MinnPost - Brad Allen

Reclaiming Twin Cities money center legacy, with a twist | Brad Allen

Brad Allen — Thu, 22 Dec 2011 13:23:00 -0600

“We’ve got a great list of public companies in Minnesota. Anything we can do as a state to publicize that, we should,” said Robert Buss, managing director at Disciplined Growth Investors, an independent investment adviser in Minneapolis with $2 billion under management.

Minnesota is home to more than 490 public companies and boasts more Fortune 500 companies per capita than any other state, according to the CFA Society of Minnesota, an organization representing 1,200 investment professionals across the Upper Midwest.

The Twin Cities metro is also home to 56 institutional asset managers, hedge funds and private equity firms managing an estimated $415 billion. In addition, more than 90 corporate, nonprofit and government pension plans and endowments around the state manage another $210 billion in assets.

So it seemed natural when as president of the Society, Buss and colleagues launched an effort to revive something the financial community hasn’t seen here in some time — a regional conference bringing local public companies together with local investors.

“We felt uniquely positioned to do this,” Buss said.

“If I look back, we used to have annual investor conferences sponsored by Dain Raucher and Piper Jaffray. They were big events locally,” he recalled.

Next May, the CFA (Chartered Financial Analyst) Society is sponsoring InvestMNt, a day-long conference that aims to bring together 250 to 300 local institutional investors and 40 public companies at the Minneapolis Convention Center.

The society has never mounted an investor conference before, but Buss and former CFA Society President Tony Carideo said they hope that InvestMNt will help re-energize metro area financial professionals’ sense of community while showcasing the state’s diverse economy.

They also hope to set a model for how investors and companies can come together, free of perceived conflicts that have tainted traditional brokerage-sponsored conferences. Under the old model, firms that had investment banking or a trading relationship with the sponsoring broker would make up the majority of presenting companies.

While that approach worked for the brokerage industry, Buss says, it has failed to meet the needs of most institutional investors who want to meet a cross section of companies and managements, regardless of which firm does the most banking business or generates the most trading commissions.

Institutional investors, who put six- and seven-figure bets down on a stock, talk about how they invest in management teams, as much as in the companies. Therefore, investors like to look a CEO and CFO in the eye before they put their clients’ money into a stock. As a result, access to senior management is a highly valued part of the investment process.

“This is a conference developed by investors, not a brokerage firm. Invitations will not be limited to companies with investment banking relationships or potential but instead to the broader Minnesota Investment Community,” the society proclaimed in promoting the conference.

A decade ago, the Twin Cities enjoyed a reputation as a major U.S. money center — not as big as New York, Boston, Chicago, or San Francisco perhaps — but certainly in the top 10. Since 2000, consolidation within the industry has diminished the region’s heft and ranking, though not its reputation as a home for savvy investment management.

According to the U.S. Bureau of Labor Statistics, Twin Cities employment in the securities and investment sector has dropped by 25 percent over the past decade, from 20,000 to 15,000. The financial market meltdown and Great Recession further eroded employment ranks. In the past year alone, employment in the sector has dropped by more than 5 percent.

Click to write a comment or read comments about this post.

Mexico-U.S. relations: beyond 'looniness, stupidity and flatulence' | Brad Allen

Brad Allen — Thu, 22 Dec 2011 10:44:00 -0600

"As in all good families, there will be looniness and stupidity and flatulence on both sides of the border."

The speaker, Mexico's Ambassador to the U.S. Arturo Sarukhan, shared that colorful observation with an appreciative luncheon audience of the Economic Club of Minnesota last week as he warned about political rhetoric during both nations' 2012 presidential elections.

Sarukhan said both countries "will have to Teflon-coat our bilateral relationship so some of the stupidity that gets said on the campaign trail on either side of the border does not stick."

Both countries also will need to "lock in the fundamental sea change that has occurred" in the U.S.-Mexico relationship.

Since the North American Free Trade Act (NAFTA) was passed nearly two decades ago, trade among the U.S., Mexico and Canada has been "a fundamental driver" re-making the relationship a more equal and strategic one for all the partners, he said.

(You can listen to Ambassador Sarukhan's full comments here.)

Despite popular notions, Mexico has become a middle-income nation with population growth equal to or lower than the U.S. He also reminded the audience that 1.5 million Americans live in Mexico, further tying the two countries' mutual interests.

This past quarter, Mexico surpassed China as the United States' No. 2 trading partner, behind Canada.

Trade with Mexico directly supports 10 million American jobs, Sarukhan said, and Mexico is the No. 1 or 2 trading partner with 28 states. (Mexico is the fourth-largest export market for Minnesota, according to the state Department of Employment and Economic Development.)

Those facts "don't fit on a bumper sticker. It's much easier to say ‘No to free trade,' or ‘No to NAFTA'," he added.

But the complex relationship between neighbors includes some problems that will have to wait until after the elections in each country, the ambassador said. The illegal flows of guns and cash into Mexico and movement of drugs and people into the U.S. present the thorniest set of issues the two countries face, and will require joint action to solve.

