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Thursday, Sept. 27, 2018 12:09 am

Starting Springfield’s economic engine

Will public money help?


If nothing else, hundreds of thousands of dollars in public money buys hyperbole.

“This is, indeed, a once in a generation opportunity,” Timothy Killeen, University of Illinois president, said as he drew comparisons with Silicon Valley. “We are on the cusp of an extraordinary future for the state of Illinois,” Gov. Bruce Rauner stated as he drew comparisons with Harvard and Cal Tech while asserting that our state’s universities are better than any on the east or west coasts. “This is a dream come true for the city of Springfield and for the university,” U.S. Rep. Rodney Davis, R-Taylorville, gushed after quoting Eleanor Roosevelt. “We will look back on this date as one that made Sangamon County and Springfield and the state of Illinois’ economy explode,” state Rep. Sara Wojcicki Jimenez, R-Leland Grove, predicted as she wrapped up 40 minutes of speeches from politicians, business leaders and educators who gathered last month in downtown Springfield to announce that University of Illinois Springfield will spend $250,000 a year to fund Innovate Springfield, a two-year-old business incubator on the edge of the Old State Capitol.

So far, Innovate Springfield has housed makers of lip balm, architects, software geeks, providers of sundry digital services, a real-estate company, a janitorial service and assorted other enterprises, some more successful than others. Some have disappeared, at least one has established a presence on Amazon, selling a doohickey that allows a smartphone to control televisions, ceiling fans and any other electronic device that recognizes an infrared signal.

Just how the new public money will be spent isn’t yet clear, but the incubator’s backers are promising big things. Broadly speaking, the idea is to pool money from local taxpayers, UIS and the private sector to form a place where entrepreneurs and academics and students and investors and sundry researchers can pick brains and collaborate and form partnerships and launch businesses that will create jobs and make both Illinois and the capital city thrive. Now that UIS has signed on, the incubator will have a $500,000 annual budget, with the city, the Community Foundation for the Land of Lincoln and the Land of Lincoln Economic Development Corporation collectively contributing half the cash. The incubator launched in late 2015 with money from the community foundation, which provided $127,500 in 2016 (according to the latest available Internal Revenue Service records), and the Greater Springfield Chamber of Commerce.

With funding comes ownership, and as the biggest financial backer, UIS is now in charge of the downtown incubator, which checks off at least one box for municipal officials who have long called for a university presence downtown. But the incubator, its backers vow, will reach far beyond the capital city. It is, university officials and politicians boast, the first so-called hub of the Illinois Innovation Network that’s being planned by the University of Illinois and pitched as part of Discovery Partners Institute, a proposed Chicago campus that would be built with state and private money. Lawmakers have earmarked $500 million; no private money has been publicly announced. And some legislators, concerned that downstate could end up with little or nothing, are demanding details.

Entrepreneur Kirk Kellus, left, plays Pictionary with Land of Lincoln Economic Development Corporation CEO Eric Berglund, center, and Sarah Beth Ayers, business incubation program coordinator for Innovate Springfield.
Photo By Bruce Rushton


What, exactly, is DPI? What is the Illinois Innovation Network? How will the two fit together? What do words like “collaborate” and “innovate” really mean in the real world? How much money will be spent on what, not to mention where? So far, solid plans are lacking.

“The focus, they claim, is not on Chicago,” says state Sen. Chapin Rose, R-Mahomet, who notes that last month’s announcement that UIS is taking over Innovate Springfield came after the Senate Higher Education Committee scheduled a hearing to ask University of Illinois officials about planning for DPI. “I think, honestly, they were getting beaten up so bad they wanted to unveil something.”

Rose, whose district includes the University of Illinois’ main campus, was sharp with Killeen in a June letter to the university president.

“Tim, it is time for you to put some meat on the bone and let Champaign-Urbana know, publicly, exactly what is in this for east central Illinois,” Rose wrote two months before Killeen appeared before the Senate committee. “Too many conversations in the dark, Tim – time for you to bring the broader community into the conversation.”

During the senate committee hearing held the same day as the UIS-Innovate Springfield merger was announced last month, Killeen said he expects to soon announce private funding for DPI. Tel Aviv University in Israel already has agreed to be part of the effort, and Killeen said that he expects other overseas partners soon will come on board. But basic questions about money, construction schedules and operational plans went unanswered, prompting senators to request monthly progress reports. “There is no document from which we can judge your progress,” Sen. Pat McGuire, D-Crest Hill, told the university president at the Aug. 28 hearing.

