St.

Louis Regional Economic Adjustment Strategic Plan

Prepared for: St. Louis County Economic Council State of Missouri City of Fenton September 30, 2011

Table of Contents
EXECUTIVE SUMMARY.......................................................................................................................................... 1 INTRODUCTION .................................................................................................................................................... 15 STAKEHOLDER INSIGHTS .................................................................................................................................. 25 ECONOMIC AND FISCAL IMPACTS OF CHRYSLER ......................................................................................... 43 ECONOMIC BASE RECESSION & RECOVERY ............................................................................................... 73 ECONOMIC BASE ST. LOUIS REGION ............................................................................................................ 87 INDUSTRY WHITE PAPERS ............................................................................................................................... 139 ACTION PLAN PRIORITIES................................................................................................................................ 193 APPENDIX ........................................................................................................................................................... 235

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Table of Tables
Table 1: St. Louis Regional Automotive Sector, 2007 .......................................................................... 46 Table 2: Automotive Sector Output Multipliers, 2007 ........................................................................... 49 Table 3: Automotive Sector Employment Multipliers, 2007 .................................................................. 50 Table 4: Total Commodity Inputs for Light Truck Manufacturers, 2007 ............................................... 51 Table 5: Regional Commodity Inputs for Light Truck Manufacturers, 2007 ......................................... 51 Table 6: Job Losses Resulting from Plant Closures ............................................................................. 54 Table 7: Estimated Direct Impact of Plant Closures, 2011 ................................................................... 54 Table 8: Region Employment, Wage and Output Impacts (2011 dollars) ............................................ 54 Table 9: Economic Impacts for Sectors Directly Impacted by Plant Closures...................................... 55 Table 10: Sectors with Largest Output Impacts .................................................................................... 55 Table 11: Sectors with Largest Employment Impacts .......................................................................... 56 Table 12: Sectors with Largest Wage Impacts ..................................................................................... 56 Table 13: Taxable Assessed Values for Top Taxpayers in St. Louis County....................................... 58 Table 14: State and Local Fiscal Impacts, 2011 ................................................................................... 59 Table 15: 2011 Vacancy Status of Key Supplier Sites ......................................................................... 65 Table 16: Chrysler Employee Status Changes, 2008-2009 ................................................................. 67 Table 17: Tri-State Employment Loss in Transportation Equipment MFG, 2006 to 2009 .................... 69 Table 18: Education Requirements for Projected Top and Bottom 30 Occupations (2008-2018) ....... 82 Table 19: St. Louis Region Population Growth (2000-2010) ................................................................ 90 Table 20: Change in Cost of Living vs. Change in Population and Labor Force, 2000-2010 .............. 91 Table 21: Non-Farm Employment, St. Louis Region Jan. 2008-June 2011 (thousands of jobs) ......... 94 Table 22: Change in Non-Farm Employment, St. Louis Region Jan. 2008-June 2011 ....................... 95 Table 23: Firms and Employment by Firm Size, 2001-2008 (in thousands) ........................................ 96 Table 24: St. Louis Region Employment, 2001-2009 ........................................................................... 99 Table 25: Change in Employment, 2001-2009 CAGR.......................................................................... 99 Table 26: St. Louis Region Average Wages, 2001-2009 ................................................................... 100 Table 27: Clean Energy Economy, 2007 ............................................................................................ 103 Table 28: St. Louis Region Output (in millions), 2001-2009 ............................................................... 104 Table 29: St. Louis Region Output per Job, 2001-2009 ..................................................................... 104 Table 30: Industrial Integration of Top Performing Private Sectors, St. Louis Region 2009 .............. 106 Table 31: Federal Government Spending, St. Louis Region (millions) .............................................. 110 Table 32: Intra-Regional Trade as Shown through Exports (billions) ................................................. 111 Table 33: Interstate Trade in the St. Louis Region (millions), 2007 ................................................... 111 Table 34: Select Goods Exported from the St. Louis Region by State, 2007..................................... 112 Table 35: Value of Exports from Illinois and Missouri, 2007 to 2010 (millions) .................................. 113 Table 36: Population Growth, 2000-2010 ........................................................................................... 115 Table 37: Rank of Top 30 Regions by Population (2000-2030) ......................................................... 116 Table 38: Top Regions Cost of Living (Quarter 1, 2011) .................................................................... 117 Table 39: Private Sector Weekly Wage (2001-2010) ......................................................................... 123 Table 40: Violent Crime Rates per 100,000 Residents, 2009 ............................................................ 129 Table 41: Reviewed Programs ........................................................................................................... 147 Table 42: State Wind Resource and Capacity Development, Q3 2010 ............................................. 160 Table 43: Data Unit Size Reference ................................................................................................ 161 Table 44: Sectors with the Largest Water Use, 2002 (billions of gallons) .......................................... 176 Table 45: Total Water Withdrawals for the St. Louis Region .............................................................. 177 Table 46: Projected Middle-Class Spending, Compound Annual Growth Rate ................................. 188 Table 47: Top US Exports to China, 2010 ($ billions) ........................................................................ 192 Table 48: Top Performing Private Sectors, St. Louis Region 2009 .................................................... 201 Table 49: Retail Margins in St. Louis Region, 2009 ........................................................................... 202 Table 50: Private Sectors with Largest Multipliers and RPCs, St. Louis Region 2009 ...................... 203 Table 51: Largest Economic Impacts in Private Sectors with $25 Million Investment........................ 205 Table 52: Plant and Medical Sciences Sectors, St. Louis Region 2009............................................. 206 Table 53: Performance Metrics for Plant and Medical Sciences, St. Louis Region 2009 .................. 207

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Advanced Manufacturing Sectors, St. Louis Region 2009 ................................................. 208 Performance Metrics for Advanced Manufacturing, St. Louis Region 2009 ....................... 210 Information Technology Sectors, St. Louis Region 2009 ................................................... 213 Performance Metrics for Information Technology, St. Louis Region 2009 ......................... 213 Transportation and Distribution Sectors, St. Louis Region 2009........................................ 214 Performance Metrics for Transportation and Distribution, St. Louis Region 2009 ............. 214 Financial Services Sectors, St. Louis Region 2009 ............................................................ 215 Performance Metrics for Financial Services, St. Louis Region 2009 ................................. 215 Highest Return on $25 Million Investment Among Targeted Clusters................................ 216 St. Louis Region Transportation Sector Output .................................................................. 222 Total Commodity Supplied and Demanded (millions) ........................................................ 223 Regional Purchase and Sales Coefficients ........................................................................ 224 Total Exports ....................................................................................................................... 225 Domestic and Foreign Exports ($ millions) ......................................................................... 225 Total Imports ($ millions) .................................................................................................... 226 Indirect and Induced Output Multipliers (for each $1 direct impact) ................................... 226 Commodity Inputs, Air Transportation (inputs in $ millions) ............................................... 227 Top Commodity Inputs, Rail Transportation (inputs in $ millions) ...................................... 228 Commodity Inputs, Water Transportation (inputs in $ millions) .......................................... 228 Commodity Inputs, Truck Transportation (inputs in $ millions) .......................................... 229 Commodity Inputs, Courier Services (inputs in $ millions) ................................................. 229 Commodity Inputs, Warehousing........................................................................................ 230 Industry Expenditure on Air Transportation (inputs in $ millions) ....................................... 231 Industry Expenditure on Rail Transportation (inputs in $ millions) ..................................... 231 Industry Expenditures on Water Transportation (inputs in $ millions) ................................ 232 Industry Expenditure on Truck Transportation (inputs in $ millions) .................................. 232 Industry Expenditure on Courier Services (inputs in $ millions) ......................................... 233 Industry Expenditures on Warehousing (inputs in $ millions)............................................. 233

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Table of Figures
Figure 1: St. Louis Region Automotive Sector Employment, Select Years .......................................... 45 Figure 2: St. Louis Region Auto Production, 2005 - 2010 .................................................................... 47 Figure 3: Annual Truck & Minivan Production (2005-2009).................................................................. 47 Figure 4: Monthly Truck and Minivan Production (2009) ...................................................................... 48 Figure 5: Where Chrysler Workers Live by Census Tract, 2003, 2005, 2007 and 2009 ....................... 57 Figure 6: Commercial Real Estate Construction Trends Since 1982 ................................................... 61 Figure 7: Industrial Real Estate Market Metrics, 1st Qtr 2011 ............................................................... 62 Figure 8: Office Real Estate Market Metrics, 1st Qtr 2011 .................................................................... 62 Figure 9: Retail Real Estate Market Metrics, 1st Qtr 2011 .................................................................... 63 Figure 10: Fenton Industrial Market Vacancy Trend, 1st Qtr 2011 ....................................................... 64 Figure 11: Fenton Industrial Market Rent Trends, Through 1st Qtr 2011 ............................................. 64 Figure 12: Vacancy Rates for Industrial Properties in Fenton, MO (Q1, 2011) .................................... 66 Figure 13: Training Focus for Former Chrysler Workers in St. Louis County....................................... 68 Figure 14: US Banks Total Assets, 2002-2010 ................................................................................. 77 Figure 15: Missouri Banks Total Assets, 2002-2010 ......................................................................... 77 Figure 16: Underperforming Assets in US and Missouri Financial Institutions, 2002-2010 ................. 78 Figure 17: National Debt Types, 2004-2011 ......................................................................................... 79 Figure 18: Percent Change in the US Housing Price Index, 1981-2010 .............................................. 80 Figure 19: National Employment, March 1990-2011 ............................................................................ 81 Figure 20: Total Employment vs. Unemployment Rate, 2nd Quarter 2000-2011 .................................. 81 Figure 21: Population Growth Projection (1990-2030) ......................................................................... 83 Figure 22: US Census Map of Population US Center, 1790-2010 ....................................................... 84 Figure 23: Population Center Distance Traveled SW (1790-2010) ...................................................... 85 Figure 24: Changes in Household Structure, 1990 to 2010 ................................................................. 91 Figure 25: Share of the St. Louis Region by Age, 2000-2015 .............................................................. 92 Figure 26: High School Drop Out Rate (2006-2010) ............................................................................ 93 Figure 27: St. Louis Region Labor Force, May 2000-2011................................................................... 93 Figure 28: Selected Super Sector Employment Growth, June 1991-2011........................................... 95 Figure 29: St. Louis Firms as Share of US by Firm Size ...................................................................... 97 Figure 30: Selected Super Sector Wage and Employment Annual Growth (2008-2011) .................... 97 Figure 31: Share of Goods Producing Jobs, 2001-2009 ...................................................................... 98 Figure 32: LQs for St. Louis Manufacturing Relative to the US, 2001 and 2009................................ 101 Figure 33: LQs for St. Louis Sectors that Show Strength Relative to the US, 2001 and 2009 .......... 102 Figure 34: LQs for St. Louis Sectors that Need to Improve Relative to the US, 2001 and 2009 ....... 102 Figure 35: Business Development by Industry Cluster....................................................................... 105 Figure 36: Residential Building Permits Issued in the St. Louis Region ............................................. 107 Figure 37: New Permits by Geography............................................................................................... 107 Figure 38: Compound Average Growth Rate in Gross Regional Product .......................................... 108 Figure 39: Change in Demand Generators......................................................................................... 109 Figure 40: Gross Regional Product for the St. Louis Region by State for Select Years (billions) ...... 109 Figure 41: Distribution of Demand in Illinois and Missouri Counties .................................................. 110 Figure 42: Per Capita Units of Government........................................................................................ 114 Figure 43: Per Capita Regional Bank Deposits .................................................................................. 118 Figure 44: Broadband Accessibility .................................................................................................... 119 Figure 45: Change in Residential Building Permits Issued, 1995-2010 ............................................. 120 Figure 46: Change in Housing Price Index (1991-2011) .................................................................... 121 Figure 47: Annualized Emp. Change: Recession 05/07 to 05/10 & Recovery 05/10 to 05/11 ..... 121 Figure 48: Change in Employment Relative to Benchmarks (2008 to 2011) ..................................... 122 Figure 49: Current Unemployment Rate (May, 2011) ........................................................................ 122 Figure 50: Change in Private Sector Weekly Wage, 2001-2010 ........................................................ 123 Figure 51: Per Capita Personal Income (1999-2009) ......................................................................... 124 Figure 52: Annualized Growth - Per Capita Personal Income ............................................................ 124 Figure 53: Industrial Property Inventory.............................................................................................. 125

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Industrial Space per Employee per S.F. TTU Super Sector (Q1, 2011) ........................... 125 Share of Population Age 25+ by Education Attainment (2009) ......................................... 126 Doctorate and Professional Degrees Per Capita (2009) ................................................... 127 Percent Change in Real GDP (2001-2009) ....................................................................... 128 Business Climate (2010) ................................................................................................... 129 State and Local Tax Burden vs. US (1999-2009).............................................................. 130 Change in Unemployment, Relative to US (01/2010-06/2011) ......................................... 131 Change in Employment, Relative to US (01/2010-06/2011) ............................................. 131 Annualized Growth - Retail Fuel vs. Inflation (Month of March, 1994-2011) .................... 132 Share of Households within a Quarter Mile of Transit Stations......................................... 133 State and Local Government - Tax Collection Index (Base Year-1988 = 100) ................. 134 Monthly Employment in US Manufacturing, January 1990 to July 2011 ........................... 135 Manufacturing Employment - Right to Work vs. Closed Shop, April 2002-2011 ............... 136 Average Weekly Wage for Manufacturing- Right to Work vs. Closed Shop, 2003-2011 .. 137 Total Auto Production (Month of January, 1986-2011) ..................................................... 141 Auto Production by Vehicle Type (Month of January, 1986-2011).................................... 142 Relative Water Footprint of Select Water-Intensive Industry Sectors ............................... 176 Real GDP Growth Rate (selected countries) ..................................................................... 184 Inflation Rates for Selected Countries, 2000-2010............................................................ 184 Merchandise Export Growth Rates.................................................................................... 185 Hourly Compensation Costs, MFG Employees in Regions, 2009 (US dollar) .................. 186 Hourly Manufacturing Costs in China, India and Philippines, 2003-2008 ......................... 186 Change in Import Prices from Noted Markets to US, 2005-2011 ...................................... 187 Private Consumption as a Percentage of GDP, 2008 ....................................................... 189 Health Expenditure Per Capita in Selected Asian Countries ............................................ 190 Outbound Travelers from China and India (millions) ......................................................... 191 US Exports to China and India ($ billions) ......................................................................... 191 Water Ports - Total Cargo Tonnage, 1998-2008 ............................................................... 218 Annual Passenger Enplanements, 1990-2030 .................................................................. 218 Lambert International Airport - Top 10 Destinations, 2000-2010 ...................................... 219 Transportation Sector as a Share of Total Industry Output, 2001-2009 ........................... 222 Air Transportation Sector as a Share of Total Industry Output, 2001-2009 ...................... 223

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Executive Summary

Overview
AECOM Technical Services Inc. (AECOM) was engaged by the partnership of the St. Louis County Economic Council, the State of Missouri and the City of Fenton to evaluate the Regional economic impact caused by the closure of Chryslers Fenton assembly operation and to recommend adjustment strategies for Regional recovery from the essential collapse of the local vehicle assembly sector, which has lost more than 20,000 jobs since 1997. Our approach included study of economic data, as well as interviews with over 100 civic, public, private, and institutional stakeholders involved in economic and workforce development. The analysis is also supported by AECOMs experience in other metropolitan areas that have been hard hit by auto industry restructuring. It is clear that the economic damage to the Region due to the loss of Chrysler is extensive, with a total loss of over 40,000 jobs (direct, indirect, and induced) and over $15 billion in lost output. Combined with the effect of the recession, the Region experienced a total loss of almost 70,000 jobs since 2007. While the Region has been resilient in responding to past economic challenges, the severity of the impact caused by Chrysler is a call to action, and the need for determined, sustained and Regionallysupported efforts is apparent. Our recommendations for the Region were informed by the following observations: The Regions self image which is at times surprisingly negative The challenge of local governance post-recession, with limited financial resources, political polarization, and disparate views about priorities The deteriorating condition of Regional infrastructure assets will diminish the Regions competitive position if nothing is done to address key problem areas The need to focus greater resources on business retention and expansion The Regions extent of fragmentation in economic development, with an array of organizations and leaders who function in different capacities with varied constituencies

The local tradition of siloed and fragmented thinking with regard to economic development is a major hindrance, preventing the Region from living up to its economic potential. If the Region is to recover from the loss of Chrysler and expand its participation in the global economy, a more deliberate and inclusive approach to economic development is needed. Core recommendations are: Build on Regional capacity in advanced manufacturing, Plant and Life Sciences and Clean Tech, clusters which are clear federal economic development priorities Streamline and improve resources to assist entrepreneurs and small businesses Enable local companies to better penetrate global markets Address critical infrastructure needs to sustain long-term economic growth Organize and align workforce training with business retention and expansion efforts Improve Regional economic development collaboration and leadership Enhance St. Louis City/St. Louis County collaboration

Further detail supporting these recommendations is contained in the body of the report.