Sarukhan said the flow of illegal immigrants to the U.S. has fallen dramatically in recent years, in part because of the collapse of the U.S. construction industry, as well as the strength of the Mexican economy, which grew 5.5 percent in 2010.

He also cited increased border security and the involvement of organized crime in human-smuggling rings. Both have increased the cost and risk for migrant workers who previously easily made annual, albeit illegal, round trips to the U.S. and back to Mexico.

The immigration issues will not be solved, Sarukhan said, unless two issues are addressed simultaneously: the flow of about 300,000 to 350,000 undocumented workers each year, and the existing 11 million illegal immigrants living in the U.S.

Sarukhan proposed a documented guest worker program to address U.S. demand for seasonal workers and what he termed a "path to documentation" for those currently living in the U.S. illegally. That would include payment of a fine and "going to the back of the line" for U.S. citizenship.

Since 9/11, the perception of a safety threat from across the U.S.-Mexican border could derail the bilateral relationship, he said, so "it behooves Mexico to enhance security across the border."

Sarukhan pointed to his country's involvement in uncovering an alleged assassination plan against the Saudi ambassador to the U.S. and the recent foiling of plot to smuggle Muammar Qaddafi 's son into the country as evidence that Mexico is serious about border security.

Sarukhan also described Mexico's emergence as a middle class society.

He cited conservative government economic policies that prevented the financial sector from getting into the risky investments that have hobbled most other economies.

The ambassador also credits an aggressive decades-long effort to lift 40 million Mexicans out of extreme poverty by linking government financial benefits to women and children's participation in health care programs and children's enrollment in school.

Click to write a comment or read comments about this post.

2012 regional economy looking up, Fed says | Brad Allen

Brad Allen — Wed, 21 Dec 2011 10:26:00 -0600

The recovery is slowly picking up momentum across the upper Midwest as moderate economic and employment growth outpaces 2011 and stays ahead of the national economy.

That optimistic outlook comes from the Federal Reserve Bank of Minneapolis's annual forecast, which was released Tuesday.

The forecast is based on the Fed's regional economic model as well as surveys of business leaders and manufacturing executives conducted in November across the six-state Ninth District, which stretches from Montana and the Dakotas, to Minnesota, Michigan's Upper Peninsula and northwestern Wisconsin.

State-by-state forecasts show employment and personal income growth picking up across the region, and unemployment continuing to decline as it stays below the national rate everywhere except in Michigan's Upper Peninsula, according to associate regional economist Rob Grunewald.

North Dakota is projected to see unemployment dip slightly to 3.4 percent, the lowest in the region and likely nationally, as it posts the strongest employment growth in 2012, 4.8 percent.

At the other end of the spectrum, Michigan's U.P. is projected to see unemployment of 9.4 percent, above a projected 8 percent nationally. Northwest Wisconsin is forecast to have the lowest rate of employment growth in the region, at 1.9 percent. Minnesota's employment is expected to grow 2.8 percent and record a 6.5 percent unemployment rate.

As upbeat as the employment outlook is for the Ninth District, there is a possibility it could actually beat the current Fed forecast, which is based on actual quarterly data through September.

The projections have not included the large drops in the unemployment rate seen both nationally and in the region in October and November. So, for example, the Fed's 2012 forecast for Minnesota's unemployment rate is 0.6 of a percentage point above last month's 5.9 percent reported rate.

Rob Grunewald, associate regional economist, acknowledged the likelihood of a positive revision once fourth-quarter data is incorporated into the Fed model. "Nothing says [unemployment rates] are going up, so they'll be where they are now or a little bit lower. It looks like employment will increase a little bit faster" than the forecast, he added.

North Dakota's economy continues to shine, driven by the oil boom in the western part of the state. Only Texas and Oklahoma have more active oil rigs, according to the Fed, and North Dakota has maintained the lowest unemployment rate through the recession and recovery.

The oil boom comes with some challenges as well. In stark contrast to the rest of the region, 94 percent of business executives surveyed in North Dakota report that securing workers is a challenge.

Manufacturers across the district enjoyed increased orders, production, exports and profits in 2011 and expect the trend to continue in 2012 at slightly higher levels, according to a survey of 474 manufacturing executives across the region.

Fed regional economist Toby Madden said manufacturers also anticipate increasing investments in plant and equipment and hiring more workers.

Even with the upbeat outlook, two yellow flags were thrown up for the manufacturing sector. European economic turmoil continues to add uncertainty to the outlook for exports, Madden cautioned. In addition, 19 percent of manufacturing executives reported that credit conditions tightened in the third quarter, compared with only 8 percent who reported an improving credit climate.

A separate survey of 409 business executives across all sectors was also upbeat. Sixty-two percent reported optimism about their own local economies, with manufacturing and retail executives the most positive.

Source: Federal Reserve Bank of Minneapolis

Nearly one-third of respondents in those two sectors expect to increase the number of full-time employees, more than twice the number who expect employment declines. Hiring expectations in all other industry sectors, except agriculture, showed a similar pattern of growth expectations exceeding declines, although not with as wide a spread between the two.

While the agriculture sector is facing increasing drought conditions, particularly in Minnesota in 2012, Madden said, "As long as the drought doesn't intensify, 2012 should be a pretty good year," based on U.S. Department of Agriculture crop price forecasts.