Rose sounds equally bemused and flustered as he describes the path that led to UIS putting its shingle on the Springfield incubator as part of an innovation network. It started 18 months ago, he says, with talk about “nodes” that would be created throughout the state that would somehow be linked with each other as well as the DPI campus in Chicago. “We said, ‘Tell us about that,’” Rose recalls. “They said, ‘We don’t have any details yet.’ Then they kind of figured out that, to the extent that nobody knew what a node was, they started calling them hubs. ‘Tell us what you mean by that.’ They said, ‘We’ll get back to you.’”

Hired in July, Eric Berglund, CEO for Land of Lincoln Economic Development Corporation, says time is important: “We’re at a crossroads.”
Photo By Bruce Rushton


Rose insists he’s not trying to kill the Illinois Innovation Network or DPI or the Springfield incubator. But he also says that $500 million in state money for DPI that’s been appropriated won’t be released until legislators take further action. “You’ve got to start giving us details before that money starts getting spent,” Rose says. “It’s a work in progress, man. My point is not to complain or throw more barbs than I’ve already thrown, but to stay on them to continue to provide details as this thing moves forward so we can see a return on investment for taxpayers throughout Illinois.”

Bruce Sommer, a UIS instructor who teaches business courses and co-founded the incubator, says he welcomes the attention from lawmakers.

“That’s the scrutiny that has to be there, absolutely,” Sommer said. “Absolutely, we’re going to have to perform here. … This could change things more than anything else. I’ve never been more excited.”

A change in course
That public money should be spent to spur economic development isn’t a new concept. In Springfield, civic leaders acknowledge that past efforts haven’t always lived up.

Case in point is Quantum Growth Partnership, aka Q5, which the Greater Springfield Chamber of Commerce launched in 2007. With $5 million pledged by government and businesses, Q5 set a goal of creating 4,500 new jobs in five years. It soon became obvious that 4,500 new jobs weren’t coming, and so the goal was broadened to include retaining jobs. Money from Q5 was used to pay lawyers who sued the state in 2008 to block the transfer of 150 state Department of Transportation jobs out of Springfield, and Q5 funds also were tapped to pay legal bills and otherwise help persuade the state and federal governments to fund improvements to the 11th Street rail corridor in hopes of eventually making room for Union Pacific trains so that the Third Street rail corridor can be shut down. “Q5’s priorities evolved into many areas that do not necessarily relate to primary job creation and retention,” The Development Consortium, a consultant retained by Sangamon County, observed in a report issued a year ago that’s been used as a lever to change course.

Innovate Springfield is part of that course change. So is the Land of Lincoln Economic Development Corporation, a nonprofit agency funded by the county, the city and the private sector that was created this year based on recommendations in last year’s report, which urged civic leaders to listen to new faces and consider new ideas. And so money that once went to Q5, which has quietly disappeared, is now going to the development corporation, which in turn is providing $100,000 for the incubator. The relationship is cozy to say the least, with the EDC headquartered in the same downtown office space as the incubator.

“Entrepreneurship is such a critical component to economic development,” says Eric Berglund, EDC chief executive officer. “It’s awesome to be able to have a program and a facility to help grow companies locally. That’s such an important component.”

Hired in July, Berglund previously was president of the Southwest Florida Economic Development Alliance, a Fort Myers-based nonprofit formed in 2014 that sounds a lot like the local economic development corporation, a group formed with public and private money that aims to lure businesses and create jobs. That whoever got the job here would be from somewhere else was a near given, considering that a lack of fresh ideas and thinking was highlighted in the critical 2017 report that made the case for an economic development corporation. Before the city agreed to pony up, Mayor Jim Langfelder, initially a hard sell on funding the corporation with city money, questioned whether the new nonprofit would try new things.
It’s not clear whether the people who ran Q5 played Pictionary at the office, but Berglund and folks at Innovate Springfield did last week during a monthly happy hour that features beverages from Rolling Meadows and plenty of conversation. Participants included Kirk Kellus, co-owner of a fledgling commercial cleaning company who also builds apps for mobile phones. His latest creation allows union members to pay dues while also keeping track of hours and benefits.

In addition to free coffee and WiFi, the incubator provides office space, either private or shared, a conference room and classroom space, with monthly fees ranging from free for students in need of shared work space to $600 per month for a private office for fledgling business owners or entrepreneurs seeking to start businesses. The incubator arranges seminars to help with such business basics as marketing and bookkeeping and matches entrepreneurs with advisers. Lawyers and accountants provide free guidance during weekly office hours, and the incubator also has copying, printing and mail services. A whimsical wish list on a wall includes such wants as a Sno Cone machine, evidencing something of a Silicon Valley vibe that encourages having fun while changing the world.

