Lowell's

The CentrePointe Scam

We've long been critical of the economics of the proposed CentrePointe development just a few blocks away in downtown Lexington.  

One of the least understood portions of the project is the element known as Tax Increment Financing, or TIF.

In essence, TIF allows cities and states to allocate future incremental tax revenues to finance today's public improvements related to new economic development initiatives.  

The recent changes to the CentrePointe project invite a reassessment of the CentrePointe TIF program.

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CentrePointe's TIF program would use future new tax revenues from the CentrePointe development to fund about $50 million in projects around CentrePointe.

These public initiatives would include:

• A new underground parking garage beneath Phoenix Park;
• Renovating Phoenix Park;
• Renovating the old Fayette County Courthouse (now the Lexington History Museum); and,
• Providing new infrastructure including storm sewers, sidewalks, and - according to the most recent renderings - a pedway which seems to cross Upper Street to (?!) McCarthy's Irish Pub.

The state and city would issue some $50 million in 30-year bonds (i.e., public debt) to fund the initiatives.  Over the course of the next 30 years, our governments would pay out some $100 million in principal and interest to the investors in the CentrePointe TIF bonds.  The state would cover three-quarters of the total payments (about $72 million), and Lexington would cover the rest.  

Then, the state and city would hope to use new taxes generated from CentrePointe over the next 30 years to offset the $100 million spent paying bondholders.

But is this a good investment of taxpayer dollars?

To get an informed answer, we need to dive deep into the business fundamentals of the CentrePointe TIF project.

(Note: What follows is financially 'geeky', but it is also critical to understanding how our money is invested.)

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We have two major concerns with the CentrePointe TIF:

1. The valuation methodologies used by the state and city are fundamentally flawed, and are not the standard for evaluating a long-term investment.
2. CentrePointe will not generate the promised revenues, due to incredibly optimistic business model assumptions.

Let's look at each of these concerns in succession.

Valuation Methodology
As far as we can tell, there have only been two evaluations of the public impacts of the CentrePointe project:

• A late 2008 assessment of CentrePointe done for Lexington by Morgan Keegan & Company which expected $211 million in total tax revenues over 30 years; and,
• An Economic Research Associates (ERA) report [PDF Link] done last summer for the state's Cabinet for Economic Development, which expected nearly $70 million in tax revenues from CentrePointe for the state alone.

Of the two, ERA's assessment is the more recent, more complete, and - in our judgment - more reliable.  It is also the one which the state used to approve the CentrePointe TIF.

But, as mentioned above, there are deep flaws in how both of these reports valued the public benefits stemming from CentrePointe.

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Businesses make investment decisions all the time: products, facilities, acquisitions, marketing, and so on.  

When businesses evaluate an investment project, they look at how much they put in up front ('the investment') versus how much they can get out over time ('the return').  

But when looking out into the future, most businesses lower the value of future earnings.  In other words, the promise of $1 million next year isn't worth as much as $1 million in-hand today.  A lot of things can happen in the course of a year - inflation, disasters, competition, market shifts.  And $1 million two years from now is worth even less, because there is even more risk of something happening.

Typically, stable and established businesses use an annual rate of around 10% to 'discount' future earnings.  For example, if an investment generates a return of $1 million today, that is valued at $1 million.  Simple enough.  But if it promises another $1 million next year, that is worth just $900,000 to us today (i.e., 10% off of $1 million). The promise of $1 million two years from now is worth just $810,000 today, and earnings further in the future are given even steeper cuts in their valuations.  So the promise of $1 million 30 years from now is worth just $42,000.

This 'discounted cash flow' method is the same standard that Warren Buffett and other investors use to evaluate how much to pay for an investment, and it is the financial equivalent of 'a bird in hand is worth two in the bush'.

Depending on the kinds of risks an investment faces, the discount rate might be significantly higher.

When we purchased Lowell's, we used a 20% discount rate.  Even though Lowell's was a solid business with loyal customers, we faced a number of uncertainties.  Would we lose key employees? Would customers stay away in droves?  Would things fall apart? Those things didn't happen, but they posed very real risks as we purchased a new business.

With an especially speculative venture like CentrePointe, we would usually apply an annual discount rate of 20%. Or more.

So what kind of discount did Morgan Keegan and ERA apply to CentrePointe's promised future tax revenues?  

Zero.

Instead of incorporating the risks inherent with a project like CentrePointe, these assessments valued CentrePointe as if there were no risks at all. In these scenarios, the faint promise of $1 million in 2040 from CentrePointe was just as secure as having $1 million in our wallet today. 

This is especially problematic, because so much of CentrePointe's tax revenues were promised so far in the future, when a conventional valuation methodology would steeply cut their value.

For instance, in Morgan Keegan's assessment, nearly half of CentrePointe's tax benefits - over $100 million - came between 2030 and 2040. 

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The original report [PDF link] from Economic Research Associates (the state's CentrePointe consultant) estimated that 30 years of tax revenues from CentrePointe would generate some $70 million for the state - while the state's expenses for CentrePointe projects ran $72 million.  So ERA projected that the state stood to lose $2 million on the CentrePointe TIF.  

And that estimate derived from the faulty methodology we described above.

So what does the CentrePointe TIF look like when we apply standard valuation techniques?  Let's be generous, and apply the 10% annual discount rate reserved for stable investments to our analysis of CentrePointe.  We'll also use ERA's estimated stream of future tax revenues.

Using a more conventional valuation of CentrePointe's incremental taxes, they're only worth about $25 million to the state, and an estimated $32 million overall.

In reality, the city and state would incur $50 million in public debt today for the CentrePointe TIF bonds, and only get back $32 million of that in future tax revenues.  CentrePointe TIF is a poor investment which loses $18 million for taxpayers.

And that is even before we look at the stability of CentrePointe's overly-optimistic business model...

Business Model Assumptions
A distinct pattern emerges in ERA's assessment [PDF link] of the CentrePointe project for the state. At numerous points throughout the document, ERA hedges: they express skepticism about some element of the project, but then use the developer's assertions about the project as 'proof' of its ultimate viability.

How ERA evaluates CentrePointe's million-dollar condominiums is typical of these hedges (we've added emphasis in red):

"ERA approaches new luxury condominium projects in 2009 with a healthy degree of skepticism. [...] Bank financing for new condominium construction has seized up. There is a very high degree of uncertainty in residential markets, especially high-end condominiums, across the U.S.  And in recessionary times, introducing a luxury product where it has not been present before represents a considerable risk.

"However, there are two reasons for optimism in the CentrePointe Tower. First, the developers have pledged an all-equity transaction. This greatly reduces the risk that loans would have to be renegotiated in the middle of a deal, that payments would be missed, or that financing would be pulled at the last minute. While it does not eliminate all risks associated with financing, an all equity transaction greatly reduces the risks and complications of development in this difficult market.

"The second reason for optimism is that the developers have reservations for 64 units, out of 91. While a reservation is less a commitment than a purchase contract, this is still an impressive level of sales for this stage of the process. With two-thirds of units reserved before construction begins, the developers have demonstrated there is demand for these types of units."

Both of the reasons for optimism that ERA cites come directly from the developer's tenuous assertions.

The 'all-equity transaction' refers to the developer's dead mystery financier, whom the developer had claimed was putting up cash (the 'all-equity' part of the transaction) to back the development. Last week, the developer admitted that he was forced to pursue more conventional financing.  Using ERA's logic, this would greatly increase the risks to the project's success.

The 'reservations for 64 units' refers to the handshake deals that the developer claimed for the old CentrePointe design.  As we have previously documented, 64 'reservations' stretches the bounds of credibility in a market which only sold 10 million-dollar properties in all of 2008. And last week, the developer trimmed the number of condominiums in the new design from 91 to 63.

(Update: As Beverly Fortune notes, the numbers haven't gotten better for million-dollar residential properties: Only 8 sold in Lexington in 2009, and only 5 have sold thus far in 2010.)  

With both 'reasons for optimism' now rendered impotent, how would ERA evaluate CentrePointe's condominiums today?

ERA's skepticism extends to every other major part of the project:

Offices: "Estimated rents of $26 per square foot would be about $6 per square foot higher than the current highest quoted rate in the market – a number that may be difficult to achieve given current market conditions and may require some concessions."

Retail and Restaurant: "ERA believes that $27 per square foot is an aggressive ask in this market, especially in downtown."

Hotel: "With a first year ADR [room rate] of $175 and RevPAR [revenue per available room] of $103 at 53 and 45 percent higher than any comparable properties in the market at the end of 2008, these metrics may be optimistic. [...] Projected hotel occupancy as well, is projected by the developer to be nearly 10 percentage points higher than the 2008 year-end average of 61.9 percent."

In evaluating the entire project, ERA says

"Traditional bank financing would be extremely difficult, if not impossible, to secure for a project of this scale at a time like this. [...] If the project’s equity financing remains intact and the investors are satisfied with the projected return, then ERA does not see a market barrier to feasibility of the project."

How would ERA evaluate CentrePointe's feasibility now that the 'equity financing' has fallen through?

Not well, we suspect.

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We took the liberty of re-running ERA's estimates with more realistic (but still quite generous) assumptions:

• The developer estimated that he would spend about $250 million on the old CentrePointe design. While there are few specifics, he has used a figure of $200 million for the new design.  We adjusted construction spending down by 20%.
• The developer assumed they could get higher occupancy levels (over 71%) even though they were charging 50% more per night than the Lexington hotel market.We adjusted hotel occupancy to market levels - a more reasonable 62%.
• The developer has claimed to be able to sell two-thirds of their condominiums at the outset of the project. We adjusted expectations down to about 20% at the outset, and we never expect full occupancy of the 63 condos without drastic reductions in property price.
• The developer assumes a $26 to $27 per square foot rate for its office, retail, and restaurant leases.  We've adjusted those assumptions down by about 20%. Such an adjustment still leaves these CentrePointe spaces as the highest rents in the Lexington market.

These adjustments to the CentrePointe business model have a number of economic ripple effects: Lower spending, lower sales, lower profits, fewer jobs created, lower quality of tenants, and lower tax revenues.  

Using these more realistic assumptions, our estimate is that CentrePointe will generate incremental state and local taxes worth only $21.5 million ($16 million of that would go to the state, and the remaining $5.5 million would go to Lexington).

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As long-time critics of the CentrePointe project, we hear a common counter-argument: that CentrePointe is a private development on private property and that we and our community leaders have no business questioning the project.  

CentrePointe is a private development on private property.

But CentrePointe also has a number of externalities that make it of public interest. It would require significant public investment in new infrastructure and facilities to support the new development.

And while TIF projects are targeted to public improvements, the reality is that about half of the $50 million publicly-financed CentrePointe TIF projects would most directly benefit CentrePointe's developer: the parking garage, sidewalks, pedways, and other infrastructure. 

It is highly unlikely that the developer would go forward with the project without the public subsidy of these elements - despite his prior threats to do so.

A second TIF reality is that the public bears a disproportionate part of the risk of the new development: In return for putting up $50 million of our money today, taxpayers are promised an unreliable trickle of future tax payments over the next thirty years.

So despite what many of CentrePointe's defenders - including Lexington's mayor - say, CentrePointe's TIF program does amount to a public subsidy of the private development of CentrePointe.  

And when we apply a realistic analysis, that CentrePointe TIF subsidy is a truly awful investment. 

In return for committing $50 million in new debt (and paying another $50 million in interest on top of that), taxpayers get a return of just $21.5 million.  

Local government would lose almost $7 million on its $12 million investment, while the state would lose $21 million on its $37 million investment.

And despite the developer's indignant none-of-your-damn-business attitude toward public inquiry on CentrePointe, it clearly is a public issue with public dollars at stake.  The CentrePointe TIF is little more than outright welfare for the developer and his project.

The CentrePointe TIF is a spectacularly bad public investment, and every attempt should be made to rescind the TIF approval.

The proposed redesign of CentrePointe should be a time for community leaders to rethink the community's investment in CentrePointe.

At a time when our public budgets are under extreme duress, now is not the time to spend extravagantly on a wildly speculative private development such as CentrePointe.

No responsible business would make this kind of investment.  Our governments shouldn't either.

"What is that thing?!?"

Lowell's customers and pedestrians on Mechanic Street have noticed that we have a strange vehicle in our garage which is most definitely not a Toyota.