The struggling construction sector provided the one sour note in the Fed forecast. Despite a slight pickup in homebuilding in 2011, Madden expects housing starts to decrease across the district next year.

Click to write a comment or read comments about this post.

Northrop Auditorium, a U icon and white elephant, transforming for 21st century | Brad Allen

Brad Allen — Mon, 19 Dec 2011 10:06:00 -0600

MinnPost photo by Brad AllenNorthrop Memorial Auditorium is a familiar landmark on the U of M campus.

The University of Minnesota's Northrop Memorial Auditorium has been described as "the Carnegie Hall of the Midwest," "a major icon," an "architectural treasure" and "the second-most-recognized building in Minnesota."

It also has been termed "ponderous" and "embalmed," branded with a reputation for poor acoustics and known as a place most Minnesotans step into maybe once or twice in their lives, for a graduation or concert, never to return.

But an ambitious $100 million renovation launched in 2006 — and about to hit high gear — has promised to transform Northrop into a modern, technology-rich performance space and academic center that would turn the landmark into a hub of daily campus life.

University officials gave the news media a look inside the massive shell, now totally gutted, to build awareness of the renovation as the final phase of construction is set to begin.

MinnPost photo by Brad AllenReconstruction is about to start inside the gutted cavernous shell of Northrop Auditorium.

The seven-year renovation retains the familiar classical exterior of the massive 1929 building that anchors the north side of the U's main campus mall.

The project is totally rebuilding the interior with improved acoustics and unobstructed sight lines in the performance space. The number of auditorium seats will drop from 4,800 to 2,600, bringing the audience much closer to the stage.

"We are not going to be a competing venue with the Ordway and places like that," explained Michael Denny, director of development services for the university. Instead, Northrop will continue to focus on performances and lectures that would not otherwise find a venue here. "We're after the lecture [with] international esteem where we can be simulcasting with somebody in Russia," Denny explained.

MinnPost photo by Brad AllenMichael Denny, director of development services for the university, describes the renovation project.

Communications technology will be a key feature of the revamped building, he said.

"We've actually set up infrastructure in the building — because you can only do this once — to adapt to future technology. We've got it hooked up for satellite links. You can just come in and hook up to the building and start broadcasting from a trailer if you want."

He contrasts the U's renovation program with a similar restoration effort at the University of Michigan that ran into funding problems. They had a 5-pound budget with 10 pounds of expectations. We were very careful about keeping both those in line," Denny added.

The space gained by shrinking the auditorium will increase the amount of public study and meeting space on the East Bank by 50 percent. The new Northrop will house the University Honors Program, the Institute for Advanced Study and the Institute for Innovation by Design as well as a small theater, seminar and meeting rooms, a café and study space.

Denny said the project won broad support within the university community because of Northrop's expanded role beyond just a performance space.

One well-known Northrop feature, the massive 40-foot-high pipe organ, is not part of the current renovation. The organ's 6,975 pipes have been dismantled and are in safe storage as the U attempts to raise the $3 million needed to restore the organ and re-install it in a space that will be built for its eventual reinstallation.

The first phase, beginning 2006 and costing $15 million, stabilized and restored the building's exterior, replaced windows and repaired the roof. The second phase, demolition work, began in February, when the regents approved more than $80 million for the renovation plan.

Funding for the program comes from a combination of state Higher Education Asset Preservation and Replacement (HEAPR) funds, private donations and university funds. Private donations totaling about $10 million have been raised so far, according to Denny.

The facility is scheduled to open in fall 2013, with the performance space ready in spring 2014.

Click to write a comment or read comments about this post.

Minnesota loses 13,600 jobs; unemployment rate falls to 5.9% -- huh? | Brad Allen

Brad Allen — Thu, 15 Dec 2011 14:17:00 -0600

By one measure, Minnesota’s jobs market is fully recovered from the depths of the recession and is at an all-time high. But by another measure, the state showed its biggest one-month drop in jobs since June 2009.

Those conflicting statements are factually accurate — as far as the reported statistics go — highlighting a dilemma facing state labor-force number-crunchers and a growing disagreement with changes made by the U.S. Bureau of Labor Statistics (BLS) last January in how state employment numbers are gathered.

First, to the numbers.

The Minnesota unemployment rate, based on survey data from 1,700 households, fell by half a point in November to a seasonally adjusted 5.9 percent, the lowest since October 2008. That’s well below the U.S. rate of 8.6 percent, according to figures released today by the Minnesota Department of Employment and Economic Development (DEED).

The separate survey of 3,500 employers showed job losses of 13,700 across virtually every sector except education and health services, which gained 1,300 jobs, and mining and logging, which remained flat. October figures were revised to reflect an additional 1,200 jobs lost during that month.

The drop in the unemployment rate may signal good news for the economy, but because the three-month average unemployment rate fell below 6.5 percent, about 14,000 long-term unemployed Minnesotans will not be eligible for extended unemployment benefits currently being debated in Congress. Even if Congress passes the extension, those Minnesotans currently receiving extended benefits will see them ending in January.