Innovate Springfield’s offices evince a casual atmosphere reminiscent of Silicon Valley
Photo By Blake Wood


Applicants are asked everything from their educational backgrounds to whether they are veterans to the status of their financing to how many employees they expect to have in three years to whether they will be using any hazardous materials. A questionnaire asks what problem they plan on solving, who they see as competition and who their target customer is. The incubator now has more than 40 members who have either started businesses or are in the planning stages.

“We want to see how dedicated they are,” says Katie Davison, the incubator’s executive director. “It’s not my job to determine if it’s going to be viable. They’ve got to come in here and do the work. They’ve got to make money. … They don’t want to be in coffee shops, they don’t want to be at home. They want to be in an office environment.” Incubators have sprung up across the country in recent years, and Davison says most startups born in incubators remain for two or three years before going it alone.

Davison said she’s hoping that money from UIS will allow the incubator, which now has three employees, to increase staffing and programming. She’d like to bring in speakers from around the nation. So far, she said, the incubator has succeeded in a city that isn’t accustomed to such ideas.

“We’ve come out of a major recession and a (state) budget impasse – folks, they’re very risk averse, they want to hang on to what they have,” Davison says. “We’re trying to cultivate things, bring in some venture capitalists. That’s been a bit of a challenge. This was all kind of a hypothesis: We’re going to start this incubator, we know that incubators can be successful, we’ve seen it around the country. Ultimately, we had to open our doors to see what would happen. A lot of times, we talk about change being challenging. But we see people supportive of change. The university has doubled down on things. Stars are aligning a little bit right now.”

Sommer boasts that 30 percent of the incubator’s members are minorities and half are women. He predicts big things, both for the incubator and its encompassing network.

“This is the start of something,” Sommer said. “Illinois Innovation Network and Discovery Partners Institute is as significant as anything I’ve seen in any part of the country I’ve been in.”

Challenges remain
In addition to helping pay for the incubator and the EDC, the city of Springfield employs its own economic development director, Val Yazell, who is working under a $96,000 annual contract. While the mayor was initially reluctant to spend money on the EDC, Yazell gives Berglund and the corporation high marks.

Katie Davison, director of Innovate Springfield, says stars are aligning.

“He (Berglund) and I meet and discuss things at least weekly,” says Yazell, who was on the chamber of commerce board when Q5 was launched, then lost momentum and finally went away. “I hope that’s something the community gets and understands. It feels like I have a true partner in this journey. … I feel very, very positive right now, probably moreso than in the last 10 or 15 years. It feels like everybody’s really on the same page, everyone’s seeing the same thing now.”

For Yazell, jobs are the measure of success. “There’s no sugar coating on this one,” she says “We need jobs, plain and simple. That’s all there is to it.”

Two thousand fewer people were employed in Springfield in June than a decade earlier, according to data from the federal Bureau of Labor Statistics. The number of workers in the labor force has dropped by more than 4,000 during the same time period. Berglund adds declining property values to the list of woes as well as projections showing that the city and county likely will lose population during the next five years.

“All of those are very bad trends that you have to turn around,” Berglund says. “Of utmost importance, now, is time. We’re at a crossroads.”

Berglund’s turnaround strategy isn’t surprising. Lure new businesses, aim for diversification so that the region doesn’t rely too much on a single industry and don’t forget about businesses that are already here. “Retaining our existing companies is of utmost importance,” he says when asked about H.D. Smith, the prescription drug wholesaler that employs 375 people and was acquired in January by AmerisourceBergen Corp., which is headquartered in Pennsylvania. “Whether it’s that company or others…there’s always risks with mergers and acquisitions that they can go somewhere else. Where’s your competition? Our natural competition is any other market that they’re in.”

Firms employing between 50 and 100 workers are more likely to come than big companies that employ 1,000 or more workers, if only because bigger companies are less common than smaller ones, Berglund figures. “Some things are going to be incremental, for sure,” he says. “That’s the nature of economic development.”

Besides increases in job numbers, Berglund says that success can be calculated by looking at property values, population numbers and new investment into properties. “There’s lots of ways you can measure things,” he says.

Sommer takes a pragmatic view. Springfield’s economic problems, he says, are bigger than statistics show.
“The data is lagging – it worries me,” Sommer says. “I am optimistic about the new EDC. If we don’t get in front of it, as that rock rolls downhill, it picks up momentum. Right now, I can’t tell you how fast it’s moving, but it’s moving faster than I wish. The best time to make these investments was 20 years ago.”

Contact Bruce Rushton at brushton@illinoistimes.com.


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