by Ben Kinsley, for the Campaign for Vermont
If you missed the first two installments of the Campaign for Vermont’s economic recovery plan, you can find them here. Below you’ll find the third and final phase: access to workers and capital.
Phase 3 – The Long Game. It’s not enough to have a thriving tourism industry and universal broadband access in our state. Tourism is important, but most of its jobs are low-wage with limited growth opportunity. Broadband is an important for a whole host of reasons, but it won’t solve all of our problems.
New York, Boston, and Silicon Valley all offer a unique mix of conditions that create growth: culture, innovation, and capital. This formula has been repeated in places like Chattanooga and Boise with great success. Here in Vermont, Chittenden County already has the potential to be an up-and-coming tech bubble. Springfield shows some signs of this as well. Middlebury has a burgeoning aerospace and advanced manufacturing industry, as does Saint Albans. And, of course, we all know about Vermont craft beer, cider, maple syrup, coffee, and ice cream. Many of these products are the best in their industry and it comes down to innovation, craftsmanship, and investment.
Innovation is reliant upon talent (human capital) and technology transfer. The latter is most often generated by universities that are able to transition their research and development grants into actual commercial enterprises. Universities like Columbia, Stanford, and MIT do this with stunning efficiency. In 2019 alone, UVM received $136M in grant funding and has generated nearly two dozen startups and many more companies who are licensing technology developed at the University. We can expand this, both at UVM and other institutions. Programs as simple as maker spaces can even assist with technology transfer as projects move from the conceptual stage to proof of concept.
Another key piece of innovation is workforce. Having a leading research university (and even a couple supporting ones) is great, but we also need a reliable and affordable skills-based talent pipeline. This is where our state college system (VSC) has fallen flat. Both UVM and VSC have been chronically underfunded for decades. UVM focused on relevant and in-demand programs and has grown consistently while VSC has hemorrhaged both students and revenue. The current proposals to consolidate all campuses under one umbrella are on the right track, but what’s really needed is better curriculum alignment. There is too much program duplication and, perhaps more concerning, a miss-alignment between what skills are needed by our workforce and what education is available through our state colleges. In short, they are out of touch with their communities and our economy.
Despite the negative headlines and financial problems, there are bright spots. Vermont Tech is able to boast one of the highest job placement rates in the country at 99%, despite the pandemic. CCV has also outpaced the other schools in the VSC network by focusing on in-demand programs and creating talent pipelines with Vermont employers. This is what we need the entire VSC network to do. We also can’t forget technical education centers as they offer an accessible point of entry to higher education for adult learners and technical-minded post-secondary students.
The most frequent complaint we hear from Vermont businesses is that they can’t find enough qualified workers. This was true at the start of the pandemic and it’s even more true now. Training and re-training our workforce, increasing participation, migration, and immigration are all key to solving this challenge.
Some concerns have surfaced during this legislative session that there is a disconnect between tech centers and the VSC system and we agree. We need to re-evaluate our entire talent pipeline and make sure it aligns with student needs as well as our workforce needs. We should be engaging Vermont employers to make sure our programs are relevant and teaching the correct skills, whether it is advanced manufacturing techniques at a tech center, an engineering management program at Vermont Technical College, or just general upskilling by taking a class at CCV.
We also can’t forget about K-12 education. Families may move to rural Vermont for the safe atmosphere and beautiful surroundings, but they won’t stay if our rural schools are sub-par. Vermont schools are some of the best resourced in the country, but it’s WHERE and HOW those dollars get spent that is key. Increasingly it is becoming clear that our funding system favors urban schools, we need to fix this. Our schools are well-positioned to be world-class, but we need to get more of our funding to classrooms and students. We believe that Vermonters would be more willing to pay our high property taxes if we felt we were getting a good return on that investment.
The second source of fuel for economic growth is capital. Acquiring capital has always been a challenge for Vermont. We don’t have many deep-pocketed families willing to invest millions of dollars in startup ventures like the former merchant cities of Boston and New York or the gold-rich investors of northern California. Our former industrialist families like the Vanderbilts, the Webbs, the Fairbanks, and the Billings invest more in philanthropy than industry these days.
Fortunately, what we do have is proximity to financial markets. New York City and Boston both rank in the top five cities in the world for investment in venture capital, beating out London, Los Angeles, and Berlin. Vermont is surrounded by plenty of capital, but we have traditionally had a difficult time attracting it. This may be changing. As workforce shifts away from the cities, investors may follow. Rural Vermont suddenly seems like a more attractive investment if a concentration of highly skilled workers moves here or if outstanding post-secondary schools are turning out well-qualified students who would prefer to stay in the Green Mountains and there is infrastructure to support them. It might be time to give this a fresh look.
The third leg to the stool supporting long term economic development is housing. We mentioned some immediate investments earlier, but if we are going to train, attract, and retain a world class workforce that supports a vibrant 21st century economy, we need somewhere for them to live; somewhere they want to live. Vermont home prices average $279k, which is pretty affordable compared to other neighboring states. However, that still represents nearly $1k per month in mortgage costs. Add taxes and insurance to that and it’s more like $1,300. For a family to afford that “average” house, they would need to generate $52k of income; pretty doable for some of the industries we have talked about above. The problem is, you can’t find them. A search of available real estate yields only a handful of properties near this price point and most under $400k are either undeveloped, underdeveloped, or in need of renovation or repair.
Looking at the rental market leads to even more discouragement. Fewer than 300 units are available for rent, which means that roughly 99.7% of Vermont’s rental units are occupied. Even more concerning, half of those available units are $1,500 or more per month and those that are not suffer from the same issue as our owner-occupied housing stock: they look to be in poorly maintained buildings or are badly outdated. These are not places that will appeal to the young professionals we hope to attract.
Our housing stock is a problem. The disappointing part is that we have so many beautiful homes from previous generations that are rotting in place and unusable. Many of them are on main roads with convenient access to commuting routes or downtown centers and they often have sufficient square footage to subdivide for multi-family use. Even the Commissioner of Housing has identified this as an issue – citing 7,000 buildings in the state that are not currently suitable for habitation. Redeveloping and refurbishing these properties would maintain our state’s natural charm while creating more usable housing stock.
There are also other innovative ideas that could prove fruitful; things like redeveloping now empty office spaces for residential use. This is already being done in places like South Burlington. There are also other developments that may offer solutions like college campuses that have closed could be repurposed as residential innovation hubs with onsite resources like workshops and maker spaces.
The market might also not just be young people. Some of this redevelopment could be aimed at high-end retirement housing. Baby boomers, after all, control most of the country’s wealth and many are already in retirement age. Encouraging them to move to a beautiful state with good health care infrastructure might not be that tough of a sell.
There may even be new ways of financing these projects. Typically, the state has either issued bonds to subsidize the buildout of affordable housing or issued “loans” that they don’t actually intend to recoup the cost of. Real estate is actually one of the highest profit margin businesses at around 29%, leveraging crowdfunding mechanisms to revitalize aging buildings could offer local investors the ability to keep their money in state and also contribute to their local community.
Coupling these ideas with our existing downtown redevelopment efforts could yield excellent results for the state and we can’t afford to take our foot off the gas pedal. There are incredible opportunities for Vermont if we can be forward-looking, strategic, and make the right investments.
- Develop robust technology transfer programs at our leading universities
- Work on attracting seed capital from nearby cities
- Leverage the VSC system as the foundation of a relevant workforce development pipeline
- Invest heavily in housing over the next five years, focusing on redevelopment efforts and innovative financing models.