The Milken Institute is a think tank that is based in California. Since 2002, the Milken Institute’s “Best-Performing Cities” report has tracked the economic performance of major large and small United State Metropolitan cities using 9 individual criteria to track job growth, including wage growth, high-tech gross domestic product (GDP) indicators and overall wage and salary. 200 cities are ranked on overall performance using indicators to identify components behind their success or failure.
To quote the Milken Institute report:
“The Milken Institute utilizes the geographic terms and definitions used by the Office of Management and Budget (OMB). The OMB defines a metropolitan statistical area (MSA) as a region generally consisting of a large population nucleus and adjacent territory with a high degree of economic and social integration, as measured by community ties. Once specific criteria are found, an MSA with a single nucleus and a population of 2.5 million or more is then divided into geographic areas called metropolitan divisions (MDs).
The Milken Institute measures growth in jobs, wages, salaries, and technology output over 5 years to adjust for extreme variations in business cycles. It also incorporates the latest available year’s performance in these areas. In addition, it includes a measure of 12-month job growth to capture recent momentum among metropolitan economies.
Employment growth is weighted more heavily because of its critical importance to community vitality, as is growth in wages and salaries because it signals the quality of the jobs being created and retained. Other measures reflect the concentration and diversity of technology industries within the MSAs and MDs. High-tech location quotients (LQs), which measure the industry’s concentration in a particular metro relative to the national average, are included to gauge an area’s participation in the knowledge-based economy.
Milken Institute also measure the number of specific high-tech fields whose concentrations in an MSA or MD are higher than the national average. Best-Performing Cities is solely an outcomes-based index. It does not incorporate input measures, such as business costs, cost-of-living components, and quality-of-life conditions, such as commute times or crime rates. These measures, although important, are prone to wide variations and can be highly subjective.”
2020 MILKEN INSTITUTE ABQ RANKINGS
During the week of February 24, the Milken Institute released its 2020 report on the 200 best-performing cities in the country. Albuquerque did not fair too well. The city dropped in the rankings among the 200 largest cities rated. You can review the full report here:
ABQ’s DECLINE IN HIGH TECH JOB GROWTH
According to the report, out of the 200 largest cities ranked, Albuquerque went down in ranking from 125 to 161 overall. Albuquerque’s decline was the 14th-largest decline of any city on the list. The report showed Albuquerque has seen very little high-tech “Gross Domestic Product” growth over the past several years. The city and state receive billions each year from the federal government and the military for research and development. The lack of growth in high tech Gross Domestic Product is very troubling given that Sandia National Laboratories is located in Albuquerque, not to mention Los Alamos National laboratory.
Michael Lin, one of the report’s authors, said Albuquerque historically has fared well in categories focusing on the concentration of tech workers in the city due in part to the presence of Sandia labs. Lin attributed the City’s decline in high tech jobs in part to a relative lack of industry diversification within the tech sector and said:
“If you look at San Francisco or San Jose, they have something more than national defense.”
ABQ’s STAGNANT WAGE GROWTH
Kevin Klowden, who oversaw the study for the Milken Institute, said Albuquerque’s ranking suffered from stagnant wages and relatively slow high-tech industry growth over the past several years and said:
“What happens is that you wind up in a situation where even if a city is adding jobs, it’s not doing it in a way that’s lending itself to a healthy enough economy.”
Albuquerque suffered from poor wage growth despite a significant decline in its unemployment rate. For the two-year period of 2017 to 2018, Albuquerque ranked 177th in wage growth, and 167th in wage growth over the past five years from 2013 to 2018. The slow wage growth may be due to Albuquerque’s high number of government jobs, which tend to have more steady wages than private-sector jobs.
Smaller cities in New Mexico did not fare very well either. Slow wage growth extended to Santa Fe, which ranked 166th and to Farmington which placed 196th on the list of 200 small cities. Klowden said he was encouraged by Farmington’s relatively strong recent job growth in 2018 and 2019 but added both Santa Fe and Farmington were hurt by stagnant wages saying:
“The state is being left behind in wage growth.”