Introduction
In 2010, the Partnership of St. Louis County Economic Council (SLCEC), the Missouri Department of Economic Development and the City of Fenton received a grant from the US Economic Development Administration to develop a Regional Economic Adjustment Strategy (the Strategy) to address the economic impact caused by the closure of the North and South Assembly Plants formerly owned by Chrysler LLC. AECOM and Vector Communications were engaged to complete this Strategy, using a multidimensional approach which included identification of economic, fiscal, and real estate impacts on the 16-county St. Louis Metropolitan Area (the Region) caused by the closure. Interviews were conducted with civic, public, private, and institutional stakeholders to clarify perceptions, issues, and opportunities that shaped the Strategy. Extensive analysis of local, state, and national economic data was undertaken to clarify trends and opportunities. The analysis has framed recommendations for how the Region can recover and reposition for future growth, building on organizational assets and industries that are best positioned to contribute to future growth. The economic damage caused by the closure of Chryslers North and South Plants in 2008 and 2009 was dramatic, and led to the loss of 6,365 on-site jobs, direct wages of about $880 million, and total output associated with the two plants of $15.5 billion. The ripple effect of the plant closures extended across the Region, resulting in a loss of 37,485 indirect and induced jobs (computed using IMPLAN), for a total loss of over 40,000 jobs. The indirect job losses included about 2,500 actual jobs at local supplier companies, many of which had been gearing up as part of Chryslers 2005 announcement to invest $1 billion in both plants; by the end of 2009 all of this activity had ceased.

Total Employment, St. Louis Region

1,450,000
South Plant Closes Loss of GM Wentzville 2nd Shift North Plant Closure

1,400,000

1,350,000

1,300,000

1,250,000

Peak Regional Employment

Loss of South Plant 2nd Shift

1,200,000 Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr 2007 2008 2009 2010 2011

While job losses were concentrated in St. Louis County and Jefferson County, other counties in Missouri and Illinois were impacted (see Residential Locations for Chrysler Workers map on the following page). The collapse of Chrysler must also be viewed in context with the broader Regional decline in automotive assembly employment since 1997, during which the Region lost nearly 20,000 jobs, placing the loss of Chrysler on a par with other major economic challenges the Region has faced since the 1970s.

Residential Locations for Chrysler Workers, 2007

Regional Industry Sector Analysis

Using IMPLAN, an industry standard analysis program, AECOM evaluated over 400 industry sectors that power the Regional economy, covering traditional sectors as well as evolving industry clusters, including Plant and Life Sciences and Clean Tech. A location quotient (LQ) analysis was used to compare the percentage share of employment in each sector to total employment in the Region, which is then compared to national averages, using 2009 data. Sectors with a LQ ratio greater than 1.0 are more significant locally compared to the nation. In general, higher location quotients point to industry sectors which are more integrated in the local economy, and have a greater influence on job creation. A sample of the sectors evaluated in the analysis follows:

Sectors Needing Improvement

Food Processing Mgmt/Scientific Consulting Air Transportation Warehousing Software Development Computer Sys. Programming Rail Transportation Truck Transportation
0.5 0.6 0.7 0.8 0.9 1.0 1.1

Key Factors: These sectors have an average Location Quotient of 0.86, and support about 75,000 jobs, with output per job of about $300,000 Air transportation ref lects the loss of hub status at Lambert

Railandtrucktransportationcouldbestronger Foodprocessing (excludingbreweries)couldbe stronger

Manufacturing Sectors
*Soybean Processing *Medicinal Preparations *Fertilizer & Pesticides *Oilseed Farming Auto Assembly *Organic Chemicals Aircraft Parts & Assembly *Soap & Cleaning Compounds Ammunition Manufacturing Breweries & Distilleries
0 1 2 3 4 5 6 7 8 9 10

Key Factors: These sectors have an average Location Quotient of 3.35 and support about 30,000 jobs, Average output per job is about $965,000 - f ive times that of services. Six sectors are part of Plant and Lif e Sciences

Aircraftassemblyiscritical totheregion GeneralMotorscontinuestoassemblevansin Wentzville,sustainingatrainedworkforce Breweriesanddistilleriesremainimportant

Strong Sectors
Securities & Investments *Medical Instruments *Private Hospitals *Scientific R & D Civic, Social, & Professional Data Processing & Hosting Business Support Services Management of Companies Private Colleges & Universities
0.5 1.0 1.5 2.0 2.5

Key Factors: These sectors have an average Location Quotient of 1.6, and support about 235,000 jobs, with output per job of about $165,000 Three sectors are part of Plant and Lif e Sciences

All sectorsarefocusedonservicedelivery,with lowerresultingoutputperworker Private collegesandhospitalssupportabout 60,000jobs

* = part of Plant and Life Sciences Cluster

The Location Quotient analysis led to the following core findings: The Regions strongest sectors for employment are in educational, medical, and financial services; however, these sectors have significantly lower total output per job compared to manufacturing. Identified Plant and Life Sciences related sectors (identified above with an *) support about 88,000 jobs with an average LQ of 1.83, well above national averages. Apart from breweries and distilleries, food production should be expanded, particularly with the Regions access to fresh water sources. Although manufacturing employment is a modest share of total Regional employment, output per worker is more than five times greater than in the services sector. Higher output per worker is driven by greater integration with suppliers and supply chains, with each step adding value to the manufacturing process. Despite the loss of Chrysler, the Regional auto assembly sector remains viable, as evidenced by the recent announcements by Emerald Automotive and General Motors. Emerald Automotive announced that it has selected St. Louis as a location for a future plant for assembly of hybrid electric vans. More recently, GM announced that it would expand its Wentzville assembly site for production of a new mid-sized truck, creating an estimated 1,850 jobs beginning in 2012. Although rail, truck, and air transportation make up a modest share of Regional employment, these sectors have a profound impact on the economy. An efficient and cost effective system for movement of goods between modes would be a very strong asset, given the Regions central location in the country.

Stakeholder Interviews
Interviews were conducted with over 100 people representing more than 80 entities and organizations involved in civic, economic and workforce development across the Region. The interviews focused on both the impact of the loss of Chrysler, and how the Region can adjust economically to the loss of over 40,000 jobs. The interviews highlighted perceptions, issues, and opportunities that will influence the recovery and adjustment process. These insights were evaluated and prioritized based on AECOM experience, considering facts, perceptions, and biases to arrive at specific observations:
Strengths Diverse economic base Impressive cultural amenities Importance of quality of life Competitive cost of living Concentration of PhD Level research Plant and Life Sciences, Aerospace, Financial Services Opportunities Manufacturing employment is recovering The Region has private wealth Leadership transitions at key regional ED organizations Strong educational institutions - Wash U, UMSL, SLU, others Positive and improving City - County relationship New Mississippi River Bridge will improve access Growing export markets in Asia Weaknesses Traditional over-reliance on larger firms Achievement gap - High school dropout rates Insufficient long-term job growth State leadership and the Metro vs. Rural debate Underinvestment in Regional logistics infrastructure Lambert and Mid-America Airports have financial challenges Challenges More units of government per capita / fewer resources Fragmented governance - local, state, and federal Fragmented economic development leadership A history of racial tension Higher fuel prices Shrinking public sector finances Refocus ED funding for business retention and expansion

AECOM Observations
Although the Region is currently one of the 20 top US metropolitan areas, its rate of long-term growth has not kept pace, such that by 2030, the Region is projected to fall out of the top 20 if accelerated progress does not occur. The Regions perceived satisfaction with the status quo and surprisingly negative self-image is troubling and also ironic, given its significant cultural and economic assets. Both the State and Region appear reluctant to adjust purposefully to what is an increasingly global economy, where the claim of being low cost is no longer compelling. That the Region has been able to grow at all is remarkable, given the array of constraints created by fragmented and parochial local, state, and federal jurisdictional boundaries that exist across the Region. Research by institutions such as the Brookings Institution shows that metropolitan areas drive the majority of US job growth. Effective coalition building with other metros in Missouri and Illinois could increase collective influence on legislative issues that align with broader Regional interests. The current Regional economic development framework is a challenge, with an array of entities (RCGA, individual counties and cities, Civic Progress, RBC, Metro, East-West Gateway, etc.) that function in different capacities with varied constituencies. The Regions economic development structure has found ways to work cooperatively, as evidenced by the formation of the Great Rivers Greenway District, the Zoo Museum District, and recent voter approval of a sales tax increase to fund Metro maintenance and expansion. The Region needs to upgrade its benchmark metropolitan areas. Cities such as Boston, Minneapolis, Denver, and Dallas are as appropriate as Columbus, Indianapolis, and Memphis. Regional leaders need to be mindful that people outside the Region (e.g., site selectors) do not recognize organizational and municipal boundaries, and that irrational competition across such boundaries is counterproductive at a Regional level.

Historically, the Region has exhibited a measure of resiliency through 2007 in responding to a series of major economic setbacks, including the stockyards closure in East St. Louis (1970s), auto / manufacturing losses (1980s), and defense adjustment (1990s). However, with the beginnings of economic recovery now underway, it is clear that the Region has arrived at an economic development crossroads, where relying on the status quo will lead in the direction of under-performance and insufficient growth, and more proactive strategies will require very deliberate decisions about how organizations, leadership, and resources can be realigned to encourage Regional economic growth. Specific priorities include: Ensure that the Region can sustain an environment that is conducive to new business formation Preserve the Regions rich quality of life which is attractive to businesses and their workforce Capitalize on existing Regional assets in the Plant and Life Sciences and evolving strengths in Clean Tech to rebuild advanced manufacturing through legislative initiatives such as MOSIRA. Support small businesses through expanded export opportunities and workforce training, as well as streamlined and better-promoted support services.

Restructure economic development toward a more Regionally cohesive platform, anchored by county-level leadership in business retention and expansion.

Insight
AECOMs recommendations are built on experience across the country in cities that have been forced to adjust to the loss of a major employer, including cities impacted by auto industry restructuring and military base / BRAC realignment. Our experience also reinforces the importance of managing three specific themes: Recovery: Between December of 2007 and June of 2009 the US economy endured the longest stretch of economic decline since World War II, making comparisons with the Great Depression (19291933) relevant. While signs of recovery are emerging, clear public sector fiscal challenges have made it difficult to separate politics from policy at the national and state levels. For the Region, fiscal stress has led to a measure of self-interest by municipalities, a perspective which constrains the Regions ability to recover. Boomer Retirements: Over the past 50 years, the Baby Boom generation has exerted an outsized influence on the nation. With their retirement savings and home values reduced, many Boomer households are now delaying their retirement and are electing to remain in the workforce. For the Region, which already supports an aging population, Boomer decisions will continue to influence demand for health care and workforce training needs. Higher Energy Prices: Higher energy prices are now focusing serious attention on efficient transportation options for movement of people and freight. Higher energy prices are driving considerable investment toward an array of potentially transformative strategies related to renewable energy.

Action Plan Recommendations

The St. Louis Regional Economic Adjustment Strategy has identified six goals that should become the basis for economic adjustment in the Region: 1. Sector Specific Research AECOM noted the laudable success of the Regions Plant and Life Sciences cluster, which was established and grown by a deliberate, well-funded and supportive network of collaborative organizations and institutions. Plant and Life Sciences sectors include agricultural feed stocks and chemicals (including bio-fuels); drugs, pharmaceuticals, medical services, and medical devices; and research, testing, and medical labs. Similar opportunities are now emerging locally in the Clean Tech cluster, which includes industries such as recycling, renewable energy, energy storage, and green chemistry; information technology; and green transportation Through supportive federal policy, research efforts in Plant and Life Sciences and Clean Tech are converging. There is considerable research focused on alternative energy (biofuels) and energy storage, with linkage to other industries such as agricultural products and chemicals, as well as research and testing, human / animal health, diagnostics, and plant sciences. With these overlaps in mind, we identified several areas for deeper investigation, focused on ways to expand evolving linkages between sectors:

Build on recent announcements related to the formation of BioSTL, which will be supported by $30 million in committed funding from entities that include Washington University, BJC HealthCare, and the St. Louis Life Sciences Project. Funding will be used to support pre-seed and seed investments in the biosciences. Evaluate Regional opportunities in emerging fields related to advanced manufacturing, materials, and alternative energy, beginning with local firms such as Zoltek, MEMC Electronic Materials, GKN and Boeing. Other areas of focus should include wind power logistics and manufacturing support. Explore how the Regions available supply of fresh water and considerable logistical connections can be used to grow a more vertically-integrated food processing sector. Evaluate how existing Regional capacity in Information Technology can be used to grow opportunities in bioinformatics. Firms in the Region such as Intuitive Genomics, now located at BRDG Park, are actively shaping the space where computer science, information technology, biology and medicine are converging.