Some folks giggle when they see it.  Some just shake their heads.  Most smile.  Everyone wants to know, "What is that thing?!?"

It is a wildly-colorful, whimsical, bicycle-powered, musical, and Seuss-ical contraption known as "PRESTO: The People-Powered Pianobike".  

What's a people-powered pianobike?  It is pulled by two bikes.  It is powered by a third bike.  It is an electronic keyboard with amp.  It is a community work of art utilizing recycled materials and musical instruments.  It is a celebration of music, fitness, recycling, and fun.  And we keep it here at Lowell's.

PRESTO is the brainchild of Debra Hensley (that's her on the right) of Debra's Social $timulus, and it will be making appearances at public events all over Lexington.  

On Memorial Day, PRESTO led 3,000 bicyclists through downtown Lexington for Bike Lexington's Family Fun Ride.

In conjunction with Debra's Social $timulus, Lowell's is storing PRESTO here at the shop.  We've already had several passersby interact with PRESTO, including a swarm of kids honking PRESTO's many horns.

We think PRESTO is a lot of fun.  If you come by the shop, be sure to look it over.  And smile.

The Tombstone at CentrePointe

We last wrote about CentrePointe one year ago this week.  

In Tangled Webb, we wrote about the folly of the CentrePointe development, capping a series of posts chronicling our growing skepticism about the downtown Lexington project's financing and viability.

We then stopped writing about CentrePointe because there wasn't much left to say.

Four months later, Business Lexington reprinted Tangled Webb, prompting an aggressive and condescending response from CentrePointe's developer, in which he simultaneously attacked us, bloggers in general, and Business Lexington.  He asserted that we knew "little about commercial real estate development or the potential and viability of this project".  

Time would tell.

New v. old CentrePointe designs

A New CentrePointe?
Yesterday, finally admitting that his financial backing had failed and that his initial design wasn't viable, the developer submitted a smaller design for CentrePointe to the Courthouse Area Design Review Board (CADRB).

The new tombstone-shaped design (shown at right, superimposed over the older design) is 210 feet shorter than the one that the CADRB had previously approved.

The project still proposes a 237-room J.W. Marriott, along with office and retail space.  The upper tiers of the project would house 63 high-end condominiums (scaled back from the originally-proposed 91).

The developer asserts that "progress is being made" on "more conventional financing".

What is the CADRB?
Within Lexington's crazy-quilt of planning bodies and agencies, the CADRB is a five-person board commissioned by the Urban County Council to oversee a small portion of downtown called the Courthouse Area Design Overlay Zone.  The CentrePointe site falls within this irregularly-shaped zone.

In 2008, the CADRB approved the developer's demolition of several long-neglected-but-historic buildings on the site - including Morton's Row, which had some of Lexington's oldest commercial buildings.  In June 2008, the CADRB approved an initial design for CentrePointe, issuing an "authorization permit" good for one year.  The CADRB  then approved a modified design again in November 2008.  

On July 8th, 2009 the developers sought - and received - an early extension to their November 2008 authorization permit.   That third permit expires less than 30 days from today.

The Overlay Zone is intended to "encourage growth and redevelopment in the downtown area, while preserving and protecting the unique features and characteristics of the area."  As outlined in its bylaws, the CADRB has 5 mandates:

• promote those qualities in the environment which bring value to the community;
• foster the attractiveness and functional utility of the community as a place to live and work;
• preserve the character and quality of Lexington’s heritage by maintaining those areas which have special historic significance;
• protect investment in those areas;
• raise the level of community expectations for the quality of its environment.

Since initial approval, the CentrePointe site has been, by turns, a pit of rubble, a dust bowl, a pond, and, now, a horseless horse pasture with huge signs heralding how CentrePointe is "Coming Soon".

By issuing demolition and construction permits for the CentrePointe site, the CADRB failed on every one of its own mandates.  The development has failed to bring value to the community.  It has failed to deliver the promised 900 jobs.  It has failed to preserve the character and quality of Lexington's heritage.  The fantastical proposal never had the right scale or proportion for the Overlay Zone. Along every dimension, CentrePointe has been a collossal failure.

In light of that multidimensional failure, now is the time for the CADRB to take corrective action.

New design, same old problems
While scaled back in height, the new 'Pointe-less' design for CentrePointe is no less problematic than the old one.  It fails to address some of the project's deep, long-standing flaws. These include:

Financing: While the developer asserts that progress is being made on new funding, this is actually a step back from previous assertions that funding was already in hand.  On June 4th, 2009, the developer assured the Lexington Forum that he had two ready sources of funding if his dead mystery financier's estate didn't come through.  Yesterday's application for extension made it clear that those sources failed as well - if they ever existed at all.  

Capital flows to the most promising investments, even in a difficult economic environment.  The fact that the developer has yet to secure funding for CentrePointe speaks volumes about its quality as an investment.

Business Model: The developer has continually asserted that he has a ready list of tenants for the property.

But there are enough problems with his business model assumptions to call the viability of the entire project into question.

• Analysts hired by the developer assumed that the J.W. Marriott hotel could achieve higher occupancy rates - at start-up - than surrounding hotels even though the Marriott would charge 50% higher room rates.
• While the number of million-dollar condomimiums has now been scaled back to 63, that is still far too many for the Lexington market to absorb (when only 10 million-dollar properties sold in all of Lexington in 2008).  
• The one retail prospect that the developer has named as 'interested' in the project wasn't really that interested.

Vague Assurances & Broken Promises: The developer has offered many claims - but little substance - with regard to the project's viability.  He has repeatedly decommitted from previous promises.  When challenged, the developer usually responds by playing either victim or bully - and, sometimes, both at once.

It is time to openly challenge the developer's overreaching claims and blithe assurances.

Scale: CentrePointe's proposed tower has never had the appropriate scale for the historic character of the Overlay Zone.  The CADRB's approval of the initial designs and subsequent re-approvals were mistakes.

Now is their chance to undo those mistakes.

Accountability for CentrePointe
Before issuing a fourth permit, the CADRB needs to require the kinds of accountability for this iteration of CentrePointe that was missing in the project's earlier phases.  

They have a responsibility to ensure that our community does not end up with - in the words of former Councilmember Don Blevins Jr. - a "vertical Lexington Mall".

When the developer presents CentrePointe's new design to the CADRB on June 30th, the board should do the following:

Ask the tough questions.  Especially the ones which weren't answered the first time.

• Does the developer have financing in hand, or is he just 'working on it'?
• What, exactly, happened to CentrePointe's previously 'rock-solid' financing?
• Can the developer really build the design being considered?
• What is the business model for this property?  Will that model really work?
• Is this design really consistent with the unique character of our downtown?

Require documentation.  Don't accept the developer's word at face value.  His proven inability to deliver on previous promises mean that he should be required to document the stability of his financing and his business model before any design is approved.  

Rethink prior approvals. As mentioned above, the CADRB made a mistake by approving the old design of CentrePointe.  Don't just rubber-stamp the new 'tombstone' design.  Make sure it works with the surrounding community.

The Overlay Zone exists for a reason.  On June 30th, The CADRB should fulfill their duty to ensure responsible economic development within the Zone which preserves the unique character of our downtown.

The old design of CentrePointe didn't do that.

The new one still doesn't.

The CADRB should reject the application for extension.

It is time to put a stop to the empty promises.  It is time to stop enabling this kind of overreaching incompetence.  It is time to end the delusional fantasy of CentrePointe.

While you wait: Superlative Coffee Roasters

116 Mechanic Street, 2009

Last year, I wrote about some of the neglected properties surrounding Lowell's, including a small run-down house across Mechanic Street from our lobby.  

The house was long-abandoned, and the giant half-dead tree in front hung menacingly over passersby. 

A few months ago, that little house was sold to new owners, who spent a lot of time and money renovating the building and removing the rotting tree.  

The result: a very nice example of refitting an older property for a modern use.

116 Mechanic Street, Today

Last week, Superlative Coffee Roasters opened up for business at the new, much-improved 116 Mechanic Street.  Superlative is a craft roaster of organic, fair trade coffees.

Jenny Super, Superlative's owner, has offered to let Lowell's customers taste samples of one of her small-batch coffees through the end of June.

Today, I sampled the shop's Signature Blend.  Wonderful, wonderful stuff.

The Little Red Roaster

While there, be sure to check out their Little Red Roaster - It is often busy roasting up the latest fresh batch of beans.

Superlative is a welcome addition to our vibrant North Limestone neighborhood. Please lend your support to this great local business!

Come by the shop, pick up one of Superlative's free sample cards, and cross the street for a delicious free cup!

Superlative Coffee Roasters
116 Mechanic Street
Lexington, KY 40507
859.252.5000
Jennifer Super, Owner and Craft Roaster
superlativecoffee.com
Twitter: SipSavorShare

Will Creative Cities Matter?

Lexington hosted the third installment of the Creative Cities Summit late last week (previous editions were in St. Petersburg in 2004 and Detroit in 2008), and the event was headlined by internationally-recognized experts in urban growth and vitality: Charles Landry, Rebecca Ryan, Richard Florida, and Bill Strickland, among others.  

 The event drew participants from across North America, but most of the attendees seemed to be from Lexington.  And while Lexington was not the central focus of the event, our city naturally entered into many of the conversations.

In the wake of the event, a vigorous local debate emerged about whether Creative Cities was significant for our city.  What's intriguing is that much of the debate is occurring between folks who normally get along.  And much of the negative criticism is coming from folks that I like and respect (see here, here, here, and here), and who aren't typically curmudgeonly.

That criticism has led to head-scratching - and, at times, indignance - from those who felt that the summit was a worthwhile, transformational, and enlightening experience.  

And that leads us to an interesting - and telling - distinction: Most of the attendees of the summit seemed energized by the discussions and the ideas which emerged from Creative Cities; Most of the criticism came from those not in attendance.  

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There seem to be three basic criticisms of Creative Cities:

1. It was too exclusive.  This criticism usually centers around conference participation: who was invited, who wasn't, and the perceived snobbery of some of the attendees.

2. It was too expensive.  This criticism focuses on the $199 registration, and whether the scholarships to the event were adequately publicized.

3. It was too much talk (and much of that talk was self-involved drivel).  This criticism takes multiple forms, including:

• The conference was too self-involved and self-congratulatory, and prioritized self-help and good feelings over substantial change.
• It glorified out-of-town gurus who repackaged the obvious while angling for their next consulting gig.
• It didn't involve enough meaningful action, and thus amounted to a vacuous echo-chamber of do-nothing happytalk.

As an attendee of the summit, I find a kernel of truth in all of these criticisms.  But I don't think that any of them are completely fair, and none are particularly helpful in crafting a better future for Lexington.  

I have to admit I'm not all that patient with the 'exclusive' or 'expensive' arguments.  Everyone was invited; everyone had a chance to participate.  While the price of the event was problematic for many, it was far cheaper than similar events with participants of this caliber.  Events like this cost a lot - and high-quality speakers, food, and facilities are necessary to draw a national audience.

What concerned me the most about these critiques was that the perceived exclusivity or expense of the event often became an excuse for dismissing the good ideas which arose there: A good idea is still a good idea, even when someone has to pay to hear it.  

And if the criticisms of conference ideas are based upon bruised egos and hurt feelings, then I've got zero patience for that.

I'm much more sympathetic to the 'too much talk' reasoning.  

Before I bought Lowell's, much of my corporate life was spent in the company of very skilled consultants: research consultants, design consultants, business strategy consultants.  

There was a predictable part of nearly every consulting engagement where the consultant would suggest that hiring them for another engagement was part of the solution to the problems we hired them to resolve - "The way you fix that is to hire me again!".  Consultants always position themselves for doing more consulting.

We did get to see that angling-for-the-next-gig routine with some consultants at Creative Cities.

And admittedly, there was a little too much excitement over slick ideas and catch-phrases, and not enough thought about the hard work needed to truly transform Lexington for the better.

But that hard work isn't what a conference is for: The summit was for learning and for exchanging ideas; the hard work comes after.

* * *

The structure of the conference didn't help its perception - especially on Twitter - for those who didn't attend.  In the process, I think some of the shortcomings of Twitter for civic conversations like these were exposed.

The most compelling (and, presumably, highest-paid) 'keynote' speakers addressed all participants at the same time.  For these speakers, attendees usually tweeted about the same inspiring messages, giving rise to the echo-chamber perception.