The two separate surveys show the state has lost 22,900 jobs over the past three months, even while the unemployment rate was falling from 7.2 percent to 5.9 percent during that period.

“There’s been a serious degradation in the quality of estimates [coming from the BLS], said Steve Hine, DEED’s director of Labor Market Information. “Looking at Minnesota data, I very clearly see it. But Minnesota is only one state.”

The beef that Hine and fellow state labor officers have is that the BLS started conducting employer surveys on its own last January. Saying it could save $5 million by not contracting with each state labor office to gather the survey data, the BLS in Washington felt it could do the same job at lower cost. For Minnesota, that meant a savings of about $100,000 and the elimination of 1.5 positions, which Hine said his department absorbed through early retirements.

As a result of the change, Hine said the BLS often misses what’s happening in the states and has to come back later to revise numbers, usually upward.

He cites an example where construction employment was up, according to an employer survey, but the BLS felt it was too optimistic so it “smoothed” the data, applying a trailing 12-month average employment. Such an approach, coming out of a recession, risks understating what is actually happening on the ground, Hine said.

In another instance, the University of Minnesota did not respond to the employer survey in time to be included so its impact on education employment was understated for that month. Once the survey data came in, the previous month’s figures were revised. When the state was conducting the survey, they would have recognized the significance of the gap in U of M data and followed up before releasing numbers, he said.

Hine, who sits with other state labor officials on a policy-making body for the national employment statistics system, said the group plans to study the quality of the year’s data by looking at the magnitude of monthly revisions.

They plan to complete the study next spring.

Even if the household survey data do more accurately reflect what’s going on in the economy, it still shows the state faces some significant challenges for what the BLS calls “workforce underutilization.”

The “official” unemployment rate (known as U3 in BLS-speak) is the number most often cited in news reports and comes from the household survey conducted by the Census bureau on behalf of BLS. That survey counts as “unemployed” individuals 16 and older who have actively sought work in the previous four weeks but are not working. There are other measures of what the BLS calls “labor underutilization” as well.

The largest category is the "underemployed," meaning workers who currently work fewer hours than they would like. This number swelled during the recent recession and remains high, accounting for 5.5 percent of the total U.S. workforce and 5.2 percent in Minnesota for the 12- month period ending in September – the latest available statistics.

“Discouraged workers” are those who have given up looking for work “because they believe no jobs are available for them,” according to the BLS. In November, 1.1 million people in the U.S. fit that category, a decrease of 186,000 from a year earlier. Discouraged workers accounted for 0.6 percent of the workforce nationally and 0.3 percent in Minnesota.

Another category is the “marginally attached,” those who have not looked for work in the past four weeks for such reasons as school attendance or family responsibilities. This category accounted for 0.9 percent of the U.S. workforce and 0.7 percent in Minnesota.

Adding together the various measures produces a Minnesota labor underutilization of 13.1 percent, about 340,000 people. That ranks 40^th among the states. The U.S. rate of labor underutilization stood at 16.2 percent for the same period, about 25 million people.

Click to write a comment or read comments about this post.

U of M's private research guidelines break new ground -- and bow to new realities | Brad Allen

Brad Allen — Wed, 14 Dec 2011 10:23:00 -0600

Industry will have an easier path to tapping the brain power, laboratories and infrastructure at one of the premier research institutions in the country as a result of changes the University of Minnesota is making to simplify ground rules for privately sponsored research.

Last week’s announcement followed approval by the Board of Regents of Minnesota Innovation Partnerships, dubbed MN-IP.

The new effort was previewed at the Carlson School of Management a few days earlier by University President Eric Kaler, who described it as a “unique approach” to handling intellectual property (IP) that results from private, industry-funded research.

Kaler predicted that the changes “will make the University of Minnesota a research destination of choice” for corporations.

UNIVERSITY of MINNESOTA TECHNOLOGY COMMERCIALIZATION
	2007	2008	2009	2010	2011
Disclosures	193	217	244	255	250
New U.S. Patent Filings	51	52	65	66	78
New Licenses	77	63	44	67	76
Start-Ups	4	2	3	8	9
Outgoing Material Transfer Agreements	n/a	67	106	171	271
Current Revenue Generating Agreements	n/a	281	306	399	457
Non-Glaxo Revenues ($ MILLIONS)	$9	$8	$9	$9	$10
Glaxo Revenues ($ MILLIONS)	$57	$79	$87	$75	$-
Gross Revenues ($ MILLIONS)	$65	$87	$95	$84	$10

Source: U of M Office of VP for Research

As groundbreaking as it is, MN-IP also is a response by the U to new fiscal realities that all public research universities face as state and federal budgets continue to get squeezed.

MN-IP abandons the often-antagonistic and always-drawn-out wrangling over who owns the patents and licenses, or IP, that result from industry-funded research.

While industry may have desired the intellectual firepower within the U, wrangling over patent rights led to negotiations that “usually took months and sometimes years to resolve,” according to Tim Mulcahy, the U’s vice president of research, who championed the new guidelines.

As a result, industry sponsors now will pay an upfront fee of 10 percent of the contract, or a minimum of $15,000, in exchange for exclusive license to the IP. The U would only begin collecting royalties if sales from the IP exceed $20 million.