2. Entrepreneurial / Small Business Development / Export Opportunities AECOMs research has confirmed that the Region has traditionally been over-represented by large companies, and needs to adopt strategies to energize entrepreneurship and grow nascent companies that have potential to become new economic engines. Priorities include: Catalog all the Regional entities that are involved in entrepreneurship and develop a plan for enhanced easy access to existing area entrepreneurship resources. Educational institutions such as Wash U and SLU should be engaged. Evaluate the climate and capacity for entrepreneurial / small business development across the Region, defining local strengths and weaknesses, funding gaps and industry best practices. Missouri Enterprise and the Illinois Manufacturing Extension Service should have an important role in training and business development activities aimed at export markets. The future roles of these entities should be thoughtfully developed. Help local companies expand export opportunities to global markets, particularly in Asia and Latin America, building on experience with China Hub efforts. Research the technical feasibility of a large-scale Regional manufacturing incubator, and the potential role of local educational institutions in supporting the effort. Research the role and need for a civic champion to pursue additional cluster opportunities, using the existing Plant and Life Sciences cluster as a model. Conduct further studies to understand how evolving state legislation for MOSIRA can be used to support job creation in the Plant and Life Sciences and Clean Tech Clusters. Work with the Illinois and Missouri US Congressional delegations to determine whether existing district boundaries for organizations such as SBA, EDA, and FEMA can be redefined to better serve the Region. Work with local units of government to standardize planning and development regulations to ensure greater consistency and efficiency across jurisdictions.

3. Infrastructure Investments While the Region purports to be an impressive location for logistics, with four interstates, six Class 1 railroads, and two major rivers, our analysis confirms that the existing linkages between modes remain too arbitrary. The Region needs to think strategically about infrastructure investments now underway, with $1 billion that has already been invested to upgrade rail capacity between Alton and Joliet (Illinois) for 110-mph passenger service and freight service. With an estimated cost of $4.4 billion, the project raises questions for how the Region connects with this evolving asset, given the reported poor condition of both Mississippi River railroad bridges. Priorities include: There are several freight movement bottlenecks that need to be addressed, beginning with existing rail bridges over the Mississippi River. Similar bottlenecks in the Chicago area are now being resolved through the CREATE Program, as the railroad companies proved unable to address the issue themselves. St. Louis should consider a similar effort to improve connections between rail, truck and barge transport segments. Under a consent decree with US EPA, MSD has committed to invest $4.7 billion to upgrade storm water and sanitary systems in the Region to meet terms under the Clean Water Act of 1972. Nationally, other cities have re-worked storm water management systems to expand recreational amenities and revitalize communities, with cities such as San Antonio and Kansas City being good examples. We note that the St. Louis Arch reinvestment project includes important infrastructure and transportation access enhancements. As Millennium Park in Chicago enabled significant additional real estate development and tourism, so too could the Arch project help transform the Riverfront area. Investigating ways to increase access to public transportation, particularly light rail and bus rapid transit. Analysis confirmed that less than 1% of Regional housing unit inventory falls within a 1/4mile distance of current light rail stations. With inevitable growth in gas prices, demand for walkable housing will drive greater interest in higher density transit-oriented development sites.

4. Workforce Development Workforce development remains a clear challenge for the Region, particularly the challenge of preparing young people for future careers while also ensuring that they actually have practical skills to enter the workforce. Recommendations focus on the current structure of workforce development in St. Louis City and St. Louis County, which clearly needs improvement: Build greater cooperation between St. Louis City and St. Louis County Workforce Investment Boards (WIBs) and intermediaries, including St. Louis Community College. Currently, St. Louis City and St. Louis County have separate WIBs, which creates an artificial barrier in Regional workforce efforts. Ensure that workforce development is aligned with the clear need for a focused business retention and expansion effort. Local companies need to be pulled into the workforce training process as partners. The success of Ranken Technical College in St. Louis is impressive in terms of linking corporate workforce

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needs with specialized training programs. The Ranken model should be a focus of further study and emulation. Sustain focus on early childhood education and support programs, as well as programs in math and science Further study of the applicability of Midwestern automotive adjustment programs such as the Automotive Manufacturing Technical Education Collaborative, which is an organization of educational institutions in communities across the country that have been impacted by auto industry restructuring.

5. Regional Economic Development Leadership There is a clear need for a more integrated and collaborative Regional economic development structure aligned deliberately with business retention and expansion efforts. Opportunities begin with leadership transitions now underway at RCGA, Metro / Bi-State, and East-West Gateway. With these transitions occurring simultaneously for the first time in 20 years, and acknowledging that the current structure of Regional economic development is quite complex, it is clear that further in-depth research is needed to map out how the pieces of the Regional economic development puzzle can be better aligned to provide more seamless and integrated economic development services. Recommendations include: Continue to hold annual Regional economic development summits to set the agenda, identify priorities, develop funding strategies, and support follow-through. Enable the existing county-level economic development entities to prioritize Regional economic development around strategies to retain and grow existing businesses as a top priority. There is a clear need for a cohesive Regional platform for capturing and presenting data regarding successful business expansion and retention efforts; current reporting is fragmented. County-level involvement in Regional marketing and job attraction should also be strengthened. While challenging fiscal conditions make it difficult to broaden economic incentives, consideration should be given to a temporary economic development sales tax to fund pressing infrastructure needs, workforce development improvements, and economic development / entrepreneurship efforts. The role of SLCECs Economic Development Collaborative should be expanded as a mechanism for connecting with, and establishing common goals among, municipalities across St. Louis County. Conduct further research into the Bi-State Development Agencys ability to implement projects of Regional importance and provide collaborative economic leadership. Bi-State has the legal ability to implement truly Regional projects. Evaluate the RCGAs current role and financial support for providing external marketing and attraction services. As part of this evaluation, AECOM recommends that consideration be given to clearly separating the traditional chamber and economic development functions within RCGA. Re-engage with Metro East economic development leaders, to ensure their participation in efforts which move the entire Region forward.

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6. Enhanced St. Louis City and St. Louis County Collaboration Enhanced collaboration between the City of St. Louis and St. Louis County must be a key outcome of this study. Our analysis, supported by 15 years of work experience across the Region, has reinforced two elements of prevailing wisdom. First, historically, there has been a general lack of cooperation and coordination between St. Louis City and St. Louis County in basic government services. Notable exceptions are the cooperation in functional areas such as the establishment of the Convention and Visitors Commission, Great Rivers Greenway, the Zoo-Museum District, the passage of the Metro sales tax and certain economic development initiatives. Second, it is clear that the City of St. Louis faces considerable structural challenges, including constrained financial resources as well as a fragmented and highly decentralized governance structure. With the outsized economic importance of St. Louis City and St. Louis County to the Region in mind, it is apparent to AECOM that these factors have combined to diminish the growth potential and competitive position of the Region nationally and globally. For the near-term, this analysis reinforces the practical need for a more integrated St. Louis City/St. Louis County economic and workforce development platform, with the goal of aligning specialized workforce training with business retention and expansion. In a similar fashion, consideration should be given to implementation of a joint St. Louis City/St. Louis County geographic information systems (GIS) platform to better support planning and economic development efforts. As a first step, the City of St. Louis GIS system needs to be improved to the level of St. Louis Countys current GIS system which is highly advanced. Over the long-term, significant attention needs to be focused on resolving fundamental structural, legal and financial challenges which the City of St. Louis faces. While it is clear that St. Louis City re-entry into St. Louis County (or other fundamental reorganization of government) will not address all of St. Louis Citys fiscal challenges, our experience suggests that the status quo is equally untenable. The same is true for St. Louis County, which now finds itself in a fiscal position that the City of St. Louis enjoyed roughly 50 years ago. The logical extrapolation of current trends raises concern over St. Louis Countys long-term ability to sustain its current standard of economic performance without fundamental change. In total, if the Region is to be competitive as a metropolitan area in the future, substantive further cooperation between the two jurisdictions is imperative. For this reason, we would argue that the executive and legislative leadership of both the City and County of St. Louis should actively engage in a long-term and phased strategy for transforming the St. Louis City/St. Louis County relationship over the next 20 years.

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Conclusion
The St. Louis Regional Economic Adjustment Strategy has confirmed that several structural and organizational challenges effectively prevent the Region from living up to its economic potential. Some challenges are a result of federal policy; workforce development is a specific example. Other factors are uniquely local, linked with the distant history of the Region going back to the 1800s. While the challenges are clear, the solutions are complex, particularly in light of the diverse components of the local economy and the fact that the Region has lost a significant industry that needs to be replaced, likely incrementally, over time. Additional research is recommended to further explore some of our initial findings. Emphasis will be placed on deeper dives into specific areas where AECOM research shows that future economic growth is most promising and will best position the Region to replace jobs lost as a result of the closure of Chryslers operations in Fenton.

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Introduction

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Project Framework
Beginning in January of 2011, AECOM Technical Services, Inc. (AECOM) and Vector Communications were engaged by a consortium which included the City of Fenton, the St. Louis County Economic Council (SLCEC), and the State of Missouri to complete an Economic Adjustment Strategic Action Plan related to the closure of two Chrysler assembly plants in Fenton, Missouri. The approach focused initially on the evaluation of direct, indirect, and induced economic impacts created by the closure of Chrysler on the City of Fenton, St. Louis County, and the St. Louis Region. Additionally, the analysis sought to identify economic adjustment strategies for how the Region should react to the closure, and reposition for future growth as the Great Recession ends. Our experience shows that economic development strategies can and do encompass the fullest array of amenities and factors that influence Regional growth, ranging from primary and secondary education and workforce development to incentives, transportation, cultural institutions, governance and leadership. In practice, all of these elements need to be understood and placed into context. The analysis must also understand all of the demographic, economic and policy factors that shape current and future business development opportunities across the St. Louis Region, including an overview of broader economic forces in play nationwide and globally that will continue to shape business and industry. To accomplish these efforts, our approach incorporated an array of steps, including:

Stakeholder Interviews
AECOM conducted interviews with over 100 people representing more than 80 entities and organizations across the St. Louis Region, on both sides of the Mississippi River. The focus of the interviews was directed at (1) the impact of Chrysler, and (2) how the Region can adjust economically to the loss of 6,365 on site-workers as well as approximately 2,500 supplier jobs.

Economic and Fiscal Impacts of Chrysler

AECOM evaluated the direct, indirect, and induced impacts of the Chrysler closure on the St. Louis Region, evaluating changes in employment, earnings, and output which rippled across the Region, extending from local auto parts suppliers and area restaurants and hotels, to impacted local units of government and households. The discussion also focused on broader real estate and workforce development impacts generated by the closure. Focus groups with former Chrysler employees and impacted businesses in Fenton were also conducted, under the direction of Vector Communications.

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Economic Development Opportunities and Diversification

AECOM assessed the St. Louis Regions current economic situation, documenting how the area is recovering from the Great Recession, benchmarked against similar metropolitan areas. The approach focused closely on the economic underpinnings of the Region, including key sectors that drive the economic base. Broader discussion focused on key trends that will shape the future of St. Louis, as well as an evaluation of the specific industry sectors and clusters that will be best positioned to drive job growth through enhanced industry linkage in the future.

Industry White Papers

The past four years have been extreme, marked by both violent economic change as well as interesting and exciting new opportunities that have potential to drive job growth for the Region over the next 20 to 40 years. To provide a sense of focus for these evolving areas, AECOM developed a series of papers covering topics ranging from Asian market opportunities, to container on barge, from manufacturing to biofuels and venture capital support. Each paper is framed as a literature review, summarizing key sources, opportunities, and policy implications.

Action Plan
The action plan frames the core results of the analysis, identifying strategies for how the St. Louis Region can adjust to the closure. As noted earlier, although economic development touches all aspects of how a community and region function, the nature of resulting recommendations will focus largely on issues that are within the potential control of public, private and institutional actors across the St. Louis Region.

Site Reuse Implications

While the question of site reuse was a clear priority at the onset of this project, the realities of the bankruptcy liquidation process for Chrysler have largely reduced the site reuse question to a secondary consideration. As of June 2011, the two assembly sites are undergoing demolition, which is expected to be completed by the fall of 2011. At present, it is assumed that the existing foundation slabs will remain in place after demolition is complete. While the owner of the site has forwarded a conceptual site reuse plan for the property, full reuse and redevelopment will likely be a 10 to 20 year process. Specific factors associated with reuse are noted in this study. Each section of the report includes Core Findings which frame specific insights that will shape overall report conclusions.

Acknowledgments
AECOM acknowledges the roles of key individuals who have made substantive contributions to this process, beginning with the project steering committee: City of Fenton Dennis Hancock and Gary Crabtree State of Missouri Jason Archer St. Louis County Economic Council Barbara Featherston, Doug Rasmussen, Jackie Wellington, and Denny Coleman

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The specific contributions of Sally Sowards and Carol Johnson, both formerly with the Regional Collaboration Center in Fenton are acknowledged for their support in contacting former Chrysler employees. Jeannie Braun with the Fenton Chamber of Commerce is acknowledged for her support in connecting with Fenton Area businesses that were impacted by the closure. The report also acknowledges the insight provided by people such as Jason Archer, Gordon Douglas, Darin Gilley, Don Akerman, and Nick Robinson who helped frame stories about the history of the two assembly plants. More broadly, the overall research effort involved a significant number of interviews with public, private, and institutional leaders in the Region, who volunteered their time to contribute to the overall effort.

