A Quiet Crisis: Regional Economic Development Transcript

Mr. Frolik–Sandy, one of the roles of the Federal Reserve Bank in Cleveland is to gather data, economic information on our region on joining states, and you also get to see what the other banks around the country do around about in their regions.

Can you give us a little sense of how Northeast Ohio stacks up in terms of, perhaps, job growth, income, wealth creation with other regions? How are we doing basically with other neighbors and nationally?

Ms. Pianalto–Well, Joe, data, different measures give you different conclusions. In the decade of the '90s, in many ways, Cleveland and Northeast Ohio out-pays the nation in many, many measures.

For example, we had a lower unemployment rate here in Northeast Ohio than in the rest of the nation. The typical Cleveland worker earned more than the national average. Our income growth was greater than the national average. So from those measures, you would say we are doing very well.

However, our economy is smaller than it was a couple of decades ago. We had a larger share of the nation's jobs in this area a couple of decades ago. That's been shrinking. So we aren't showing a propensity to grow in this area right now.

Mr. Frolik–In terms of growth, one of the things I think struck a lot of people was when the sensory data recently came out. It showed that essentially Northeast Ohio has been stagnate for almost four decades now moving outward, but still, the basic population staying about the same. How concerned ought we to be about that? Is population in and of itself something that is a significant worry for the region?

Mr. Hill–My feeling is it's not. In many ways, focussing on population and job growth, which we tend to do, is looking at the wrong measures. When we are looking at economic well-being, what we really should be paying attention to is incomes. And behind incomes lies growth and productivity. So it really is that link between productivity and incomes and quality of life makes a difference.

We do have some issues in terms of where people are living. The fact that we are building a lot of housing spread over a large part of the landscape without a large increase in population that's bringing land use issues.

But if you are really looking for economic well-being, it's income growth and productivity that's important coupled with the concerns that people who don't have the education and skills to earn good incomes. But, focussing purely on population growth is not a game we're ever going to win.

Mr. Eckart–But demographics to work force are as important to ratings as ratings are to television. Anyone can get, as CBS did a few years ago, when you own the elderly market which has almost no disposable income because everyone is watching 60 Minutes. The issue in census numbers, though, in one other context, is young people. Not young people in that demographic shrinking, but when you look to the next level, when we would hope to see -- if they've gone away to college that they would come home to Cleveland, they have not.

And when you look at the declining enrollments across some of our universities, both public and private in Northeast Ohio, you realize that the brain drain issue, I guess, is in some ways overstated as a context, but it is important that the work force remains rejuvenated, that it comes out of educational institutions that have newer technology skills, and that if they go away, they have some reason to come back.

So, I would kind of agree with you, Ned, that it may be overstated. The fact is is that it's a harboring like the canary in the coal mine. It is sending a signal to us that our future generation is not necessarily staying here. They don't see a future for themselves or their families here.

Mr. Frolik–Let me ask you -- let's go around the table. If you were to identify to people, what's the one thing that is maybe the greatest call for optimism about the economy of Northeast Ohio looking ahead to the future and then maybe the one thing that ought to be the greatest concern to people. What would that be? Let's start with Joe and go around the table.

Mr. Frolik–I would say that a cause for optimism, as a community, we are starting to focus on not only investing the things that have worked well for us, but also starting for the first time investing in new things whether it's biomedicine or whether it's worrying about NASA, it's -- for the first time, I feel as a generalization we're looking for new things.

To me, the biggest concern we should all have is education. Because our kids, those kids that are in the fourth grade today are going to be entering our work force in six to ten years. And I mean, it's right behind our doorstep and that's something we need to be very, very concerned about.

Mr. Hill–The greatest source of optimism to me is the rate of growth of productivity in this region. It has been very, very high. There has been lots of wealth generation around it and so our firms have been reinvesting themselves quite aggressively and really focussing on innovations in production processes, essentially making the setup of products better. My concern is, two, I share Joe's. I think that education primarily at the primary secondary level is the top concern.

The second concern is product innovation. Essentially, our existing economic base, developing new sets of products that increases the top line of the balance sheets. And I think that those two go hand-in-hand.

The way in which we get young people to stay, essentially, is providing economic opportunity. And it's going to be, one, having the skills so you can earn a good living coupled with our current sets of firms and new firms coming in generating new sets of products.

Mr. Minter–Well, in some respects I think I will probably be a little redundant, but I certainly would say we still have a significant manufacturing base to build on and to keep working on because that's the core. The challenge is to identify some new clusters of things that we could really dramatically make a change in over the next 3 to 15 years.

I would say my second concern is that we still have got a major job to do in this region in terms of the inclusion of minorities, more in the economic mainstream. And as business owners, as persons who are contributing to productivity and our record is not very good in that regard.

Mr. Eckart–I think Joe hit the nail on the head when he spoke about education. We all just have to look at Issue 14, what a tremendous mode of confidence the City of Cleveland gave itself in investing in primary education. Simply a link to the biopark initiative, I think graphics, I think materials, I think fuel cells are bright lights. Case Western and the linkage with what they are doing with fuel sells at NASA Glenn I think has some exceptional needs, some opportunities.

I think beyond that, though, we have to start thinking much bigger. Joe has talked about this before. Thinking about things in terms of scope and scale, to start doing things, stop asking for permission, start expanding the envelope and not think about small initiatives, although as successful and helpful as they might be, to start doing things that makes fundamental changes in the way our economy functions. And I see that particularly in biopark, if we could ever get the two hospitals to stop warring with each other and figure out how to construct a joint agreement between University Hospitals, the Clinic and the University.

Ms. Pianalto–I would have to echo what Ned said about productivity in terms of what I'm optimistic about. The companies in our region have helped the rest of the world become more productive. We have a very high concentration of capital goods industries in our region and they help other producers of goods produce them with technology and more efficiently, and I think we are going to continue to build on that.

My concern about the future actually goes back to the issue that we were just talking about in terms of population. Even though we have seen a slow down and the decline of our population, the age group or the category that is slowing or declining most rapidly is that population between the ages of 20 and 44. They are a critical component of our future work force, and I think the reason that we are seeing that age category either leave our region or not come into our region goes back to the concern that a couple people have already raised, Joe and Ned, about our educational system. That age group is the age group of child bearing age and they want to have children and raise a family in an area that has a good quality of life, and it's very important for a quality of life to have a good educational system. So, that's one of my concerns, losing that critical component of our population, and one of the reasons I think we are losing it is because we don't have the educational system they want for their children.

Mr. Shatten–That's true. I'm a project guy. And so I think about what are the projects. And I'm encouraged. Joe's comment says we have a queue. So for the first time in a while you think about the last 20 years. We had a wonderful rush of projects. We did downtown, we did the stadiums, we did this amazing array of housing in all of our neighborhoods. We did a lot of stuff. Now this doing sort of slowed down. And so I'm optimistic a little bit because there is a new queue. There is a queue out there. It's the biopark, it's the Cuyahoga Valley, it's the convention center, it's the array of manufacturing initiatives.

You have a queue. Now what's the concern? The concern is does this community have the will and the capacity to get over the edge? It's what Dennis said. Can we imagine the scale to say oh, the next stop on hospitals, the next stop on land is a billion dollars. And the notion that we are fighting over or having the debate over, spending the additional money to move this place another step will require another -- and I used to be very reluctant to say these things, but I'll say it, another billion dollars and probably tax increases, a lot of things we don't want to talk about. If you want to pay for things that are big, big projects cost a lot of money. You can't wish them away.

