How Amsterdam can thrive in the Emerging Economy

Posted: December 5, 2011 in Economic Development
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In the comments section of my last post, we began to discuss ideas for future business development in Amsterdam. I’d like to get into this topic in a little more detail because I believe that our current “default” strategy in this area is incomplete and out of date. I believe that there are great opportunities for Amsterdam to take advantage of the trends in the current economic climate, but to do so requires an entirely new game plan.

Our current situation has us relying on the Amsterdam Industrial Development Agency (AIDA) to lead in the area of business development.  AIDA’s benefit to the city can be seen primarily by the ten or so businesses that occupy the Edson St. Industrial Park which is administered by AIDA, as well their role in helping several other larger businesses within the city.

A majority of the companies in the park, such as Fiber Glass Industries, Breton Industries, Power and Composite TechnologiesSaratoga Horseworks,  Mohawk Sign Systems, and Fort Miller Company, are manufacturing businesses.  All the buildings in the park are very large in size, and I would venture to guess that most of the businesses employ 100 people or more (either at their Amsterdam locations alone or the total for all their locations).


Based on these observations, I think it is safe to say that our city’s “default” strategy for business development is currently geared toward larger manufacturing (ie “industrial”) companies. This is precisely what I believe needs to change in order to jumpstart our city’s economy. We need to broaden the scope of the types of businesses that we work to attract.

Most people are aware that manufacturing jobs have been declining in America. This graph illustrates just how steeply they have plummeted since 2001. Going forward, the US Bureau of Labor Statistics predicts the number of manufacturing jobs will continue to decrease.  Overall GDP of the manufacturing sector continues to rise due to increasing productivity (that’s a whole other topic), and no doubt manufacturing will continue to be an important and sizable part of our economy. But based on the employment numbers, it should become obvious that we cannot continue to look at only manufacturing companies to create jobs.

According to the BLS, the types of jobs that will be growing in numbers include those in the fields of healthcare, science and information technology (especially network systems, data communications, computer software and application engineers).  In the area of healthcare, we have St. Mary’s Healthcare as the largest employer in the area which provides a base for this industry in the region. My hunch is that this industry will continue to grow just fine in Amsterdam on its own.  What I don’t see is any progress toward or vision for attracting science or information technology jobs.

The other problem is the size of businesses that AIDA appears to be geared for. Crucial to creating new jobs are new business startups. According to research done by The Kauffman Foundation, most startups average between 5-8 employees, and the trend shows that number has been getting smaller over the past few years. What resources does AIDA have to attract and assist this type of small business?

Another emerging trend in businesses startups in the increasing percentage of sole proprietorships, otherwise know as self-employed workers or “freelancers”. According to the same research done by the Kauffman Foundation (cited above), single employee businesses now make up more than 27% of new business startups, and the number of multi-employee startups has actually fallen in comparison. So the question has to be asked again: what resources does AIDA have to attract and assist these types of new businesses?

The Kauffman Foundation sums up their research this way…

… policymakers’ focus on big changes in employment because of events such as a new manufacturing plant or the recruitment of a business to a community ignore the more important fact that our jobs outlook will be driven more by the collective decisions of the millions of young and small businesses whose changing employment patterns are not as easy to see or influence.

Given that idea, I believe our city can become more attractive to smaller science and information technology based businesses. Here’s what I believe needs to be done…

  1. Clearly define AIDA’s mission to focus on large manufacturing businesses (or other large businesses). Pursue integration of AIDA with the Montgomery County IDA to facilitate funding of larger projects.
  2. Create a separate entity to attract and assist small business. The incubator center that Flippin proposes as part of his Big A initiative is exactly what we need. While other incubator projects in the area have had less than desirable results, I think Flippin hits the nail on the head as to how this idea would be different:

    Where will companies come to occupy the incubator? They will originate from various venture and startup programs at local universities. The incubator will recruit firms from the surrounding area (even westward) as it will have what startups want: dollars to invest and space. The fact that funding exists acts as a big differentiator to other programs.

  3. In addition to an inventory of the larger structures and property available for business use, an inventory of smaller spaces, including rentable space (such as in the Clock Tower and Noteworthy buildings) must be made available online and updated regularly.
  4. In order to attract self-employed entrepreneurs, fund the formation of a co-working facility such as this one in Fort Collins,  Colorado.
  5. Form a business organization similar to a Chamber of Commerce, but exclusive to the city and which facilitates more structured networking between businesses, markets the city’s business opportunities, and serves as “welcome wagon” to new businesses moving into the area.

I believe these initiatives will put our city on the right track to taking full advantage of the emerging economy. Other ideas? Post them in the comments section!

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Comments
  1. robert purtell says:

    All interesting points.

    Rule #1: Know your product, What are we selling, to attract interest in the City?

