1. 0 January 12, 2011 Restarting Private Sector Job Growth in the Greater MSP Metro Area

2. 1  Case for Change  What Drives Job Growth?  Strategies for Greater MSP Agenda 1

3. 2 For the past 30 years, the Twin Cities have enjoyed steady growth GDP per capita 1 Real income per capita 1 2.0% CAGR 1.9% 200520001995199019851980 1.7% CAGR 1.8% 1.4% 200520001995199019851980 1 In 2005 dollars Midwest Twin Cities U.S. average

4. 3 The Twin Cities has an incredibly strong private sector... Revenue earned by Twin Cities Fortune 500 companies $425 billion Fortune 500 companies headquartered in the Twin Cities 22 Ranking among regions for most companies in the Fortune 400 private companies list – including Cargill and Carlson 6th MSP has the 3 rd most Fortune 500 companies per capita in the country

5. 4 5th among all states in patents per investment dollar... world-class research and strong human capital... Educational Attainment, 2007 U.S ave 85 MSP 93 Population >25 with high school diploma Percent U.S. aveMSP Population >25 with advanced degree Percent MSP has the 5 th best percent of advanced degrees among MSAs U of M is nationally ranked # 7 in patent- revenue generating research The Mayo Clinic ranks 2nd in the US News & World Report 2009 America’s Best Hospitals for 5 th consecutive year

6. 5 Volunteering rate in the nation #1#1 And the largest pond hockey tournament in the world! 4 Major League sports franchises “Local food” community in the nation #1#1 #3#3 Number of museums Theatre seats per capita, behind NYC #2#2 “Most Athletic City” in the nation #1#1 Largest mall in America #1#1... and quality of life amenities

7. 6 However, the region is losing ground 1 3-year moving average difference between Twin Cities and the U.S. using the given year and the previous two years Job growth has significantly declined relative to the U.S. Difference between Twin Cities employment growth and U.S. employment growth 1

8. 7 Our business rankings have worsened Milken Best-Performing Cities 2003 rank2009 rank2003 rank2009 rank Austin81Raleigh-Durham122 Raleigh-Durham13Sacramento1558 MSP7620Austin594 Columbus3824Denver8944 Denver1434 Sacramento11936Columbus10135 Seattle1789Seattle1317 Chicago71100Chicago14160 MSP99123 Forbes Best Places for Business and Careers

9. 8 The Twin Cities have a challenging business climate Minnesota is 38 th out of 50 in terms of overall business climate according to Milken Institute Cost of Doing Business Index 38 th 43 rd The tax foundation ranked Minnesota 43 rd out of 50 on its business tax climate Twin Cities is 373 rd out of 381 MSAs ranked from lowest to highest labor cost 373 rd

10. 9 High cost of doing business in the Twin Cities is driven largely by tax, regulatory and labor costs Initial findings  Minnesota ranks 30 th on Forbes’ “Best states for doing business” rankings  Minnesota has the most stringent health insurance mandates in the country Legislative/ regulatory environment  Minnesota ranks poorly both on business climate (41 of 50) and ratio of tax benefit to tax burden (46 of 50)  Minnesota’s corporate tax rate of 9.8% is third highest in the country Tax environment  Twin Cities has the 8 th highest labor cost (out of 381 cities)  15.9% of workers are in unions, above 12.5% national avg.  Wages for low skilled workers in the Twin Cities are 8.5% higher than peer regions Labor costs COST OF DOING BUSINESS SOURCE: McKinsey Global Institute, Forbes, Tax Foundation, Moody’s Economy.com, Firm experts

11. 10 48 MN state rank (1=lowest, 51=highest) 1 Represents the highest marginal corporate tax rate 2 Represents the highest marginal personal income tax rate 3 This represents the relative ranking of corporate property taxes (0=best possible property tax ranking, 3= US average, 6 = the worst possible ranking). SOURCE: Tax Foundation Corporate Income Tax 1 Sales Tax Personal Income Tax 2 Corporate Property Tax Index 3 2009, Percent 44 39 17 Minnesota All other states COST OF DOING BUSINESS Minnesota’s taxes are among the highest in the country US Avg. 6.6 9.8 US Avg. 5.086 US Avg. 5.9 7.9 US Avg. 3.0

12. 11 The Twin Cities lack a coordinated business development effort Site Selection Consultants say... We have multiple organizations focused on economic development, but no coordinated, regional effort... “You probably have lost a significant amount of corporate prospects due to a lack of regional agency.” Local Business Leaders say... “Minnesota gets dominated by almost every other state because we have no one hit team, one organization, in economic development. Nothing’s coordinated, it’s a mess...”