Data Sources
The primary study area for this report is the St. Louis Metropolitan Statistical Area (MSA), which is otherwise referred to as the St. Louis Region in this report. The 16-county region includes: Missouri: Counties of Franklin, Jefferson, Lincoln, St. Charles, St. Louis, Warren, Washington, and the City of St. Louis Illinois: Counties of Bond, Calhoun, Clinton, Jersey, Macoupin, Madison, Monroe and St. Clair

Current economic performance metrics have been extracted from an array of sources. This information was collected and evaluated to help frame an understanding of strengths, weaknesses, opportunities, and threats that will influence the entire Region. Individual metrics have been benchmarked against other comparable metropolitan areas that were chosen based upon AECOM experience, in conjunction with client team insight. Data sources include:

Federal Sources
Broadband USA Congressional Budget Office (CBO) Federal Aviation Administration (FAA) Federal Bureau of Investigation Federal Communications Commission (FCC) Federal Deposit Insurance Corporation (FDIC) Federal Housing Finance Agency (FHFA) Maritime Administration National Center for Biotechnology Information National Renewable Energy Laboratory (NREL) US Army Corps of Engineers (ACOE) US Census Bureau US Council for Automotive Research (USCAR) US Department of Agriculture (USDA) US Department of Commerce, Bureau of Economic Analysis (BEA) US Department of Commerce US Department of Energy US Department of Labor, Bureau of Labor Statistics (BLS) US Department of Transportation US Economic Development Administration (EDA) US Energy Information Administration (EIA) US Federal Housing Finance Agency US Federal Reserve System / Federal Reserve Bank of St. Louis

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US Geological Survey

US Government Accountability Office

State Sources
Missouri Department of Economic Development Missouri Department of Education Missouri Department of Natural Resources Missouri Department of Transportation (MoDOT) Missouri Economic Research and Information Center (MERIC) Missouri Transportation Alliance

Regional Sources
East-West Gateway Council of Governments St. Louis Regional Chamber & Growth Association (RCGA)

International Sources
Asian Development Bank European Bioinformatics Institute International Economic Development Council (IEDC) International Trade Commission Internet World Statistics National Bureau of Statistics of China World Bank Group

News and Other Publications

Bloomberg News Christian Science Monitor Economist Environmental Science and Technology Journal of Commerce New York Times Public Broadcast Service, Nova Science Now St. Louis Beacon St. Louis Business Journal St. Louis Post Dispatch Wall Street Journal

Other Sources
ACCRA Cost of Living Index American Water Works Association American Wind Energy Association (AWEA) Archer Daniels & Midland Company (ADM) Biodiesel Magazine Biomass Research & Development Board (BRDB) The Brookings Institution Carnegie Mellon Center for Economic Development Center for Automotive Research The CoStar Group The Council for Community and Economic Research (C2ER) Council on Competitiveness Encyclopedia of Energy ESRI Business Solutions Global Industry Analysts, Inc. IHS Global Insight

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IMPLAN Independent Bio-Products Introduction/Policy Problem Kaufmann Foundation Land Policy Institute Location One McKinsey & Company Morgan Stanley NAI DESCO NASDAQ The National Biodiesel Board (NBB) National Science Foundation Nelson A. Rockefeller Institute of Government

Pacific Institute Pew Center on the States Pew Charitable Trusts PwC Renewable Energy and International Journal Revitalizing Auto Communities Environmental Response Trust (RACER Trust) Science Direct Tax Foundation W.E. Upjohn Institute for Employment Research Water Environment Federation Water Reuse Association

In addition, we acknowledge the significant amount of local and statewide research completed under the auspices of the Missouri Department of Economic Developments Strategic planning process, which was completed in the spring of 2011. The RCGA also has been quite active in evaluating market opportunities. Information from both of these sources was used as a baseline in the analysis.

Chrysler Closure Chronology

The two Chrysler plants in Fenton have been an economic and community anchor for the St. Louis Region for close to 60 years. The North Plant, otherwise known as the Missouri Truck Plant, opened in 1966 and built the Dodge Ram and similar vehicles. It was on hiatus from 1980 to 1983, and reopened in 1983 for the Chrysler 5th Avenue, expanded in 1985 for a minivan, and added a third shift. In 1994, it added the Dodge Ram truck. The plant closed initially in April 2009 as a result of the bankruptcy. While most auto assembly plant shutdowns are planned years in advance, this was not planned; the plant closed with no warning. The South Plant, otherwise known as the St. Louis Car Assembly Plant, opened 1957/1958. The plant was on hiatus from 1991 to 1994, and reopened in 1995 to build minivans. Both plants were in the process of retooling and reinvestment beginning in 2006, a process which slowed in 2007 and ended in 2009 with the closure of both facilities; closure was announced in 2007 and the plant closed by October 31, 2008. As the following chronology of events suggests, the two plants were a minor source of news regionally until 2005, when Chrysler announced a $1 billion expansion and retooling strategy. The chronology was developed from research of local media, including the St. Louis Post Dispatch and the St. Louis Business Journal. 2005 Chrysler is stable 5,000 jobs on site first year since 1999 for Chrysler with no layoffs

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Dec 12, 2005 Chrysler announces $1 billion reinvestment On site employment: 5,500 jobs (3,200 at South, 2,300 at North). Reported potential for five new suppliers and 500 more jobs is first noted in media reports. 2006 January Ford Hazelwood Closes 1,300 jobs are lost January First new supplier announcement Kelcey Hayes (100 jobs) June 2nd supplier announced HBPO North America Front end modules (60 100 jobs) October 3rd supplier announced Dakkota Integrated Systems interiors (100 jobs) December 4th supplier announced Exkor Manufacturing Inc. - engine components 200 jobs December New York Times reports that automotive jobs shifting away from core to Midwest and South Missouri auto employment up since 1986 to 33,000 jobs December First sign of unease, with no St. Louis Regional job growth in 2006 Chrysler has an extended holiday shutdown 2007 January 5,500 Chrysler jobs on site February South Plant second shift elimination announced Loss of 1,300 south plant jobs by Q2 2008 Still committed to $1 billion investment in Fenton February First rumor: Daimler Chrysler to sell Chrysler unit to GM March 635 North Plant job cuts announced by 2010 $1 billion investment still on track April Second rumor: $4.5 billion buyout from Tracinda (Kirk Krekorian) Chrysler is for sale according to news sources April 489 Chrysler workers take buyouts 193 North Plant workers and 296 South Plant workers April Ektor Manufacturing scraps Dupo expansion May 14 Daimler Chrysler sells an 80.1 percent stake to Cerberus Capital Management April News reports are clinging to optimism regarding Chrysler expansion August News reports indicate suppliers are undeterred October Modest UAW strike resolved November Chrysler announces broad employment reductions Fenton impact unclear 2008 January 1 South Plant second shift layoff happens early: 1,078 positions are released March New employment numbers: North Plant: 2,300 jobs / South Plant: 1,500 jobs April Nissan and Chrysler announce partnership which should benefit Fenton Plant June 30 South Plant closure announcement North plant reduced to 1 shift

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September North Plant employment at 1,085 workers 2009 Dodge Ram is launched October Buyout offers from Chrysler continue. Negotiations to sell Chrysler to GM or Renault SA / Nissan Motor emerge; 1,000 workers remain at North Plant October 29 - South Plant closed 1,500 to 1,700 jobs are lost / JP Morgan Chase / Goldman Sachs pressures Cerberus regarding Chrysler loans November Buyouts extended to 3,500 employees November Seven suppliers announce closures 1 million square feet of vacated space December Chrysler sales down 40 percent from 2007 / Bailout discussion begins to evolve $34 billion to start, tied to restructuring plans. 1,800 Chrysler employees take buyouts. Extended holiday idle period for North Plant. President George W. Bush approves $17.4 billion emergency loans for GM / Chrysler from the federal Troubled Asset Relief Program (TARP), tied to restructuring plans. 2009 January Fiat takes a 35 percent interest in Chrysler, Cerberus Capital Management is still majority owner February More buyout offers are extended / possibility of closure is considered. The industry begins to retrench, with key assembly factories moving closer to the supplier base according to news sources. Chryslers viability plan is submitted to the US Treasury. March First of several rolling deadlines for Chrysler buyouts March The Viability Plan for Chrysler is rejected by the US Treasury April 27 Daimler AG gives up its remaining 20 percent stake in Chrysler LLC to Cerberus Capital Management April 29-30 UAW concession deal is reached between the US Treasury, Fiat, and Chrysler. Chrysler declares bankruptcy. May 1 1,000 workers remain at North Plant. Many employees debate the buyout option, wondering if the possible plant closure will be temporary, or permanent. May 2 Officials announce that up to 8 Chrysler plants will close as part of the restructuring, including both St. Louis sites. Summer 2009 With all auto production either temporarily or permanently idled, it is the first time in at least 40 years where no cars or trucks are being assembled in greater St. Louis. June Chrysler deal with Fiat is completed June 17 Limited truck production is started to fill specific orders July 10 Final shift for 600 remaining workers

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News coverage of the Chrysler closure changes abruptly in August of 2010, with fewer articles about the plants, and greater emphasis on adjustment to the closure with three common themes: 1. Former employees associated with the Chrysler (employees or suppliers) 2. The impact on the host municipality of Fenton, as well as the cities of Eureka and Pacific, the Rockwood and Lindbergh School Districts, and the Fenton Fire Protection District 3. The question of site reuse Moving forward to May 2011, Chrysler repaid $7.6 billion in loans to the US and Canadian governments. By June 2011, final negotiations between Fiat, Chrysler, and the US Treasury were focused on the remaining six percent stake in Chrysler held by the US Government. News sources indicated that if the deal plays out, that the US Treasury would have recovered a majority of its initial $12.5 billion bailout of the company. This point is of minimal consequence to the St. Louis Region, which absorbed a significant economic impact when both facilities were abruptly closed.

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Stakeholder Insights

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Core Findings
The St. Louis Regional Economic Adjustment Strategic Plan has incorporated an extensive level of stakeholder involvement to help clarify and define perceptions, issues, and opportunities that the St. Louis Regional economy faces as it adjusts to the closure of Chryslers operations in Fenton. The interviews, focus groups, and visioning session output was reflective of St. Louis Regions tendency of inward and parochial thinking, with views speaking to both intense dissatisfaction with, and acceptance of, the status quo regarding economic development and job creation, and the challenge of ensuring that everyones voice is heard. To AECOM, the interviews stressed the need to identify and build consensus around practical strategies that can help the Region move forward in a more focused and cohesive manner. Key points identified in the interview process include: The unique opportunity created by current leadership changes at St. Louis Regional Chamber & Growth Association (RCGA), Metro (Bi-State), and East-West Gateway to recast the organization of economic development for the Region, building on the strength of county-level economic development organizations retention and expansion. The potential role of Bi-State was noted as a key opportunity, deserving of further research. Fiscal challenges in Springfield, IL and apparent political gridlock in Jefferson City, MO reinforce the need for greater local coordination and coalition building in addressing economic development issues that the St. Louis Region faces. While these efforts would directly challenge the Regions traditional predisposition for parochial and inward thinking, they were viewed as essential to help the Region move forward. The evolving St. Louis City St. Louis County relationship was noted as a critical factor that will significantly impact future economic opportunities for the St. Louis Region, even considering the array of challenges with City re-entry. In the near-term, greater cooperation in economic and workforce development was viewed as essential. The City-County question was also placed in context with the broader debate about governance in St. Louis County, where a number of municipalities struggle with delivery of basic services. While the Region benefits from an impressive location for logistics supported by four interstates, six Class 1 railroads, and two major rivers, the interviews suggest that the Region does not take these strengths seriously enough. The loss of Chrysler has highlighted a broader concern about the significant pool of under-skilled people across the Region who appear to be less prepared for work in advanced, knowledgebased economy sectors where backgrounds in math, science, and IT are increasingly essential.

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The interviews noted an array of challenges related to workforce development, some of which relate entirely to state and federal laws that govern workforce development, not all of which are solvable locally. Stakeholders reinforced the evolving strength of the St. Louis Region in support of entrepreneurial activity supported by Regional colleges and universities and other institutions. While the Region has prioritized growth of the plant and life sciences, the interviews suggest that efforts to reinvigorate manufacturing are equally important. While there was considerable debate about access to venture capital in the Region, interviews also suggested that the Region possesses considerable wealth which could be reinvested in the community.

Introduction
Beginning in January 2011, the stakeholder interview process focused attention on two core areas: Meetings with a broad array of public, institutional, and private sector leaders to frame core perceptions of Regional strengths, weaknesses, and opportunities for the St. Louis Region. Meetings with people associated with the Chrysler operation, including former employees and suppliers, impacted units of government, UAW leadership, and Regional workforce development officials. Content from these specific interviews has been included in Chapters 2 and 3 of this document.

These interviews were also used to identify additional contacts across the Region to better understand the diverse array of perspectives and opinions regarding economic adjustment and new directions for growth. We worked initially with SLCEC staff to identify initial interview candidates. The interview list expanded as interviewees generated additional names of people to contact. The list of stakeholders who were contacted as part of this effort includes the following individuals and organizations:

Core Team
City of Fenton St. Louis County Economic Council State of Missouri

Local Economic Development Organizations

Center of Research Technology & Entrepreneurial Exchange (Cortex) Coalition for Plant and Life Sciences Danforth Foundation Danforth Plant Science Center East-West Gateway Council of Governments (East-West Gateway) Great Rivers Greenway (GRG) Innovate St. Louis Metro East / Leadership Council Southwestern Illinois Metro/Bi-State Development Agency Midwest - China Hub Commission Missouri Economic Research & Information Center (MERIC) Partners for Progress / St. Charles County The Partnership for Downtown St. Louis Regional Chamber and Growth Association (RCGA) Regional Health Commission Southwestern Illinois Development Authority (SWIDA)

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St. Clair County Economic Development St. Louis County Council Leadership St. Louis County Economic Council (SLCEC) SLCEC - Enterprise Centers SLCEC - Helix Center SLCEC - World Trade Center

St. Louis County Human Services / Workforce Development St. Louis County Planning Department St. Louis Development Corporation (SLDC) St. Louis Regional Health Commission United Auto Workers Union (UAW)

State Economic Development Organizations

Illinois Department of Commerce & Economic Opportunity (DCEO) Missouri Department of Economic Development (MODED) Missouri Enterprise Program (MEP) Missouri Partnership Missouri Technology Corporation (MTC)

Federal Government
Federal Reserve Bank of St. Louis US Small Business Administration (SBA), St. Louis District Office

Impacted Units of Government

City of Eureka Fenton Chamber of Commerce Lindbergh School District Pacific City Rockwood School District

Elected Leadership
City of St. Louis - Mayors office St. Louis County elected representatives St. Louis County Executive State Representatives

Educational and Workforce Institutions

Chrysler Workforce Center CityArchRiver 2015 Foundation Commerce Bancshares, Inc. Missouri University of Science & Technology Rolla Ranken Technical College Saint Louis University (SLU) Saint Louis University - School of Business St. Louis Community College UMSL / IT Enterprise University of Missouri - St. Louis (UMSL) University of Missouri System Washington University (Wash U)

Local Non-Profit Organizations

Better Family Life Hispanic Chamber of Commerce St. Louis County Municipal League St. Louis Minority Supplier Development Council Urban League of Metropolitan St. Louis

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Private Sector
Ameren BJC Health Care The Boeing Company Brown Shoe Company Commerce Bancshares, Inc. Edward Jones Energizer Express Scripts Members of Civic Progress Members of the Regional Business Council (RBC) Monsanto

Transportation and Infrastructure

Burlington Junction Railway Burlington Northern Santa Fe Railroad (BNSF) Lambert St. Louis International Airport Mid-America Airport Missouri Department of Transportation Norfolk Southern Railway (NS) Port of St. Louis Port Working Group St. Louis County Department of Highways and Traffic Tri-Cities Port District

Insights
The range of opinions and perspectives were distilled by AECOM, based on our experience with economic development around the United States, to frame core principles that influenced the projects recommendations. The stakeholder interviews revealed a number of factors that influence how the Region begins to adjust to the loss of Chrysler. At an overall level, the interviews generally focused on three core perceptions the Regions current economic condition. In many ways, all three are simultaneously true: We have been resilient. The St. Louis Region has managed to grow while dealing with recurring economic challenges which began in the 1970s with the closure of the stockyards and other manufacturers in East St. Louis, followed by closure of the Corvette plant in St. Louis in the 1980s, post-Cold War downsizing of McDonnell Douglas, loss of TWA, military base realignment (BRAC) decisions in 1995 and 2005, and several notable corporate headquarters departures. Through 2006, the Region had grown slowly in spite of these challenges, supported by a diverse Regional economic base. However, the loss of Chrysler has removed one essential leg of support for the Region. We have muddled through. The St. Louis Region has managed to grow in spite of political and economic development systems which appear to be as much a part of the problem as the solution. The Region also struggles with the Mississippi River, which simultaneously anchors the Region and serves as a practical geopolitical barrier to cooperation. While the Great Recession is ending, the St. Louis Regions local units of government will continue to struggle with strained finances, raising the core question of how the Region aligns scarce resources with extensive near-term community reinvestment needs over the next two years.