    Rule # 2 Know what makes your product different from your competition, what does Amsterdam have that is better than the rest of the cities in the world, that are looking for the same opportunity.

    Rule # 3 Believe in your product, a hard thing to do in todays global economy, but you have to do it.

    I believe a SWOT analysis would be important to complete to really understand the truth about the 3 rules listed above.
    It would be interesting and productive if we could use this or some other blog to have people tell us what our STRENGTHS, WEAKNESS’S, OPPORTUNITIES AND THREATS are.

    • Tim Becker says:

      OK, good idea. I’ll post an open thread at the end of the week inviting people to post their SWOT’s. We’ll see how it goes!

      After 10 years of being self employed, I’ve come to a slightly different take on Rule #2. I’ve found that being the best in the world at anything is almost impossible. I’ve always believed I’ve offered a quality product, and I’ve always worked to improve, but I’ve found there’s always someone out there who is better no matter what I do. What I am is “best” for certain clients with certain style preferences, functional needs, personality, price range and project timeframe.

      Applying that to Amsterdam, I don’t think we necessarily have to be best in the world at anything, nor is that what I would consider an attainable goal. What we can do is look at what we can improve and do better at, and hopefully that quality will be attractive to an increasing number of people with certain needs, styles, prefereces, etc.

  2. Something does need to be done with the Amsterdam Industrial Development Agency. According to their budget report, they will be $30,944 in the red for 2011. Despite the failure to produce, their projected budget includes an increase in salaries and wages from $60,000 in 2011 to $90,000 in 2012 and $100,000 in 2013 (38% of their steadily decreasing total income).

    http://www.abo.state.ny.us/annualreports/PARISBudgetReports/FYE2012/IDA/AmsterdamIDA2011-12.pdf

    Integration with County IDA is not possible according to existing law. Destined for failure, the AIDA needs to be dissolved. Their assists and liabilities then become the responsibility of the City of Amsterdam.

    General Municipal Law/Article 18A/ Title 1
    § 882. Termination of the agency. Whenever all of the bonds or notes issued by the agency shall have been redeemed or cancelled, the agency shall cease to exist and all rights, titles, and interest and all obligations and liabilities thereof vested in or possessed by the agency shall thereupon vest in and be possessed by the municipality.

    The problem with the current law governing Industrial Development Agencies is that the board members are political appointments that serve at the pleasure of the governing authority. Are we getting the best possible candidates for the job, or are we getting those that contributed the most to election campaigns or some other political favor?

    • robert purtell says:

      Not sure that we need to close the coffin yet on AIDA, What I did not see on the spreadsheet is net assets, Ie: buildings, land, cash on hand and outstanding loans etc. also it looks like a poorly designed budget that provides for a zero balance year after year. We need to know and understand what the asumptions were when they prepared this spreadsheet.

      As I have said in the past, I do feel confident that there is a constructive use for AIDA, if history teaches us anything, it shows that AIDA has been able to help some local companies through some tough times and has been able to help the growth or relocation of others in the city.

      Combined with Montgomery Countys help, as well as the Mohawk Valley economic Development Corp., there were 3 sources of funding, knowledge and planning. Any company that I was able to put packages together for did well and increased their workforce, stabilizing the local economy.

    • Tim Becker says:

      Yeah, by “integration” I guess I mean some sort of collaboration with the MCIDA, like what was attempted previously.

      I’m not sure if this spreadsheet means that AIDA is destined to fail or not. Their revenue is projected to slowly decrease, but so are their expenditures. I think the real benefit to look for at the end of the day is whether their efforts are bringing in new tax revenue. As far as I can tell, AIDA is self funded, so it’s not like they are a drain on the city budget.

  3. Rob Millan says:

    On the note of the sole props, an incubator is where the ideas for small biz are born and is a sure-fire way to go toward investing at least in microbusinesses.
    I remember in school, alumni-turned-CEO’s and the school president together started a small incubator where students could approach the board with a plan, design, and business model. Those who proved themselves were given microfinance options, cubicle space to run their business out of, internet, mailbox, and pretty much anything else you’d need for starters, When you outgrew your space, you moved out into bigger digs. It ran pretty smoothly. I had pre-med friends who started a medical device company, some econ. major friends that started a microfinance and lending network for the poor

    (side note, one of those guys was named to Time’s Top 100 list in 2006 for being seen as an innovator with an idea to keep a close eye on: http://www.time.com/time/specials/packages/article/0,28804,1975813_1976769_1976772,00.html , AND he has close ties to Amsterdam…)

    and a current check of the businesses in the incubator reveals a list with start-ups that range from web designers to sauce makers.

    Run by a successful group of people, the incubator can certainly prove itself as being pretty successful itself. The problem starts at the beginning stage, though, in finding the people to a) fork over the capital; and b) finding the right people to govern it.

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