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Business Council of New York State - 2008 Annual Meeting
Andrew J. Rudnick Speech
September 17, 2008

Good morning, welcome to Buffalo Niagara and thanks to Kenneth and the Business Council board for taking the risk to move these meetings from the Sagamore out into “the real world.”

My role is to talk about “where you are” via a short geography briefing followed by an economics one regarding “how we’re doing”.

For the geography part, let’s start with a map.

On Saul Steinberg’s famous cartoon on the cover of New Yorker magazine, you’re someplace between the Hudson River and Chicago….

So, let me try this one instead….

This map was done by Albany’s Legislative Correspondents Association during the Lazio v. Clinton U.S. Senate race in 2000…and, well, it isn’t quite right either….(though I guess you’d assume Buffalo, the state’s second largest city, must be pretty close to New York City, huh?).

This third one actually gets it just about right.  Daniel Wallingford’s famous 1930s map of a New Yorker’s view of the U.S. That’s it, isn’t it? 

Seriously folks... You are, in fact, at the westernmost edge of the state, on Lake Erie, and closer – by some 150 miles -- to Detroit than to New York City.

We’re actually closer to Detroit than to New York City in more ways than just distance: there’s also accent, attitude and economics.  And just like someone from Detroit, when we’re headed to the “Big Apple” for business or pleasure, we say we’re going to “New York” (even though we already live in New York…state, that is).  On the other hand, if I were to say – as many downstaters do – I’m “going to ‘the city’” when I’m on my way to Manhattan, I’d likely be asked by someone around here, “which one?”

We’re about a three hour drive from Cleveland and Pittsburgh (it’s about 8 hours to Manhattan).  Detroit’s a straight shot, 250 miles west from here, through Canada.  Yes, Canada is west... and north... sorry.  In fact, if you drew a 500 mile circle around the Adam’s Mark hotel, you’d cover 41 percent of the U.S. population and 59 percent of Canada's.

Buffalonians, and a lot of folks upstate for that matter, are certainly Midwestern leaning…in numerous ways, even though we live in a solidly “blue” state which political commentators will not equate with the so-called working class swing states of the Midwest.

Looking west, the Great Lakes region, of which we’re very much a part, is the most important economic area in North America, and perhaps, the world:  Holding twenty percent of the world’s fresh water, it is home to the second largest economy in the world, combining all or part of 12 U.S. states and Canada’s two largest provinces.

The Great Lakes region also accounts for a third of the nation’s population, 32 percent of its GDP, 30 percent of its merchandise exports, and 28 percent of its patents.  More than 30 percent of North American corporate headquarters are in this area, and the colleges and universities here produce 41 percent of U.S. and Canadian graduates annually.  By the way, there are 100,000 college students within 50 miles of this building.

Making the circle a little tighter, to focus on our more immediate region, you see we’re definitely bi-national.  Across the Niagara River, in the middle, that’s Canada. 

Little story:  Congressman Peter King, from Long Island, is serving his eighth term in the U.S. House of Representatives. He is Ranking Member of the Homeland Security Committee and is  co-author of the Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005.  But, a few years ago, when retiring local Congressman Tom Reynolds brought King up here to rant about the Western Hemisphere Travel Initiative, he took him on a helicopter ride.  When Reynolds pointed out Canada from the chopper, the story goes that King said: “Canada?!  I didn’t realize it was so close to New York.”

Yes, indeed, it is. Buffalonians go to Fort Erie for dinner, have summer homes there from which they commute daily to work, while Candians have ski lodges in Ellicottville.  More of us watch the Yankees (ah, the Yankees…) play in Toronto than in New York City – it’s only a 90 minute drive.  Many of you know our Buffalo Bills, with a strong Canadian fan and season tickets base, will be playing a few games in Toronto over the next several years. The weak U.S. dollar has actually been a boon locally, as Canadian shoppers flood our malls and other retail centers.  Our airport is setting records for numbers of passengers served (and is planning it’s third expansion as a result), despite a national drop in air travel of almost 6 percent, thanks to that comparative strength of the Canadian dollar, the convenience of our airport and the number of low cost carriers serving it.