But the list is there, the queue is there. We have learned as a community in the last 20 years how to move things over the edge. It's very contentious, it's always tough. And so my only concern is that we maintain the will to move a good queue over the line to get the big projects done that cost a lot of money.

Mr. Eckart–And Richard is so right. We have to do this ourselves. We can't count on Columbus, Ohio. We used to have -- we were spoiled. We had 16 years of governors from Cleveland; Voinovich and Celeste. They knew the difference between Playhouse Square and Shaker Square. They understood the personalities of projects and individuals. We can't blame Columbus.

The City has certain financial resources that are available to us and so Richard, I think, raises a very good point. Do we have the capacity and the will to think in scope and scale beyond our boarders as well and to do the kinds of things that we can invest in ourselves and not count on Washington or Columbus. Whatever they give us should almost be viewed as surplus.

Mr. Roman: Well, it's two things. It's not only that it's probably going to result in increased taxes, but it's also getting our local governments to realize, we do have to do it ourselves which means we have to start building a capacity within our current governments within their current revenues to make investments. Not just to support the things they have already been doing for years and years and years, but to find ways to create new revenue strains within their own structures that will support capital investment.

And I'm not just talking about roads and bridges and sewers, the traditional, but new things, the kinds of things that are on the queue that will either help keep us moving forward or will allow us to slide back.

Mr. Minter: And I certainly agree with that, but it seems to me a large part of what has to happen in our economic future is to re-calibrate the partnership. Because the realty is, if we go back and look very carefully at why we were successful over the last 20 years, it is because there was, in fact, a partnership between the local community, the City, the county, the business sector, the civic sector, the foundations, the Federal money that came in new UDAG and the State dollars. I mean, there is almost no project that we can point to and say we accomplished something in which there weren't a lot of participants that had to fill the gap. So, the leadership that has to come from our local community is quite significant, and I think it is time for a renewing of that, and we have that opportunity, but I don't think we can write off and think that it's possible that we can get where we want to go without significant State and Federal support.

Mr. Eckart: But doesn't that beg the question of something where you have to rely on independent constructed political geographic entities to each give permission when perhaps you use the Mayor's race this fall as a way to talk about restructuring the port authority, to create a true countywide, almost regional economic development authority that has some independent financing basis on it's own instead of going to war over which are mayor appointments or which are the county's appointments and what are their bonding jurisdictions, I agree.

I think the fundamental partnerships that did so well for Cleveland 20 years ago probably still fundamentally are sound, but in some ways, they need to be reconfigured because some of the players and some of the people that they represent aren't around anymore as entities, so you could use an election year to change the governance issues, the vehicles to create a referendum on some of these things that that might not require us to have to do it the way we did it before.

Mr. Hill: But you can't write off Columbus and Columbus can't write off Northeast Ohio. 30% of the state's economy is Northeast Ohio. 40% of the manufacturing base of the State is Northeast Ohio.

One of the things that has happened is we have to reconstruct and rebuild that relationship with Columbus. And fundamentally, the business tax structure is hurting the northeast part of the State. It's hurting our base. We have a State budget that is not an investment budget, it's a crisis budget, and the lack of investments in that budget are directly hurting this region. So part of what we have to do is to figure out in a predominantly democratic part of the State how to have a bipartisan conversation and really try to understand about not just the State's capital budget, but the operating budget, as a way of making investments. And you two guys have been talking about this and needing it for a long time. And this notion that we are a I state to ourselves is it going to work.

Mr. Shatten: We tend to ignore the State except for when we come in for these transactional events. We built that -- that's the piece you want to try to re-calibrate, Steve.

We have built, in 20 years, this remarkable and unique partnership of everybody that can write a check and can sit at a table and have learned how to come together to do that. And all of a sudden, I think we are discovering that the State is a crucial piece of all of this. And as the State has its own constructed physical crises, it will hurt us tremendously.

I have been concerned, that the budget as currently debated, if adopted as planned, will set this State's economy behind over the next eight years. We are in the middle of a very bad set of budgets that will hurt the State of Ohio because we don't have the partnership around how to pay and we don't have the will of how much to pay.

Sandy is right. Education is where this starts. So if the State of Ohio is way behind in education, if we are 20% or 30% or 40% behind, you mentioned, Joe, all the workers that we care about, right now they are in the fourth grade. They are there. My daughter Lauren is in the fourth grade. We know who they are. Are they going to be scientists? Are they going to be mathematicians? Are they going to go college? That's all unknown to us right now and State policy I think is one of the most crucial pieces and the State is ducking it right now because they are taking a budget crises and they are whittling their budget down to the 19 point where they are going to adopt a budget where the operating side is going to be a crises and the capital side is going to be close to zero which means the State will drift for the next round with sort of modest, good data news that will keep going out, we'll find a little story here and there. I think you are right. The State is just a vital place in all this right now.

Mr. Hill: And, Richard, it goes to the next step, too. The focussing on the supply side of those markets, where those workers are going to be. The easiest and best way to keep people in the State and attract people to the State is good incomes.

Mr. Shatten: Innovation.

Mr. Hill: Innovation. And the fact is -- and no one demands labor. They demand products. So again, this is a Statewide issue. How do we get innovation taking place? Two ways. One is across our existing base because that's where most job creation comes from, or more importantly, wealth creation comes from. And the second is how do you go about 20 putting together a tax system that encourages new product formation, new firm formation? We have a corporate franchise tax that hurts new firm formation, and we have a tangible personal property tax that hurts product and process innovation. And those really should be issues that the northern part of the State is leaning on. We have to -- if we aren't getting the policy dialog out of the middle part of the State, it's got to start from the north.

Mr. Frolik: Politically, the power is shifting in Ohio to the south and to the southwestern part of the State. We are going to see that probably when the congressional districts and the legislative districts are redrawn. Dennis, as we have less of a percentage of power in the State of Ohio, how do we make sure the concerns of Northeast Ohio, of Greater Cleveland are heard in Columbus and effectively?

Mr. Eckart: Well, it probably means muscling up a little more in the political gym than we have in the past. Mr. Roman and I worked on a couple campaigns together a lot longer ago than either of us 21 want to remember and we used to have regular delegation meetings. We used to have a concerted agenda.

Mr. Shatten: I would be very clear to that to all the audience here on that point.

Mr. Eckart: In the old days, and we will go back 10, 12 years. Folks all came together, came to Washington, Vern Riffe, may he rest in peace, Governor Celeste, Mayor Voinovich, the whole crowd came in and laid out a 16 point -- here is the things you have to do for Northern Ohio.

Mr. Shatten: And you did it as a group.

Mr. Eckart: And we did it as a group and the business community presented a concerted agenda in conjunction with the political leadership. And, for whatever reasons, that has not occurred lately. Secondly --

Mr. Shatten: That's not happening right now and that's a serious issue.

Mr. Eckart: And secondly, we treat the City of Akron as if it's 300 miles away and not 30 minutes away. There is an 22 inexorable linkage. If we are shrinking ourselves, you can get bigger yourself. And one way to do that, Columbus has taught us this lesson from Franklin County, they just annexed the whole county.

Well, we can create as apropos of what you said, Steve, strategic partnerships with the Akron Regional Development Board integrating Akron University which has some phenomenal new initiatives going. Embracing -- again, Joe, you and I have talked about how we define the lake front. We are going to kind of define it and try to define it for development purposes as including Lake County and Lorain County. Guess what, the lake washes up on those shores.