This arrangement means that private research partners will know what to expect up front and won’t have to spend time negotiating patent rights, Mulcahy said.

The change is a “very reasonable tradeoff,” he added, noting that the royalty stream attributable to privately sponsored research “was real but not very large. We’re not forgoing large sums. In fact, other elements [of industry relationships] are even more valuable.”

The single-largest royalty stream in the University’s history dried up this year when several patents expired. Over the last decade, they delivered more than $420 million, which was divided among the university, the College of Pharmacy and the faculty members who developed the patents at the heart of the licenses.

That bonanza resulted from federally funded research that led to the AIDS drug Ziagen, marketed by the pharmaceutical giant GlaxoSmithKline plc.

Because that research was federally funded, it would not have fallen under the new guidelines anyway. License revenue for privately funded research totaled about $10.1 million this year, according to Mulcahy’s office.

Mulcahy expects medical/life science research and engineering, as well as agriculture and food science, to be the largest initial beneficiaries of the changed policy. He hopes to see corporate-sponsored research increase over the next two years from its current 6 percent of total research funding.

Shaye Mandle — vice president of Government and Affiliate Relations at Life Science Alley, a med tech industry trade association — described the move as “incredibly innovative and far outside the norm” of what other universities are doing.

Mandle, who was responsible for industry engagement when he worked at the University of Memphis, noted that most university research is federally funded,with the requirement that the university retain patent rights. As a result, he said, researchers tend to approach industry-sponsored research with the same mindset.

He also said that the large publicly funded research institutions, such as the U of M, will increasingly look to the private sector as “an untapped pool of capital,” in the face of shrinking public funding.

Most universities haven’t figured out how to talk to industry, but he predicted that if the new model is successful, others will be fast to follow in the U of M’s footsteps.

Mandel credits the U for taking the first steps, noting “a lot of excitement” among the med tech and life science companies in his membership. He also observed that the U of M’s historic role of close collaboration with industry was instrumental in the creation of the medical device industry here.

The amount of research funding awarded to the U (but not necessarily spent in 2011) totaled $769 million, down $57 million from last year because of declines in federal stimulus funding. Only about 22 percent of total research funding came from private sources that in the future potentially would fall under the new MN-IP guidelines.

In 2011, $46.4 million of research awards came from business and industry sources and $119.1 million from other private sources. The remaining funding sources are primarily federal programs, such as the National Institutes of Health, ($305.3 million), the National Science Foundation ($82.5 million) and the Department of Agriculture ($38.9 million).

Source: research.umn.edu

Click to write a comment or read comments about this post.

Heated U of M economic debate served up respectfully Minnesota-style | Brad Allen

Brad Allen — Tue, 06 Dec 2011 10:21:00 -0600

“It was a great success … Discussions were very Minnesotan in the sense that they often got heated but [remained] respectful.”

V.V. Chari, University of Minnesota professor of economics, beamed as he summed up the first annual policy forum of the Heller-Hurwicz Economics Institute (HHEI) that took place recently at the U of M.

If nothing else, the wild dips, swoons and edge-of-the-chasm careens of the economy over the past three years have produced a surplus of adrenaline-laced argument and opinions.

Now as the U.S. political season moves into high gear and the Euro zone crisis continues, you might think any “Minnesotan”-type discussion on economics had long ago been left by the side of the road.

But thoughtful discussion was alive and well as 18 academics, politicians and public-policy wonks from around the country spent two days cranking down the volume and turning up the lights just before the Thanksgiving break.

The final panel drilled down on health care reform. State Sen. John Marty, a longtime advocate of single-payer health insurance, made the case for universal coverage. “I reject the assumption that what we need is health insurance. What we need is health care for everyone. Think of it more as a public good … like public education, police and fire.”

Douglas Holtz-Eakin, former director of the Congressional Budget Office under George W. Bush and economic adviser to the McCain presidential campaign, took the other side. He presented the free-market arguments against the Affordable Care Act, which he called “one of the most ironically named pieces of legislation ever.”

“We are in the process of delivering to the next generation a broken social safety net as well as a broken economy and an enormous amount of debt,” he said, arguing that the current path is unsustainable. Holtz-Eakin predicted that the next Congress will be more Republican but said it will not have the votes needed to repeal the current legislation.

“We’re just going to have to do more reform. That’s all there is to it. It’s coming,” he said.

“I don’t know what the route forward is,” he added. He remains optimistic, though. that more changes will come, quoting the Winston Churchill observation that “You can always count on Americans to do the right thing, after they’ve exhausted all other options.”

Throughout the conference, presenters examined whether tax policy “can get better outcomes in situations where markets for insuring other types of risk don’t work very well,” said Chari, the founding director of the Heller-Hurwicz Economics Institute.

He described five areas of “DNA risk” for individuals, alliteratively naming them: disadvantaged circumstances of birth (such as poverty), death, disease, displacement and disability.

The participants — including keynoter Peter Diamond, a Nobel Laureate and MIT economics professor — “presented serious work, did not talk down to people, and at the same time reached out to a broader community” that included non-academics in the business and public policy arenas as well as the general public, Chari said.