And our border facilitates more than just travel…Our region’s eight international ports of entry (4 auto, 3 rail, 1 water) facilitate $81 billion in annual trade between Canada and the United States. That's nearly a third of the total trade conducted between our countries which are the world's two largest trading partners.  Looking ahead, twenty percent of the business inquiries we receive about moving a company to the Buffalo area come from Canadians. 

And all that is why the Enhanced Drivers License, which became available in New York State yesterday – thank you Governor Paterson and DMV Commissioner Swarts – is so important. We must maintain the expeditious flow of people and goods across this border.  It’s critical to Buffalo Niagara’s economy, and to New York State’s.  468,750 jobs in New York State are supported by Canada-U.S. trade, and Canadians made 2.5 million visits to New York State last year spending $679 million.

"How are we doing?"
Now that you hopefully have a better idea of where you are, let me tell you a little bit about how we are doing here in Buffalo Niagara.

Depending on which magazines you subscribe to, your feelings about Buffalo either run hot or cold (I shall refrain from making any easy Buffalo wing sauce jokes or winter weather jokes...).

In the past few years, Buffalo Niagara has been ranked:

• One of America’s Top 10 Fastest-Dying Cities AND the nation’s 5th best mid-sized market for relocating families;
• The nation’s 2nd poorest city AND the country’s 5th fastest growing real estate market;
• Second in the nation for most expensive places to heat a home AND fourth in the nation in housing affordability;
• The 3rd cleanest city in the nation AND among the worst for allergies; and finally,
• The 3rd most “miserable” sports city in America AND among the top 25 cities nationwide for cultural activities.

Pretty hard to keep straight, eh?  Nonetheless, in the midst of those contradictions, here are a couple of bits of real information that likely will be a big surprise to out-of-towners:

While the nation has lost jobs for six straight months, the Buffalo Niagara region has added jobs during that same period, according to data from the U. S. Bureau of Labor Statistics.  Moreover, for job growth here during June, while sluggish, it was higher than that in any of the state’s 13 major metropolitan areas – for the first time in decades. 

Upstate’s economy is different than downstate’s is, because our key industries, workforce and so on have always been different.  The legacies of the factory economy are not all negative and not all history. In fact, we’re also capitalizing on them now for the future.

Take as an example advanced manufacturing, which has seen more than $1/2 billion in major investments here since 1995 by America's top companies.  They’ve updated their manufacturing facilities here, in large part, because our region boasts a manufacturing workforce of nearly 100,000 skilled workers.

The people who were the backbone of our industrial past, and the people raised by those men and women whose work ethic once powered our region forward – still are a major Buffalo Niagara selling point.  And that’s for a variety of industries…not just manufacturing.

Consider this:  Citibank opened its Buffalo operation in 1976 with 10 employees.  Today, it employs 750 people here, and is planning to more than double that number over the next several years.   And, last year, Citi, as the company is now called, announced it would build a $50 million, 156,000 square foot back-office facility in Amherst, right next to the brand new facility it opened in November 2006.

GEICO, Citi, HSBC, Sodexho Marriott and NationsBanc, all have recently invested in “back office” operations here. They, combined with Bank of America, M&T, Washington Mutual and more than 40 other companies and nearly 20,000 employees make up the back office industry sector here.  Why?  Intense communications infrastructure, low occupancy cost, and worker productivity.

Life Science is the industry that politicians have, to their credit, rallied around, and it’s the sector that gets the most ink in the local papers.  And for good reason.

More than $500 million in public and private funds have been invested in life science related  infrastructure and facilities in Buffalo since 2001.  It was that year that our business community made acquiring funding for the research institutions on the Buffalo Niagara Medical Campus our top priority…and our region’s state and federal elected representatives came through – big time. 

Since 2001, about 40 start-up companies have emerged in the region, and older firms have expanded or moved into the area. That's created about 1,500 new jobs in the biotech sector, an industry that now employs about 7,000 people here – and that is not including doctors, nurses etc.

Research institutions like Roswell Park Cancer Institute, Hauptman-Woodward Medical Research Institute and the University at Buffalo have stepped up recruitment in applied life sciences fields,  and that work spawns companies.  Since 2001 about 500 researchers have been recruited here, and their work has created another 1,000 jobs that directly support their research and lab work. And overall research grants in the field have soared 40 percent in five years to more than $325 million a year.