So, if our political cloud has shrunk, and secondly, we have lost some seniority -- think about this for a second. We have lost Suhadolnik, we have lost a Sweeney, we have lost a Glenn or a Metzenbaum, a Lou Stokes, hundreds of great -- literally hundreds of years of seniority from our delegation.

And while many of our current political representatives are good, they are very green. And so we have to broaden our reach. I think 23 we have to tighten our message. We have to make demands that are inexorable. You have to use the political process.

The Growth Association is likely to make endorsements in these upcoming elections. Why? Because there are important things that need to be discussed, not that you expect to ever get everything that you always want, but you need to let folks understand that there is an ask that's what part of creating what I like to call a barrier-free intersection between public policy and private investment. We have lost it, it's shrinking. We have to get muscled back up. We have to broaden our region, include more people in what is inexorably a single region who's limited only by artificial political lines drawn over 200 years ago when the map makers sat down out to carve out counties.

Mr. Minter: I think one of the things we are all really facing is we are probably being pushed very hard to decide where are we going to make the big bets. And as of yet, I'm not sure we have arrived at a conclusion, quietly or otherwise, that if it's biotech, biotechnology, then this is really what it takes, not a down payment, but to make that big bet, or if it's something else, we really ought to expand greatly on polymers and the leadership, and that is really going to come more out of Akron and others are going to be supportive, and that's the tough piece that I think we are going to find ourselves facing up to.

The more I have gone back and looked at what other regions have done who have moved ahead in significant ways, it's very clear that the educational institutions, the business establishments, everything has been focussed on drilling very deep. And certainly, at the Cleveland Foundation, we have a lot of discussions, because we are into the quality of life business and we understand it isn't any one thing and tend to invest in a number of things, but I think the issue we are facing up to right now in terms of the conversations are what are the next couple of big things that are going to make a difference from the standpoint of improving our region's economy?

Mr. Shatten: You are saying two things. There are place bets, the Shoreway and the water's edge, but you are also saying the harder one, place big bets, and have the confidence to place a big bet.

Mr. Roman: It does go back, though, to the other governments. If we are going to approach the State and the Federal governments for the big dollars as we have in the past, we've got to be willing to make the big bet first. We can't expect the State or the Feds to put in the first bogey. We have to be willing to do that and that's what I think is so missing right now.

Mr. Hill: I take a slightly different twist on it. It's like any investment. If you load up all your bets on one stock and the stock does badly, you go with it. And I think there is broad agreement throughout this community that you need a three-part strategy, a portfolio strategy, and we're doing parts of it.

In the short run, it has to be labor force and improving the quality of life and I also say a lot of focus on a lot of the process of engineering that has taken place. Five to fifteen years out, we are going to get most of our returns by working with our existing economic base and bringing forth new products on it. And that linkage doesn't exist with the legislature, it doesn't exist with our universities. Campus has been a wonderful investment that's been helping around but on the short-term stuff.

How can we get partnerships going with our science technology infrastructure and our current set of firms and industries to continue fundamental process innovation and new products.

And then the long term, 15 years out, we need a fundamental strengthening of our science technology base because the market is smarter than any of us. We don't know which bets are going to come in. I do agree that when it comes to biotechnology, actually biomedical products, we are in a much stronger strategic position.

Mr. Eckart: There is some manufacturing expertise there as well.

Mr. Hill: Absolutely. And the other thing is what should we be looking for is a win from the biology life sciences bet. What I have said, the win on firms is distant. The win on employment in that industry and treating the research in that industry is the right win. That's going to be the indicator. So you need that portfolio.

Ms. Pianalto: I agree very much with what Ned has just said. There is a risk in trying to look out and find out which industry is going to be the growth industry of the future. We are much better off focussing on making sure we have all the infrastructure that would allow any industry to grow in this area or want to do business in this area. That infrastructure includes, as we have all said this morning, a good educational system.

It also includes -- it used to be transportation. It still can be transportation, but it is a very different type of transportation. Businesses want to be located -- because now businesses are global, want to be located in areas that have good air transportation.

And a third part of our in infrastructure has to be good communication systems. More of our business is being conducted over communications networks and we have to make sure we have that infrastructure in place. So I wouldn't want us to try and place a bet on an industry, and I don't think anyone here is saying that. We need to work on providing an environment that any industry and any business would want to be a part of.

Mr. Eckart: Sandy's point is very well taken. The purposeful design of the region, the team Northeast Ohio Concept which embraces regional concepts in a variety of ways, and the one thing we have to keep thinking about -- Richard, I heard you say this before. You don't have to reinvent the wheel. Toronto and Chicago stepped up to the plate in meaningful ways that dealt with intellectual infrastructure, that dealt with capital infrastructure, dealt with amenity infrastructure and then dealt with some attitudinal changes that need to take place, too.

We are, in some ways, our own worst enemy when we think about ourselves and other thing, what we don't do, the Harvard visitors that were just in Cleveland a few weeks ago. The first recommendation they has was marketing ourselves better, telling folks what we are about, what we have within an hour of Public Square in a context that creates an amenity that is Northern Ohio.

A Convention Center is absolutely critical to that, because as Peter Hart showed us in a survey a few weeks -- a few months ago, if you get folks here for a couple days, they love being in Cleveland, and that is something that is so introductory to this community.

Like in airports -- you don't have front porches in communities anymore. Airports are your front porches, convention centers have become our front porches. And we have to get about doing those things. And in this context, I will slightly disagree with folks. While I think the State is a very willing partner to follow the convention center thing, they might build us an access ramp and give us some sort of consideration for a half a billion dollar convention center. Columbus won't build it for us. We have to raise the money ourselves. We can't count on them to do it. And while we should integrate them into that process, we have to embrace this. Richard, you are absolutely right. Do things of scope and of scale that will fundamentally change the character of the community.

Mr. Shatten: Back to the beginning of the delegation which is your point, too, Steve, which is I think this place has to make these bets. And every bet is easy to debate and easy to disagree with, but there is a pool of bets sitting there. It's this magnificent Shoreway idea, it's this transformation of our whole biomedical strategy which we should have labeled biopark. It is a convention center. It's taking our water.

I like this notion that if you are touching the lake it matters and it takes us all the way down to the Cuyahoga Valley National Park now. It's gotten a better name. And to take our educational system which has been manufactured and remind ourselves to make stuff, to use Lorain Community College, to get Cleveland State University and use its college engineering and do something constructive with it. There is a list of stuff to do. Push it over the edge.

Mr. Roman: We have all used the word 'bets' and at the end of the day, it is going to require leadership to make the bets. The bets are not going to be made unless people, some of us, some public officials and others not in this room today who are going to have to gain the confidence that we are going to have to make those three or four bets.

The Convention Center is a perfect example. There will never be on the short term the passion for building a Convention Center as there was for keeping the Cleveland Indians. The convention center from an economic development standpoint and the visitor industry as a whole is our big missing piece. We have to have confidence, leadership has to have confidence that we can move forward.

Mr. Shatten: You can't debate it. There is a pool of stuff you have to do, and instead of fighting over the pool of stuff, you got to move the pool and hope that half of that pool gets over the edge. And some of it may not, but the whole list, a long list and it's an expensive list has to be there. And sometimes it's going to be a little sloppy.

Mr. Hill: A lot of what you are talking about is vital to the City of Cleveland.

Mr. Shatten: For Northeast Ohio.