The audience, which numbered more than 150 over the two days, were treated to some provocatively titled presentations, including “The U.S. Is Bankrupt and We Don't Even Know It” and “Measuring Leviathan: How Big Is the Federal Government?” Plus less-colorful topics, such as “Optimal Dynamic Taxes and Insurance and Taxation over the Life-Cycle.”

The full agenda, presentations and videos of the sessions are on the HHEI website here.

HHEI was launched last year “to inform and influence public policy” in the tradition of the distinguished U of M faculty members that the institute was named for: Nobel laureate Leonid Hurwicz and presidential economic policy adviser Walter Heller.

Chari told me he has a commitment from Ernesto Zedillo, the former president of Mexico, to speak on globalization at a spring HHEI forum, and the second annual policy forum is tentatively focused on financial regulation -- two thorny topics that could benefit from a healthy ”Minnesotan” conversation.

Click to write a comment or read comments about this post.

Unemployment falls to 8.6% as nation adds 120,000 jobs | Brad Allen

Brad Allen — Fri, 02 Dec 2011 09:30:00 -0600

The nation’s unemployment rate fell to 8.6 percent, its lowest level in 32 months, the U.S. Bureau of Labor Statistics (PDF) reported today.

Employers added 140,000 jobs across most private sectors in November, offsetting continued declines in government employment. Public employee rolls dropped by 20,000, the 10th time in 11 months that state and local government employment has shrunk.

The jobs numbers were also boosted by revisions to the September and October reports that showed 72,000 more jobs created than previously reported.

The decline of 0.4 of a point from October’s 9.0 jobless rate resulted in part from people leaving the labor force.

The net 120,000 gain in jobs included retail surging 49,800 and health care rising 18,700. Temporary hiring — seen as a positive sign for future job growth — increased 22,300. Manufacturing jobs edged up 2,000, with most of the gains coming from automakers.

On the downside, the battered construction sector saw payrolls fall 12,000 after losing 15,000 jobs in October.

In a separate household survey, the BLS reported 13.3 million people remain unemployed, down by 594,000 from October. Those out of work 27 weeks or longer remained at about 5.7 million. The number of discouraged workers who have stopped looking for a job stood at 1.1 million in November, a decrease of 186,000 from a year earlier, according to the BLS.

Minnesota's construction industry
Minnesota is scheduled to report November figures Dec. 5. One sector that will be closely watched is the state’s construction industry, which posted its first, albeit modest, year-over-year job growth in October.

Since the beginning of the recession, Minnesota’s construction industry has lost 50,000 jobs, a 40 percent drop, putting total construction employment at levels not seen since 1995.

Jason George, a legislative and political organizer for Local 49 of the International Union of Operating Engineers said that both layoffs and underemployment are hurting the construction ranks. “Beyond people being on the bench, it’s the number of hours. Our members are not getting as many hours” as they did before the downturn, he said.

He estimated that in a normal year, an experienced heavy equipment operator can average $40,000 to $50,000 during Minnesota’s eight-month outdoor construction season, which typically ends in November.

“This year is a little better than the last few,” particularly in highway construction because of the MnDOT package passed by the Legislature, he said. “But that’s it. There’s nothing else going on — no vertical [high-rise], no residential, no commercial building.”

While he could not estimate how many union members are idle, the construction season is ending with many members facing seasonal layoffs. The union, with 13,000 members in Minnesota and the Dakotas, has seen many workers move to North Dakota for jobs in the oil field, George said.

Ron Tamblyn, 50, a heavy-equipment operator from Blaine and father of four, has been driving tractors, backhoes and bulldozers for more than 20 years. But the member of Local 49 has worked a total of less than two months on union construction jobs in the last three years.

“Right now, I’m almost thinking about going to North Dakota,” he said. But with two children 9 and 11, still at home, one with special needs, he needs to stay at home. Otherwise, “It’s tough for one parent,” he explained.

His wife, Beth, works in accounting at McGoff Construction, the firm Tamblyn was laid off from three years ago. “We’ve been living off my wife’s income, which hasn’t been very easy.”

Tamblyn maxed out his unemployment insurance benefits “quite a while ago” but supplements the family income from a small greenhouse on his property where he raises landscape plantings and produce. They recently took out a second mortgage on their home as well.

“I’ve tried looking for other jobs,” he said. At one point, he worked for a non-union company long enough to qualify for unemployment benefits. “The guy tried to fight me on unemployment. I’m afraid to go work for anyone else other than the union … It’s nasty out there.”

He remains hopeful that the spring thaw will bring more construction jobs and see him back operating the bulldozers, cats and back hoes he’s been trained to do. But he is frustrated as well.

While he thinks the Occupy Wall Street movement “got quite a bit right,” he is reluctant to comment on the demonstrators. But he’s outspoken in his criticism of the financial industry and Washington.

“There are a lot of [construction] jobs out there, but the banks don’t want to lend money,” he said. “My wife is always saying they’ve got jobs, but it takes 10 years to get the funding.”