For instance, when Bill Strickland spoke at the end of the conference, many non-attendees mocked his 'poor people should be considered assets, not liabilities' line.  They seemed to say What fool would pay to hear something so blatantly obvious?  

But Strickland had spent several emotional minutes demonstrating how attitudes, institutions, and architecture in his native Pittsburgh neighborhood treated poor people like liabilities.  At the same time, he had shown how he had successfully used beauty and light and architecture and respect to transform his home neighborhood by treating poor people like assets.

When those present tweeted the 'assets' line, they were truly moved and inspired by Strickland's story and context.  Those outside the venue only saw vacant platitudes.

This same pattern repeated itself again and again throughout the other keynotes: The rich, compelling images and backgrounds and stories couldn't traverse Twitter effectively; only the catchiest (and apparently empty) phrases made it out.

In between keynotes, there were 4 simultaneous breakout sessions.  While the breakouts weren't as inspiring (or 'tweet-worthy'), they were far more practical and hands-on about the mechanics of transforming a city for the better.  They were - for me - the most beneficial part of the conference.  I learned about:

• Detroit's strategies for reviving long-neglected neighborhoods, building-by-building and block-by-block.
• How Toronto and Portland are funding and implementing inspiring, for-profit social innovation initiatives which pull people and neighborhoods out of poverty and make their cities more livable.
• The model Massachussetts' Creative Economy Director uses to get tangible economic development successes in arts, software, design, video games, and music.

From the discussions around my table, other Lexingtonians learned even more from the sessions I wasn't able to attend.  We also talked with people on the ground in Atlanta, Des Moines, and San Antonio about their experiences in their cities.

Because I was so busy listening and taking notes, I was much less occupied with getting the word out on Twitter.  I saw this effect repeated with other attendees, as well.

So the resulting Twitter stream was decidedly biased in favor of the least-important, most self-helpy kinds of messages, while the deeper, more important insights went relatively silent.  

And I think that is the source of the skepticism and derision from those 'out-of-the-room', while those 'in-the-room' were decidedly enthusiastic about how the event played out.

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Will the Creative Cities Summit matter to Lexington?

It is far too early to tell.  It will take time, work, and discipline to realize the vision that many of us had leaving the summit.

Should the Creative Cities Summit matter to Lexington?

Absolutely.

Seeing the innovations that other cities have applied in improving their quality of life is vital as we attempt to build a better Lexington.  We need that kind of cross-pollenation with our own innovative initiatives to ensure the best possible future for us and for our city.

For those who feel as though we need a lot less talk and a lot more action, then mark this coming Saturday 17th April on your calendar.  That is when ProgressLex is hosting the Now What, Lexington? 'unconference' at the Carnegie Center in Gratz Park.  

Now What? is explicitly geared toward generating tangible action from the ideas of the Creative Cities Summit.  Whether or not you attended Creative Cities, you should come to Now What? if you want to join with others to make Lexington better. 

Now What? will be tweeted, too.  But it will be better if you show up.  As we've seen, Twitter isn't always the most effective medium for conveying important ideas. 

It is free.  Everyone is invited.  We'll be doing things.  No excuses.

Read more of the continuing conversation about the Creative Cities Summit on Twitter with the hashtags #ccslex, #uncreatives, and #uncreativelex.  Read about the upcoming Now What, Lexington? unconference with the hashtag #nowwhatlex.  Full disclosure: Lowell's is a sponsor of Now What, Lexington?

The Limits of Local

I am a strong proponent of 'buying local' - purchasing goods and services from local businesses to boost the local economy.  I made a case for Local First in our recent To-Do List for Lexington series late last year.

But I'm not a local 'purist'.  There are times when buying local is just not practical.  And there are times when non-local competition creates a healthy diversity for local consumers (and providers).

So a recent Twitter discussion and this blog post got me thinking about the limits of 'local'.  The tenor of these conversations was that a candidate for Lexington mayor [one that I personally support, by the way] was 'disloyal' to Lexington for using a Washington, D.C. firm to design the campaign's temporary website.

These discussions echoed several earlier ones about the purchase of non-local services by our city's government.

For me, the discussions raised an important question about buying local, especially with regard to public dollars and public figures:

Should buying local goods and services be a requirement or an aspiration for a political candidate?  For a local government?

The indignation of the writers seemed to imply that buying local goods was some sort of requirement - some sort of 'litmus test' for determining whether a candidate was good enough to run.

From my perspective, this line of thought leads to unreasonable conclusions about what disqualifies candidates (or what constitutes good governance).  For instance:

• They can't shop at Walmart.  Or Kroger.  Or Best Buy.  Or Home Depot.
• They can't eat at Chick-Fil-A.  Or Qdoba.  Or Five Guys.  Or Bonefish.
• They can't drive a Toyota.  Or a Ford.
• They can't drink Coca-Cola.  Especially the imported Mexican Coke with real cane sugar.
• They must only drink Bourbon produced in Fayette County.  (And wait a few years until it is actually available.)
• They can't update their blog with an HP or Dell laptop.
• They can't tweet with their iPhone.  Or BlackBerry.  Or Droid.
• They can't watch TV produced in Hollywood.  Or New York.
• They can't use Microsoft Office.  Or Adobe Acrobat.
• They can't use Facebook.

In short: They can't use any product or service which contains any non-local content.

Is such a list of prohibitions ridiculous?   Of course.  

And that's precisely the point: Requiring some sort of 'purity' in local purchasing creates an excessive, unreachable, and unproductive standard.

Buying local should be an aspiration - something we strive for, something we measure and attempt to improve, something we do more of.

Do we need our city, our political candidates, and our citizens to buy more local goods and services?  Should we actively encourage more purchasing at great local spots like Fáilte (profiled by Tom Eblen in yesterday's Herald-Leader)?  Absolutely, on both counts.  That was why I wrote my original Local First post.

We should spend more of our money here in Lexington.  But forcing our city to spend all of our money here would stifle Lexington's economy, and restrict us from being truly productive.

So let's adopt a reasonable posture aimed at encouraging our leaders to buy local.

Lowell's Teams with Debra’s Social $timulus for Haitian relief

Lowell's is joining Debra Hensley's brilliant campaign to support Haitian earthquake relief efforts.   Together, we will match the first $2000 that you donate toward helping the quake victims. You can drop off a check at Debra’s office at 1513 Nicholasville Road or at our shop at 111 Mechanic Street in Lexington.

Make checks payable to the Red Cross International Fund or the 501(c)(3) of your choice that is helping HAITI. Texting HAITI to 90999 will donate $10 to the Red Cross relief efforts in Haiti.  If you donate by text message, forward a copy of your confirmation to us at:

[email protected]
debrassocialstimulus.com
859-333-3431

Thank you for your help in this global effort!

*** UPDATE: 1/15/2010 ***

We delivered the first batch of Haitian relief checks to Terry Burkhart of the Bluegrass Chapter of the American Red Cross this afternoon, collected from across our generous community.

Thank you so much for your donations.  Here's how Debra said it:

We just delivered the first set of checks to the Red Cross. 100% of these funds will get to the Haiti Relief Fund very quickly. You have also supported - Doctors Without Borders, Food For the Poor, Salvation Army, Oxfam America, and so many other fine organizations.

We asked you to step up and you did.  We told you we would match the first $2,000 and we did.  We will continue to ask other like businesses and organizations to join with matching funds for the need is so great.  As of this moment we have raised $6520, including our match. We will post an entire list of contributors once we have cleared it with them. Thank you, thank you and more later.

If you haven't had a chance to donate yet, we will continue to collect your contributions - as you can see in the photos and stories emerging from the tragedy, the need is profound.  Let's do all we can.

*** UPDATE: 1/19/2010 ***

Your tremendous generosity continues to mount!  Including our match, Debra and Lowell's have raised over $9600 in relief from over 100 people.  We just delivered another batch of relief checks to the Red Cross this afternoon.

If you haven't had a chance to contribute yet, we are still collecting your contributions.  Keep 'em coming!

Let's Change the World: A Review of Seth Godin's "Linchpin"

It was a few months before his third birthday.  It was also the day before he started school, and he was thrilled to embark upon this new adventure.  (He was also mighty proud of his new backpack.)

The sense of possibility radiates from his face: He's leaning forward, ready for anything, eager to engage with the new world awaiting him.

::

What happened to us?  

Once, we were like Carson is now.  We sang without fear.  We played with abandon.  We learned at incomprehensible speed.  We pretended.  We asked difficult questions.  We created things.  We did things.  We overflowed with joy.  It was (and is) a magical time in a child's life.

And no one "judged" our performance - we were just kids, after all.  In this stage of development, only a cruel adult (or sibling) would declare us "bad" at blocks or singing or playing or creating. 

But then, as we grew older, the regimen of school and critical teachers and vicious peers and numbing conformity drummed a lot of the magic out of us.  We became more anxious about singing or playing in public.  We became reluctant to stand out.  And many of us lost that childish joy associated with learning and discovery.

Then we graduated and went to work.  And the workplace actively stomped out anything which wasn't structured and standardized and routinized.  Our childish joy was smothered by conforming to the system.  But we accepted the slow, imperceptible death of our joy and creativity and genius in exchange for security.  Conforming, for all of its flaws, paid us well.

Until now.

Now, those standardized and routinized jobs that we worked so hard to "fit in" to can be (and are being) all-too-easily outsourced to someone else who will do them for less pay and less security. They are too easy to outsource precisely because the jobs are standardized and routinized and dehumanized and documented and commodified.  And it becomes a race to the bottom: There is always someone willing to do a standardized job for less.

As the economy has disintegrated, millions of jobs are evaporating as they move overseas or are consolidated.  And the sad truth is that many of those jobs won't reappear when the economy recovers.

::

I love books.  Especially business books.  I have a couple thousand books tucked into the nooks and crannies of my home, my basement, my office, and my Kindle. 

I also love learning, so the vast majority of my books are nonfiction, and most of them are business-related.  There are the software development books, many of which are getting dustier than I'd like.  There are the e-commerce books, the career-advice books, the business histories and biographies, the innovation books, the marketing books, the business-strategy books.  

Nearly every book had interesting information, insights, or perspectives.

But only a few really stand out.  Once every few years, I come across a book which rocks my worldview, which changes how I approach things and challenges me to do better. 

Seth Godin's forthcoming Linchpin: Are You Indispensable? is one of those books.

Seth is best known for his contributions to marketing, where he systematically dismantled business-as-usual approaches to marketing.  Interrupting and shouting at people (also known as "advertising") with boring "me-too" products is discredited in large part because of Seth's creative, insightful writing in books like Permission Marketing and Purple Cow.  His blog is a must-read for anyone in business.

But Linchpin is different.

::

Many of the themes in Linchpin will be familiar ones to readers of Seth's previous writing, but the scope and purpose of this book is much more grand (and effective): With Linchpin, Seth wants to do no less than help us change the world.  He wants to help restore humanity, creativity, generosity, and artistry into our work and our lives. 

When we are more human, creative, generous, and artistic, Seth shows how unique and invaluable we become.  Suddenly, instead of being another easily-replaced drone in the workplace, we are the critical links - the linchpins - of our organization (and our community).  We become indispensable.

Standing out is no longer dangerous.  Standing out is now the single most effective strategy for not being replaced or being forgotten.  Merely "fitting in" - once the source of our security and our income - is now the most dangerous strategy of all.  The more we fit in, the easier we are to outsource and the more precarious our jobs become.

How do we stand out?  By doing original, human, generous work.  Seth calls it "art", which he defines as "a personal gift that changes the recipient". 

The way for us and our work to stand out is to imbue it with artistry.  Only by adding our personal insight, ideas, innovation, and genius to what we do - only by being more human - can we avoid becoming a disposable cog in the system. 

::

Often, we have plenty of insight, and lots of ideas, and a surplus of genius.  But we fail to see it through.  We fail to produce our art.

What stands in the way?  Usually, it's ourselves.  More specifically, it is our fear.  Fear of failure.  Fear of being judged.  Fear of being rejected.  Fear of success.

So we wait.  We delay.  We procrastinate.  We go to the fridge.  We scan our email. 

And nothing happens.

In the most vital part of Linchpin (and the one which jolted me the most), Seth breaks down what really stops us from becoming great contributors.  He shows how we get in the way of our most brilliant ideas or plans.