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We have not kept pace. Although the St. Louis Region supports about 2.8 million residents, placing it among the top 20 US metropolitan areas for population and gross domestic product, its rate of growth has not kept pace with similarly sized regions. At current growth rates, St. Louis will fall out of the top 20 US metropolitan areas by 2030. As such, the Region appears to be at a crossroads, where the status quo leads in the direction of insufficient growth, and alternative trajectories require more deliberate choices regarding organization, leadership and resources for economic development. In distilling the many viewpoints, we noted the following POSITIVE comments about the current economic position of the St. Louis Region: The Region enjoys a low cost of living, supports a solid base of cultural underpinnings, enjoys low utility costs, and has a generally business friendly environment. For the first time in more than 20 years, there are simultaneous leadership transitions underway at RCGA, Metro/Bi-State Development Agency, and East-West Gateway Council of Governments. The new Mississippi River Bridge will benefit the Region, impacting development and land use decisions on both sides of the Mississippi River for years to come. Three Metro East counties have passed a special sales tax to raise $160 million for improvements to existing older levees, with improvements expected to begin in 2011 and 2012. These investments will begin to address economic development concerns in the Metro East area regarding possible levee decertification. The current relationship between the City of St. Louis and St. Louis County is positive, and the St. Louis County Government and the St. Louis County Economic Council are generally perceived to be well-run. The Region is well supplied with available sites for new office headquarters and industrial development, citing specific projects such as North Park and the 500-year levee protected sites along the Missouri and Mississippi Rivers. The pre-eminent local research and technology park (Missouri Research Park) overseen by the University of Missouri is largely built out, raising a practical opportunity for where local University of Missouri research and technology efforts will be focused in the future. While nationally, Eds and Meds is currently a popular growth strategy, the Region is already a clear leader in this area, benefiting from the presence of educational anchors such as Wash U, UMSL, SLU, and Webster University, which collectively support a large market of undergraduate and graduate students across the St. Louis Region. These institutions also support a nationally relevant health care cluster, which captures a relevant share of federal medical research dollars. Institutions such as Wash U, SLU, Missouri S&T, and UMSL are playing evolving roles in technology transfer and support of entrepreneurial development. While these institutions play important roles in these areas, their footprint could and should grow further. In this context, the strength of Missouri S&T in engineering and advanced manufacturing was noted. St. Louis supports several private sector companies such as Monsanto and Boeing which support a significant concentration of graduate and doctoral level research activity in the Region. Boeings defense contracting business delivered its 500th F-18 Block II Super Hornet to the Navy in April 2011, serving as an essential manufacturing anchor for the Region.

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The General Motors truck assembly site in St. Charles County remains an anchor upon which to sustain automotive employment in some capacity in the future as demand recovers. This site could be well-positioned to respond to the immense pressures on the auto industry to increase fuel economy, which is driving significant interest in a host of advanced technologies. Considerable progress has been made with reinvestment in downtown St. Louis, with a 2010 total of almost 8,000 housing units in the downtown area, representing about 1 percent of metropolitan housing units. Based on Midwestern experience, we would expect that over time, growth in downtown housing unit market share to 2 to 3 percent of Regional housing units is possible, representing a dramatic increase in downtown housing inventory. The recent award of an I-6 challenge grant focusing on the exploration of tech transfer opportunities associated with Wash U highlights the opportunities and challenges related to increasing tech transfer across the Region. The Region has made great strides in the plant and life sciences sector, supported by the efforts of a broad network of entities such as The Donald Danforth Plant Science Center, CORTEX, the Coalition for Plant and Life Sciences, Missouri Technology Corporation, and the Helix Fund. Scott Air Force Base was noted as a specific engine for the Region and a key employer in the Metro East area. The installation supports the 375th Air Mobility Wing which sustains the entire Air Mobility Command for the United States Air Force. The State of Missouris financial status is less challenged compared to other Midwestern states. Missouris projected FY 12 budget gap is currently estimated at about $700 million, or about 9 percent of FY 2011 budget. For all US states, the current average FY 12 shortfall is about 17 percent of FY 11 budget. There is consensus on the core sectors and clusters that drive the St. Louis Region. These sectors align with priorities identified by the State of Missouri which has just recently completed a statewide economic strategic plan. They include: Financial, information services, back office services Medical services, pharmaceuticals Logistics and intermodal Advanced manufacturing, aerospace, process engineering Sustainability, plant and life sciences and renewable energy

The assessment also noted an array of WEAKNESSES and CONCERNS about the St. Louis Region: While the Region has been marketing its central US location and logistics (rail, sea, and truck) connections to the Mississippi River for more than 30 years, there was a clear sense that the Region does not market these assets sufficiently or take seriously the need to make deliberate investments to ensure that connections between modes happen efficiently, in the fashion that Chicago is now doing with the Chicago Region Environmental and Transportation Efficiency Program (CREATE), and as the State of Illinois is doing with high speed rail. In this context, specific concerns about the condition of both railroad bridges over the Mississippi River were noted as a key bottleneck.

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The loss of hub status for Lambert St. Louis International Airport was noted consistently as a major concern and considerable inconvenience for local companies. The St. Louis Region supports a significant amount of personal wealth. The interviews highlighted both the depth of private financial capacity in the Region, as well as an equal measure of frugality. These offsetting comments were reinforced by a specific opinion about local financial capacity, in that the Region has, deep pockets and short arms. Interviews also suggested that the message of frugality implicit in the Show Me state label frames challenges for how the Region can grow its nascent cluster in plant and life sciences, a sector which has thrived in higher cost locations on the East and West Coasts. Concern about frugality and lower taxes was reflected in a broad number of interviews, suggesting that, If lower taxes were the key to prosperity, wed be California. Considerable discussion revolved around the status and role of the RCGA as the Regions economic development entity. Within the array of discussed concerns (both real and perceived), regarding RCGA, conversations reinforced several core themes: 1. A need for the Region to get past personalities and focus on the process for improving Regional economic development. 2. The need to refocus economic development on business retention and expansion, rather than attraction, and to realign scarce public incentive dollars around efforts to grow existing local companies as a clear priority. 3. The essential need for strong Regional economic development leadership which is accountable and credible. 4. Whether the Regions fragmented and parochial tendencies effectively constrain the ability of any regional economic development entity to lead under any circumstances.

While the Region is over-educated at the doctoral/PhD level, it has an equally pressing challenge of being under-educated at the high school level, reinforcing a clear workforce development challenge for the Region in manufacturing and advanced technology applications where math and science skills are critical. Governance was noted as a core concern for the Region, on multiple levels: 1. St. Louis County and its roughly 90 municipalities, many with less than 5,000 residents. 2. The City of St. Louis struggling with its own long-standing and unique governance challenges, which stem from a weak form of mayoral leadership paired with strong ward-level leadership. 3. A broader Regional governance problem resulting from a long tradition of inward thinking and parochial views, as highlighted by apparent competition between Lambert and Mid-America airports for the China Hub project.

While the recent state legislative session in Jefferson City included a variety of legislative initiatives that would enhance the competitive position of the State of Missouri, little progress was made. Given the divisive nature of politics at the state level, for the near-term, the challenge falls to local leadership to build consensus around key strategies that will move the Region forward.

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The State of Illinois is dealing with considerable fiscal challenges, with a current FY 12 budget gap of approximately $4 billion. State income taxes were increased for the first time in recent history. The Regions base of attractions includes two nationally relevant attractions (St. Louis Arch and Jefferson Barracks), as well as the internationally significant Cahokia Mounds (one of only 21 US UNESCO World Heritage Sites, which includes places such as the Grand Canyon). The interviews clarified three things about the significant concentration of civic and cultural attractions in the Region: 1. Key attractions are in need of reinvestment. 2. Residents of St. Louis City and County financially support key Regional museums, although the entire Region benefits. 3. Local residents do not seem to appreciate the base of cultural options available to them. This sense was expressed clearly in the following quotation about St. Louis being a great place to live, but I wouldnt want to visit.

The Region lacks a standard Geographic Information System (GIS) database that combines data for counties and municipalities. The economic development benefits of a standardized Regional system would be significant. Diversity is an important goal though a local history of racial challenges remains The current drawdown of the Danforth Foundation, a major philanthropic fund directed by the Danforth family, was noted as a concern. The extent to which the closure of Chrysler actually was a problem for the Region is inconsistent. Comments suggested a general lack of a sense of crisis about how the Region was impacted, and whether adjustment was needed. Focus group meetings suggested that the Chrysler operation and larger community of employees was somewhat self-contained. While a majority of respondents identified infrastructure as concerns for the Region, there was little consensus about priority projects.

Big Ideas
The interviews reinforced five main areas of emphasis for this economic adjustment study:

State and Federal Leadership

In April 2011, the State of Missouri completed its Strategic Initiative for Economic Growth. The goal of the effort was to define Missouris roadmap for future economic growth. This document lays out a detailed set of priorities, goals, and objectives for the state to pursue, as well as identification of specific sectors on which to focus. These sectors align with local priorities in the St. Louis Region. Wrapped within this study was a legislative agenda viewed by many in the Region as essential to recovery from the recession, however, at the close of the 96th session of the General Assembly, the following critical economic development bills did not pass: Aerotropolis Trade Incentive Act Compete Missouri

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Missouri Science and Innovation Reinvestment Act (MOSIRA) Legislative support for major sporting events hosted in the state Incentives for expansion of data center operations in the state

The lack of progress at the state level through the spring and early summer of 2011 reinforces the apparent need for an increase of self-reliance and local coalition building in addressing economic development issues facing the Region. In September of 2011, while MOSIRA was signed into law by the Governor, the Aerotropolis Trade Incentive Act was not enacted.

Workforce Development
As mentioned above, the loss of Chrysler has exposed a number of underlying workforce challenges for the St. Louis Region, beginning with the structure of workforce development, largely dictated by federal guidelines, which channel resources through state agencies down to local workforce investment boards (WIB) through programs such as Trade Adjustment Assistance (TAA). Challenges include: The loss of Chrysler has removed one large component of the Regions workforce training system. Chrysler drove significant annual demand for specialized short-term training in a range of disciplines for both union and temporary part-time workers, serving as a distinct entry point for non-traditional workers. This entry point has been removed, suggesting that the workforce system now needs replacement conduits for short-term credentials, as well as broader long-term retraining. The Regional workforce development system has five separate WIB boards and a significant number of non-profit and for-profit institutions that provide and compete for training services for displaced workers, adults, youth, and ex-offenders. The interviews confirmed that because the workforce system has multiple entry points, it can be difficult for an individual within in the system to see the full picture or to choose their best path. Although progress has been made at the state level in creating new workforce centers that offer one-stop shopping for services, the overall system remains challenged by the federal and state silos that channel resources to the local level.

The interviews reinforced the notion that there is significant need and opportunity for innovation in the space between middle school and traditional universities which offer a four-year degree. Interviews suggested that a majority of people in this space face a critical need to be better prepared to enter the workforce. Interviews emphasized that the St. Louis Region could do a better job of navigating students from high school toward junior college and technical schools, as well as four-year college or university programs. Interviews noted the following: Non-transferability of credit and certifications between community colleges and other workforce training intermediaries is a clear problem locally and nationally. Local workforce conditions depend on the sector. For white collar service and support businesses, the Regions workforce climate was viewed positively by local executives.

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The climate for manufacturing, plant and life sciences, and IT is more difficult, because these sectors typically require higher and more specialized skill sets compared to traditional manufacturing. In the IT sector, certifications can be more valuable than degrees. Chrysler was different from McDonnell Douglas. After Cold War defense adjustment, a number of former McDonnell employees went on to create new companies, a path for which a significant percentage of Chrysler employees, particularly assembly line workers, are arguably less prepared. A share of Chrysler workers still expected that the plants would re-open, which influenced their choice between short-term training programs that would allow them to get back to work quickly, versus long-term retraining that would have the potential to open up new career paths. Once the recession took hold by 2009, many workers found that there were essentially no jobs available in career paths related to short-term training. Closure of the Ford Plant in 2006 also impacted career opportunities. Nationally, many manufacturers who have technical workforce requirements are becoming bigger partners in the workforce training system. Understanding ways to better integrate end users in the training process appears to be an important policy goal.

The interviews reinforced the following core ideas: The St. Louis Region has a large pool of under-skilled people who are unprepared for work in advanced manufacturing sectors which are increasingly linked to computers, math and science. Training in these subjects needs to be reinvigorated locally. A small percentage of interviews mentioned ideas related to bridge / P-16/20 programs, which would focus resources more precisely on students that are less likely to follow a traditional path to college. Greater cooperation between City and County WIB boards and local workforce intermediaries is a logical first step.