Mr. Hill: And from the City of Cleveland, we have to make certain that Northeast Ohio understands what the return is for the whole region. And one of the problems we have had in Northeast Ohio is Cleveland has looked out for regional partnership when it's needed something, and it's gone down to Columbus and said here is the hole to fill.

And there hasn't been a long-term commitment to building that regional partnership. Don Pasqualic, the Mayor of Akron, one of the best mayors in the State, should be an intimate part on what happens in this region and it shouldn't just be when something is needed specifically to build it.

Mr. Eckart: And it can happen. But leadership is beyond some projects, too. It's management, it's collegiality, it's creating a sense of broader ownership in community projects. It can't just be downtown. Somebody is trying to run for Mayor, they are just going to make downtown better? I guess 80% of the people voted for Gateway in Cleveland and it didn't carry. It is to link things into the neighborhood, to make sure Tremont gets a bounce out of this, to make sure Slavic Village has a piece of the action, that the neighborhoods around University Circle share in the biopark developments, to make sure that White City, you know, White City State which is now a State park shares in it.

Because unless there is vestedness by voters in some of these where you can't get the leadership of the politicians because they think there is too much risk in stepping out. But you can't wait to get to 75 percent on something. If the County Commissioner says it's got to be three to nothing, everything's got to be three to nothing. My dad was on Euclid City Council. There were nine members. I said, "Dad, what does it take to be a city councilman?" He said, "The ability to count to five."

Joe, you are right. You get two people. You get the business community, look what you did when with you linked up John Ryan and AFL/CIO on Issue 14. Create alternatives to the traditional public private partnership that not only pushes, but pulls the political leader as well. Create the agenda. This is not Kevin Costner's, build it and they will come. But if you create more pressure on them, having been one of them myself, the last thing you want is pressure. But we don't create enough pressure and we don't have the defined agenda on the political leadership as well and so you get the mediocrity of making everything your second priority.

Mr. Frolik: A lot of it about regionalism, but is the willingness to go forward on regional projects there? Ned mentioned to a lot of people outside of Cleveland, they see Cleveland as something they wanted to move away from, why they spurred throughout the area. Within the City, and I'm sure it is in other places, there is this reluctance to give up what you've got. There was a councilman earlier this year, forget for a moment the mayor suggested regionalizing the airport. He managed to bring together his 20 colleagues and Mayor White in a rare moment of unity to denounce him. We are not going to give up our assets. How do you break through that so that regionalism or these type of discussions don't become the third rail of Northeast Ohio politics?

Mr. Shatten: This region, in the last 20 years, has been a remarkably successful exercise in regionalism. I always get agitated when people talk about regionalism. We went to a regional transportation system, we went to a regional water system, we went to a regional tax base so that wherever I work, somebody moves some money into somebody else's pocket. The park systems have become regional, the dog pound has become regional, our hospital has become regional, our Lake Farm Parks have been regional. This City is one of the standards of regionalism in the United States of America. I believe it strongly. Now, that said, let's reopen the game on the rest of it. All these government issues are important on high leverage. Why don't we have a water edge governance that can actually -- I think one of you said, can tax and raise resources. Maybe you said that, Dennis. That owns land.

Mr. Eckart: That owns land.

Mr. Shatten: Why don't we open up all of these? Why don't we open up the question of the port authority? Why don't we open up the hard questions of the airports? Each one of those has to be worked hard and carefully in the context of collegiality, that nasty thing of working together, but there are a whole list of things that you could open up there. But the antecedent to me is to not whine about it. We are excellent at regionalism. Our venture capital initiatives, they are all regional. COSE is what, how many counties now?

Mr. Eckart: We have 16 counties and 17,000 members.

Mr. Shatten: 17,000 small businesses from 16 counties and we are complaining about regionalism. What could be more regional than our small business geography in Northeast Ohio? So I think we have done a very powerful job there and there are four good enough to keep doing it. So I always get agitated when I talk about it.

Mr. Minter: I agree with you, Richard. And I think we really need to face into it and that is when you start dealing in Northeast Ohio around these sets of issues and politics and cultures and ethnic affairs, we still are a place which is highly noted as being fairly or not, but the statistics, I guess, don't lie. Highly segregated.

And when you start to deal with the issue with trying to talk with the major City which is the important driver in the region, the downtown region is still quite significant for business, for culture, for sort of defining the spirit of the region.

We still have to deal with the questions of poor families and issues of race, and, you know, we just -- look, we just went through a very critical election. The bond issue that passed successfully which was based upon -- we really only wanted people to turn out in a certain area of the City to vote for this. We want a low turnout. It was all designed significantly and probably appropriately so given the political realities around. We want people in this ward to turn out because they are African-American and they are going to vote a certain way and we want to discourage people to turn out elsewhere.

And if we look at how the population moves and we look at who is in the City, where was there a growth in population and where was there decline in population. It has a great deal to do with perceptions and feelings about race.

Mr. Eckart: Steve has just scratched a long-standing and frequently wishing it was hidden itch in Cleveland. Both racial politics and racial economics. The top 15 black entrepreneurs in Cleveland, these are successful men and women, get less than 20% of their business from other Northern Ohio orders. These are manufacturers, these are service providers, these are architects, engineers and other professionals.

And we do not -- there is no home field advantage for doing business being an African-American here. In Detroit, those numbers are almost flipped over on their head completely.

In this context, the government or entity such as all of us around the table can't try and guarantee success. That's probably where we get in trouble. Not my voting record notwithstanding in Congress. What we have to try to do is a try to do a better job in guaranteeing opportunity.

In that context, we do need to create greater linkages between African-American entrepreneurs, between capital to African-American entrepreneurs. We need to go beyond boardroom to boardroom initiatives and create a talent bank between majority companies and minority entrepreneurs who are trying to work themselves out.

You've got dozens of great graduate students at Cleveland State and at Weatherhead who would love to use test bets opportunities for empowering economic development. The only thing I would have holes in it in my view is the first quality Swiss cheese. Not in the economy end. In the context of Cleveland, we have holes on a racial basis, just as significant on an educational basis, of African-American and Hispanic entrepreneurs who are not sharing, and whatever, Sandy, the growth that has occurred, they have not sharing do not share and in an egregiously disproportionate way.

Mr. Shatten: Steve, I think that point is an essential point and it's a frustrating one because this community -- I think this community has been running honest, hard experiments for 20 years. So after the L.A. Riots what did this Mayor do? A day later a 160 mayors showed up at the Ritz Carlton Hotel to launch a major minority economic development initiative.

Year after year the community has formed minority outreach initiatives. We have figured out in housing because of the Foundation's commitment to housing in these neighborhoods, but we have mammoth experiments to deal with this issue and I think you are right -- see, I think it's an intended issue that we haven't figured out yet as opposed to we haven't done it. This place has experiments all over town but haven't clicked. We haven't gotten to the scale, e haven't gotten the boardroom to boardroom idea up to a scale where we can point to and say it's successful. We haven't gotten the mentoring programs to the point. The dilemma is we haven't gotten -- a 15-year-old we haven't gotten. So there is a big gap here in terms of how hard are we working to get over the edge.

Mr. Roman: When do we become afraid to measure it and track our progress which I think on the verge of accepting. And The Plain Dealer started this a year or two ago with some work they did. But, I think if we are going to acknowledge the problem and then start measuring and tracking our performance, one would tell you, and anything else around quality improvement, that that's the first step you got to take and I think we are ready to do that.

Mr. Hill: Issue 14 is a large part of it as well. One of the largest issues we have is the fourth grader to be competitive when they become older and to gain access has to have a set of fuel. So you have to push for access, but you also have to find away of investing in kids. And when you have a school system that is, what, 90% or higher?