And then he shows why that fear-mongering part of us can't be tolerated any longer.

We must confront our own delay tactics and call out our fears.  We must deal with the things which scare us and overcome them.  

Only then can we produce the art which will allow us to stand out and allow us to contribute meaningfully to our organizations and communities.

With his usual compelling and incisive style, Seth names each of these killers of our creativity, shows how they work, and demonstrates how to dismantle them.  In a fifty-page tour de force, he decimates the fears which limit our contributions.

Ridding ourselves of these paralyzing dread-monsters (or, at least, bringing them down to an appropriate size) allows us to inject some of that creative, playful, innovative, childish joy back into our work.  It allows us to connect more genuinely with others.  It allows us to change the world.

::

We face a choice.

We can attempt to hunker down, fit in, and conform, and live in dread that the economic storm will sweep our livelihood away.

- or -

We can take control of our careers and our lives to create unique, remarkable, significant work - "art" - and be determined to change the world for the better.

One is a passive victim's path, where the world - and life - "happens" to you. 

The other is an active, creative, joyful, innovative, human path for those who are liberated to leave a footprint on the world.  It is the same path that Carson is on right now.

It isn't really a choice, is it?

::

As I was reading Linchpin, I struggled with how to categorize this remarkable book.  Is it a self-help book?  A leadership book?  A business strategy book?

And then it hit me: It's a Seth Godin book.  And it's his best work.  And it will help you change the world - if you let it.

Let it.

[Linchpin: Are You Indispensable? will be released on January 26th.  Mark your calendars. Start here to check out other reviews.]

789 Free Oil Changes

As part of our 30th Anniversary, Lowell's gave away 789 free oil changes during the last 3 months of 2009 during our Lowell's Community Service program. In total, those oil changes were worth over $18,500. 

Community Service was our way to say "thank you" for 30 years of support - and for making Lowell's Lexington's "Best Honest Mechanic" (Ace Weekly's Best of Lex Awards) and "Favorite Auto Repair Shop" (Herald-Leader's Reader's Choice Awards) in 2009.

As we start 2010, we're looking at other innovative ways we can serve our loyal customers and our community - please let us know if you have great ideas!

We thank you for supporting us for the past 30 years, and we look forward to serving Lexington in 2010 and beyond. Happy New Year!

To-Do List for Lexington: Postscript

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Every night we go through the same routine.

After he takes his bath and gets his pajamas on, we go to his room.  I sit in the recliner, and he clambers up into my lap.  We pull a book from the shelf - the books are getting longer now - and I add a bit of vocal drama as I read to him.  

His little brain absorbs everything - pictures, sounds, words.  He asks lots of questions now, too.  We finish the book, and place it back on the shelf.

I pick him up, and we say good night to mementos from his young life, scattered about the room.  It started with 2 or 3 items after finishing Goodnight Moon, but has steadily grown to a list of 13 things: a stuffed polar bear and penguin from his great-grandmother, a huge stuffed giraffe, and an array of other objects from around the room.

I take him down the hall to say a final good night to Mommy, and we go back to his room.  I sit back in the recliner as he turns out the light, and we find each other in the darkness.  I pull him up into my lap, and give him a little water to drink.  I tell him "that's enough", and place the cup back on the shelf. 

I pull him up onto my chest, and he places his head on my shoulder.  After a few seconds of silence, I tell him I love him in Spanish: "Te amo, Carson" and he responds "te amo, Daddy"*.  He's starting to get tired now, and his words are slurring slightly.  I then quote from one of my favorite baby books, and he matches my cadence shortly after I start: "I love you through and through - yesterday, today, and tomorrow, too."  Then, "I love you, Carson" followed by a barely audible "I love you, Daddy".

I hold him tight.  In the darkness, silent except for our slow breathing, I feel the twinge of nostalgia for this moment.  He turns 3 this week.  He's growing so fast, and it won't be too long before he needs to be independent from hugs and kisses from his dad.  It won't be long before we won't experience this kind of closeness.

My mind wanders a bit as I ponder our future, his future.  I am holding so much potential in my arms.  What kind of world will he inherit?

I get up from the recliner and place him in his bed.  I tuck him in with three more stuffed animals, and kiss his forehead.  He stirs a bit to get comfortable, and I leave his room. "Good night Carson.  I love you.  See you in the morning."

::

I often get asked why I speak out so much on this blog - especially during this To-Do List for Lexington series.  Behind the questions are a variety of thoughts about my motives:

• Some folks think that I must have an enormous ego, and that I believe that I have all of the answers.
• Others think that I must be preparing to run for elected office, and these posts are part of some sort of political platform.
• Some people - including members of my family - think I'm just crazy.

They're all wrong.

I may or may not have a huge ego, but I don't assume I have all of the answers.  I am perfectly willing to engage in democratic debate on these ideas.

I don't have the time or patience to devote to political office.  I've seen the demands on elected representatives, and the kinds of people they deal with day-to-day.  This isn't a political platform.  (Not for me, anyway.)

And, I'm not crazy.  Well... at least as far as my motives behind my writing.

The underlying assumption most folks have is that there is huge risk to speaking out, especially when addressing powerful interests in our city.  I could scare away customers.  The powerful could make life more difficult for me or for my family or for my employees.

And those risks may or may not be real.

But there is an even greater, very real risk in not speaking out, in being quiet.

There is the risk that we pursue the wrong kinds of economic development.  There is the risk of wasteful spending in the face of economic crisis.  There is the risk of choking off our city's downtown.  There is the risk of further stagnation in the local economy. 

There is the risk that Lexington loses what makes it a special place to live and work - that Lexington becomes less than it should be.

I find that those risks to our future far outweigh the risks of speaking out.  I would be 'crazy' to remain silent.

::

I want Lexington to be special.  I want it to be a vibrant, exciting, growing kind of place that my son can stay in and prosper.  I want Lexington to be better.  And I hope that you do, too.

That is why I speak out.  That is why I hope you will join me.  Let's craft a better future for our city.  For ourselves.  For our children.

I love you, Carson.

* I know that "te amo" is usually reserved for romantic love, and that "te quiero" is probably more appropriate, but this habit was ingrained before I caught my error...  We'll fix it later.

To-Do List for Lexington: 9. Do!

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Throughout this To-Do List series, we've talked about the kinds of things we need to do to make Lexington a better city, especially with regard to improving our city's economic development. 

In Get Real, we talked about the need to curtail boosterism - the compulsive promotion of our city at the expense of real, substantive economic initiatives.  Lexington needs to get a lot more realistic about what kinds of civic activity drive true prosperity.

We talked about promoting growth at home as the best way to attract new growth from the outside in Stop Seeking Saviors.  Rather than spending huge, speculative amounts to draw in new firms from outside the city, Lexington should target spending on growing its economy from within.

We talked about the multiplier benefits of buying products and services from local providers in Local First.  Lexington should prioritize local purchasing, development, and investing in order to supercharge its growth.

In Embrace Openness, we talked about the need for our city to adopt an open approach to serving citizens, including open access to data about our city.  Lexington should find new, more transparent ways of serving and communicating with its citizens.

We talked about how to grow, keep, and attract educated talent - talent which is currently bleeding from Lexington - in Leverage Intellectual Capital.  We must find ways to keep experienced and specialized workers - who contribute enormously to our economy - in our city.

We talked about taking advantage of Lexington's uniqueness - including the promise of the Distillery District - in Be Original.  We must leverage that uniqueness to make Lexington a city worth visiting and worth living in.

We talked about the need for intermediate-term strategic planning as a way to connect action to vision in Plan Well.  Lexington must make thoughtful, strategic investments with its public dollars.

Then, in Demand Accountability, we talked about how good initiatives get derailed and about how we must step up to make our leaders - and ourselves - responsible for keeping such initiatives on track.

While the list covers a lot of ground, it isn't comprehensive by any means.  For instance, we didn't delve into the importance of the arts in our community.  We didn't talk about becoming more environmentally responsible, and building a sustainable Lexington.  We didn't talk about how to improve conditions for Lexington's poor. 

Our To-Do List for Lexington isn't complete.  We'll continue to add to it in the months ahead.  There's a lot more to talk about... 

But it is time to stop talking.  Stop complaining.  Stop whining.  Stop planning.  Stop theorizing.  We need to shift from analysis to execution.  This is a To-Do List, not a list of discussion items. 

Lexington must start to do these things. 

We need to ensure that leaders from across the community understand and implement these principles.  If they disagree, that's fine, but they need to articulate why they disagree in open, democratic debate. 

And if they don't, we need to get new leaders.

We need to commit our time, money, and effort to applying these principles for the betterment of our community. 

We need to go build a prosperous, beautiful, livable city.  We need to go make Lexington better.

Who's in?

Next: Postscript

To-Do List for Lexington: 8. Demand Accountability

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Why don't more good things happen?

Throughout my career, I've had the all-too-frequent opportunity to observe how things don't work out - in academics, in business, and in local politics. 

A good share of the blame resides with 'bad actors' - folks who gum up the decision-making process and derail worthy initiatives.  For fun, I've begun a typology of these people.

• There's the Smug Know-It-All, who pretends to have all of the answers, and therefore doesn't need or seek input from experts or the public.  The Smug Know-It-All just wants to be 'right'.
• There's the Intentionally Clueless, who lacks sufficient information or sound principles for making strategic decisions, and who instead makes those decisions based upon personalities of the people involved.  The Intentionally Clueless just wants to be liked.
• There's the Do-Nothing, who struggles mightily to rationalize the status quo, and who hunkers down and defers decisions in the face of any initiative which promises change.  The Do-Nothing just wants to avoid doing anything.
• And, there's the Obstructionist, who actively blocks initiatives by constructing elaborate hurdles for an initiative, often by invoking process-related parliamentary maneuvers.

What is common to all of these bad actors is an unwillingness to enter into an open, rational, democratic debate on an initiative's merits. 

 Notice that none of these folks are engaged in solving problems.  Instead, they pour their energy toward squelching debate, often by exhausting or diverting their opponents' ability to continue the fight.

Attend an Urban County Council session - or watch one on GTV3 - and it is surprising to see how many of these bad actors are on the council or work for city government.   We were able to see versions of all of these bad actors on display during the Parsons Affair, when the council decided whether or not to bond the Distillery District.

Throughout Lexington's leadership, we can see these bad actors.  We see them among our elected representatives, among public employees, in publicly-supported agencies (like Commerce Lexington or the Downtown Development Authority), and in local businesses.

More troubling, we see this behavior among our own citizens - amongst ourselves.  We know it all.  We remain clueless.  We do nothing.  We obstruct. 

We are the bad actors, too.

If we are to build a better Lexington, we must declare such behavior unacceptable.  Then, we must make bad actors answer for their actions.

Lexington must demand accountability.  From its leaders.  And from its citizens.

::

How do we begin to make good things happen in Lexington?

By making Lexington's leaders and citizens accountable for doing good things.  Reward them when they do the right things; punish them when they don't. 

Sounds simple, doesn't it?  But what, exactly, do we do?  How do we really demand accountability?

Here's a partial list of what I think we need to do.  I hope you will expand on these ideas in the comments below:

• Speak up.  Let your representatives, neighbors, friends, and fellow citizens know what matters to you.  Write letters.  Make phone calls.  Send emails.
• Show up.  Make time to attend council meetings or local neighborhood meetings, especially when they address issues which matter to you.
• Inform yourself.  Find out what is happening in our city.
• Join together.  Actively look for people with similar viewpoints, and unite your voices.  One voice is too easy to ignore; a movement is not.
• Campaign.  Fight for your causes, and recruit others to them.  Lobby for your point of view.
• Call 'em out.  When you see bad actors squelching public discussion, don't let them get away with it.  Call out their anti-democratic behavior for being anti-democratic.  Make them think twice before they do it again.
• Vote 'em out.  When representatives, public employees, organizations, or businesses continue to act in bad faith, deprive them of what they need most: Votes, jobs, or funds.
• Persist.  Bad actors are betting that you'll give up.  Make them lose that bet.

Gandhi urged us to "be the change you wish to see in the world".  William Johnsen offered this pithier 18th-century version, in 10 two-letter words: "If it is to be, it is up to me."  Both of them recognized that real, productive change takes place when we stop waiting for someone else to fix things.

If Lexington is to reach its full potential - if we are to build a better, more livable, more prosperous city - we must demand accountability from our leaders and from ourselves.  Especially from ourselves.