Entrepreneurship
The interviews reinforced the importance of strategies to sustain and grow entrepreneurship across the Region. The local base of entrepreneurial support begins with established traditions through firms such as Ralston Purina, Express Scripts, Enterprise Rent-A-Car and Monsanto. Local efforts to expand entrepreneurship build from efforts by the anchor educational institutions of Wash U, SLU, Webster, and UMSL, with a related network of rapidly evolving organizations, such as the Helix Center, the Center for Emerging Technologies, the BioGenerator, CORTEX, BRDG Park, and the Coalition for Plant and Life Sciences. Interviews reinforced several key themes: The strengthening role of local education institutions in driving economic development opportunities through spin-off commercialization of their research efforts. The process confirmed that barriers to further progress are not financial, rather, they relate to the evolving personality of the institutions involved and their risk tolerance in managing intellectual property rights between institution and its researchers. Entrepreneurship has a significant social component, influenced by connections which are simultaneously social, physical and technology related. In all cases, physical proximity is essential

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in encouraging greater collaboration. Interviews reinforced the need to expand these networks through deliberate land use choices which favor mixed use and access to transit. While there are a growing number of researchers in the St. Louis Region with good ideas, the Region has a limited or fragmented selection of services (legal, administrative) to support growth of these early stage ideas into commercial ventures. Evolving local incubation programs (Helix and others) are a critical start, but need to grow further to include the development of a manufacturing incubator. On a broader level there is a need for someone to help coordinate, organize and sustain entrepreneurial development across the Region. Many groups are looking for additional support, with a critical need for seed or pre-seed funding. For the majority of US Metros that are not Boston or Silicon Valley, access to venture capital (VC) is a challenge that needs to be kept in perspective. While other regions have imported VC talent to build local clusters, studies do suggest that a majority of funding for new businesses is sustained through personal debt and the support of friends and families, rather than VC. The broader VC system is influenced by a practical reality of short-term returns rather than long-term opportunity. IT start-ups are easier to come to market, while startups in plant and life sciences are more risky, with many failures and few successes. For companies in the plant and life sciences cluster, the reality is that seed investments of $50 million are relatively small amounts. The interviews also clearly indicated that investments in the plant and life sciences take time to materialize, and will not by themselves resolve the Regions pressing need to replace jobs lost in the recession. Although the Region makes strong arguments about being business friendly and low cost, the regulatory framework is a concern, particularly within St. Louis County, where municipal zoning and permitting processes appear inconsistent. Initial investments by groups such as the Danforth Foundation have clearly laid the groundwork for future growth in innovation and entrepreneurship in the plant and life sciences cluster.

If past recessions are a guide, the dramatic extent of creative corporate destruction generated by the Great Recession will lead to the formation of new companies that we will see as commonplace in another 20 years. In this context, deliberate choices made in coming years to encourage entrepreneurial activity will pay long-term dividends. The analysis also suggests that efforts by the public sector to create a level regulatory playing field locally would pay dividends. The interviews suggested a number of ideas for how the Regions entrepreneurial efforts could be advanced: Tech transfer opportunities linked to Wash U, SLU and UMSL and the broader plant and life sciences cluster need to be expanded. The current I-6 grant effort is another step in the right direction. The Region would benefit from an incubator facility focused on manufacturing. Efforts to partner with organizations such as Missouri Enterprise and its Illinois state level partner should be considered. A lack of tax incentives for angel investment was noted as a concern in Missouri. Other Midwestern states have developed angel investment tax credits, such as Minnesota. Louisiana is also evaluating such a program.

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Consideration should be given to an effort to work with local units of government to clarify the practical aspects of how the local regulatory process influences starting a business, including such things as zoning approval processes, as well as the provision of one-stop-shopping to streamline these processes.

Governance
Governance remains a central challenge for the Region. Key insights include: The Region has new leaders and evolving organizational entities which have successfully operated across political borders. The Region faces near-term fiscal challenges, with anticipated state budget deficits for FY 12 and likely decreases in state shared revenue. While Missouris situation is less dire, the situation in Illinois is clearly tenuous, with a projected deficit in the range of $4 billion. In St. Louis County, there are a large number of suburban local units of government, many of which have less than 5,000 residents, and some of which appear to struggle with delivery of basic services. While St. Louis County government is judged by a majority of interviewees to be an effective unit of government, interviews also suggested that the County is at a critical crossroads, sitting in a position of relative strength, arguably enjoyed by the City of St. Louis 50 years ago. Given the trajectory that the City has followed over the past 50 years, the Countys current status and position of strength can only be sustained by deliberate choices from this point forward. Through a combination of geography and history, the St. Louis Region and the State of Missouri are challenged by a unique set of issues. Factors include: 1. The City of St. Louis remains challenged by its fragmented governance structure 2. Both Kansas City and St. Louis are divided by major political and geographic boundaries, reducing their ability to provide local leadership. 3. The state endures a strong divide between urban and rural areas as well as northern and southern sides. 4. The state is also influenced by patterns of development that are Midwestern in St. Louis, and more western in Kansas City. Interviews confirmed an underlying belief that the evolving St. Louis City-County relationship will significantly impact future economic opportunities for the Region as a whole. While interviews stressed challenges with the concept of City re-entry into the County, a majority of interviews noted long-term opportunities for the Region through greater cooperation between City and County. Short-term opportunities focus on greater cooperation in economic and workforce development. The interviews suggest that with a region as large as greater St. Louis, getting all 16 counties to agree all the time is not likely. In this context, finding coalitions of the willing is essential to move specific project opportunities forward. The analysis does suggest that the county-level units of government are a key building block for the future.

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Economic Development
Interviews focused attention on the broader economic development cluster that serves the St. Louis Region. Its constituent parts include: County-level economic development entities: St. Louis County, St. Clair County, Madison County, St. Charles County, and the City of St. Louis. Regional Organizations: RCGA, East-West Gateway, Metro/Bi-State Development Agency, and Southwestern Illinois Development Authority. Private Sector Leadership: Organizations include Civic Progress, which represents the larger corporations in the community, and the Regional Business Council (RBC), which represents the smaller, up and coming corporations in the Region. Workforce Development Cluster: Includes five workforce investment boards, and many non-profit and for-profit workforce intermediaries, including community colleges, such as STLCC, and Vatterott and Ranken technical schools. State Level Organizations: Includes Missouri Enterprise, the Missouri Partnership, and the respective state economic development departments, MODED and ILDCEO. Larger Municipalities: Includes communities that staff an economic development department, as opposed to a community development department. These communities include Clayton, St. Charles and Chesterfield. Stakeholder interviews reinforced the following ideas regarding the current structure of economic development locally: There is a clear need for a greater Regional emphasis on business retention and expansion first, and attraction second. The Regional approach to business retention and expansion appears fragmented and under-funded at present, even for organizations such as SLCEC. Leadership changes at RCGA, Metro/Bi-State, and East-West Gateway provide a unique opportunity for the Region to redefine Regional economic priorities, and move beyond silos and fragmentation. The strengthening city-county cooperative relationship is a starting point. There was considerable stakeholder comment regarding the RCGA related to perceived credibility problems as well as a sense that this organization has not been as effective as it could be. Conversations regarding RCGA were tempered by the practical reality that anyone running a regional organization like RCGA in a highly fragmented place like St. Louis would be challenged. This comment reinforced an underlying conflict in the Region between those who desire stronger Regional leadership in economic development, and whether existing municipal governance silos in the Region will tolerate a stronger Regional economic development structure. Beyond comments about specific entities, interviews reinforced a sense that the St. Louis Region seems content with the status quo in many facets of economic development. This sense could reflect a conservative nature or broader Midwestern sensibilities.

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Ideas that evolved out of the stakeholder conversations include: Focusing further conversation on how Metro/Bi-State and East-West Gateway can better fit into a Regional economic development superstructure. On paper, Bi-State has tremendous capacity to support Regional economic development goals. Need for a recurring annual economic development summit for the Region, building from the St. Louis 2004 effort, which led to the formation of the Great Rivers Greenway District. The goal of the group would be to create, support, and implement one major project per year. For SLCEC, a serious push into retention and expansion would require greater resources. Strong arguments were raised that the St. Louis Region needs an economic development entity that can lead, encourage collaboration, and implement Regional priorities. Interviews noted that while the RCGA organization includes separate economic development and chamber organizations, the line between these two related entities can be blurry at times, raising the potential need to more clearly separate the two functions, while providing a dedicated source of baseline revenue for operations.

Infrastructure, Transportation and Logistics

Transportation and logistics questions for the St. Louis Region build from recent federal policy development that has focused on the long term implications of higher fuel prices, as well as more stringent clean air regulations which have increased the price of diesel fuel. These drivers, along with a broader trend that favors containerization of freight, are placing greater emphasis on freight movement by rail and marine corridors. Transportation Investment Generating Economic Recovery (TIGER) grant funding has been focused on about seven port sites in the US, including the current TriCity Port District site in Granite City, IL. Other sites that benefited from TIGER Funding included projects in Mobile, AL; Providence, RI; and Norfolk, VA. Many of these projects are focused in part on Container-on-Barge (COB) opportunities. Even as the Region is adjusting to the economic recession, our research suggests that St. Louis will also need to adjust to broader shifts that are anticipated in national logistics markets related to the Panama Canal expansion, which will enable significantly larger container ships to transit the canal, and will nearly double the operable capacity of the Canal. The expansion is generating broader debate on how freight and commodity movement may shift across the US. The entry of the upgraded and expanded Canal by 2014 carries specific implications for St. Louis, the Mississippi River and New Orleans, as ports along the Gulf Coast and eastern seaboard reposition to meet this evolving market. From a geographic perspective, with the Panama Canal location being east of Miami and approximately due south of Charleston, SC, the Canal expansion will influence East and Gulf Coasts of North America. The improvements will enable the size of container vessels transiting the Canal to increase from the current 4,400/4,500 TEU to 12,600 TEU vessel size. The other market segments served by the existing and upgraded Panama Canal (dry bulk, vehicle carrier, liquid bulk, reefer segment, cruise vessel, general cargo, and miscellaneous) will also see a significant increase in the size of vessels able to transit the Canal, including Capemax and Suezmax vessels. The very large crude and ultra large crude oil carriers will remain beyond the physical capacity of the system.

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Beyond the Panama Canal, our experience suggests that cost and Regional logistics issues will also shape opportunities in St. Louis: In response to changing transportation costs, shippers are evaluating the movement of shipping containers by barge along the Mississippi River, rather than by rail or truck. The Mississippi River rail bridges are a Regional chokepoint and need to be evaluated. MoDOT is studying the reintroduction of barge traffic on the Missouri River, which could provide shippers with lower cost alternatives for commodity movement through the Region. Norfolk Southern has completed their Heartland Corridor, which will improve container capacity between Norfolk, VA and Chicago. BNSF has finally upgraded the remaining section of their Los Angeles to Chicago / St. Louis TransCon route to double track capacity. Through the CREATE program, rail capacity through the Chicago area will be significantly improved.

The reverse flow of empty containers loaded with agricultural products has been increasing. Soybeans and grains with specific hybrid qualities are gradually being segregated from bulk transportation markets and moved along least cost carriers in separate compartments and containers. The availability of empty containers has assisted the market / shipping alignment.

Implications
In sifting through the interviewees opinions, beginning with the impact of Chrysler, and extending to how the Region is positioned from an economic development standpoint, it is clear to AECOM that, with the Great Recession now slowly fading, the St. Louis Region sits at a crossroads. Key near-term realities include: The practical challenge of confusion between policy and politics at the federal level relating to issues such as health care, transportation, debt reduction, alternative energy, and carbon pricing. Painfully slow recovery in public sector finances after multiple years of decreasing public sector revenue, forcing increasingly difficult decisions about funding priorities. Recovering from the loss of more than 70,000 jobs since mid 2007 will be a massive task, particularly since the loss of Chrysler appears to have accounted for a large share of the decrease. Efforts to quicken the pace of job growth are essential. Lingering impact of distressed real estate, linked to ongoing bank failures and apparent government policy to limit near-term damage by slowing the pace at which distressed real estate re-enters the market, suppressing growth in real estate values, and government revenue by association. The US economy is moving away from traditional manufacturing and moving toward an economy that is more focused on knowledge, information, services and advanced manufacturing. These sectors have different requirements for economic development and workforce training. The world economy is increasingly global in nature. In such an economy, physical, logistical, and IT connections matter more than ever.

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The interviews suggest that the St. Louis Region needs to be more active in framing how these issues evolve. At the same time, the interviews also reinforced the need to carefully evaluate the many economic and demographic factors impacting the St. Louis Region. Key items to be evaluated in this report include: Recession and recovery: Auto assembly, exports, population, consumer credit, mortgage debt, state and local government tax collections, and industrial production The impact of rising fuel costs on transportation, freight movement, and job and residential locations Metropolitan area rankings for population, violent crimes, Gross Regional Product, ports by tonnage of cargo, airports by landed weight Workforce occupational data, high school dropout rates Cost of living comparisons Assessment of economic linkages by sector, and analysis of output and employment across the Region.

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Economic and Fiscal Impacts of Chrysler

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Core Findings
The economic and fiscal impact assessment reinforces the Regional economic challenge created by the loss of Chryslers assembly facilities in Fenton. It is clear now that the automotive sector was a critical anchor of the Regional economy, generating $18.9 billion in output during 2007, 7.3 percent of total output in the St. Louis Region. The automotive sector had an average output per worker of nearly $1.6 million, 10 times higher than the Regional average of $152,000 per worker. The average wage for these workers was approximately $107,000 compared to a Regional average wage of $43,800. The impact analysis identified the following specific impacts associated with the closure: In 2007, prior to the closure, the two plants employed a total of 6,365 workers on site, which included full-time Chrysler employees, temporary part-time employees, and on-site contractors. Total wages supported by these workers were estimated at about $880 million. Total output associated with the two plants in 2007 was $15.5 billion. Daimler Chrysler supported the second highest taxable assessed property valuation in St. Louis County for the 2009 tax year ($184.5 million). The two plants sustained a large base of suppliers which supported an estimated 2,500 jobs in Missouri and Illinois. Many of these suppliers had just opened plants in St. Louis as part of the $1 billion retooling effort announced in 2005; by 2009 many of these jobs were gone. As measured by IMPLAN, direct employment at the North and South assembly plants supported an additional 37,485 indirect and induced jobs across the Region in other industry sectors. A majority of Chrysler employees resided in St. Louis County, Franklin County, and Jefferson County. For municipalities such as Fenton, plant closure had a direct impact on city finances, which decreased by about 10 percent compared to pre-closure levels. 2010 traffic counts on I-44 between 141 and I-270 were 96,577 vehicles per day (AADT). Comparable levels for 2007 were 123,401 vehicles per day. As such, with the closure there are 26,824 fewer cars per day driving past the site. As a result of the closure and subsequent demolition of the North and South Chrysler Assembly plants, 5 million square feet of former industrial land was rendered vacant and unused. However, if the St. Louis Region develops new real estate at the same rate it has for the past 10 years, the former Chrysler sites will not be fully redeveloped for at least another 12 years into the future.

