information technology positions
• Underdeveloped entrepreneurial culture
• Size of the public sector in the state’s economy
• Public safety perceptions in Wilmington
• Perception of K-12 education
• Coastal Zone Act restrictions on brownfield redevelopment