Next: 9. Do!

To-Do List for Lexington: 7. Plan Well

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Last week, Lexington's Urban County Council deliberated on the projects the city would issue bonds for.  When we issue bonds, we are borrowing money from bond investors - Bonds are new debt that we will pay off at some point in the future to fund today's projects.

In that bond deliberation process, one word kept coming up: Streetscapes. 

The council has earmarked some $30 million in new bonds for four streetscape projects.  In addition to funding the ongoing project on South Limestone (whose ever-escalating price tag now stands at $17 million), the council will fund new streetscape projects on Cheapside, West Main, and West Vine for $12.7 million. 

All four projects are slated for completion by July 1st, 2010 - less than 7 months from now.

::

Barely two weeks earlier, the Mayor announced a $12 to $13 million shortfall in the current year's budget, noting that - after several previous rounds of cuts - the city would likely have to cut services to balance its budget this time. 

Yet, in this economically-strapped environment, the Mayor pushed for (and council approved) a disruptive $30 million spending spree to make streets look pretty.

Why the rush?  The World Equestrian Games are coming to Lexington in September 2010, and we must look our best for "the world". 

This is boosterism run amok: In the mad scramble to make Lexington 'pretty' for out-of-town visitors next fall, the city is simultaneously 1) spending $30 million to make streets look better, 2) incurring $30 million in new bond debt, and 3) destroying $90 million of economic value by disrupting local business operations. 

And the next 6 months promise to be even more disruptive, as the four separate street projects further entangle downtown Lexington.

In the face of financial crisis, massive spending on discretionary aesthetic projects - especially ones which disrupt commerce - seems wildly irresponsible.  It is the urban equivalent of not being able to make the mortgage payment, yet getting a new loan to redesign the landscaping.

::

Last January, at the request of Lexington's Mayor, a group of citizens delivered a long-term vision for our city to the Mayor and to the Urban County Council.  Dubbed Destination 2040, the document outlined strategies and initiatives for maintaining "great city life in a productive rural paradise" for the next 30 years in Lexington.

I have previously written that I believe that Destination 2040 is destined to fail.  I make that assessment not because there is anything fundamentally wrong with the Destination 2040 vision, but because Lexington lacks the mechanisms and processes to realize such a vision.

::

Together, streetscapes and Destination 2040 provide a snapshot of Lexington's inability to implement strategic economic and urban development plans.

At the scale of decades, Destination 2040's objectives are too distant to grapple with in a systematic fashion.  It is too difficult to tangibly connect today's initiatives to the distant future.

At the scale of months, the scramble for streetscapes is ripped from a broader strategic context: Are these really the wisest investments for our city to make while facing a very distressed economic environment?  What emerges from such short-term focus is a series of disconnected, momentarily-important initiatives with spotty results.

Lexington needs t0 better connect its near-term projects to its long-term vision.  We need to invest in projects which fit within well-defined urban development goals.  We need to clearly articulate a coherent strategy for sustainable growth.

Lexington needs to learn to plan well.

Planning isn't very exciting to talk about, but it is critical that we do it well - especially when we are incurring public debt that we'll be paying back over several years.  So here are some thoughts on how Lexington can better plan its future.

Choose big, specific, near-term goals. 
Lexington needs to choose audacious goals, and then work diligently to make those goals happen.  Ideally, those audacious goals would connect to our long-term vision (such as that outlined in Destination 2040).  Then, instead of thinking in terms of months (like streetscapes) or decades (Destination 2040), we need to think in 3- to 5-year "chunks" and establish deadlines and accountability accordingly. 

Some examples:

• Aggressive growth of high-paying new jobs:  "10,000 net new jobs by 2014, adding $1 billion to the local economy".
• Dramatic increases in urban density through incentives which promote responsible infill and redevelopment: "10% greater residential and commercial density in downtown Lexington by 2015".
• Reclaim blighted areas of Lexington.  Encourage new growth and investment in those areas.  Capitalize on our originality: "Make the Distillery District one of Lexington's signature, must-visit places.  Target getting 20 stories about the District in national or regional media."

Don't just spend; make investments. 
Public money is a resource to be invested for public benefit, not a handout or slush fund to be spent.  We must evaluate discretionary public spending based upon what that investment returns (or fails to return) to the public. 

This was the massive failure of the South Limestone streetscape project - A simple analysis would have revealed the tremendous costs associated with closing a major artery to downtown for a year.

If we begin adopting an investor's mentality to urban development, we will ensure that our tax dollars are more wisely spent.

Invest selectively and intensively. 
To maximize the returns on Lexington's tax dollars, we should concentrate our investments in select strategic areas (job growth, for instance), and then allocate disproportionate amounts toward those investments.

This strategy yields two major benefits when compared to spreading public investment to multiple, disconnected projects. 

• It creates a self-imposed discipline on the ways in which we will spend public money.
• It lets us leverage previous investments, as concentrated cumulative investing can compound the desired effect.

Invest in factories, not fish. 
We can give someone a fish.  We can teach someone to fish.  Or we can invest in an infrastructure - "boat factories", if you will - to create the conditions in which they can reliably and efficiently feed millions.

Hopefully you get my metaphor.  If not, here's how my favorite charity, Acumen Fund, puts it with regard to generosity:

All too often, boosters promote one-time wins which give our city a short-term economic 'pop', but the hoped-for lasting effect never materializes.  Boosters usually hand us a dead fish.   Occasionally, they teach a few of us to fish.  That isn't enough.

When it comes to investing the public dollar, we must plan smart, sustainable investments - ones which keep growing and keep repaying the public for its investment many times over.  We need to identify gifts which keep on giving, and maximize our investments.  

::

By better connecting its short-term projects to its long-term vision, Lexington can begin to make smarter, more effective decisions about its future.  We can begin to invest public money wisely and productively toward crafting a better Lexington. 

Next: 8. Demand Accountability

Be Original. But Be Smart, Too...

(A fun little break from our To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Yesterday, we asked readers to support a $3.2 million bond issue for Lexington's Distillery District, which includes much of Town Branch Trail.

As part of the same post, we called for Lexington to "be original". 

But we didn't expect so much originality so soon.  And we didn't expect it to be so completely inept...

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As we mentioned yesterday, the Urban County Council is in a financial pinch.  And it was deciding what projects to issue bonds for, including the ever-growing bill for South Limestone streetscape construction (now at over $17 million) and early 2010 streetscape projects on Main, Vine, and Cheapside, totaling $12.7 million.

At $3.2 million, the Distillery District bonds were relatively small, and the Distillery District was the only bond project which would provide infrastructure to spawn new jobs and new revenue - meaning that it was the only initiative which could provide taxpayers a return on their investment.

This return on investment is a principal feature of tax increment financing (TIF) projects.  Public funds are made available to such projects as those projects generate tax revenues back to the city.

Roughly two-thirds of the Distillery District's bond would go directly for public improvements for direct public benefit - building out the Town Branch Trail and improving pedestrian access throughout the district.  The rest would go for researching road and utility improvements along Manchester Street (the District's primary corridor). 

::

An hour before the council met yesterday, councilmembers were sent an ominous memo [PDF link] from a former counsel (attorney James Parsons) who formerly advised LFUCG on the TIF process. 

The last-minute memo appears to be a very deliberate misreading of the Distillery District request. 

It creates the incorrect impression that the developer (Barry McNees) could simply pocket the bond funds and leave the city in the lurch.  As mentioned above, most of the funds would go directly toward civic infrastructure improvements, not the developer's bottom line.  And the remaining funds would go toward research and design initiatives - also not the developer.

And the memo is plain wrong on the developer's ability to start the project - The Distillery District already has one active, successful entertainment venue (Buster's) which employs over 30 people and, in just a few months since opening, has drawn 10,000 fans from across the region.  Other, smaller businesses are already in place, too.  And McNees has a letter of intent from a major investor to start a new distillery in Downtown Lexington.

In total, the Parsons memo appears to intentionally mislead the council on the magnitude of "dangers" associated with the project - It appears to be a blatant scare tactic designed to squelch the Distillery District.

Good News, Bad News
The good news is that the council saw through the transparent attempt to derail a worthy project.  The bad news is that they only partially funded the request (about $2.2 million).  The council narrowly (6 to 5 vote) missed approving the entire $3.2 million request.

But the Parsons affair raises a number of troubling questions:

• Why was the former TIF advisor weighing in on this project?
• Why did he so badly mischaracterize the project?
• Were taxpayer funds used to craft this diversion? (If so, this taxpayer wants a refund.)
• Who requested Parsons' input?  Why?
• Was Parsons directed to magnify the potential dangers to the project?  Again, by whom?
• And where was this alarmist "DANGER, DANGER!" attitude toward TIF while Mr. Parsons was advising LFUCG on CentrePointe?

The broader question is this: Who wanted to derail the Distillery District so badly that they used such a transparent, ham-handed approach?  

::

When we called for Lexington to be more original, we wanted that originality to be smart, too.  The Parsons memo was certainly "original".  Smart?  Not so much.

To-Do List for Lexington: 6. Be Original

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Quick!  Think of a city you love (outside of Lexington).  Really savor that mental image.  Let your positive thoughts run for a bit. 

Got it? OK.

If you're like most folks, when you think of your favorite city, you think of one (or a combination) of a few key types of memories:

• Places.  You remember neighborhoods, buildings, parks, alleys, establishments, etc.
• History.  You remember important things that happened there.
• Products.  You remember things that they have or that they produce there.
• People.  You remember who you met and how they treated you there. 

I have the wonderful affliction of loving nearly every place I visit - but always for different reasons. 

I loved crawling through the historic back alleys (and patronizing the restaurants and bars) of Boston's North End.  I had the fortune of being there in a little Italian restaurant while Italy won the World Cup in 2006.  I remember the flags, the honking, the cheering, the flavors and smells...

I loved going to Tokyo with a couple guys I worked with in my last job, and visiting the temples at Asakusa and seeing the bewildering variety of Japanese people at the temple and at surrounding neighborhoods and markets.  In one of those inexplicable cultural moments, I remember 3 separate families awkwardly approaching me to take pictures with their sons (and giving me their sons' "business card" afterward).

I love Portland.  I love Austin.  I love Boulder.

More than anything else, I love the utter originality of those cities' places, history, products, and people.

But Lexington is the city I chose. 

::

Our city leaders often go on tours of "model cities" which Lexington might be able to learn from, including Boulder, Austin, and Madison.  In the process, they see many unique things to love about those cities. 

But too often, rather than focus on what original qualities Lexington should leverage, our leadership focuses on what those cities have that Lexington does not: "If Madison has bike trails, so should we!"  (No, I'm not opposed to bike trails; I am opposed to the mindless parroting of other cities' actions.)

Lexington must be original.

What impressions do we make on people when they visit Lexington?  What impressions do we make upon our own citizens?  What unique experiences do we create?

Here are a few which jump out at me.  I'm sure there are more I missed.  (Add your own in the comments below!)

There are the memorable places like no other - Keeneland, Ashland, Gratz Park, the UK campus, the Transy campus, Victorian Square, and the downtown pasture at CentrePointe, just to name a few.  (OK, I'm joking on the last one.)  I love the North Limestone neighborhood that Lowell's is privileged to be a part of.

There are the memorable histories of Henry Clay, Town Branch, the East End, and the Carnegie Center.

There are the memorable world's-best products - basketball, Camrys, horses, and bourbon.

There are the incredible people of our city - smart, thoughtful, hard-working, and funny.

When we're looking to influence how people - tourists, visitors, job applicants, investors, business owners, our own citizens - view our city, we need to amplify our best assets. 

And, when we are presented with the rare opportunity to leverage all four memorable assets  - original places, original history, original products, and original people - at the same time, we must jump on those opportunities.

Right now, we have such an opportunity with Lexington's Distillery District and Town Branch Trail. Many people still don't know that Lexington even has a Distillery District, so I'll offer a brief overview.  On Manchester Street, there are several old, historic, and distinctive distillery buildings and warehouses which were last used last century to make bourbon in downtown Lexington.  They used the water supply from nearby Town Branch, a stream which used to run through the center of Lexington, but is now buried under Vine Street.  Several of Lexington's best and brightest people want to transform the largely abandoned district into a vibrant neighborhood with entertainment, arts, shops, restaurants, and - for the first time in nearly a century - distilling.  Businesses are already beginning to open in the district, and one - Buster's - is an entertainment venue which is already attracting notable new talent to Lexington.  The Distillery District would also be the starting point for Kentucky's Bourbon Trail.