But if anything is a lesson in patience, it’s the growth of this – still fledgling – life science industry.  No silver bullet.  No overnight miracle.  But a continuing collaborative, concerted effort by the public and private sectors.

For the reasons I outlined in my geography comments earlier – close proximity to so much of the North American population, bi-national location, water, air, rail and land infrastructure – the logistics industry sector is also taking off here. And the same things that make our region work for the logistics industry, make us a major force in agribusiness.  Think about this:  what makes more sense?  Trucking produce from California to New Jersey for $5,800 per load, or from Buffalo to New Jersey for $765?  Obviously, Buffalo Niagara to the marketplaces along the east coast is the way to go. 

Agribusiness – Biofuels, food growing, and food processing related companies – is a major industry here.  There are more than 1,200 such businesses located in Buffalo Niagara, employing some 16,400 people.  45 percent of this business is in Erie County. 

Some of the most recognizable corporate brands regionally are food:  Welch’s, Upstate Farms®, Wendt's®, Bison®, Rosina, Goya, Sorrento and so on.

In this one case, folks in New York City aren’t completely wrong for thinking everything north of Westchester, with the HUGE exception of Albany, is apple orchards and dairy farms.  New York is the second biggest grower of apples in the US…and is the third biggest producer of dairy.  A quarter of New York State’s land is used for farming, and the vast majority of it is right around here, just south and east of where you’re sitting.

So that’s how we are doing economically: Advanced Manufacturing, Agribusiness, Back Office, Life Science, and Logistics are becoming the region’s next steel, auto and grain distribution industries.

"Where do we go from here?"
But what do we need to do to ensure Buffalo Niagara completes our economic transition, and does so to the benefit of the entire state?

So much of it has to do with people.

Last night, University at Buffalo President, John Simpson, hopefully told you about UB 2020, which is one huge way to achieve that.  And my organization, and I in particular, believe this can be the most important single economic development project our region will ever see.

Conservative estimates suggest 10,000 jobs will be created as a result of the UB 2020 growth plan. Adding 750 faculty, 10,000 students, and 600 staff to UB also means adding families to the region who purchase homes, attend local schools, pay taxes and work in our region’s companies, which need their talents.  Plus, the growth strategy would put 13,000 additional people in downtown Buffalo every day.

And then there’s the added emphasis on research:  According to the U.S. Department of Commerce, each million dollars of federal research expenditures generates 29 jobs in the local economy. This part of UB2020 could translate to nearly 5,000 additional jobs in Buffalo Niagara.

Once these knowledge workers are here, we need to keep them here, and we need to help them become the next generation of civic leaders in our communities.  In early October, the Partnership’s Buffalo Niagara 360 program will be launched.  It’s a young professionals program that fills a void in our community with straightforward efforts: Professional development to address the needs and interests of young talent as they navigate career paths and seek to contribute more to their employers; career connections to unite employers with a larger pool of talent, while exposing students to real world experiences, viable career paths, and business culture; and issues and advocacy programs to engage young professionals to create solutions to issues that affect their lives and careers in Buffalo Niagara.  There are programs like this across the country (in fact, we copied parts of the best of them in organizing ours), and it’s critical that there are.  And I can tell you, more than any other program we have outside of our advocacy work, 360 has received the most financial and volunteer support from our members. 

“Brain drain” is a cliché phrase, but it’s used so much because it’s a real concern.  The mantra of our Unshackle Upstate coalition of more than 70 business and trade organizations that represent some 45,000 employers and 1.2 million employees has been “we want our economy moving, not our people”, and thus the state policies and priorities we’ve advocated focus on stimulating private sector investment to retain/attract well paying jobs; because people follow jobs. 

I’ll save you from having to listen to Unshackle’s specific platform.

But there are two things for which the Partnership and Unshackle Upstate are advocating which seem timely for me at least to introduce today: First, when it comes specifically to stimulating economic development, New York could go a long way by becoming more customer-friendly.  Multiple state agencies offer incentives and play roles in economic development projects. What if one of them – say Empire State Development – were formally designated the “lead agency” for all economic development projects?  And what if ESD coordinated the development impacting actions of the various state agencies which – while not nominally in the economic development business – actually very much are.