13. 12  Case for Change  What Drives Job Growth?  Strategies for Greater MSP Agenda 12

14. 13 Three Sources of Job Growth Retain existing companies in the Twin Cities and foster an environment for growth Enable the creation of new Twin Cities firms through a culture of innovation Attract investment and corporate relocations from outside Minnesota Quality Job Growth Retain CreateAttract

15. 14 Human Capitalquality and investment of workforce, education and training Quality of Lifelifestyle and community factors Infrastructureregional transportation, airport access, telecom, utility capabilities Cost of Doing Business R&D capabilities, commercializing research and ability to source capital support to entrepreneurs Innovation and Start-up level of taxes, incentives, regulatory and/or permitting process Environmental Levers How do you Create Job Growth? Central ED Governance A single organization coordinates economic development efforts Sector FocusExplicitly target particular sectors as growth engines for the region Economic development strategy developed and institutionalized with main economic development organizations Unified Vision Marketing Campaign Highly visible campaigns which market regional identity Process Levers

16. 15 Cost of Doing Business Quality of Life Infrastructure Human Capital Innovation and Start-up MSP above peers and national average MSP around average MSP below average Supporting Facts  Minnesota’s corporate tax is third highest in the nation at 9.8%  MN ranks 43rd in overall tax climate  MSP ranks 8 th highest in wage labor rates out of 383 MSA’s  Ranked #1 on Sperling’s best places, #2 on Forbes Best U.S. Cities to earn a living, and #2 in Next Cities: Hotspots for young, talented workers  36.8% of Twin Cities residents have a bachelor’s degree relative to 27.5% nationally  MSP average commute time of 24 minutes is at the US average and average commute time via public transportation is better than US average  Broadband penetration of 56% is middle of the road relative to peers Assessment Greater MSP Assessment  Ranks 22 nd in number of entrepreneurs per thousand residents  At 26 deals venture deals in 2007, MSP lags top innovation hubs Environmental Levers 15

17. 16 Unified Regional Vision Central ED Governance Sector focus Marketing Campaign Process Levers MSP above peers and national average MSP around average MSP below average Supporting Facts  Currently various economic development entities operate with varying visions  ED pursued at a sub-regional level  Currently, ED entities operate largely autonomously  Sub-regions within MSP often compete for business rather than coordinating efforts  Historically limited coordinated cluster efforts but some current activities underway (e.g., RCM, Humphrey Institute)  Limited outreach efforts on regional basis, with most outreach coming from city entities such as Capital City Partnership  More to Life and Positively Minnesota efforts Assessment Greater MSP Assessment 16

18. 17  Address the cost of doing business  Develop a regional vision, strategy and approach for economic development  Enhance entrepreneurship and innovation Proposed 3 Strategic Priorities for the Region to collectively work on…

19. 18  Case for Change  What Drives Job Growth?  Strategies for Greater MSP Agenda

20. 19 Where those findings led us: Itasca Job Growth Initiatives Create new companies and start-ups ▪ Support and enhance the productivity of the region’s entrepreneurship ecosystem – Establish a Business Bridge – Institutionalize working relationships between the University of Minnesota and the Private Sector ▪ Launch a Regional Economic Development Partnership (REDP) – Private - public partnership – 13 county MSA definition – Scope of Activities – Region’s ED vision and strategy – Branding and marketing – Retention and expansion – Attraction Objective: Fuel Quality Job Growth Retain, expand and attract existing companies

21. 20 – 20 MSP REDP Launch Status – 20  Engaged national executive search firm  Currently in final stages of interviews  New CEO in place in Q1  Incorporating as a 501c3  Creating board governance concepts & documents  Selecting initial board members  Nearing Year 1 Goal: $2.8M  Public Sector: 6 counties & 14 cities contribute over $900K  Private Sector: $1.5M pledged, $1.0M outstanding asks  Engaging economic development leaders throughout region  Formalizing operating protocol between REDP and other ED organizations 1 1 3 3 2 2 4 4 Hire a CEO Initiate Legal Incorporation Secure Year 1 Investment Draft Rules of Engagement