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Introduction
The following section quantifies the economic impact of job losses at the North and South assembly plants. The economic impact is measured in terms of both the direct, as well as indirect and induced jobs, wages and output lost in the St. Louis Region resulting from the loss of on-site employment. The economic impact also quantifies the state and local tax revenues impacted as a result of assembly plant closure. The automotive sector has been a major employer in the St. Louis Region for most of the last 60 years. This industry, which is highly capital intensive, is unique among industry sectors in St. Louis for two reasons. First, the production of autos and light trucks requires a large number of Tier 1, Tier 2, and Tier 3 suppliers, each of whom commits to specific delivery schedules for parts, assemblies and modules on a just-in-time basis to the final assembly plant. These schedules require a majority of suppliers to locate within specific proximity to the final assembly plant, usually within the metro area. From an economic standpoint, just in time delivery requirements expand industry linkage, boosting the indirect and induced employment supported by direct final assembly workers, well beyond what other industry sectors would generate. For this reason, the loss associated with Chrysler is significantly magnified across the Region. Second, as a practical matter, final assembly of minivans and light trucks is more involved than assembly of compact cars. Larger trucks and minivans can command retail prices in the $30,000 to $45,000 range, which correlates with more steel, plastic, and larger and heavier parts, components and modules, all of which boost industry output per worker well beyond industry averages. From this standpoint, the loss of Chrysler is a particular blow to the Region, in that this level of output per worker will be difficult to replace in the near-term. For the St. Louis Region, the automotive sector has been challenged for a number of years. Figure 1: St. Louis Region Automotive Sector Employment, Select Years
25,000

20,000

15,000

10,000

5,000

0 1996 1997 2000 2003 2006 2007 2008 2009

Automobile and light truck manufacturing Other automotive

Source: IMPLAN

Motor vehicle parts manufacturing Total employment

The above chart shows employment changes in the sector as compared to total Region employment. The employment data from IMPLAN includes both private sector salaried and self-employed workers. In 1997, there were approximately 21,400 people employed in the automotive sector. However, as the

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total economy grew in terms of employment, the number of jobs in the automotive sector declined dramatically. By 2009, sector employment had shrunk to nearly 6,100 positions; for 2010, this estimate would be still lower, reflecting the closure of Chrysler in 2009. Since 1996, the automotive sector has seen an average annual decline in employment of 8.9 percent. Even with the recent economic downturn, the St. Louis Region experienced overall employment growth of 0.4 percent per year since 1996. The largest component of employment in the sector is the manufacturing of automobiles and light trucks. As this sector has declined, so have jobs in the supporting sectors. Output, also referred to as revenue or sales volume, is the broadest measure of economic activity, and covers the cost of materials, labor and profit. As measured by IMPLAN, the automotive sector in St. Louis generated $18.9 billion in output during 2007, 7.3 percent of total output in the Region. Of the 1.7 million people employed in the Region, nearly 12,000 were in the automotive sector. With such a significant share of the total economic output and a relatively small share of total employment, it is no surprise that the average output per worker is significantly higher than the Regional average. In 2007, the automotive sector had an average output per worker of nearly $1.6 million, 10 times higher than the Regional average of $152,000. The average wage for these workers was approximately $107,000 compared to a Regional average wage of $43,800. Table 1: St. Louis Regional Automotive Sector, 2007
Industry Segment Light truck and utility vehicle manufacturing Motor vehicle body manufacturing Truck trailer manufacturing Motor home manufacturing Travel trailer and camper manufacturing Motor vehicle parts manufacturing Automotive Sector Total Region
Source: IMPLAN

Output (000) $17,507,102 $50,694 $232,164 $25,824 $12,293 $1,108,075 $18,936,475 $259,244,478

Jobs 7,010 300 870 80 60 3,570 11,900 1,709,720

Wages (000) $959,108 $14,087 $75,958 $3,302 $1,920 $217,779 $1,272,164 $74,880,791

Output per Job $2,496,300 $167,100 $265,500 $325,700 $215,400 $310,500 $1,591,600 $151,600

Average Wage $136,800 $46,400 $86,900 $41,600 $33,700 $61,000 $106,900 $43,800

Within the automotive sector, the largest segment is light truck and utility vehicle manufacturing, which includes assembly of light trucks and utility vehicles. Vehicles made include light duty vans, pick-up trucks, minivans and sport utility vehicles. In 2007, there were 7,000 people employed in this segment with an average output of $2.5 million per worker. For every worker in light truck manufacturing added, the St. Louis Regional economy will grow by $2.5 million. Job losses would have the opposite effect in shrinking the economy. In 2007, the average wages in this segment was $136,800. These realities reinforce the challenge of the loss of Chrysler to the Region and how to replace these lost positions and their associated output.

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North and South Assembly Plant Auto Production

From 2005 to 2010, total auto production in the St. Louis Region decreased by an annualized rate of 33 percent. In 2005, the North and South Assembly Plants made up 60 percent of the total auto production in the Region, increasing as a share to 68 percent in 2006, and subsequently decreasing to 0 percent at the end of 2009, at which time both the North and South plants were closed entirely. Had Chrysler maintained a 60 percent share of all auto production in the St. Louis region from 2005 to 2010, total auto production would have decreased by 19 percent annually, this is a result of decreased production in Ford and GM plants. The chart below depicts the decrease in total auto production in the St. Louis Region from 2005 to 2010, signifying Chryslers impact. Figure 2: St. Louis Region Auto Production, 2005 - 2010
700,000 600,000 500,000 400,000 300,000 Chrysler Total

The adjacent figure shows the total production volume of Dodge Ram pickups, Town & Country minivans, and Dodge Caravans at the North and South Assembly Plants located in Fenton from 2005 to 2009.

Overall, production of all types of automobiles came to a halt by August of 2009. The South 100,000 Plant stopped producing Town & Country minivans and Dodge 0 2005 2006 2007 2008 2009 2010 Caravan minivans by Source: Ward's Automotive 2011 November 2008, while the North plant continued to roll out Dodge Ram pickups until July 2009; however, in 2009 the North plant produced less than one sixth the amount of Ram pickups as it did annually since 2005.
200,000

Figure 3: Annual Truck & Minivan Production (2005-2009)

250,000 200,000 Pickup Truck 150,000 100,000 50,000 Minivan

At, their respective peaks, the South Assembly Plant produced 247,625 Town & Country and Caravan minivans in 2005, while the North Plant produced 152,715 Ram pickups in 2006. Within a matter of three years, each plant stopped production for good, the North Assembly plant lagging the south by nine months.

2005

2006

2007

2008

Source: Ward's Automotive 2011

47

2009

Figure 4: Monthly Truck and Minivan Production (2009)

7,000 6,000 5,000 4,000 3,000 2,000 1,000 Pickup Truck Minivan

Due to the closure of the North and South Assembly plants, the St. Louis Region is no longer manufacturing any type of automobile for the first time in over 50 years. The task of producing new Chrysler minivans and Dodge Ram pickups has located elsewhere. In 2010, both plants were demolished, now the site is 294 acres of vacant industrial space.

10/2009
48

11/2009

Source: Ward's Automotive 2011

Economic Impact Analysis

AECOM used IMPLAN, proprietary software that runs on data collected by the Minnesota IMPLAN Group (MIG) to estimate the economic and fiscal impacts of the plant closures on the St. Louis Region. MIG assembles data from regional and national sources to model the ways in which businesses and households interact in the study area. Economic impacts can be described as the sum of economic activity within a defined geographic region (St. Louis Region) resulting from an initial change in the economy. This initial change, or direct impact, spurs a series of subsequent indirect and induced (ripple) activities resulting from interconnected economic relationships. The total economic impact is the sum of the direct, indirect and induced impacts as defined below: Direct effect: The predicted change in the local economy that is to be studied, in this case the closures at the Chrysler-Fenton plants. Indirect effects: Impacts on suppliers to the directly affected businesses (including trade and services at the retail, wholesale and producer levels). This also includes wages paid to workers to assemble the good or service. An example of an indirect effect would be job losses at a dashboard manufacturer resulting from the loss of auto part orders at Chrysler. Induced effects: These represent the impacts on all local industries caused when households spend their earnings generated by the direct and indirect effects. An example of an induced effect would include losses in area retail employment resulting from declining household spending associated with North and South Assembly Plant job losses.

Economic impact analysis traces the changes in economic activity resulting from some action, identifies the economic sectors that are impacted by that activity and estimates the resulting changes in output, employment and income in the Region as defined below: Output: This is the total value of goods and services produced across all industry sectors and all stages of production in the study area.

12/2009

1/2009

2/2009

3/2009

4/2009

5/2009

6/2009

7/2009

8/2009

9/2009

Employment: This represents the number of jobs needed to support the given economic activity across all sectors. It includes all wage and salary employees, both part- and full-time, as well as self-employed jobs. It is measured in terms of the average number of annual jobs. Compensation: The total payroll costs (including benefits) of each industry. It includes the wages and salaries of workers who are paid by employers, as well as benefits such as health and life insurance, retirement payments and non-cash compensation. It also includes proprietary income received by self-employed individuals.

Multipliers
A change in demand is said to have a multiplier effect where the initial change ripples through the study area (i.e., causing indirect and induced impacts). For example, a change in demand for a product affects the producer of the product, the producers employees, the producers suppliers, the suppliers employees, and so on, ultimately generating a total effect in the economy that is greater than the initial change in demand. The ratio of the overall effect to the initial change is the multiplier. The magnitude of the multiplier depends on the industry, the size of the study area and the study area itself. The larger the study area, the more dollars will be spent locally and not leak to outside areas. Multipliers for the same industry will vary by study area. For example, a multiplier for the automotive sector in the St. Louis Region will differ from the Chicago Region since changes in demand will ripple through the two economies very differently. AECOM presents the output and employment multipliers for the automotive sector in the St. Louis Region during 2007 to better understand the impact of changes in the automotive sector on the Regional economy. In the following table, the output multipliers show the total increase in demand for all industries per dollar of demand in the specific sector. Table 2: Automotive Sector Output Multipliers, 2007
Sector Light truck and utility vehicle manufacturing Motor vehicle body manufacturing Truck trailer manufacturing Motor home manufacturing Travel trailer and camper manufacturing Motor vehicle parts manufacturing
Source: IMPLAN

Total 1.4226 1.6980 1.6738 1.6994 1.6447 1.6605

For every dollar spent in the light truck manufacturing sector during 2007, it had a total impact of $1.42 in the St. Louis Region. Each direct dollar generated $0.42 in indirect and induced impacts throughout other sectors of the Region. Within the automotive sector, the highest multiplier is for motor home manufacturing where each additional dollar of demand had a total impact of $1.6994 in St. Louis during 2007. The next table shows two types of employment multipliers for the automotive sector during 2007.

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Table 3: Automotive Sector Employment Multipliers, 2007

Industry Segment Automobile manufacturing Light truck and utility vehicle manufacturing Motor vehicle body manufacturing Truck trailer manufacturing Motor home manufacturing Travel trailer and camper manufacturing Motor vehicle parts manufacturing
Source: IMPLAN

Total Multiplier 5.75 3.02 10.88 8.81 7.45 9.12 7.91

SAM Multiplier 1.87 7.55 1.82 2.34 2.43 1.96 2.46

The total multiplier shows the number of jobs supported by $1 million in direct spending. For example, in the case of light truck manufacturing, every $1 million in direct spending supported three total jobs (direct, indirect and induced) in the Region. In fact, the $1 million in spending in this industry will yield 0.4 jobs in light truck manufacturing and 2.6 indirect and induced jobs in other sectors indicating a high level of integration. The SAM multiplier confirms this. For every job directly created in the light truck manufacturing industry, there were 7.55 total in the economy. That is, each job in light truck manufacturing supported 6.55 other jobs in the Region.

Regional Inputs
In addition to being a large contributor to the overall economy in the St. Louis Region during 2007, the automotive sector is integrated with other sectors in the Region. Here we examine the specific commodities the light truck and utility vehicle manufacturing sector buys from the Region for production. This sector purchases goods and services from 159 other sectors. We profile the top 10 sectors on several key metrics: Gross absorption coefficient: This is the percentage of each dollar in industry outlay that is dedicated to a given input. Recall that not all of an industrys expenditures go toward other firms, some portion goes toward employee compensation, dividends, taxes, etc. Gross inputs: Based on the size of the industry, this is the amount that the industry spends on a given commodity. Whereas the gross absorption coefficient measures how much of each dollar goes to a certain commodity, the gross input says how many dollars that is. For example, if an industry spends $1 million in total outlay, and the gross absorption coefficient for a given commodity is 10 percent, then the gross input is $100,000. Regional purchasing coefficient (RPC): This is the share of the commodity input that is purchased within the local study area. Regional absorption coefficient: Similar to the gross absorption coefficient, this describes the percentage of one dollar spent on a given commodity in the local study area. It will be some portion of the gross absorption coefficient. In the example above, if an industrys gross absorption coefficient is 10 percent and it spends half of that in the local study area (the RPC), then its regional absorption coefficient is 5 percent. Regional inputs: This is the amount of spending on a given commodity in the local study area. It is derived by multiplying the regional absorption coefficient by the industrys total output. Again, in the example above, the regional input would be $50,000; that is, the industry in question spends $100,000 on a given commodity, half of which is spent in the local study area.

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As noted earlier, the light truck manufacturing sector had $17.5 billion in output in 2007. Of that, approximately $15.7 billion was spent on inputs, $3.6 billion of which came from the local area as shown below. The majority of inputs for this sector come from motor vehicle parts, $9.2 billion. However, only 10 percent of those purchases are made locally. Combined, these ten sectors provided $13 billion of the total inputs needed for the Regional light truck manufacturing sector in 2007. Table 4: Total Commodity Inputs for Light Truck Manufacturers, 2007
Sector Total Commodity Demand Motor vehicle parts Wholesale trade distribution services Management of companies and enterprises Semiconductor and related devices Other engine equipment Tires Other plastics products Motor vehicle bodies Totalizing fluid meters and counting devices Truck transportation services Subtotal 10 sectors
Source: IMPLAN

Gross Absorption 89.6% 52.3% 7.1% 2.9% 2.2% 2.2% 1.8% 1.6% 1.5% 1.4% 1.2% 74.2%

Gross Inputs (000) $15,683,383 $9,153,688 $1,238,501 $511,888 $389,923 $385,204 $314,972 $278,972 $263,261 $251,442 $205,199 $12,993,050

RPC 23.1% 10.0% 99.5% 80.0% 25.3% 7.2% 0.1% 46.7% 10.2% 2.6% 100.0% 23.5%

Regional Absorption 20.7% 5.2% 7.0% 2.3% 0.6% 0.2% 0.0% 0.7% 0.2% 0.0% 1.2% 17.4%

Regional Inputs (000) $3,616,118 $913,270 $1,232,450 $409,5106 $98,661 $27,721 $164 $130,346 $26,805 $6,606 $205,199 $3,050,733

The following table, though similar to the above, focuses on the top ten sectors in the Region that provide inputs needed by the light truck and utility vehicle manufacturers during 2007 in St. Louis. These are the sectors that will be most impacted by changes to the light truck manufacturing sector. The largest input used by the St. Louis Regional light truck manufacturer was wholesale trade, $1.2 billion in 2007, followed by motor vehicle parts with $913 million of inputs. Due to high output per job, high average wages and large employment multipliers in the light truck manufacturing sector, any change in employment in this segment will generate large regional economic impacts. The regional inputs provide insight as to which sectors will be most impacted by changes in the sector. Table 5: Regional Commodity Inputs for Light Truck Manufacturers, 2007
Sector Total Commodity Demand Wholesale trade distribution services Motor vehicle parts Management of companies and enterprises Truck transportation services Other plastics products Semiconductor and related devices Rail transportation services Adhesives Scientific research and development services Other pressed and blown glass and glassware Subtotal 10 sectors
Source: IMPLAN