The economic slump “goes hand in hand with the banks and the politicians. Neither one can agree on anything except for giving bailout money,” he said. “After they paid back the loans, [bank executives] gave themselves bonuses.”

Click to write a comment or read comments about this post.

Outlook for commercial real-estate dims in Twin Cities | Brad Allen

Brad Allen — Tue, 29 Nov 2011 10:48:00 -0600

The two-year outlook for commercial real-estate development in the Twin Cities has turned less optimistic, mostly due to economic and political uncertainty developers are feeling from events outside of the Minneapolis-St. Paul market.

The semiannual Minnesota Commercial Real Estate Survey of 50 real-estate industry developers, investors and financiers released yesterday, was conducted by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business.

"People are just stepping back, saying, ‘We really don’t know what to do,’" said Herb Tousley, director of the Shenehon Center and one of the survey authors. Commercial real-estate insiders are concerned about "all the things that went on last summer affecting the whole country," he said, including the political impasse in Washington over debt deliberations and the ratings downgrade of U.S. debt.

Tousley said the subdued survey result "doesn’t mean activity will stop" but developers will "think a lot harder before committing to major projects."

The more cautious outlook is not only a reversal of an increasingly optimistic trend that started with the first survey in May of 2010, but is also the single largest swing in sentiment observed in the local commercial real estate market since the survey’s launch two years ago.

The composite index registered it first decrease, falling from 55.6 last spring to 51.2 for the November 2011 survey. A score of 50 or above is considered optimistic, but Tousley described the current results as "essentially neutral."

Tousley and co-author Tom Hamilton, an associate professor of real estate at St. Thomas, found positive but declining sentiment looking two years out across four of six separate factors they measured: rents, occupancy levels, expected rates of return and required levels of equity investment. The two other factors, prices for land and materials, while registering negative sentiment, actually improved slightly from the spring survey.

The survey results gives little hope to Minnesota’s beleaguered construction sector, which last month reported its first slight year-over-year job growth in five and a half years. Total construction employment is down 40 percent, or 50,000 jobs from 2006, according to the Minnesota Department of Employment and Economic Development (DEED).

While there are pockets of strength and weakness within the metro region, Tousley said, "it’s hard to generalize" about the health of commercial real-estate activity in the core city versus the suburbs. He observed that downtown Minneapolis is "doing very well" while some other areas are struggling. In general, the western and southern suburbs are doing better than the north and east metro region, he said.

New space for Himle firm
Coincidentally, the same day the St. Thomas survey came out, public relations and public affairs consultant John Himle was settling in to new office space under a new name in downtown Minneapolis after 29 years as a suburban-office dweller.

"Obviously it’s a good time to be in the market, negotiating a long term lease," he said. Himle, Rappp – the firm’s new name – moved into 8,000 square feet on the 24^th floor of the Accenture Tower at a lower cost per square foot while increasing the firm’s overall office-space footprint.

But economics was not the driving reason behind the move, he said. "There’s a lot of client activity and potential client activity…downtown. That seemed a good option for us…. On a practical level, I was driving five to eight thousand miles a year," traveling to meetings from his office in Bloomington south of downtown Minneapolis. "It was not only mileage but the time drain. It just seemed to make more sense," Himle added.

Himle founded Himle & Associates, Inc. in 1982, which became Himle Horner. Former partner Tom Horner left the firm to pursue an unsuccessful run for Minnesota governor in 2010. Himle and partner Todd Rapp moved the 15-person firm over the long Thanksgiving weekend.

As far as employees are concerned, the move downtown "cuts both ways." Himle said. "Obviously, there’s energy to being downtown. That’s attractive. But parking costs are a downside, especially when you have employees that had free covered parking all these years. You had to make some adjustments for that."

Himle’s firm was previously located at the 8500 Tower in Normandale Lake Office Park. While glad to be in the center city, he admitted to one regret: "I will miss watching the eagles as they’re fishing on Normandale Lake."

Click to write a comment or read comments about this post.

New Historic Rehabilitation Tax Credit helping to heat up construction jobs | Brad Allen

Brad Allen — Wed, 23 Nov 2011 10:40:00 -0600

CC/Wikimedia Commons/ElkmanMinneapolis' former North Branch Library, built in 1893, qualified for a 20 percent state historical rehabilitation tax credit.

A group of historic preservation advocates huddled in the former North Branch Library, a bare, unheated old red brick castle on Emerson Avenue in North Minneapolis earlier this week, as the first real taste of winter came to the Twin Cities.

Cradling cardboard cups of hot coffee more for warmth than caffeine, the gathering included a few reporters perched on cold folding chairs arranged in front of a podium surrounded by posters displaying 14 historic buildings.

The event, co-sponsored by the Minnesota Historical Society and the Preservation Alliance of Minnesota, was called to report on anticipated economic benefits from the first projects eligible for the state’s Historic Rehabilitation Tax Credit, enacted a year ago.

"While there are no silver bullets that will solve our economic challenges, there are a number of solutions that will help make things better," Minnesota Historical Society Director Steve Elliott told the gathering. "The historic tax credit is one of those things. Every little bit helps."