Mr. Minter: It's not that high. It's more in the 70s.

Mr. Hill: But it's a substantially poor system that you have to make certain that the quality comes up, and the school system has done amazing things. But then you have to say, well, how can we expose suburban kids to African-American experience and how do you get different races of kids to mix together when they don't live and play in the same places? That's very hard. So, not only do you have the issue of opportunity of entrepreneurship, but you also have to realize the fourth grader in Cleveland, East Cleveland, the Heights, maybe in Lakewood, that's part of our work force, that's part of our opportunity.

Mr. Frolik: Steve, you spent a lot of your -- almost your entire career working on issues related to education, job training, job preparation, that sort of thing, and a lot of work at the Cleveland Foundation, and before that you were a cabinet member of the administration --

Mr. Minter: Sub-cabinet member.

Mr. Shatten: He was working at the high talent level, not the high political.

Mr. Frolik: We talk a lot about work force, we talked about these fourth graders. We have talked about it for a long time. How do we do a better job of linking the business sector, the employers with how we're training and what we need to do for those future employees, those fourth graders. Are there other models out there, other cities, other communities who really do it well and that we can take some lessons from?

Mr. Minter: Well, I don't think there are one or two communities you can look to and say they do it well. I think we can find best practices in a lot of different communities of pieces that are done well. And in that regard, I wouldn't be so, you know, disappointed about where Cleveland is.

And point of fact, the work that has been done over the last couple of years, and particularly lead by Dan Barry at the Growth Association on the whole work force development has been some of the, I think, some of the best work and has drawn upon the resources of the best we can find anyplace around the country.

It's now going in and doing the stitching, it's like taking the basic sciences and working on it and making the collaborative approach and articulation agreements between what happens in elementary, what happens in the middle schools and what happens in high school and that transition to, first, the community college level.

Because we have now learned, and a lot of us have come to appreciate even more that our challenge isn't just getting college graduates. We don't need 80% college graduates. We need people who have technical skills, and fortunately here, if we look at Northeast Ohio, the three community college systems in this part of the State are among the best there are. Cuyahoga County Community College, Lorain and Lakeland College are doing tremendous jobs. Roy Church over in Lorain is well noted for his work.

So, I think we have the elements. The question is really staying after the components and putting it together. And so that's why I think the building block of what's happening with the Cleveland Public Schools, and, let me stress, what's happening with the inner ring suburban schools, keep in mind that East Cleveland and Warrensville and Shaker and Cleveland Heights and Euclid and South Euclid and Lakewood and Parma, these systems are turning out a lot of young people. Some of those systems have significant records in terms of going on to higher education and some had pretty mediocre records and some are poor.

So it isn't just Cleveland, although we obviously need to focus on those 77,000 students, but really placing a great deal of emphasis on this and really continuing to push with work with our higher education institutions. We have to sometimes constantly remind ourselves there really is a lot more than the community college and Case Western Reserve and Cleveland State.

Mr. Eckart: You have more kids coming to Northern Ohio to go to college every fall than much in the Boston area. What we don't have, in my view, is a significant linkage between higher education and the business community in definable ways. Case is probably a little bit ahead of the crowd there. But Carol Cartwright down in Kent State and certainly Louise Perenzo over at Akron have now started to build on some more significant business relationships that are significant. Creating true broadband interactive classrooms between each of the four State universities alone would do a lot to make every professor available to any student on any campus.

But also creating, for instance, a linkage between what Jeri Sue Thornton's doing over at Tri-C or Roy or the new president out at Lakeland between tomorrow and growth where we would actually have a joint vice presidency who are not just taking cookie cutter curriculums, but sitting down with you, the business person, and saying okay, what do you need? What do I have to teach these young people coming here to be a value to you? And it's creating is a more significant linkage. It's what Zell Miller did down in Georgia that really played very well because it worked. They developed curriculum around economic needs. They just didn't teach a curriculum that had been developed in some other context.

Mr. Frolik: I'm going to go Joe to here. He's on the State Board of Education. Particularly on the science end, what are you hearing from businesses about science and technology? What should these kids know?

Mr. Roman: As a lot of the folks around this table know, I'm a proponent for -- I think our community colleges are excellent. But if we want to go back to your opening comment, how do we reach scale in this town, if we wait to cure problems until kids leave high school, we are done. We are done.

And as we speak, this State is rewriting all its standards. We got the cart before the horse. We started to test kids with proficiency tests before we knew what the kids should really know before they graduate.

So we are trying to go back as a State such as others have done such as Texas and North Carolina, and create the very understandable system that says at the end of third grade, kids should know this, to keep progressing and at the end of each grade and to test those progressions. We know what kids are going to expected of in the State of Ohio.

Right now we are rewriting the science curriculum for the State of Ohio. And Dennis made a joke about it, but it's one of my concerns is that we are hearing more as a State as those standards get written as we speak about whether creationism should be added to our science curriculum, then what are the kids going to need to know when they make those career decisions in ninth grade, in tenth grade, in eleventh grade and then go on into either the work force, to college, community or otherwise, they are going to be affected right now by what we do.

And we are not hearing from -- there has always been sort of a Chinese Wall, largely constructed, I believe, by the education community, which was the business community can't come in this door because what the business community is really trying to do is create robots. They are just trying to tell us what our kids need to know so that when they graduate from here they can do that little kind of job that's been defined-- that's not the case anymore.

If we don't bring them in and allow them to come in, and if the business community doesn't jump in with both feet, we will forever sort of be sort of relying on our excellent community colleges to cure the problems that we didn't get to when we should have and I'm very frustrated by that.

Mr. Hill: There is another spin or connection between the education community and the business community that hasn't worked terribly well. I saw what came out with the my interpretation of the Ohio Plan. Part of what we are missing is the researching development potential or capacity in the private sector and the university sector really hasn't made a good link. We are twentieth in the nation per capita basis on R&D as a fraction of growth state product which is very, very low. We are the the overall in gross numbers.

The Ohio Plan bothered me because it focussed too much on info-nano-bio and didn't focus enough on working with our existing base and tying it together essentially in forming partnerships and the business has problems with open science. Closed science is what they sometimes want, but we haven't figured out how to take our corporate R&D capacity, especially with smaller firms, and linking it up with our university system.

And one of the problems we have is it cannot be either or. We need info-nano-bio. That's the long part of our investments, but we also need to take our existing R&D base and really make it much more robust and much better than it currently is.

So, not only are we talking about those leaderships and the connection at the community college level, you are manufacturing tech programs and the manufacturing center which Cleveland Tomorrow helped found -- what was that, how many years ago was that?

Mr. Roman: 17 years ago.

Mr. Hill: The Cleveland Advancement Manufacturing Program. We need to keep our leveraging off of that. It's what Richard is saying, it's right on the edge of making it, but we need that next push.

Mr. Shatten: Don't forget, Tom Hayes at the County has put these training academy programs together with Dan Barry. We are taking County training money that used to just come through as sort of wasted money. It's now a link to money under the contract to the community colleges.

So there is a systematic program in Ohio right now and in Cuyahoga County that says all of this gigantic Federal money under this thing called the Work Force Investment Act. That money is flowing down, not just washing, it's flowing down to the contracts between community colleges and employers called training academies. I think well see Tom Hayes, as he moves up to the State, propagate that model of training academies wide.