The only New Mexico city to rise in the rankings was Las Cruces. It jumped in the studies ranking from 173 in 2019 to 102 in the 2020 report. Las Cruces posted strong tech growth in 2019 which can be credited to the growing defense and aerospace industry by new jobs at Spaceport America.
Research source materials:
TOP 10 BEST PERFORMING LARGE CITIES COMPARED TO ALBUQUERQUE
For comparison purposes, and using metropolitan statistical areas (MSA) defined as a region generally consisting of a large population nucleus and adjacent territory, following are the ten best performing cities and rankings followed by Albuquerque’s Rankings according to the Milken Report:
San Francisco-Redwood City-South San Francisco, California:
2020 Rank 1, 2018 Rank 4, Change: +3
2020 Rank 2, 2018 Rank 1, Change: -3
Austin-Round Rock, Texas
2020 Rank 3, 2018 Rank 3, Change: Steady
2020 Rank 4, 2018 Rank 11, Change: +7
San Jose-Sunnyvale-Santa Clara, California
2020 Rank 5 (tied), 2018 Rank 2, Change: -3
Orlando, Kissimmee, Sanford, Florida
2020 Rank 5 (tied), 2018 Rank 7, Change: -2
Boise City, Indiana
2020 Rank 7, 2018 Rank 12, Change: +5
Seattle, Bellevue Everette, Washington
2020 Rank 8, 2018 Rank, Change: Steady
Dallas, Plano, Irving, Texas
2020 Rank 9, 2018 Rank 5, Change: -4
Palm Bay-Melbourne-Titusville, Florida
2020 Rank 10, 2018 Rank 54, Change: +47
Albuquerque’s drop in rankings reflected in the report listing the 200 Best Performing Larger cities are as follows:
2020 Rank 161, 2018 125, Change: -36
Albuquerque’s 5-year job growth ranking (2013 to 2018) : 156
Albuquerque’s 1-year job growth ranking: 134
MAJOR HIGHLIGHTS OF THE 2020 RANKINGS:
The Milken Report is 56 pages long and contains an Executive Summary followed by a detailed breakdown of the various cities and their rankings. The link to the entire report as a “pdf document” for download is here:
Following is a report summary of the 4 major highlights delineated in the Executive Summary of the report:
1. “San Francisco-Redwood City-South San Francisco, CA, regains the crown as the best-performing large metro after 2014. The skilled workforce, abundant venture capital (VC), and innovation and entrepreneurial culture support regional high value-added industries, including the expanding tech and biotech industries. The metro’s excellent performance in our five-year high-tech GDP growth (ranked first) illustrates this point.”
2. “Twenty-one top-performing large metros return from our 2018 Best-Performing Large Cities Index. A substantial number of them are metros with dynamic tech sectors, including San FranciscoRedwood City-South San Francisco, CA; Provo-Orem, UT; Austin-Round Rock, TX; and San Jose Sunnyvale-Santa Clara, CA. Others, like Reno, NV, continue to develop a diverse industrial base while experiencing rapid growth in the advanced manufacturing and technology sectors.”
3. “California secured four (San Francisco-Redwood City-South San Francisco, CA; San Jose-Sunnyvale-Santa Clara, CA; Oakland-Hayward- Berkeley, CA; and Riverside-San Bernardino-Ontario, CA) of the Top 25 spots among large metros. The Bay Area in Northern California consistently shows economic excellence powered by high value-added industries. “
4. “For the fourth straight year, Bend, OR, ranks first in our Best-Performing Small Cities list. Compared with other small metros, the region has a rather diverse industrial composition with a well-developed, niche tech scene in e-commerce and vehicle technology. Bend’s entrepreneurial community has also helped grow its tech sector.”
“Overall, metros with strong tech industries remain the superstars of regional economies. One key factor in the success of these tech powerhouses is their ability to engage in new technologies. For instance, metros in the Bay Area/Silicon Valley area of California (San Francisco-Redwood City-South San Francisco, CA, and San Jose-Sunnyvale-Santa Clara, CA) lead tech innovation.”