The first 14 projects eligible for the 20 percent state tax credit (a dozen in the Twin Cities — including the North Branch Library — and two in Duluth,) will generate $9.20 in economic activity for every dollar the state provides in tax relief or grants. That’s the finding of a study by the University of Minnesota Extension Center for Community Vitality that was forwarded to the Legislature last week.

Project developers anticipate paying $83.7 million in wages to about 1,800 construction workers. The study projects a total of 2,948 jobs with wages of $152.4 million, including employment in ancillary services such as architectural and engineering firms, as well as food, beverage and retail outlets expected to benefit during construction. The projects, once completed, are eligible for up to $49.1 million in state tax credits and will produce up to $451 million in total economic activity, the report concludes.

Rehab of existing buildings is more labor-intensive than new construction, and that is part of the intended benefit.

Last month, Minnesota’s construction sector saw its first slight year-over-year job growth in five and a half years. But total construction employment is down 40 percent, or 50,000 jobs, from 2006, according to the Minnesota Department of Employment and Economic Development (DEED).

Reflecting on the rehab tax credit, Dave Semerad, president of Associated General Contractors of Minnesota, told the audience: "Our industry has been devastated. We call it a depression."

"It’s cold in here, but you can’t help but be warmed by what we’re doing," Semerad added. "We’re taking this old gem of a building and transforming it for this community, and in the process, we’re putting people to work."

David Kelliher, director of public policy at the Minnesota Historical Society, believes the state tax credit has stimulated rehab activity that would not have happened otherwise.

He estimated that more than two dozen projects are "in the pipeline" since Minnesota became the 31st state to pass its own historic rehab tax credit. He compares that with the previous year when only two projects in the state receiving federal rehab tax credits, which is a requirement for state eligibility.

The historic rehabilitation tax credit was part of an omnibus jobs bill signed in April 2010 by then Gov. Tim Pawlenty that included a variety of other tax incentives, including the angel investor tax credit, tax increment financing for local government, and a doubling of the state’s R&D tax credit for business investments.

Supporters had been pushing for the preservation tax credit for several years as a stand-alone measure but were unable to get it passed until combining it with other measures favored by Pawlenty, according to Rep. Joe Mullery a Minneapolis DFLer who attended the meeting.

The old North Branch Library, built in 1893, was the first open-shelf library in Hennepin County and influenced the growth and development of the Minneapolis public library system. It served as a public library until 1979.

Designed by Minneapolis architect Frederick Corser, the library is among several of his buildings listed on the National Register of Historic Places, also a requirement for receiving tax credits. Described by some architectural commentators as "medieval revival style" and "Chaeteauesque," the building has several distinctive features — its tower, a stepped front gable, and an arched entrance shaped like a basket handle — that stand out in the mixed commercial-residential district of more recent and unmemorable buildings.

Project Emerge, a local nonprofit that provides job training and placement, will use the renovated library as a career and technology center with offices, classrooms and a community center. The $4.8 million rehab, including an expected $560,000 state tax credit, will start next spring and is expected to be completed by early 2013.

Standing under the vaulted ceiling Mullery said: "This building brings back really fond memories. Serving his eighth term as a representative from North Minneapolis, he recalled travelling on the streetcar down Broadway Avenue with his mother to visit the library.

‘When I was little, I used to come down here … and I remember thinking what a fantastic looking building this was. The only thing that was different, though — it was a lot bigger then," he recalled. When he was in high school, Mullery regarded the distinctive castle as something beautiful to be proud of as a North Side resident.

Today, the surrounding neighborhood is struggling economically. Parts of North Minneapolis suffer from 40 percent unemployment, Mullery said. In addition, the area is home to one of the highest home-foreclosure rates in the country, having been a target of mortgage fraud schemes aimed at minorities. And last spring, a tornado blew through the North Side, tearing up whole blocks of houses.

Recounting these challenges, Mullery said he sees the library rehabilitation as a visible sign of revitalization, demonstrating to residents that "something positive is happening."

At the end of the event, a small group went on a tour of the cavernous old building, moving quickly through the cold cement basement. When the tour ended, everyone dispersed quickly to warm cars, leaving the old library unoccupied again and tomb-cold, waiting for spring.

Click to write a comment or read comments about this post.

MinnPost - Brad Allen

Reclaiming Twin Cities money center legacy, with a twist | Brad Allen

Mexico-U.S. relations: beyond 'looniness, stupidity and flatulence' | Brad Allen

2012 regional economy looking up, Fed says | Brad Allen

Northrop Auditorium, a U icon and white elephant, transforming for 21st century | Brad Allen

Minnesota loses 13,600 jobs; unemployment rate falls to 5.9% -- huh? | Brad Allen

U of M's private research guidelines break new ground -- and bow to new realities | Brad Allen

UNIVERSITY of MINNESOTA TECHNOLOGY COMMERCIALIZATION

Heated U of M economic debate served up respectfully Minnesota-style | Brad Allen

Unemployment falls to 8.6% as nation adds 120,000 jobs | Brad Allen

Outlook for commercial real-estate dims in Twin Cities | Brad Allen

New Historic Rehabilitation Tax Credit helping to heat up construction jobs | Brad Allen