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The RAND Corporation, The Horizon Initiative and an Economic Development Model for New Orleans 2009/12/10

Posted by Mike Cutno in Economic Development.
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The Horizon Initiative, a collection of more than 400 business leaders, was formed in 2006 in response to the bleak economic outlook caused by Hurricane Katrina. The group wanted to partner with the City of New Orleans to coordinate economic development through a public-private partnership (PPP). It was their view that New Orleans needed both a centralized economic development unit and that such a unit should be in the form of a private organization that partnered with city government. In this instance the organization would replace the economic development effort of the City, and partially funded by the City, but would not be a public agency.

The Horizon Initiative went to the RAND Corporation to get the ball rolling on creating the PPP. RAND is a policy research organization with high credentials, and various accolades and criticisms. Horizon requested that RAND conduct a study on the best practices for economic development and recommend a set of policy goals for New Orleans.

RAND conducted a study, “An Economic Development Architecture for New Orleans,” that indeed concluded that New Orleans should use a PPP as an economic development unit. The study used three research methods to come to this conclusion: 1) examination of seventeen cities’ economic development models to determine the best practices nationwide; 2) study of New Orleans economic infrastructure before and after Katrina; and 3) interviews with economic development professionals to get an understanding of the economic development operations and overall environment.

Their findings from other cities they studied showed what they considered to be best practices across organizations including:

  • A comprehensive design with an implementation plan executed by the; proper organization;
  • A vision for goals set forth by the development authority and community;
  • A set of industries targeted by a strategy;
  • A coordinated effort with a clear division of labor among economic development parties;
  • Setting priorities and goals; and
  • Having a system to measure if and how those goals are met.

The PPP that RAND proposed should be funded by public and private sectors and staffed according to appointments by private and public sector officials. It should also have a director that coordinates efforts and directs a resource group headed by industry experts. The director would keep an outlook on the strategy and project into the future.

RAND grouped New Orleans industries into three categories that should be the focus of a development strategy:

  • Core Industries: Maritime, Oil & Gas, Tourism.
  • Vital Industries: Biomedical, food-processing, small-business.
  • Growth-Potential Industries: arts & entertainment, IT, energy technology.

Their recommendation was to use a “retain and grow” strategy that focused on strengthening the core industries, reinvesting in the vital industries, and implementing policies, while investing little, into growing growth-potential industries. The rationale was that New Orleans needed to secure the economic base before endeavoring to expand in new sources of jobs and production.

The city, both the City of New Orleans and the wider business community, embraced the RAND report, at first. In January of 2009, Mayor Ray Nagin approved $2 million dollars to be allocated to the PPP from the City’s economic development fund. He did, however, request that the private sector provide $400,000 before the PPP would garner final approval. This delayed the founding of the PPP, but the Horizon Initiative started a campaign that was completed in April of 2009 to raise funds to meet the private sector requirement.

The process then moved forward to appoint members to the PPP. However, this proved to be more conundrum-ical than not. The City contacted the International Economic Development Council (IEDC) to recommend its own best practices apart from those recommended by RAND. The IEDC recommended that the appointments to the PPP have industry-specific experience and come from diverse backgrounds. The City consulted with IEDC after the appointments were submitted and the findings were that the appointees lacked both diversity and industry-specific experience –only four women were nominated for positions. The City issued a press release stating that the PPP would be put on hold because of the IEDC findings and political maneuvering on behalf of interested parties.

The PPP will have to wait for the election of a new mayor and city council if it is going to come to fruition. Mayor Nagin’s decision to put the process on hold was considered to be a purely political move by a lame duck mayor, but there was a large degree of validity to his decision especially when considering New Orleans’ past inability to get things done because of political inertia. The PPP was supposed to be as depoliticized as possible so that it would serve economic growth instead of concentrated business interests. In this regard, the IEDC recommendation of diversity and industry-specific experience served a functional role and not a ceremonial one. The interested parties failed to meet these criteria whether or not Nagin’s assertion that groups jockeyed for position is true. Hopefully, this will serve as a lesson for the next round and the future nominees will correspond to the IEDC recommendations. New Orleans could benefit from a coordinated economic development effort.

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