22. 21 Appendix

23. – 22 Active Minneapolis-Saint Paul Regional Economic Development Efforts Regional Economic Development Activities* Talent Transportation/ Land Use Entrepreneurship / Innovation Strategy and Growth Green ▪ 4FRONT ▪ TheLineMedia.com ▪ Living Cities Corridors of Opportunity ▪ HUD Sustainable Communities ▪ Integrated transit/ROI planning ▪ Central Corridors Funders Collaborative ▪ Entrepreneurial Accelerator ▪ Business Bridge – Minnesota Showcase – Supplier Library ▪ REDP: Regional Economic Development Partnership ▪ Brookings Metropolitan Business Plan ▪ Regional Competitiveness Project ▪ Destination 2025 ▪ MetroMSP.org ▪ Thinc.GreenMSP *Funded/Confirmed programs and efforts with individuals actively working to positively impact regional economic development in the greater Minneapolis Saint Paul metro area 22

24. 23 Where those findings led us: Job Growth Initiatives Retain, expand, and attract existing companies Create new companies and start-ups Key Itasca Initiatives Rationale ▪ Support and enhance the productivity of the region’s entrepreneurship ecosystem – Establish a Business Bridge – Institutionalize working relationships between the University of Minnesota and the Private Sector ▪ Launch a Regional Economic Development Partnership (REDP) – Private - public partnership – Scope of Activities – Region’s ED vision and strategy – Branding and marketing – Retention and expansion – Attraction ▪ Region’s entrepreneurial activity slowing in recent years ▪ Prominent and critical gaps in funding availability, entrepreneurship culture, and regulations ▪ Opportunity to bundle and promote core assets ▪ Other regions are aggressively competing for jobs, while Twin Cities frequently not in consideration set Objective: Fuel Quality Job Growth

25. 24 Itasca Project History (2003 – 2009) Ideas, Innovation, and Business ClimateTalent/Workforce Infrastructure Quality of Life Retaining and Growing Leading Employers/Grow MN! Strengthening University-Business Relations Supporting the Growth of Small Business / GetGoMN.org Advancing a Comprehensive Transportation Plan Twin Cities Compass Creating a World-class K-12 Education System in MN Supporting the Strategic Redirection of Minneapolis Public Schools Supporting Early Childhood Development Financially Fit Minnesota Understanding and Addressing Socio- economic Disparities/Close the Gap 1 2 3 7 8 9 10 6 5 4

26. 25 1-3% Gains from creation of new firms 4 1-3% Gains from attracting new establishments 5 18%-22% Gains from existing MN firms 3 Loss from establish- ment closings 2 (17%-21%) (3%-6%) Loss from contraction 1 Twin Cities average gross employment flows Average annual percent change of employment, 2002-2007 SOURCE: Bureau of Labor Statistics, Dunn & Bradstreet, Economy.com, McKinsey analysis RetainCreateAttract Employment loss Employment gain Retaining and growing Twin Cities-based establishments is a significant opportunity Key questions  Should we focus on retention of jobs given that it has the largest base of growth?  Which focus – retain, create, attract – would provide the greatest return on investment?

27. 26 Small employers account for approximately 76% of job growth SOURCE: US Census Statistics of US Businesses, McKinsey analysis Total employment in Minnesota, Employment growth by enterprise size 1 Percent, 2003-2006 Large Medium Small Percent of Employment Growth 2 24 76 Percent of Employment 49 34 17 Small (1-20 employees) Medium (21-499 employees) Large (500+ employees) Percent of employment growth, US Percent, 2003-2006 77 21 2 Key questions  Should we develop strategies specific to company size?  Where do we get the greatest return on our investment?

28. 27 Twin Cities Job Creation by Sector (2002 – 2007) Percent Employment Growth CAGR Twin Cities A small group of sectors has driven the majority of job creation Other General Merchandise Stores Professional Services Administrative Services Ambulatory Health Care Social Assistance Hospitals Educational Services 1 Food/Drinking Places Job Creation 31.8 4.0 6.2 7.2 7.8 10.3 10.5 11.0 11.1 SOURCE: Bureau of Economic Analysis, Bureau of labor statistics, Moody’s economy.com, McKinsey analysis Top employment growth sectors Employment Growth Difference MSP-US 2.35.8 1.8 1.4 6.8 5.04.0 1.1 -0.3 +3.0 +3.3 +0.6 +3.7 -0.2 -1.5 -0.3 Key questions  Should we focus on growing specific high skill, high productivity sectors?  Should we focus on improving the economic foundation – “a rising tide lifts all boats” ?