This afternoon (at 4 PM), Lexington's Urban County Council is voting on whether to issue $3.2 in infrastructure bonds for the Distillery District.  Issuing the bonds would not be a handout - the funds would be reimbursed through taxes on the new commerce that takes place within the District.  Also, the funds would be released incrementally - as new commerce takes place, more funds would be available for needed infrastructure improvements. 

The bonds would be used to create parts of Town Branch Trail (a greenspace and walkway along historic Town Branch), to improve pedestrian access along Manchester Street, and to look at how to improve utilities, roadways, and streetscapes along Manchester as well.  

Lexington is in a financial pinch at present, and there are many on the council who just want to "wait a while" for things to get better in the economy.  The trouble with waiting is that - often - waiting turns into permanent deferral, and projects never get done.  Unlike CentrePointe - of which I have been highly critical - the Distillery District has active businesses and active investors who are ready to utilize the improvements that this bond offers.  These businesses are poised to contribute far more than $3.2 million back to our city's coffers over the coming years.

::

Lexington has the all-too-rare opportunity to create a unique place in our city - the kind of place which ultimately would stand next to Keeneland, Gratz Park, and Ashland as one of Lexington's "signature" locations.  We should leverage our our originality - our unique and memorable places, history, products, and people - to craft a better Lexington. 

That's why we should support the Distillery District, even in difficult financial times.

Let's be original.

(This post is awfully late in getting up - If you don't have time to contact your council person prior to their 4 PM vote, please do take the time to see how they voted.  And remember that for the next election.)

Postscript: The backroom intrigue as the council vote approached.

Next: 7. Plan Well

To-Do List for Lexington: 5. Leverage Intellectual Capital

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Lexington is losing its minds.

At 100,000 strong, Lexington's college graduates represent approximately one-third of the population over 25 [Source: US Census Bureau, American Community Survey, 2006 and 2008].

The University of Kentucky and Transylvania University churn out over 6,000 new graduates - including over 4,000 new bachelor's degrees - each year.  With 4,000 new degree-holders per year, Lexington should have increased this talent pool from 100,000 in 2005 to about 112,000 in 2008.

But we didn't.

Instead, even as Lexington's overall adult population grew by 9,000 in that 2005 to 2008 period, the number of college graduates remained stuck at 100,000.  (For comparison purposes, Louisville grew from 191,000 college graduates in 2005 to 202,000 in 2008 - growth of 5.7%).

Somehow, 12,000 graduates have slipped from our economy - far more than can be explained through normal attrition (retirement, death, etc.).

The explanation: Educated talent is leaving Lexington.  We suffer from a "brain drain".

::

In recent years, it has become fashionable for Lexington's leaders to talk about attracting the "creative class" to Lexington.  Coined by Richard Florida, "creative class" refers to professionals who work in knowledge-intensive industries, and Florida's theory is that this group of professionals drives economic development in "creative cities".  

When our leaders talk of the creative class, they frequently focus on diversionary amenities which will attract young creatives to our city - entertainment, events, and facilities which will make life in Lexington more enjoyable outside of work. 

While not entirely misguided, the problem with this approach is threefold:

1. It confuses cause and effect.  Is this creative environment really the driver of economic prosperity in American cities?  Or, more likely, are they the result - the pleasant side-effect - of a prospering economy?
2. The flagrant boosterism which permeates Lexington's attempt to attract new talent often comes at the direct expense of retaining the talent we already have, as Steve Austin ably points out.
3. It assumes that the creative class is something 'out there'.  Lexington already has a creative class.  And we must cultivate it here first.

Instead of focusing on amenities, Lexington should focus on crafting a vibrant economic engine which will keep the educated talent our city produces and which will create real demand for those amenities.

::

Who's leaving?

When we see that Lexington has lost 12,000 college graduates in 3 years, our impulse is to look for an exodus of newly-minted degree-holders, and to start thinking about what we could do to retain our newest, youngest graduates.

And while the loss of a departing new graduate's energy, potential, and future is certainly tragic, there is an even-more-profound tragedy which Lexington must actively address: the loss of the experienced employee.

When experienced employees with college degrees leave Lexington, they injure our economic engine far more than a young graduate.  Experienced employees represent significant investments in training, dollars, relationships, know-how, and, well, experience.

In aggregate, these experienced employees are vast pools of expertise which create enormous economic advantage for Lexington.  They have more income than recent graduates.  They provide more tax revenue.  They have higher property values.  They spend more money in the local economy, which creates more local jobs.  They tend to add more value to their companies.

This is the primary reason I have been so publicly critical of Lexmark's implosion.  Every few quarters, Lexmark announces fresh rounds of layoffs and "restructuring" which shed dozens or hundreds of local employees.  Many other employees have left of their own accord. 

Seeking employment which can utilize their expertise, these folks often leave Lexington.  Many who remain in Lexington are underemployed.  When so many highly-trained experts in engineering, software development, logistics, and marketing leave our city, it is an enormous hit to the local economy. 

Lexington must find ways to solve this exodus of talent (in both new graduates and experienced employees).  We need to be creative in how we grow, keep, and attract smart people.

Lexington must leverage its intellectual capital.

::

How do we grow, keep and attract smart people?  We need to start by helping to create new local jobs.

There is a common misconception that all job growth in the US comes from small businesses.  But business size isn't the determining factor; business age is.  The Kauffman Foundation found that all job growth in our country comes from young businesses (regardless of their size).  Entrepreneurial ventures founded in the last 5 years drove all job growth in our nation's economy.

When we think about entrepreneurship, our focus is often (again) on our younger generations.  We are drawn to stories of Gates, Jobs, Dell, and Zuckerberg launching wildly-successful ventures from their dorm rooms or garages.  They came so far from such modest beginnings.  In Lexington, we see this youthful energy and creativity exhibited in Awesome, Inc. (who are awesome, by the way), a local business incubator.

They make really compelling stories.  But the meteoric rises of Microsoft, Apple, Dell, and Facebook are so compelling precisely because they are so rare. 

And they misrepresent the realities of the entrepreneurial world.

In another counterintuitive study, the Kauffman Foundation found that older, more experienced workers actually start new businesses at higher rates.  Other studies have found that the vast majority of technology startups are founded by people 35 or older.  And where do many of those older entrepreneurs come from?  Often, from large corporations.

So how do we create new jobs in Lexington?  How do we keep and attract members of the "creative class"?  How do we stem the bleeding of expert talent from our city?  Here's a starting list for leveraging our intellectual capital.  I hope you will add to it:

1. Fuel the entrepreneurial engine.  From experience, I can tell you that starting a business is daunting hard work.  There is the bewildering array of legal and tax implications.  There are a variety of financial hurdles.  And, unless you've done this sort of thing before, there is a ton of on-the-job learning about what you don't know about starting a business.

Lexington (LFUCG and Commerce Lexington) should strive to streamline the start-up process far more than they do today.  Our city should embrace entrepreneurs as they seek to create new jobs for our economy. 

We should help them flatten the usual barriers to getting a business started.  We should provide forums for getting enrepreneurs connected with other talents and businesses which can assist them in the setup and growth of their businesses.  We should give them open access to critical business data about our city.  We should give them some amount of preference in local bidding contracts.  We should provide them with essential training in operating their businesses (e.g., If they are brilliant engineers, that doesn't always mean that they are brilliant marketers or financial analysts). 

When possible, we could even provide them with financial support or space (such as setting them up in the plentiful space available in Lexington's Distillery District).

In short, Lexington needs to foster the conditions under which entrepreneurs can create jobs.

2. Grow our pools of expertise.  Our mayor frequently talks about how Lexington's 3 H's (Horses, High tech, and Healthcare) form the foundation of our city's economic development strategy.  Those sectors may be the right ones to leverage going forward. 

But when we think about stopping our exodus of talent, we need to think in more flexible terms than specific industries.  A supply chain manager leaving Toyota has a unique skillset (how to get things made overseas, optimizing inventory, logistics, etc.) which can carry over to a variety of other - not necessarily high-tech -  industries.  A marketer leaving Lexmark has a vast array of experiences with retailers, ad agencies, design firms, and product strategy which could be redeployed to, say, UK Healthcare.

In addition to choosing strategic industrial sectors, we should also choose strategic, functional areas of expertise that we can tap into as one industry wanes and another expands.  Some ideas? Supply chain, marketing, sales, engineering (multiple types), software development, etc.  (Add your own in the comments below.)

Not every employee currently leaving Lexington will want to become an entrepreneur.  But nearly every one wants a job. 

As companies like Lexmark shrink, Lexington should seek to actively funnel their fleeing employees to growing local enterprises like Alltech, UK Healthcare, HP's Exstream, or some new entrepreneurial venture.  We should inject some "liquidity" into the local job market, so that finding local opportunities is an easier, more streamlined process.  When we learn of new layoffs, our city should mobilize to keep that valuable talent local.

We shouldn't allow employees, especially experienced ones, to leak from our economy.  

3. Coordinate and amplify existing efforts.  Today, we have a patchwork of agencies and institutions which have missions to grow Lexington's economy and provide jobs.  We have one person working on economic development in the Mayor's office.  Commerce Lexington is given tax dollars to help produce new jobs, but is unable to show that they have actually created any.

We should coordinate such efforts in a more strategic, consistent, coherent, and effective way.  We should designate a person or an agency who has accountability for results - especially for job growth in our city. That entity should also have responsibility for fueling our entrepreneurial engine and for growing our pools of expertise.

And then - and this is really important - we must hold them accountable for the results they get.

::

The loss of 12,000 educated Lexingtonians shows us that our city needs to work hard to grow, keep, and attract talent.  If we create the mechanisms to create new entrepreneurs while simultaneously magnifying our existing expertise, our economy should have the raw materials to begin growing again.

Next: 6. Be Original

To-Do List for Lexington: 4. Embrace Openness

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

In January 2008, we were in early discussions to buy Lowell's.  Since Lowell's focused only on Toyota brands, I had a simple question: How many Toyotas, Lexuses, and Scions are in Lexington?

It seemed like a fairly straightforward question, and since the county and state kept vehicle registration records, it seemed like the answer should be easy to find - especially since Indiana freely published precisely the kind of data I needed, but not for Kentucky counties.

After trying internet searches and coming up empty, I contacted the Fayette County Clerk's office, who referred me to the state Department of Transportation.  After a few more phone calls, I learned that I'd need to file a request under the Open Records Act, specifying the exact data that I would need.  I later found that I'd also have to pay $225 to get the data.

It all seemed so needlessly bureaucratic: It was public information, after all - so why wasn't it more public?

What followed was 13 months of a couple dozen intermittent phone calls, a similar number of emails, maddening unresponsiveness, and inane forms (including a mandatory contract which required that I wouldn't use anyone's personal data, even though the data I requested contained no personal information - it was just counts of vehicles by county).

Finally, this past February, I got the report I needed.  Well, sort of.  It was in a file and format which was nearly useless.  And, we got it a full 7 months after we bought the business, so much of the urgency to get the data had dissipated.  Still, we eventually wrangled it into something we thought was interesting and informative, and published the results in early April as the Bluegrass Vehicle Report 2009.

::

Bureaucracies often have a maddening, self-perpetuating logic wherein the only purpose of the bureaucracy appears to be to maintain the bureaucracy.  Laden with rules and restrictions, such organizations often turn their focus inward and forget their true purpose.  And rather than engaging with and serving their constituencies, they tend to serve the bureaucracy's interests.

In the process, bureaucracies become tangled, closed, unmovable beasts which are hostile to the very people they are bound to serve.

Our vehicle data experience is, unfortunately, all-too-typical.  But it doesn't have to be...

Lexington suffers from a bureaucratically-driven lack of openness (as does Kentucky at large).  And that lack of openness hinders our city's economic, social, and political progress.

Lexington needs to embrace openness.

There are (at least) two ways in which we can create a more open city: 

1. By creating more open information and information systems
2. By adopting more open approaches to how our city serves its citizens

Open Information
Portland, Oregon recently approved an economic development strategy which directed the city to open its information to the public in a structured, standardized format.  Portland is just one of the latest in a fast-growing list of progressive communities who are opening their data to their citizens.

