Economic impact of arts-culture events vs. incentives for corporate headquarters vs. building a local economy

Baltimore City had a study done of the economic impact of some of the major events it supports, Artscape--a four day arts and crafts street festival; the book festival (which usually runs during the same time as the one in DC that appears on the National Mall); and a New Year's Festival in Inner Harbor, and found the economic impact of the three events to be $36 million.

See "Report points to city arts' economic impact" from the Baltimore Sun. From the article:

•Baltimore's 2009 Artscape festival cost $860,000 and returned $25.97 million in art and food sales, taxes collected, hotel bookings and other revenues.

•The 2009 Baltimore Book Festival cost $162,000 and had an economic impact of $4.51 million.

•The 2010 New Year's celebration at the Inner Harbor cost $150,000, all privately underwritten, and generated $6.9 million, even though crowds were smaller than usual due to rainy weather.

Interestingly enough, Steve Pearlstein, the Post business columnist, wrote yesterday, in "In scramble for Northrop, the usual foolishness," about why the dog and pony show of jurisdictions showering benefits onto relocating corporate headquarters, specifically writing about Northrop Grumman, which is relocating from Southern California.* He writes:

There's nothing quite like the prospect of landing a corporate headquarters to get the competitive juices flowing among local politicians and economic development officials. ... Never mind that virtually every credible study finds that using taxpayer subsidies to chase after corporate locations rarely pays off. These testosterone-filled contests are never really about money so much as pride and ego and political bragging rights. By the time the competition ends, the benefits from winning have been pretty much bargained away and everyone comes off looking rather silly. ...

For the District, which is looking at a $200 million budget shortfall next year, getting into this bidding war is particularly loony. Virginia and Maryland officials can argue at least that the winner of the headquarters sweepstakes would collect income taxes on all those highly compensated executives, even if they commute home elsewhere. That's the way the tax system works in most places, but not in the District, which is prevented by Congress from imposing an income tax on employees who commute in from Virginia, Maryland or any other state. Without that, it would take decades for the District to recoup the $24.5 million that the mayor and D.C. Council have offered Northrop over the next 10 years.

The reality is that most of the economic studies don't show a significant positive impact on the municipality from such largesse, and yes, with regard to DC, if the people don't live in DC, then the city doesn't generate much in the way of income, other than property tax and income tax only from work conducted in the city property.

Now, you're not going to get me to say that it's better straight up to have cultural events like Artscape with an amazing economic return, and not support business development.

But the real focus for an economic development strategy in DC ought to be figuring out how to leverage the innovation ecologies of the local universities, particularly their engineering, science, and technology departments. Many years ago I read an obituary of an engineering professor who taught at Catholic University. He had created many companies over the years, from technologies he studied and developed at CUA. But he lived in Columbia, Maryland, and that's where the businesses were based.

Blackboard, the software company that develops curriculum-teaching support programs that are used in many major universities, is an example of a company that developed in the city and still remains here. It would be interesting to see where the employees work, because as Pearlstein wrote about the kind of people who work at Northrop Grumman:

District officials are also kidding themselves if they think the accountants, engineers and retired generals who run the defense industry are going to give serious consideration to moving their headquarters to the still largely vacant neighborhood near the new baseball stadium. These are not hip, young, urban pioneers we're talking about -- and in any case, they're likely to be Dodger fans.

It becomes necessary to work to attract the kind of people and companies who see the city and all it has to offer as an asset, rather than as something to stay away from.

The point of the * is that the sad thing about the move of Northrop Grumman from the standpoint of innovation ecologies and clusters is that it demonstrates that now for companies like them, it's more important to be close to where the customer is--in this case the federal government, and it will be easier for the corporate bosses to lobby Congress on programs (Congresspeople like defense spending so long as it gets sprinkled around their various districts) as well as the executive branch agencies--rather than to be located close to the technologists, engineers, and scientists who develop the products.