29. 28 Quality of life Innovation and start-up Human capital Infrastructure Cost of doing business Central ED governance Unified vision Sector focus External marketing campaign Best practice regions employ varying mixes of levers but several emerge as consistent across regions Key area of focus of economic development effort Secondary area of focus of economic development effort Not an area of focus of economic development effort Consistent lever across regions Environmental levers Process levers NashvilleAustinPittsburgh Raleigh- Durham IrelandSingapore

30. 29 The Twin Cities compare well against peers in civic engagement and leisure amenities 1 Rank compiles data on dining, shopping, entertainment, outdoor activities, media, performing arts, and museums SOURCE: Corporation for National & Community Service; Cities Ranked & Rated; Trust for Public Land QUALITY OF LIFE Leisure and entertainment rank, 2007 Score based on multiple metrics 1 Raleigh- Durham Sacramento Columbus Austin San Diego Seattle Denver Baltimore MSP Chicago Volunteerism, 2007 Percent of pop’n volunteering in past year Denver 29.8 34.1 Seattle Columbus MSP 28.3 38.3 35.1 28.8 Austin Chicago22.1 Sacramento23.2 San Diego25.9 Baltimore27.1 Raleigh-Durham Libraries, 2007 Library volumes per capita Seattle 3.5 3.6 Chicago Baltimore Columbus 2.6 4.2 3.8 2.9 MSP Sacramento1.7 San Diego2.2 Raleigh-Durham2.3 Austin2.4 Denver Recreation space, 2007 Acres of park per 1,000 residents MSP 18.1 34.2 San Diego Raleigh-Durham Austin 15.3 37.5 35.9 16.7 Columbus Chicago4.2 Baltimore7.7 Seattle10.4 Sacramento 11.3 Denver Arts Community, 2007 Arts establishments per 1,000 residents Seattle 0.72 Austin MSP Denver 0.53 0.92 0.74 0.62 Chicago Sacramento0.42 Columbus, OH0.48 Baltimore0.52 San Diego

31. 30 Population over 25 with high school diploma Percent, 2007 SOURCE: US Census “American Community Survey,” McKinsey analysis HUMAN CAPITAL The Twin Cities have a highly educated population US Average: 84.5 Chicago San Diego Baltimore Austin Sacramento Raleigh-Durham Denver Columbus, OH Seattle MSP Advanced Degree Attainment Percent, 2007 14 Austin 12 Baltimore1933 Chicago32 21 US Advanced Degree Average: 27 2012 San Diego33 382513 Sacramento302010 Raleigh-Durham402515 Denver362313 Columbus, OH322111 Seattle352312 MSP372512 Bachelors Graduate or Professional

32. 31 Average commute time by car, truck, or van alone Minutes, 2007 SOURCE: US Census Bureau, American Community Survey INFRASTRUCTURE Twin Cities residents have reasonable commute times relative to peers US Average 25 Chicago Baltimore Seattle Denver San Diego Raleigh-Durham Sacramento MSP Columbus, OH Austin Average commute time by public transport Minutes, 2007 US Average 48

33. 32 Venture capital investments The Twin Cities’ VC market is less robust than its peers Average annual investment, 2004-2007 $ per capita SOURCE: Capital IQ INNOVATION Denver San Diego Austin Seattle Raleigh Baltimore Sacramento Columbus Chicago MSP Total venture capital deals Total, 2004- 2007 Number of deals Denver San Diego Austin Seattle Raleigh Baltimore Sacramento Columbus Chicago MSP

34. 33 Entrepreneurial activity 1, 2007 Number of entrepreneurs per 100,000 people 22 Minnesota has competitive levels of entrepreneurial activity SOURCE: Kauffman Foundation Index of Entrepreneurial Activity 2643401947 1 Using Census Current Population Survey data, the study tracks the change in the number of non-business owners who become business owners month-to-month 201017 State rank 1=highest INNOVATION North Carolina Colorado California US Average = 300 Ohio Washington Illinois Texas Minnesota Maryland Entrepreneurship Growth, 2002-2007 CAGR