Now, since we are on TV, I can add my one outrageous, wild and irresponsible recommendation for linkage. I have been waiting ten years to say this. You will tell me it's stupid. We are the only place in the United States of America with State universities in four contiguous counties in the country. Four contiguous counties.

Now, imagine what the Northern Ohio State University system would look like if it was one system with a dominant campus. I would put it at Kent for the moment just for this conversation and I would give you guys sort of all urban responsibilities. I would give Akron all chemistry responsibilities. And have a single campus run by the State of Ohio without the duchies so that we actually could take some advantage of the fact that we have some talent as opposed to dividing by four, dividing by six, dividing by eight. So we are down to the number of 46. It's a big, crazy idea.

Mr. Eckart: That's right. It would create no scope and scale, more kids, more buildings, more money, more professors, combined research dollars, but it requires, we used the word before "bets." It requires some nut cracking choices. You can't be all things to all people.

Economic development is not one size fits all. We relate to the hospitals again. You can't just say just the Clinic or just UH or just Metro. You always have to say Clinic Metro UH as if it is one single entity.

Now, granted, I'm not going to repeat the Cleveland Clinic billboards out there, but you have different components that people are in different places in life. Maryland made choices. They bid on John Hopkins (sic) and they told the University of Maryland system you will do other things. We are going to have a single and it requires us not only to make bets, but in some ways -- Joe, you and I talked about this twenty years ago. The government has to choose. To choose sometimes means you have to say no, and it requires an amalgamation, it requires some cohesion and it requires some choices, and until this community is prepared to make some of those tougher choices and not say all seven of you get to go together to be first, we won't get to be first.

Mr. Hill: It also means selective excellence. One of the problems you have is academic socialism at work. A tendency in university is to level. And when you have public universities in particular, you have to say we are going to treat different units differently. We're going to hold you to different standards, different expectations, and I'm sure that I'll hear from the union about this later, but the issue really --

Mr. Eckart: Your tenure doesn't matter.

Mr. Hill: That's it. But Cleveland State has to be an open university. We have to be the way in which people start making up through the system, but at the same time different units have to perform differently with different expectations.

Mr. Roman: And measurements.

Mr. Hill: And measurements are critical.

Mr. Roman: Only for the fact that Ohio State probably wouldn't like your idea, I think it's a great idea.

Mr. Shatten: We are Ohio State, you are right.

Ms. Pianalto: It's called the Northeast Ohio Counsel in Higher Education where the presidents of the 22 colleges and universities in Northeast Ohio have come together. That organization has been in existence for sometime, but I'm a public trustee on that organization and it is re-engineering itself and the presidents of these 22 colleges and universities recognizing that they can't be competing and that they are not all the same. They do have different comparative advantages.

So I'm encouraged that these 22 individuals are coming together, meeting -- we have developed a strategic plan for the Northeast Ohio colleges and universities. The core elements of that plan are to focus on work force development. The technology, use of technology, not only within the technology that we need for this economy, but the use of technology in our colleges and universities.

So there is some of that going on where these individuals recognize that it does them harm to compete with one another and that they are going to be much better off if they can work together. So I think we are going to see some progress along those lines.

Mr. Minter: In the last ten years that that has all happened, just to able to break out of the Cleveland group and to incorporate and bring in the outlying, "universities and colleges."

Another one of the sort of little step by step in terms of regionalism, I do think it will be interesting to see Dennis and Joe when, in fact, the business sector, in fact, really becomes regional. I mean, that will be -- here is the private sector. That will be a huge signal to this region when it becomes Northeast Ohio tomorrow.

Mr. Eckart: You are absolutely right. With almost 17,000 COSE members across 17 or 18 counties, it is the single largest chamber of commerce of its type in the entire country. Does the its political muscle match its size yet? No. We have to. It's part of our accountability. It's part of our assuming significant advocacy. Do we go just go beyond issues in education?

Mr. Shatten: It is a big opportunity; right? Just lay that out a big organization with big responsibilities and more that it can do, these are good news stories; right?

Mr. Eckart: Sure. And if we just raised dues alone, $100 a member, we can put $1.8 million on the table. Now, I think I just heard the phones ringing. Please send those checks in now. But, the reality is, Steve, you are right. There is leverage across size if in fact we would be willing to do that.

A lot of what we have talked about has been growing jobs. David Davercoe, Joe, your chairman, said something to me that was interesting to me, and maybe if we could go around the table for a minute or two it would be fun for me.

Mr. Frolik: Why don't we start with that when we come back because I think we are at the end of the audiotape.

(Whereupon, a brief recess was taken)

Mr. Frolik: Dennis, we have talked a lot about growing jobs and the kind of things we need to have in place to grow jobs and we'll talk a little more about that. What do we do in terms of retaining what we got and strengthening what we have already in this area?

Mr. Eckart: Well, Mr. Roman's chairman of Cleveland Tomorrow, David Davercoe, the chair of National City, is very fond of telling me the story that after 20 some years in dozens of states, he has had virtually every other mayor, governor, commissioner from 19 of those other 20 states ask him about if you are going to expand or if you are going to grow. Never been asked by the local mayor, the State of Ohio governor even though it is a Cleveland company.

And so while growing and creating the opportunities is very significant, there has to be a component of job retention and local expansion as part of a regional marketing campaign. You just can't let folks who do business in other states become enamored of the person next door where the grass potentially does look greener.

In some context when Joe and I were looking at this a few weeks ago, we are spending less than $400,000 a year in terms of local retention attraction and recruitment. You've got cities all around us. Rochester, Buffalo, Syracuse, Pittsburgh -- Joe, help me -- Columbus and Detroit all spending million dollars of doing recruitment, retention and a attraction of existing facilities so that you don't lose your existing base.

If you marry it in Ned with what you were talking about and Steve in terms of work force and productivity improvements, which you say we do a good job of here in Cleveland, and then take the attraction part across, Steve, you know the clusters you referred to sometime ago, where we don't try to put up a billboard in southern California. You track our clusters.

Which you know, Richard, you worked on a long, long time ago and Steve you funded and invite folks to come here that fit here and most importantly, invite the folks to stay here to want to stay here and create the type of environment.

And it could be silly things like governance. If you are going to pour a new driveway, you stand in the same line to get the same permit that Dick Jacobs does to build the stadium. You have no one-stop shopping, you have no ease of permitting and inspections, you have no common planning process. It's easier to go some places than it is to stay home.

So we need to have a fundamental attraction/retention program that also deals with college campus recruiting. We just don't do it and other cities are beating us to the punch in big ways.

Mr. Minter: We do have a couple significant things to build on. It's about the bunts and the singles and the Cleveland Advanced Manufacturing Program that has been a very solid program. We have to continue to have that program built and provide support for it and WireNet which is largely operative on the West Side working with companies of twenty to onehundred fifty people providing those kinds of resources that help re-engineer so that they could stay in their current locations.

That is a large part of this region's manufacturing base are these small companies that expand and contract as the economy changes. And we have been widely recognized throughout the country. We constantly have visitors come here, but keeping those dollars coming to stay at it for the long term, and then I think Cleveland did a pretty good job over the last decade in developing some industrial parks and land space, but now we have the tougher job is that we have got to do something with roads in order to make some of the green space more available.

It is the whole business in the ground fields, because if we are going to have the job locate, then you've got to be able to say, here is space, here is land, here is help in terms of financing. We have a lot of those elements, but we've got to go more to scale.

