Sunday, February 26, 2012

Case For Economic Regionalism

Poaching industry from another state is common. This is also true within states and metro regions (job sprawl). Less notoriously, there is a war for talent and taxpayers. Somebody has to foot the bill for all those incentives:

The Pittsburgh-to-Paris flight has cost Pennsylvania and Allegheny Conference on Community Development at least $7 million of the $9 million guarantee, as the revenue generated by Delta did not meet certain minimums during the first two years of operation.

“That’s one of the risks of starting a new product,” said Ken Zapinski, senior vice president of the conference. “We sold as many tickets as the business model projected, but what we didn’t anticipate was the worst economic climate in the last 60 years and the bottom dropping out of the airfare market and ticket prices dropping 35 to 40 percent.”

Pittsburgh had flights to Paris, London and Frankfurt in the late 1990s, but they were all canceled by 2005 — leaving several area companies upset and forcing their executives to make connections to get to these cities.

Without the new flight to Paris, Zapinski said, “any of these companies might have thought about moving to New York, Chicago or Atlanta. We didn’t lose those jobs.”

And this, he added, made the $9 million guarantee a wise investment.

Classic brain drain boondoggle. If we don't pay, then everyone and everything will leave. Metros cling to airport hubs and nonstop flights like they do professional sports franchises. It's more a matter of status than economic development. Pittsburgh lost its status and the world didn't end. Industry didn't flee. Pittsburgh isn't a model for revitalization because the ACCD subsidized a flight to Paris.

I've previously tackled this issue. Pittsburgh would be better served by leveraging its existing connectivity advantages, not pandering to a few disgruntled CEOs. The low-hanging fruit is DC, New York, and even Cleveland/Columbus. I'd rather see $9 million invested in Tech Belt connectivity.

Flying into and out of DC, I can think logistically about three airports. The same is true for Pittsburgh. While living in Denver, I flew direct to Akron/Canton on Frontier Airlines. But the links between CAK and Pittsburgh are weak. Having everything at PIT is nothing more than hubris, a bit of chest-beating. The three major Tech Belt airports compete against each other instead of working in concert. $9 million falls into the cracks. Waste.

Lastly, economic fortunes can change quickly. The European Union is in crisis. Shale gas is booming. Flying to Paris seems less important than a direct to Oklahoma City. Investing in any route is a risky proposition. A regional approach diversifies the options and enhances economic resiliency. Those $9 million won't disappear like they will if Pittsburgh-to-Paris fails.


Stephen Gross said...

A few thoughts:

* Connectivity makes a lot of sense, but how do you sell it? City branding is usually city-focused; how do you get boosters to wrap their heads around a city being desirable because of proximity/links to other cities?

* The PIT airport has more capacity than demand. What's the solution? Re-envision how to use the space. What's the challenge? Inertia: Everyone assumes an airport must be used as an airport. How to get people to think out of the box, imagine that the built space of the airport could have alternate uses?

Jim Russell said...

There is plenty of thinking around the airport capacity issue. I've seen a few interesting ideas floated in the news. I don't consider it to be a pressing issue.

Concerning connectivity, the local focus is the dominant paradigm. That will take a long time to change. However, there are forward-looking initiatives such as the Power of 32 and the TechBelt. That's a good start.

Overall, I'm not lobbying the ACCD to alter its course. I'm hoping to find other like-minded people. DIY instead of waiting for powers that be to get on board.