And, then, there’s energy.  It is essential that our leaders in Albany create and implement a comprehensive, long-term energy program designed to yield maximum economic development benefits.  Unshackle Upstate and the Partnership will be unveiling our detailed perspective on what that program should look like later this fall.  In the meantime, though, I’d be remiss if I didn’t urge thoughtful Albany consideration of the Regional Greenhouse Gas Initiative.

We all strongly support cost-effective energy efficiency and environmental measures, but right now the cumulative high cost impact of these state initiatives on economic development and the public good is being ignored. Combined, these initiatives threaten increases in monthly electricity bills of nearly 10 percent for residential consumers, with even greater increases of up to 20 percent for businesses. Accordingly, we believe additional assessments are essential before this initiative is finalized.

Looking beyond Albany, the Brookings Institution, in conjunction with a network of our peer business organizations from here to Minneapolis, began a multi-year research and policy development initiative in 2005 to improve the economic vitality of the overall Great Lakes region.

In addition to the reform objectives the employer community continues to seek in New York, this brand new Great Lakes Business Initiative provides additional federal government level answers to the question: How do we get Buffalo and Upstate thriving to the benefit of the whole state?  Here are some of the most important of them.

First, we need a true federal transportation infrastructure policy – and dedicated funding to address the maintenance and development of transportation systems in an intermodal fashion: highway, rail, water and air. 

Second, for all of the reasons I cited earlier, our northern border with Canada must balance national security with economic security.  To do so, Northern border issues must be separated from southern border issues.  Ours is not an issue of illegal immigration, but an issue of increasing trade, human connections, and economic prosperity. Bottom line: we need policy, technology and procedures to deliver the efficient movement of all people and goods across the CanAm border with no more than a 15-minute wait. 

Third, to help New York companies compete in the global marketplace for high-skilled and entrepreneurially-inclined talent, the U.S. desperately needs fundamental reform of its immigration system. In particular, High Skill Immigration Zones in places like Buffalo that would exempt some visas from national caps, would allow spouses of visa holders to work, would create visa programs for professions crying for additional trained people – e.g. RNs, and would expedite student visas.

And finally, the federal government must increase allocations for basic and applied research in the public and private domains and provide matching funds for state programs. We also need venture funds, and help with tech transfer.

Whew!  That’s a lot to consider, and I thank you for the opportunity to share where and who we are.  I’m also so glad you’re here, in Buffalo Niagara.  I know you’ll enjoy our region. This is a remarkable place, and thus we are pleased you’ll have some time later today to see why people want to live and work in this community.

Those of you who are headed to Niagara Falls later will see nature at its most powerful (Lewiston Power Vista), and also see powerful reminders of our industrial past – and future.  Depending on your route, you’ll see some of the largest acreage of brownfields in the galaxy.  You’ll also see sites where companies are investing, drawn by the power generated at Niagara Falls, and the hard working people who live in its midst, and mist, just as industries throughout the last century did.  Having said that, the City of Niagara Falls is a “work in progress”, with a long way to go; a distance which in 2008 should be a public policy embarrassment to us all.  There are other comparably stressed cities in this country, but none of them is 500 feet from one of the Seven Wonders of the World.

Folks who are taking the architecture tour will see reminders of the industrial wealth that once made Buffalo one of the nation’s most influential cities. You’ll also see what our creative class, not- for-profits and private sector businesses are doing with old churches, mansions and even industrial buildings designed by America’s most important late 19th and early 20th century architects.  You’ll also hopefully see our city’s residential neighborhoods – which, in large part, will answer questions about why so many people want to live here. 

And those of you going on the boat tour of our waterfront will see reminders of a time when Buffalo was the nation’s 8th largest city – because of the Erie Canal, and our ports.  You’ll also see a renaissance underway – from our quite beautiful wind turbines to construction, for residential, recreation, and 21st century industry, on our inner and outer harbors … Another “work in progress” which, although long overdue, is finally becoming quite real.

Of course, for those of you who skip all of the above and head to a local bar, well, you’ll probably get the best perspective on our region of anyone.