Mr. Hill: There is one thing we people forget. We are having this discussion while LTV Steel is going through its reorganization, and there is going to be lots of news coming out over the next couple weeks about that, but we keep forgetting that the State of Ohio, since 1982, the manufacturing sector has added $15.2 billion worth of value in inflation adjustment terms which shows you how important it is.

Going back to the attraction and especially retention and expansion is that that is where that has largely come from. So it's not only getting the physical stuff right, and of course getting the government to treat business like a customer, very important, but, again, it's focussing on innovations within that base.

Mr. Shatten: This community built a music and communications building and a convocation center at the exact same time it that it could have built a gigantic industrial engineering program and an incubator.

So it's in alignment of our higher education system to say what should our higher education system do be absolutely certain it's supporting the manufacturing. And Akron should have an agenda. Cleveland State should have a quintupled agenda because I think there is a lot of retention you can market and you can market effectively, and then you have to think again, don't forget the Growth Association has to have a method. Once we are out marketing, we have to get them, land them and keep them. We have to have the land that you are speaking to, Steve.

So there is a big agenda of stuff that can be done with the systems here, but I think we have -- it's right at the edge. It's right at the edge. People need to take some of those assignments. I would love to see the President of Cleveland State say "manufacturing can anchor us" and don't think of manufacturing as some rotten old place where you are going to get laid off. You had some words when we started, I forget the words you said. Nano -- I forget those fancy little words you had. They were cute.

Mr. Hill: Nano-bio-info.

Mr. Minter: I thought he was the one.

Mr. Hill: I got them from Richard.

Mr. Shatten: Those are manufacturing jobs. We did some studies. Where were the largest manufacturing jobs created in the last ten years? San Francisco. Manufacturing is not a bad thing, it's a wonderful thing.

Mr. Hill: What's also interesting in this community is the Cleveland Institute of Art has the best industrial design program and it's not even a player, not in the game.

Mr. Shatten: Not in the game.

Mr. Hill: Not in the game. And if you look at the technologies and sets of industries in the State of Ohio, industrial design is one of the lynch pins and that really is the way you bring forward new products. So why isn't CIA recognized as a wonderful resource in this community?

Mr. Shatten: It's a great idea.

Mr. Eckart: The clusters are instruments, controls and electronics. We do more parts for planes, but don't build any planes here. Across that single cluster, and that that needs to develop. Basically, it's finding out what you have that you don't have to go invent and then build and expand upon it.

Mr. Hill: One of the best areas of software that this region does is factory automation and controls and the fact is we don't really play it up for what it is.

Mr. Shatten: But we have thousands, thousands of human beings working here who are writing software for factory automation control. It is a huge industry.

Mr. Hill: And there is no difference between old economy and new economy. There are firms that innovate, firms that use information technology, firms that bring forward new products, and then there are dying firms and that's it.

Mr. Frolik: I think there has been a lot of beating up on ourselves in this region about missing the boat. Why don't we recognize those things, that we write the software for the manufacturing, or people who are working in the manufacturing -- Sandy was talking about in the back office of the Federal Reserve Bank they have little robots. There are a lot of very high tech things, and we are certainly not perceived as high-tech region.

Ms. Pianalto: That has shown how much productivity increases have occurred in that manufacturing sector in an industry which is very important to Northeast Ohio, the trucking industry. You think what new ideas have come to that industry, and it's interesting. The diagnostics that are now going into a truck, because what's important if you are operating a truck is to make sure that truck stays operational. And they are moving over long distances and the last thing you want is to have that truck breakdown. They are now, and these are manufacturers here in Northeast Ohio, are putting diagnostics in trucks that will let the operator of that truck know way in advance what is happening inside that truck so that fixes can take place well in advance of a breakdown. And so, you know, you think of this industry like trucking, and see how much technology has been brought to that table.

And, Joe, I think we are aware of the fact that we are participating in the new economy, because the definition of a new economy, it's not so much what you are producing, but how you are producing, and we are producing in everything we do. You mentioned the Feds processing currency, we are producing that now with robots or moving that currency around with robots, no longer with people.

So yes, we are participating in this new economy because the new economy is how we're making things, how we're doing things, and I think it's just very clear that Northeast Ohio is participating in that new economy.

Mr. Shatten: It's going to be very hard though, the whole question is is this happy talk or depress talk. It's very hard for Northeast Ohio to say how should we feel, good or bad right now?

Mr. Frolik: How about just nervous?

Mr. Shatten: And should we be nervous or optimistic, and that's the tricky piece here. We have to go back to this cohort of fourth graders who will be us in that matter of time.

Ms. Pianalto: To participate in this new economy does require an understanding and ability to use technology, and we don't necessarily have the work force ready to do that.

In the nineteen seventies, most jobs -- only 25% of the jobs in the country required an equivalent of a college education. Today that's closer to 35% of the jobs. And we don't have a work force in the country that has the 35% of our work force has a college education, and we clearly don't have that in Northeast Ohio.

Mr. Shatten: And we don't spend anything here in making that happen.

Ms. Pianalto: So really getting that work force prepared to participate in this new economy is just so critical.

Mr. Roman: Another element I think of that's sometimes sort of embodied when we talk about new economy, and we have all been working on this to some degree in Northeast Ohio is some area of entrepreneurship, and will the cohort of fourth graders be as likely to go work for Parker Hannifin as a scientist as possibly be willing to start their own business.

And all statistics in our community seem to suggest that we have a problem. Whether it's our culture that has sort of forced us to be an entrepreneurship in the last 30 or 40 years, we certainly were onehundred years ago, but we seem to be riding that wave of a very strong manufacturing economy during much of the 40's, 50's, and 60's. We seem to have that dilemma in front of us, and it's a hard one because it really is cultural. I don't know how you get to that in standards, or so forth, but it's there and we have to deal with it as a community because we need more fourth graders who are going to be just as interested when they're 22 at starting -- a lot of pressure on these fourth graders, but we need that.

Mr. Frolik: I have heard in preparation for this discussion a number of people say the venture capitalists here in the region, but the venture capitalists here aren't bringing us ideas. We are hearing from other people coming to us with ideas. How do you change that culture? How do you inculcate that entrepreneurial ethic, that obviously, like Rockefeller and Mather had 100 years ago in the City?

Mr. Shatten: Look, I think there are a lot of shots at this, but really, fundamentally, underneath this entrepreneurship here, it is not a culture story and it is not a one-shot story. It is the base that generates talent that can be entrepreneurial is not as big as we would like it to be. We don't have enough college-educated people and our scientific research, while good, is not big enough.

We are missing $300,000,000 probably in biomedical research in this region right now. And without $300,000,000, it's hard to get the cooperation. You can't just create an entrepreneurial culture. Creating an entrepreneurial culture means getting this cluster thing. So if the design is good, we need to have not only the best designers, but the most designers.

We have to be big enough at enough things and place multiple bets, which makes it very hard to play this game because we always want to go with one-liners. We want to go nanotechnology and we all get excited and do our one nanotechnology, but it turns out we have to do nanotechnology and we have to do biotechnology and we have to do rubber and we have to do chemistry. And so seven is a best number. What are our seven bets? Not what's our one bet, and we should to be rallying around seven bets and spending money on it.

Mr. Hill: But there is also a linkage issue that's been missing in Ohio. And the linkage is, again, between the existing base and our research and technology base.