Portland followed in the footsteps of San Francisco which - through DataSF.org - has created a clearinghouse of over 100 sets of up-to-date government data.  That data includes geographic information, crime statistics, transportation data, and measures of performance for key city departments. 

By standardizing this data and making it easy to download, San Francisco has enabled software developers to create rich new applications.  In just a few months, this move toward openness has spawned several mobile applications dedicated to anything from getting around the city to spotting neighborhood crime trends to finding places to take the kids.  It has even created a showcase of these applications, encouraging both users and developers to make use of the open data.

Indiana - for many years - has offered incredibly rich datasets on a wide variety of the state's data on Indiana University's StatsIndiana site.

By sharing this data - even when it is uncomfortable (like the crime data) - these places are enabling citizens to understand their communities better.  If the crime data highlights problems, so much the better - at least citizens know what they are dealing with, and the community can begin to address problems with knowledge and insight.

In short, these places are making their communities more livable, while simultaneously encouraging local entrepreneurs to leverage the data to create new applications and new businesses.

These places follow a few simple rules to create useful clearinghouses of data:

• Data should be standardized into a structured, machine-readable format so that it may be easily imported into databases and spreadsheets for use with other applications.
• Data should be updated regularly.  If possible, it should tap into data sources in real time.
  
• It should cover the widest possible array of government information - statistics, contracts, spending, performance, etc.  (Don't try to predict or direct what information will be needed - let citizens decide on their own.)

In addition, most of the places adopting open data standards are also standardizing on lower-cost open source software.  By adopting open source platforms like Linux (operating systems), Apache (web servers), MySQL (databases), and Ruby (software development), the cities are able to move away from expensive proprietary systems from Microsoft, Oracle, and PeopleSoft, while simultaneously tapping into a rich community of developers, applications, and support.

Lexington can and should learn from these cities.  

From an economic development standpoint, this kind of open information is crucial to business growth.  In Lowell's case, vehicle registration information would have been valuable for developing better, more informed business plans and strategies.  Such information is crucial to local businesses as they evaluate market opportunities in our city.  It would be equally critical for businesses who wish to locate in Lexington from the outside. 

And, most important, having more complete, more open information would help Lexington make better, more informed decisions and have smarter conversations about our future.  For example, we could have better evaluated the closure of South Limestone:

• How much traffic would be diverted to other streets?
• How much congestion would that cause?
• What are the environmental impacts of the increased congestion?
  
• How much commuter time would be lost?
• What are the costs to downtown businesses in lost customers, lost productivity, and lost services?
• What are the tax implications of those business and commuter losses?
• How did the bid process actually work?
• What did the bid documents say regarding daily work schedule, incentives, and overall timeframe?

Some of these questions may have been answered inside the Lexington-Fayette County Urban Government (LFUCG), but those answers didn't enter into the public discussions in a meaningful way.  If this data and these processes had been more open and transparent, the decisions made around the South Limestone project may have been very different.

Open Approaches
One of our most frequent critiques of LFUCG is the way in which it serves (or fails to serve) the interests of Lexington's citizens and economy.

Nowhere is this more apparent than in the structure, timing, and conduct of LFUCG's Urban County Council meetings, which seem designed to suppress thoughtful public discourse.

The council holds a bewildering array of meetings with a variety of purposes, but two of the most important meetings are held on Tuesdays at 3 PM or on alternate Thursdays at 7 PM. Depending on the agenda, citizen input comes either at the very beginning or very end of the meeting.  Each citizen is limited to three minutes to speak to council.  In fact, both citizens and council members are placed on a visible countdown clock to limit their discussion times.

This format poses a number of problems:

• Participation.  Because of the timing of meetings, our ability to participate is restrained.  Most citizens have work or family obligations at 3 PM on a Tuesday.
• Beat the Clock.  Generally, the three-minute limit and the countdown clock stifle thoughtful civic discussion on complex and nuanced issues like CentrePointe, underground utilities, or South Limestone.  This is especially the case under the iron hand of Mayor Newberry, who - whatever his other qualities as an executive - is a ruthlessly efficient timekeeper.
• Timing.  Putting citizen commentary at the beginning or end of meetings divorces it from the council's discussion of those topics, which comes in the middle of the meeting.  Thus, citizen input is placed at the margins of the discussion instead of in the midst of it.
• Abuse.  The time limits, when coupled with parliamentary maneuvers, allow some council members to squelch the discussion when it goes in directions they don't like.  One council member is so adept at using this technique - on citizens and on fellow council members alike - that it should be named "the Myers" in his honor.

Such scheduling and time-allotment rules are relics of the last century: They seem more at home in the 1950's or 1850's than in 2009.  And they are leftovers of a bureaucracy which has lost its way - squelching civic discussion rather than contributing to it.  Worse, it shows disrespect and disdain for the very citizens those rules are supposed to serve.

LFUCG should adopt more open - and more modern - approaches to debating issues and to gathering citizen input.

[Note: What follows is excerpted from an old post which we feel framed the issue best.  Sorry to self-plagiarize.]

In an age of websites, blogs, Twitter, and Facebook, every business has had to engage in conversations with customers on the customers' terms.  The ubiquity of the internet means that these tools are available to nearly everyone, nearly everywhere.  The latency of the internet means that the conversations don't have to happen at the same time - they can build over time.  The internet's ubiquity and latency forms the foundation of a new and better town hall.

Why should we all have to cram into a room at the same time?  Why should we have to play 'beat the clock' when talking about issues which are complex and nuanced?  Why should we have to forgo pressing business or personal matters to attend a meeting which is designed to be convenient for our representatives?

The internet provides the perfect public forum for every citizen to express his or her public policy views, ideas, and thinking.  Even better, our ideas can build on one another as we tinker with and improve the ideas of our neighbors.  Plus, conducting civic conversations on the internet can happen around the clock.  Citizens can participate in the public discussion when and where it is convenient for them, not for the elected representatives who serve them.  Isn't that the way it should be?

Further, every single representative should publish their conversations, thinking, dilemmas, trade-offs, beliefs and positions (and the transactions between them and other interested parties - like developers or investors or campaign contributors).  These records should be posted online for all citizens to see, comment on, debate, and improve.

The council members' emails are listed on the city's website, as are the mayor's newsletters.  But these are old, closed, one-way forms of communication.  They aren't vibrant community discussions.

So, do I want to see tweets that the mayor's advisor is picking up eggs?  Or a Facebook entry featuring the halloween costumes of the councilwoman's children?  Not particularly.  But we deserve to see real-time updates of their thinking on critical community issues.  We should know why they have changed their minds at the last minute.  They should tell us who they talked with and what they said.  After all, they are public officials.  We should see into a transparent civic machine which serves all of us.

What is clear is that a 19th-century civic apparatus has hamstrung our 21st-century community. The ancient contraption allows far too many secrets to hide within.  Whether our representatives and our governments use blogs, Twitter, Facebook, or some other platform matters far less than whether they start participating in open conversations with the people they serve.

The technology already exists.  Millions of people already use it.  Thousands of your constituents use it every day.  It's easy.  It's free.  And it will make Lexington better.  What are you waiting for?

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Lexington needs to adopt open, transparent, and up-to-date approaches to serving its citizens.  Lexington should also provide open information about the city so that we all can make smarter, more informed decisions.

Our lack of openness impedes our commerce.  It impedes our democracy.  It impedes our path to a better Lexington.

Let's change that.

Next: 5. Leverage Intellectual Capital

To-Do List for Lexington: 3. Local First

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

When we spend a dollar in Lexington, what, exactly, happens to it?

It sounds like a silly kind of question, but it is actually quite essential to our city's economic vitality.

When we spend money in Lexington, some of that money is extracted out of the local economy (going to other parts of the country or of the world), and some continues to circulate inside the local economy.  Whatever amount stays in Lexington is available to help fund other purchases, other jobs, other investments, and other businesses. 

This is known as a "local multiplier effect".  As each dollar reverberates through the local economy, as it is re-used over and over for other purchases or investments, its effect becomes larger than just a dollar.

So understanding where money goes and how much remains in the local economy is important as we craft a sound economic development strategy for Lexington.

And, to a great extent, how much remains in Lexington depends on where we spend it.

A study by Civic Economics looked at Austin bookstores and found that out of every dollar spent in a national chain's bookstore, about 85 cents leaked out of the Austin economy.  That 85 cents "leaves" to pay national and international suppliers for the books, to distribute profits to owners (shareholders) around the world, to pay federal taxes, and to pay for support staff -- marketing, finance, administration, etc. -- located elsewhere.  The remaining 15 cents stayed in Austin (mainly in the form of local employee wages, local utilities, and local taxes).

When the study shifted its focus to a local bookstore, some interesting effects kicked in.  Because the owners were local, more profits stayed in Austin.  Because they used more local suppliers, more of that money stayed in Austin, as well.  The support staff was also local.  The net effect?  Out of every dollar spent at the local bookstores, 45 cents remained in Austin - 3 times as much.

If we apply the same rates to Lexington, that means that $100 spent at, say, locally-owned Morris Bookshop (no relation to this author, by the way) turns into $145 as the initial $100 sale ripples through the local economy, and other businesses realize an additional $45 in sales.  The same $100 spent at, say, the Hamburg Barnes and Noble yields only $115 for the local economy.  Are these numbers absolute?  No - but they do provide a relative measure of the value of a local purchase.

How representative is a bookstore to the rest of the economy?  It depends.

Books are manufactured things, and they tend to be manufactured 'somewhere else'.  That means that much of the money used to buy a book leaves the local economy pretty quickly.

If we look at businesses which produce goods or services with even more local content, then the money spent on those products tends to circulate through the local economy for much longer.   

Here at Lowell's, we did some back-of-the-envelope multiplier calculations.  Roughly half of our sales are goods (mainly car parts) and half are services (the expert labor of our technicians). 

The parts side of our business works a lot like the local bookstore - most of our suppliers are local parts distributors, but most of their suppliers are national distributors who get parts from Japan or China.  So the money spent on parts at Lowell's bounces around the local economy for a couple of rounds, but much of it eventually leaves Lexington because our parts are made overseas.

The services side of Lowell's, however, is very different.  Because our 'suppliers' (employees) are all local, the majority of each dollar spent on services at Lowell's circulates through the local economy for 3 rounds or more, with a little more leaking out of Lexington in each round. 

Our rough estimate is that each dollar spent at spent at Lowell's turns into at least 2 dollars for the local economy. 

And we aren't - by any means - the best example of a local multiplier.  

As the local content of goods or service ramps up, the multiplier compounds.  In some cases, the local multiplier could reach 5 or more: each dollar spent results in $5 recirculating through the local economy. 

A great example of this compounding is Good Foods Market, a local co-op which sells a lot of locally-produced items.  That local produce often uses local labor and local inputs, and the multiplier compounds quickly.

We often hear the phrase "Buy Local".  And it often sounds defensive or protectionist or even a bit naïve.  And sometimes it is.

But purchasing goods and services from local providers also pays hefty benefits for Lexington's economic health.  And finding those local providers is relatively easy, with sites like Kentucky Proud and Local First Lexington providing useful directories of local products and services.

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Lexington needs to think 'local' first.

Because of the way local purchases supercharge our economy (through the multiplier effect), prioritizing local business investment and development should be a cornerstone of Lexington's economic development strategy.

But it doesn't appear to be.

Commerce Lexington - our local chamber of commerce - is also commissioned by the Lexington-Fayette Urban County Government (LFUCG) to marshal economic development efforts in our city.  More than any other organization, Commerce Lexington should understand the economic benefits of prioritizing local investments over external ones.  

Looking through Commerce Lexington's policy statements on economic development, they are filled with booster-speak - pushing incentives aimed at attracting new businesses (see our last post on why this strategy is deeply flawed).  And, we see nothing in those statements regarding prioritizing local business investment.

Other Lexington leadership seems to have overlooked the local multiplier as well.  LFUCG paid Vision Internet (based in California) $24,000 to redesign the lexingtonky.gov website.  Rather than injecting $48,000 into the Lexington economy (assuming a 2x multiplier) and helping sustain a local business, the city created a multiplier of 0 and drained $24,000 from the local economy.