During the last 10 years, Albuquerque has fallen to the bottom and in many cases dead last of every meaningful ranking in the country, including economy, jobs, crime, education, real estate, desirability, and traffic. According to one Brookings Institution report, the Albuquerque metro area’s economy was so bad between 2009 and 2014 that it almost fell off the charts of three measures of economic health. In a Brookings Institute Report on the largest 100 metro areas in the U.S., Albuquerque ranked 100th, 99th and 83rd in the three areas measured by Brookings: Growth, Prosperity and Inclusion.
The Bureau of Business and Economic Research (BBER) at the University of New Mexico (UNM) lists the nine (9) major Albuquerque industries or economy sectors as follows:
1. Retail and Wholesale Trade
2. Transportation, Warehousing and Utilities
4. Education and Health Services
5. Accommodation and Food Services
6. Real Estate & Financial Activities
7. Professional and Other Services
ALBUQUERQUE’S EMERGING FILM INDUSTRY
Clearly the film industry in Albuquerque is emerging as a major new industry in Albuquerque with the NBC Universal deal and the NETFLIX purchase of ALB STUDIOS.
THE NBC UNIVERSAL DEAL
On June 14, NBC Universal announce it will open a studio in Albuquerque as part of a 10-year venture with Garcia Realty and Development. The media giant will be taking over, renovating and creating sound stages at a now vacant industrial building south of I-40 on Commercial Street, north of downtown in the vicinity of historic Martineztown.
The NBC Universal plans are to redevelop the warehouse into a state-of-the-art television and film studio with two sound stages, offices and a film production mill. The turnaround time for the renovations is very short and it’s expected to be complete in the fall of 2019.
The media giant is expected to provide more than 330 full-time jobs year-round at the film studio. NBC Universal employees will earn about $58,000 a year. The studio operation is projected to generate an economic impact of $1.1 billion over a 10-year period.
Once complete, the studio will be used by NBC Universal to produce scripted productions for many platforms, including broadcast and cable channels.
The state’s Economic Development Department is providing $7.7 million through the Local Economic Development Act (LEDA) to the redevelopment and production commitment. The City of Albuquerque will provide another $3 million from its LEDA fund which was approved by the Albuquerque City Council on June 17, 2019 by a unanimous vote.
THE NETFLIX PURCHASE OF ALB STUDIOS
On October 8, 2018, it was announced that Netflix was buying Albuquerque Studios.
The State contributed $10 million of Local Economic Development Act funds. The City of Albuquerque contributed another $4.5 million of Local Economic Development Funds. Albuquerque beat out other places such as Denver, Salt Lake City, Austin, New York, Georgia and Los Angeles. The Albuquerque site will be Netflix’s first hub purchased in the United States.
It is estimated that at least 1,000 well-paying jobs per year will be created. The jobs will run the gamut of film and TV production work, most of which is project-based contract labor. Many of the jobs are expected to pay $70,000 a year. The purchase deal also calls for $1 billion worth of production spent over 10 years which will have a dramatic effect on the City and State economies.
ECONOMIC BASE JOBS VERSUS SERVICE INDUSTRY JOBS
A service-based industry is one that offers its products, goods or services primarily within a particular region and does not supply markets outside the region nor increase the economic base of a region. In general, service base industries offer lower paying or minimum wage jobs not requiring much education or technical skills.
An economic base job is one created or needed by a business or industry that increases economic growth of a region by increasing exports of manufactured products, goods or services from the local economy or region to another region or economy thereby increasing the size of the local economy with profits and cash flow from outside the region.
The corner stone of the “economic base theory” is that an increase in economic growth of a region or economy is dependent on increase in exports, manufactured goods or services from one region or economy to another region or economy and supplying markets outside the local economy.
AN EQUITY PROFILE OF ALBUQUERQUE
On June 19, 2018, a report entitled “An Equity Profile of Albuquerque” was released. You can read the entire report here:
The report is a racial profile of the city and the impact race has on the city economy.
The Equity Profile Report examined the indicators of economic and social inclusion and found that “equitable growth” leads to a stronger local economy.