I do work occasionally for the American Academy for Advancement of Science, the research competitor in this group, and one of the most exciting proposals we ran into was in the State of Maine. Very small state, limited amount of money, and what they said is whenever we fund anything within a firm, it's closed science, it doesn't build our base, and whenever we fund something purely in the university system, it doesn't hook up with business at all. And so we said, why don't you take the best of both worlds and say you are going to put together a competition that funds business and either nonprofit research labs or your universities and partnerships with juries that are composed of academics as well as business types.

Mr. Eckart: In the last several days, we just rolled out an announcement about where we will actually create a jury of business plan competitions --

Mr. Hill: Multiple ones.

Mr. Eckart: -- multiple. And spend half a million dollars rewarding folks who take risks. And in so doing that, it's just is a baby piece, but what we got away from was what this community did so well which was taking risks, and we have few risk takers today. And in this context, this is a marriage between the business community, the university community and Reserve and other capital folks to actually fund business plans and there will be components to that that can make a difference, but this is only just a single component that measures our willingness to invest and to take risk.

Mr. Hill: That's wonderful. And I would like to see that same type of thing going through OBOR, Ohio Board of Regions, to get partnerships going like that when it comes to research and development dollars. I think you would have a better constituency for the Ohio Plan if you had that type of research competition with real partnership and it would get us to that five to fifteen year period to re-energize the base, and not to the exclusion, but it's got to be both. We've got to put together a portfolio approach that deals with the short, medium and long run. We haven't articulated that yet. It's got to take place.

Mr. Minter: Being with this conversation really pushes even harder at why we've got to invest so much in education. Those are the steps where the incremental success things give a degree -- will give a degree of confidence to a lot of other facets of our economy to move forward.

Just the more I think about it, the more that's -- that is the reluctant piece where this community lacks confidence that we can really make a change and why what is going on right now in the Cleveland Public Schools and the inner-ring suburban schools because you will find me continuing to stress this with what's happening in terms of higher education.

It also says to me, for example, there are probably a lot more us who ought to be highly exercised and highly energized and we probably aren't about what's going on at Cleveland State University and the current search and where that university is going to go.

Try and think about that in the next decade, because it's someplace where you can make an investment. And if we look back at Case Western Reserve University and the medical school in the early eighties when our foundation and a number of others put money in supporting the basic science departments and how that paid off in terms of AIH grants and so on and so forth, where there was a tremendous amount of money and where they will be we already know from the Federal budget, very significant increases.

So, part of the business of being -- getting the competitive edge on the economy is also looking at where there are some resources out there to be tapped. It would be nice if we got more than our fair share. And clearly, in the education arena, both elementary and secondary education and higher education, we need to take some major steps and we've got some tremendous resources to build on here.

Mr. Shatten: Those major steps though, I don't think this is going to be possible until a governor has the strength to look at this budget today and say we are going to need to raise taxes.

We have talked about education and everybody agrees that this is the way to growth and to innovation and to entrepreneurship, but this state, under the current circumstances, I don't think is going to be able to pull it off without a tax increase. And we're not allowed to say "tax increase" in this society, you say tax increase and everybody hides under the table.

But, over the last twenty years, we have successfully disinvested in education and hurt our income, our wealth-generating capacity. You are raising a basic point, Steve, and I would add onto that, you can't duck it. There has to be a debate about trying to slim down and slim down. You can't just do that. There has to be a way to say, we deserve our fourth graders a better education so that they can be entrepreneurs when they graduate from college and go onto graduate school and create jobs. It is a huge, messy, miserable issue. I'm angry about it. I'm exorcised about it.

Mr. Eckart: But when in the years of Voinovich was there marketing more, doing more with less?

Mr. Shatten: And you pay a premium for that which begs the question, in my view, as to what do you then expect the next mayor of Cleveland to do? Having gone out and done a major tax increase for our schools, having been through the audacity of trying to sell the power plant after they sold the sewer system after they sold the bus system to keep the City alive and afloat once upon a time.

Is there an element of political leadership that is prepared to have the kind of very frank discussion about other assets? The airport is one that comes to mind, the linkage with the Akron/Canton Airport. How you develop Burke, which is a primo piece of real estate, and by the way, which Chicago decided they were going to get rid of that because it's too valuable lakefront real estate right now. And Joe and Cleveland Tomorrow with Civic Vision have done a number of initiatives, but where in the context of the mother city in linkage with certainly Lorain and Akron probably, and I define by the way the mother city as picking up the under-ring suburbs because their future is in inexorably linked --

Mr. Shatten: So that's sort of the role of the mayor in terms of pushing that issue? Is that where that lands?

Mr. Eckart: I think the next mayor for the next generation can't just be about single projects. It has to be about broader regional vision. There is a bumper sticker out there: "Think globally, act locally." If that wasn't the Mayor's campaign slogan in the sense of now trying to figure out, how do I integrate neighborhoods into what this downtown is doing, but how do I integrate this downtown to where other downtowns are at?

How do I have forty percent of the Cleveland Public School teachers come from Cleveland State University? You want to fix the schools? You intervene at the university. You make a fundamental impact there turning Cleveland State into the center of excellence for urban education.

So but the point is I think the next mayor has to have a little broader vision than -- and I'm not saying rudimentary services don't work. We went through a mayor who held rudimentary services hostage to philosophical visions once upon a time.

But, the next mayor's race is going to define the City in significant ways beyond even which governor will influence us, because while I concur the State of Ohio has a lot to do with it, I'm tired of asking other people for permission to do things. And while I want everything I can get out of Columbus, I don't expect Columbus to do it for us because they are certainly awfully busy doing it to us. And right now, I think it is going to have to be an amalgam of county and other regional mayors that come together and help us define ourselves in ways that Columbus and Washington can't.

Mr. Minter: So if the next mayor exercises as much leadership as the current mayor has, it's possible this community could move a long way. In all fairness, we step back and look carefully at what we have accomplished in the last twelve years. It is a pretty significant list of things.

Mr. Eckart: I think White's been a phenomenal mayor. The question is that mayors, like administrations, have a time and place in history, and now there is another time and another place for Northern Ohio's history, number one.

Number two, like any period of time, you run out of gas, and alternative leaderships and leadership styles, different emphasis, different personalities brought to the case are very important. But it's not just projects, It's government issues, it's management issues, it's addressing regional issues from a different perspective because this is not nineteen eightnine anymore.

Bob Taft is running the string out on a State budget conundrum that can't go any further. Richard, I think you are absolutely right. They can't fundamentally re-trigger it the way they are doing it just by rearranging chairs.

Mr. Hill: And you also can't do it just by putting Band-Aids on the current tax code. This is one of the fundamental challenges. We have got a business tax code that is the gateway to 1950. We have to get a tax code that helps --

Mr. Shatten: Isn't that a year or two ago?

Mr. Hill: The fourth chapter here is all about doing that, but if you have a tax code that punishes inventory, that punishes your ability to invest in plant equipment, that takes retained earnings and then gets taxed. These are some very serious issues. If you look at business taxes in the State, the dollar amount has gone up, but its share of total tax take has gone down.

And if you look at the tax that the manufacturing sector is paying, it's five times that of services -- of the service sector. And that's giving you a clear signal. If our future is higher productivity resulting in higher incomes, why do we have a tax system that's punishing productivity? It doesn't make sense.

So part of what's run out of gas is not only the fact that we've got a current budget in the State, it's investment budget. It's crisis budget that we have a tax system that we have been dealing with Band-Aids rather than fundamentally rethinking.

Mr. Eckart: Well, it's the county though. We have spent so much money that what we seem to have to spend in social service things, that if you spend half a penny of their discretionary county budget, they could fund more economic development than the