And the Lexington Convention and Visitors Bureau contracted with New York's Pentagram to design the CVB's 'Big Lex' logo.  Regardless of your feelings about the logo itself (we didn't find it relevant), the CVB missed a big opportunity to contribute to Lexington's own thriving branding-and-design community.  They could have created a compelling story by working with a bigger, award-winning local firm like Elevation Creative.  Or, they could have partnered with a smaller, growing local firm like Martin Design Studios (who crafted the crisp, clean new logo for Lowell's).  Instead, CVB missed out on a chance to leverage local relationships to create a new logo and contribute to the community's economy.

Some observers might (rightly) be concerned about the effects of nepotism or cronyism if the government (or their agents) were to award such contracts to local firms.  The "good ole boy" network is alive and well throughout the city, but there are ways to ensure local preference while simultaneously ensuring that taxpayers are not being fleeced.  Several progressive communities throughout the country have identified and adopted rules for local government purchasing which do just that if a local bidder is within, say, 5% of the best non-local bid. 

Lexington should explore our options for implementing similar local-preference purchasing rules, so that our community may benefit from the local multiplier.

In any case, Lexington should make local business development and investment a cornerstone of its economic development strategy. 

Next: 4. Embrace Openness

To-Do List for Lexington: 2. Stop seeking saviors. Start making them.

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Last July, Florida Tile announced that it was relocating its headquarters to Lexington from Lakeland, Florida.  Kentucky's state government made a $3.7 million capital investment to bring 25 new Florida Tile jobs to Lexington.  Florida Tile estimates that the number of jobs may grow to as many as 51 in 10 years.  In October, Lexington's Urban County Council dropped the occupational license tax for Florida Tile to 1.25% from the normal 2.25% - a benefit of up to $1.3 million over the next 10 years.

How will 25 (or 51) new jobs pay back the millions of public dollars invested in bringing Florida Tile to Lexington?  It is doubtful that they will.  And that points out significant problems with Lexington's economic development strategy.

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In our last post (Get Real), we talked about the destructive effects of Lexington's booster mentality, which couples a self-deceiving optimism with a compulsive need to look good to others.  Boosters often pursue expensive, highly-visible, ego-driven civic projects with the promise of vague future rewards.

The economic development strategy which springs from such boosterism is one in which a great deal of effort and capital is expended to attract outside commerce to Lexington.  So boosters promote big civic investments (events, buildings, infrastructure projects, or incentives) with the hopes that those projects will entice new companies to invest or locate here.  And the underlying assumption is that the firms we attract to Lexington will - eventually - pay back the investments of effort and capital.

But this kind of economic development strategy has a number of irredeemable flaws:

• Waste.  Projects like the 2010 World Equestrian Games and CentrePointe are wildly speculative and profoundly inefficient ways to draw new commerce into our city.  And, when one looks at the numbers, it is doubtful that Florida Tile's incentive package will pay back taxpayers over the next 20 years - if they stick around that long.
• Loss of Power.  When we try to attract companies from outside Lexington, we cede significant negotiating power to the company we are courting.  That company can stay where they are, or go to a city other than Lexington.  We are prone to enter bidding wars with other desperate cities in the pursuit of desirable 'saviors', and the process becomes a race to the bottom: Who can offer the most lucrative incentives and conditions?
  
• Misguided.  These strategies pursue the wrong kinds of firms.  When we resort to incentives to, in essence, bribe companies to come to Lexington, what kinds of companies are we attracting?  Ones which are much more mercenary and which - by definition - have less investment in our community and its future than firms who are already here.  To be clear, every business should be concerned with improving  its bottom line.   But when public dollars are at stake, we must decide how to allocate those dollars based upon public benefit.  And underwriting mercenaries is not the best use of public funds.
• Hidden Penalties.  The incentives granted to companies like Florida Tile disadvantage already-local firms.  Those local firms not only help pay for the new firms' incentives through taxes, but they also don't get the financial subsidies, new facilities, or extended tax advantages that are often granted to newcomers.

This economic development approach - attract outside saviors to drive growth - also ignores a vital question: Where are these firms coming from?

Or, put differently: How is it that such firms even have the capability to expand to a city like Lexington?  How did they grow?  What did their home cities do to foster that growth?  And, most importantly, why isn't Lexington doing that to grow great businesses at home?

Lexington's leaders frequently look to similar American cities in the attempt to understand how those cities have grown and how they have built a great quality of life.  If we look at 'model' cities like Austin, Madison, Portland, and Pittsburgh, we see a very different economic development model at work. 

In fact, these cities suggest that the old booster model has it exactly backwards: Those cities invest in growth at home first, then outsider attraction follows.

Lexington should be asking a lot of questions about those cities:

• How did they foster key industries at home?  (For instance, how did Austin nurture the development of vibrant economies around semiconductors, computers, and music?)
• How did those cities redevelop key districts into vibrant contributors to their economic engines? (Think Sixth Street in Austin or The Pearl District in Portland.)
• What specific approaches did these cities use to leverage their relationships with local universities to drive economic growth?  (Think Carnegie Mellon or University of Wisconsin.)
• What infrastructural moves did they make to enhance the local economy? (Example: How did Austin Energy help the city save enough energy - even as Austin grew - to avoid building a new power plant?)
• What did they do to nurture and promote the careers of key locals?  (Think Michael Dell in Austin or Rebecca Ryan in Madison.)

And then Lexington needs to take a hard look inward and think about how those lessons apply here.  For instance:

• Who are Lexington's Michael Dells or Rebecca Ryans?  How would we know?
• What are the best ways to allocate economic development funds to cultivate growth in their businesses?
• Which districts in Lexington hold the most promise for redevelopment?  What specific lessons can we draw from, say, the Pearl District redevelopment process?
•  How can we leverage the University of Kentucky and Transylvania University as key resources for economic growth (and not think of them only as educational institutions)?

These cities suggest that Lexington should stop seeking external 'saviors', and instead focus on building up our city's internal competencies and infrastructure.  Then, outsiders might find our city desirable without requiring huge ransoms. 

Focusing on internal growth is, in fact, how cities like Austin, Madison, Portland, and Pittsburgh have fueled sustained growth over the past 20 years.  Lexington should follow their example.

Lexington should stop seeking saviors, and start making them instead.

How does that look?  Here are some initial ideas:

1. Make targeted investments. Instead of, for example, throwing $80 million at the World Equestrian Games in the speculative hope that the investment will draw future commerce from outside the city, make smaller, more targeted investments in growing specific businesses with specific growth measurements and targets (jobs, tax revenues, etc.).
2. Select target industries, and invest there.  Choosing particular industries will allow Lexington to develop self-reinforcing ecosystems around key technologies or competencies.  Lexington's mayor has frequently touted the "3 H's" strategy for Lexington's economic development: Horses, health care, and high-tech.  These might be valid industries to target, but we've allocated precious little development resources toward those goals and seen precious little progress in those areas. 
3. Oversee development with sharp business intellects.  Typically, Lexington's economic development has been overseen either by developer-driven boosters (Commerce Lexington) or by academics and architects (Downtown Development Authority).  Lexington needs to shift the balance to more entrepreneurial businesspeople who have experience in business growth and who understand which business models work and which don't.  
4. Prioritize business investment over infrastructure investment.  Projects like streetscapes and buried utility lines, while pretty, will contribute relatively little to Lexington in the way of tangible jobs or revenues.  And attempts to financially justify these projects frequently cross into sheer booster speculation about making better impressions.  Instead, we should focus on cultivating growing businesses and directly creating jobs and revenues with our development funds.
5. Think "local" first.  Supercharge our investments by prioritizing local businesses before external ones.  More on this in our next post in this series.

Rather than spend hundreds of millions of dollars on hope and speculation, we need to make smarter, more targeted investments with our public development dollars.  We need to run the business of growing our city like a business.  Anything less is a waste of our time and money.

Next: 3. Local First

To-Do List for Lexington: 1. Get Real

(Part of the To-Do List for Lexington series.  Click here for an overview and links to the rest of the series.)

Lexington suffers from a booster mentality.  That mentality dictates that we must constantly paint our city in the most favorable light.  And, often, the booster mentality buys into its own hype: "Everything is great; Everything is wonderful; No problems here!"  Boosters often champion ego-enhancing feel-good projects with questionable economic value.

The trouble with such unrelenting optimism is that it frequently crosses into rampant self-deception.  When things are going badly, the booster cannot admit it; Doing so would destroy their carefully-constructed mental image of the perfect city. 

The booster mentality partly stems from wanting to look good for others, for outsiders.  And, from an economic development standpoint, boosters look to attract commerce (businesses) from outside the city.

The trouble with such primping and preening is that an obsessive amount of effort is spent on cosmetic rather than substantive improvement.  By spending so much time trying to look good for the outside world, boosters often neglect very real problems at home.  And their self-deception means they have trouble even acknowledging the existence of such problems.

Boosterism takes a number of  forms, but follows a pretty standard recipe:

1. Hold out the promise of a vague future reward
2. Leverage that promise to justify current sacrifices
3. Question the patriotism, loyalty, intellectual ability, credibility, and / or intentions of all who question either the extent of the reward or the merit of the sacrifice
4. Never, ever admit that maybe the reward wasn't worth the sacrifice

We see this all over town.

With CentrePointe, there was the promise of the state's tallest building, containing a J.W. Marriott and a fictionalized Hard Rock Café.  Lexington would have status.  If it meant destroying some historic buildings and taking some gigantic leaps of faith, so be it.  And, if folks make too much of a fuss over the historic buildings, marginalize them and the block the buildings stood on.  And never, ever admit that the whole speculative venture was a mistake.

With streetscape projects, there was the promise that we'd look good for our out-of-town visitors while the world's eyes were upon us during the 2010 World Equestrian Games (WEG 2010).  By looking good to the world, Lexington might be able to attract more tourists. Or maybe businesses.  Or something.  If it means severing the most significant southside artery (South Limestone) for over a year and losing some downtown businesses along the way, so be it.  And, if folks make too much of a fuss over the cost ($88 million), dismiss their calculations without offering any of your own.  Or use silly diversionary tactics like forcing them to remove their logos from key presentations.  And never, ever admit that the project's execution and timing were poor.

Sport is a common justification for such development projects.  For the promise of "major league status", cities have destroyed historic neighborhoods or paid huge ransoms to attract (or keep) a major sports team or event (such as the Olympic Games).  Boosters cite the added visibility and prestige that comes with such status as justification enough.  But most such "investments" rarely pay off.

With WEG 2010, we have such an example of sports-led economic development right here at home.  And the promise of the world's attention and the event's prestige have become their own rationale for action - without regard for whether such action is truly justified by a real-world reward. 

Boosters assert that today's torn-up streets, empty blocks, disrupted commerce, and vast new facilities - often paid for with tens of millions of public dollars - will all be worth it...

Someday. 

They hold out the vague and unmeasured promise of future visibility, prestige, tourists, businesses, investments, and commerce.  In the meantime, they drain significant economic vitality from the city while pursuing future attention and dollars.  But the boosters of CentrePointe, streetscapes, and WEG rarely do a realistic accounting of the true value (or value destruction) of their ventures. 

In essence, boosterism is an incredibly expensive and inefficient form of untargeted advertising: Hundreds of millions of dollars thrown at the rest of the world in the faint hope that someone - anyone - will throw some of it back into our economy.  And, as we've written before, Lexington needs to focus less on advertising and promoting how great it is and focus more on actually being great.

Lexington needs to get real.

We need to get real about which community investments will actually pay dividends.

We need to get real about what is wrong (and what is right) with our community and about what it will take to craft a better Lexington.

We need to get real about the destruction wrought by unbridled boosterism.

Getting real isn't about ceasing to support our fine city.  It isn't about becoming negative - 'nay-saying' every project or bad-mouthing Lexington. 

It does mean that we start openly discussing and debating the merits and shortfalls of the investments our community makes.

Only by acknowledging that we have significant problems can we begin to wrestle with them.  I've written before that Lexington is too polite.  In conversation, we are so indirect that we avoid confronting our difficult issues. 

But we must.  We must begin to engage and debate our city's future.  We must get a full accounting for the folly, waste, and fraud which accompanies such unbridled boosterism.  We must redirect effort and attention from this glamorous-but-questionable boosterism to projects and investments which, while far less ego-boosting, will yield tangible economic benefits for our city.  And we must get real about the present state and future possibility of our city.

And getting real is what the rest of this series is about.

Next: 2. Stop seeking saviors. Start making them.