In the report, and “equitable city” is defined as “when all residents – regardless of their race/ethnicity, nativity, gender, income, neighborhood of residence, or other characteristics – are fully able to participate in the city’s economic vitality, contribute to the region’s readiness for the future, and connect to the region’s assets and resources.”
(See “An Equity Profile of Albuquerque”, page 11).
COMMENTARY AND ANALYSIS
Since the 1950’s, Albuquerque has relied upon the federal government for billions in funding. As goes federal spending, so goes our economy. Over the last few decades, especially the last, the mantra from politicians, community leaders and the business community has been Albuquerque and New Mexico need to diversify the economy and wean itself off of federal funding. Further, Albuquerque’s economy is the economic engine of the State. Albuquerque’s ranking of 161 out of 200 in the 2020 Milken Institute report is clear evidence that the City is continuing to fail at diversifying its economy.
Albuquerque has made some progress with economic development in diversifying its economy with the film industry with the NBC Universal deal and the NETFLIX purchase of ALB STUDIOS as evidence of this fact. Critics of the film industry proclaim that the film industry is very fickle, not to be relied upon and that New Mexico and the City will never fully recover all the subsidies and tax credits paid and given to it.
Notwithstanding the criticism leveled against the film industry, last year alone, the film and TV production industry brought in over $180 million of direct spending to the city and state. With the Nextflex purchase, the State now has a major production and distribution company hub that will produce projects on a consistent time line for at least 10 years and probably more. Far more important, $70,000 a year jobs will be crated and have to be filled.
The emerging Albuquerque film industry is the first time in a very long time that a new industry is emerging that is producing a large number of economic based jobs. Once Netflex is fully up and running, it is expected to produce at a minimum 1,000 jobs with many of those jobs paying $70,000 a year. NBC Universal employees are expected earn about $58,000 a year. The jobs Netflex and NBC will be providing are a far cry from the hourly wage jobs provided by the minimum wage “call centers” that the state and city have become accustomed to being announced.
The City and the State need to continue with efforts that will ensure that our education institutions such as the New Mexico Community College continue to offer a trained work force for the film industry. Both the City and the State need to create more incentives to build and guarantee that the film industry continues to grow and prosper in New Mexico.
GROWTH INDUSTRIES KEY TO DIVERSIFYING ECONOMY
Albuquerque and New Mexico need to pursue with a vengeance the real growth industry like healthcare, transportation and manufacturing, the film industry and the recreational industry to diversify our economy. Public-private partnerships in the growth industries where ever possible should be encouraged and developed. Special emphasis and support should be given to the film industry which is developing, expanding and proving to be very successful in providing well-paying jobs. A good start would be funding a $20 million initial startup fund for new local businesses with claw back provisions with the program administered by the Economic Development Department.
When it comes to economic development and diversifying the city’s economy, far more must be done. Albuquerque can and must expand and find better ways to use financial incentives for economic development such as tax increment districts (TIDS), industrial revenue bonds, and even fund economic development investment programs such as initial startup funding with claw back provisions. Public-private partnerships in the growth industries where ever possible should be encouraged and developed. Emphasis must be placed on attracting “economic based” job industries and not the service industry-based jobs the city is accustomed to attracting .
The June 19, 2018 “Equity Profile of Albuquerque” released needs to be relied upon heavily by the city formulate an economic development program to diversify the Albuquerque economy. The report found persistent inequities by race and gender that are holding the city back from having a stronger local economy. The report identifies 22 industries that are expected to grow over the 10-year period from 2014 to 2024. The report also identified 22 specific occupations that are expected to grow over the 10-year period from 2014 to 2024.
Our elected officials and the business community, including the Greater Albuquerque Chamber of Commerce, Albuquerque Economic Development (AED), the Economic Forum, NAIOP and the banking, finance and development industries, need to think long and hard about finally doing something to attract new industry instead of just being satisfied with protecting their own financial interests and bottom lines and membership drives.
Our political, business and civic leaders need to show far more backbone and commitment to improving and diversifying Albuquerque’s economy. Otherwise, we are destined to become a dying, dusty southwest city without any real potential for growth and better economic times.
Until then, “lights, camera, action.”