Gross Absorption 89.6% 7.1% 52.3% 2.9% 1.2% 1.6% 2.2% 0.3% 0.4% 0.3% 0.4% 68.7%

Gross Inputs (000) $15,683,383 $1,238,501 $9,153,688 $511,888 $205,199 $278,972 $389,923 $57,822 $75,624 $49,825 $67,183 $12,028,625

RPC 23.1% 99.5% 10.0% 80.0% 100.0% 46.7% 25.3% 89.4% 56.9% 80.0% 44.6% 26.2%

Regional Absorption 20.7% 7.0% 5.2% 2.3% 1.2% 0.7% 0.6% 0.3% 0.2% 0.2% 0.2% 18.0%

Regional Inputs (000) $3,616,118 $1,232,450 $913,270 $409,510 $205,199 $130,346 $98,661 $51,711 $43,012 $39,860 $29,933 $3,153,952

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Economic Impacts
For the purposes of this analysis, the economic impacts of Plant closure have been separated from the ripple effects associated with the current recession. To do this, AECOM modeled the North and South Assembly Plant employment losses in 2007, since the data would not yet reflect employment, spending and output losses associated with the recession. Therefore, the following figures reflect the economic impact of direct employment losses at the North and South assembly plants should the recession not have occurred. Figures below are reported in 2011 dollars. AECOM measured the economic impact of 6,365 on-site jobs lost in the Region as a result of the North and South Assembly Plant closures as shown below. These companies were 100 percent tied to Chrysler, all of which went out of business as the plants closed. These suppliers include Cassens Corporation, BNSF, Syncreon / LSI, Yazake, Integram Seating, AT&T Telecommunications and DuPont. An estimated 835 jobs were lost among these suppliers due to the closures. The Cassens closure is significant in that the firm controlled a 14.84 acre site adjacent to the plant with frontage on I-44, with two buildings supporting about 42,000 square feet of indoor space. BNSF still owns extensive property on the site, at least 46 acres. In addition to the on-site cluster of suppliers, the analysis identified a second tier of off-site suppliers who were effectively 100 percent tied to Chrysler. Through 2007, many suppliers were scouting locations and ramping up production to serve an evolving south plant expansion, which was intended to allow this facility to support up to five vehicle models on a flexible line. At one point, potential models included Town and Country (domestic and export), VW Minivan, Chrysler Pacifica, and Chrysler Imperial. A summary of supplier impacts follows: Kelsey Hayes (TRW) Braking systems (Fenton). This company signed a letter of intent to lease 84,000 square feet in 2006, and was supporting 80 to 100 jobs by 2007. The facility closed by 2009. HBPO North America Front end modules. The company leased 59,000 square feet in 2006 and supported about 80 jobs. The facility closed by 2009. Visteon Dashboards / Interiors (Eureka, MO). This company leased 217,000 square feet in a larger building and opened by January 2008, following a $26.8 million investment, with plans for up to 200 jobs. The plant was closed by the end of 2009, resulting in a direct loss of 110 positions. Subsequently, this space was re-leased to a printing company looking to consolidate other locations. Integram Seating Seats (Pacific, MO) this 400,000-square foot facility was closed in stages by 2009 due to closure of Chrysler plant loss of 800 positions. Ventra Group Bumper assemblies (Pacific, MO) 75,000 square feet, opened in august 2007. Closed by 2009 with a loss of 75 workers; space is still empty. Lumbee Enterprises Quality testing (Fenton, MO) Cut from 60 to 20 jobs in 2008 to zero in 2009. Yushin USA Kirksville, MO laid off 100 with second shift loss. Logistics Services Inc. (LSI) Fenton, MO won contract and replaced Syncreon at the truck plant, supporting about 125 jobs before closure. Syncreon Logistics / part sequencing provider 65 lost jobs in 2009 with Bankruptcy closed.

52

Dakkota Integrated Systems Interiors / panels (St. Louis). This company had leased 100,000 square feet in late 2006 and supported 96 jobs serving the truck plant in 2008. The facility closed by 2009 with a loss of 60 employees. Decoma International (Magna) Front end modules They scouted sites in 2007 and opened a 100,000 square foot site in Dupo, IL in 2008. The facility closed by 2009 with a loss of about 80 jobs. Kace Logistics opened in 2007 with 17 positions (average wage of $1.7 million). Oakley Industries Green Park, MO Scouted locations in St. Louis in 2007 and then leased a 150,000 square foot building with a $21.5 million dollar investment. 53 jobs were lost with the closure. Exkor Manufacturing Engine components (Dupo, IL). This company signed a letter of intent to lease 140,000 square feet in early 2007, with plans to hire 200 jobs. This expansion never occurred. Permacel Automotive St. Louis, MO located in a 137,000 square foot building. Portion of building has been re-occupied. Johnson Controls Scouting St. Louis locations in 2007 and opened a facility with a reported 70 employees in Earth City / Hazelwood. They went into 150,000 square feet of company owned space, which is still vacant. Lear Corporation Seat manufacturer for GM, Ford, and Chrysler, with multiple facilities in the Region Lear entered bankruptcy in July 2009, with a loss of 250 employees related to Chrysler. Purcell Tire Fenton, MO Linked with trucking companies. Mahle Engine Components Manchester, MO closed and moved out of state in 2008 with a loss of 210 employees. Findlay Industries Chesterfield, MO closed with a loss of 68 positions in August 2008. Harman Becker Automotive Systems Washington, MO This Tier 2 supplier services a number of automakers including Chrysler with sound systems; has a reported 300 employees in Washington. The plant is reported to be closing soon. In addition, the surveys noted the following closures for which there was no information: MSX International wheel supplier Textron Automotive Exteriors relocated to Pacific, MO then shut down Dura Automotive Systems Moberly, MO

Due to initial planned expansion noted above and subsequent shutdown, the following opportunities were cancelled before construction started: Grupo Antolin: 100,000 square feet and 100+ jobs Linamar/Excor: Canceled project Magna: related firms were considering 2 expansions totaling 250,000 square feet, which would have included a metal stamping plant.

In total, AECOM estimates that 6,365 jobs were lost as a direct result of the Chrysler plant closures.

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Table 6: Job Losses Resulting from Plant Closures

Industry South Plant North Plant Cassens BNSF Syncreon DuPont Yazake AT&T Integram Seating Total Jobs 3,200 2,330 500 200 120 10 2 2 1 6,365

This estimate includes approximately 3,200 workers at the South Plant and 2,330 workers at the North Plant as well as up to 800 temporary part-time workers based on seasonal and special circumstances. In addition, we identified a significant number of on-site suppliers, who were directly impacted by the closure. They were responsible for transportation (both rail and truck), parts, wire harness installation, painting and telecommunications support.

The following table shows the associated direct output estimated for 2011 with the Chrysler plant closures. As shown earlier, the automotive sector Source: Interviews had a high output per job relationship. Therefore the 5,530 jobs lost in light truck and utility vehicle manufacturing equates to a $15.4 billion in lost economic output and $879 million in lost wages. Table 7: Estimated Direct Impact of Plant Closures, 2011
Sector Light truck and utility vehicle manufacturing Transport by truck Transport by rail Paint and coating manufacturing Telecommunications All other miscellaneous electrical equipment and component manufacturing Motor vehicle parts manufacturing Total
Source: IMPLAN

Output (000) $15,388,056 $91,631 $91,308 $7,206 $1,025 $525 $317 $15,580,068

Jobs 5,530 620 200 10 2 2 1 6,365

Wages (000) $822,385 $32,684 $22,767 $1,008 $182 $134,000 $66,000 $879,225

As measured by IMPLAN, the direct employment at the North and South plants supported an additional 37,485 indirect and induced jobs across the Region. When direct, indirect and induced employment losses are taken into consideration, the total employment impact from plant closure is estimated at 43,845 jobs throughout the St. Louis Region. Table 8: Region Employment, Wage and Output Impacts (2011 dollars)
Type of Impact Direct Indirect + Induced Total
Source: IMPLAN

Output (millions) $15,580 $6,459 $22,039

Jobs 6,365 37,480 43,845

Wages (millions) $879 $2,219 $3,008

Chrysler employment generated $3 billion in total Region wages including $879 million in direct, and $2.1 billion in indirect and induced wages. Therefore, for every $1,000 in direct wages lost at the North and South Plants, an additional $2,420 indirect and induced wages were lost in the Region. Within the Region, direct employment could have generated an estimated $15.6 billion in direct output during 2011. However, when business to business interactions and household spending are taken into consideration, the total impact on Region output is estimated at $22 billion.

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The following table shows the total economic impacts of the sectors directly affected by the closure of the Chrysler plants in Fenton. Of the $22 billion impact resulting from job losses in the Region, 75.6 percent of the impact, $16.7 billion, occurred in the sectors directly impacted with job losses. Due to large interaction effects between the sectors, such as light truck manufacturing and motor vehicle parts manufacturing, the majority of the total economic impact was felt in these sectors. Table 9: Economic Impacts for Sectors Directly Impacted by Plant Closures
Sector Light truck and utility vehicle manufacturing Transport by truck Transport by rail Paint and coating manufacturing Telecommunications All other miscellaneous electrical equipment and component manufacturing Motor vehicle parts manufacturing Total
* Less than 5 jobs Source: IMPLAN

Output (000) $15,407,361 $325,986 $149,038 $7,740 $67,633 $991 $699,497 $16,658,245

Jobs 5,540 2,210 330 10 130 * 2,200 10,420

Wages (000) $823,417 $116,275 $37,161 $1,083 $12,008 $253 $145,443 $1,135,639

Every economic sector in the St. Louis Region was impacted to a varying degree by the closure of the Chrysler plants. The following table shows the ten largest output impacts felt by sectors not directly impacted by the closures. With the plant closures, wholesale trade could have an estimated economic loss of nearly $1.3 billion in 2011. Table 10: Sectors with Largest Output Impacts
Sector Wholesale trade businesses Management of companies and enterprises Imputed rental activity for owner-occupied dwellings Real estate establishments Petroleum refineries Food services and drinking places Other plastics product manufacturing Private hospitals Offices of physicians, dentists, and other health practitioners Insurance carriers Total
Source: IMPLAN

Output (000) $1,251,358 $515,917 $205,449 $182,167 $139,244 $119,650 $115,706 $113,507 $111,670 $100,739 $2,855,407

Jobs 6,420 1,880 0 1,530 20 2,020 480 950 860 290 14,450

Wages (000) $508,272 $217,931 $0 $26,200 $3,177 $37,544 $28,477 $52,744 $64,581 $22,087 $961,012

There were nearly 44,000 jobs lost as a result of the Chrysler plant closures. Of those, 6,365 were tied directly to the plants. As shown above, the sectors directly impacted experienced a total job loss of 10,420 jobs meaning more than 4,000 jobs were lost as a result of indirect and induced impacts within those sectors, again reflecting the significant interdependence of those sectors. The sectors with the top 10 job losses resulting from indirect and induced impacts are shown below. Wholesale trade was the sector with the most jobs lost (6,420), which paid an average wage of $79,200. Restaurants and bars employ many residents and this sector also experienced a large decline. With so many people impacted by the plant closure, it can be assumed from this data that fewer people

55

would be going out to eat. Combined, the job losses in these 10 sectors represent 37 percent of the total jobs losses occurring with the plant closures. Table 11: Sectors with Largest Employment Impacts
Sector Wholesale trade businesses Food services and drinking places Management of companies and enterprises Real estate establishments Private hospitals Offices of physicians, dentists, and other health practitioners Employment services Retail Stores - General merchandise Nursing and residential care facilities Services to buildings and dwellings Total
Source: IMPLAN

Output (000) $1,251,358 $119,650 $515,917 $182,167 $113,507 $111,670 $33,223 $35,813 $32,578 $35,672 $2,431,555

Jobs 6,420 2,020 1,880 1,530 950 860 850 650 610 560 16,330

Wages (000) $508,272 $37,544 $217,931 $26,200 $52,744 $64,581 $24,700 $15,724 $17,849 $13,668 $979,212

With the Chrysler plant closures, there is an estimated $3 billion loss in wages. Of that, $1.1 billion occurred in the sectors directly impacted by the closures. The sectors with the largest wage losses among those not directly impacted by the closure are in the following table. Combined, these 10 sectors accounted for 11 percent of the total economic output as a result of the Chrysler plant closures but 35 percent of the total wage impacts. Table 12: Sectors with Largest Wage Impacts
Sector Wholesale trade businesses Management of companies and enterprises Offices of physicians, dentists, and other health practitioners Private hospitals Semiconductor and related device manufacturing Scientific research and development services Food services and drinking places Legal services Other plastics product manufacturing US Postal Service Total
Source: IMPLAN

Output (000) $1,251,358 $515,917 $111,670 $113,507 $70,153 $63,731 $119,650 $72,367 $115,706 $32,717 $2,466,775

Jobs 6,420 1,880 860 950 230 320 2,020 410 480 300 13,870

Wages (000) $508,272 $217,931 $64,581 $52,744 $42,842 $40,432 $37,544 $33,448 $28,477 $26,800 $1,053,070

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Geographic Dispersion
The following maps the distribution of Chrysler workers living in the St. Louis Region for 2003, 2005, 2007 and 2009. AECOM used Local Employment Dynamics data from the US Census Bureau to examine these trends. Although data specific to an employer is not available, AECOM was able to define an area immediately surrounding the Chrysler plants and obtain data on all private, goods producing jobs which includes construction and manufacturing. Though not all workers reported here were employed at the two Chrysler plants, based on our understanding of employment at the plant, they either directly or indirectly employed most of the workers in the vicinity. Figure 5: Where Chrysler Workers Live by Census Tract, 2003, 2005, 2007 and 2009

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In 2003, there were approximately 7,200 goods producing workers in the immediate area surrounding the Chrysler plants. By 2009 this had fallen to approximately 1,800 according to the US Census. The majority of employees came from the Region ranging from 91 to 94 percent from year to year. The majority of workers lived in either Jefferson or St. Louis Counties. As the number of jobs fell, the impact on the surrounding counties is very clear as shown above. The analysis shows that Chrysler workers were spread across the entire St. Louis Region, with about 42 to 45 percent concentrated in St. Louis City and County, and key subsets in Jefferson and Franklin Counties, representing about 30 to 35 percent of workers over this time frame. The data indicated that about 5 to 8 percent of workers commuted from the Illinois side of the Region. The impact associated with lost UAW positions was mitigated in the short-term by the generous employee buyouts that were offered, offsetting the loss in wages that would have otherwise occurred in 2009. For non-UAW positions, the loss in employment had more immediate impacts on the host communities, specifically reduced spending on goods and services which resulted in lower sales taxes.

Fiscal Impacts
Economic impacts will generate changes in government revenues and expenditures, referred to as fiscal impacts. Economic impacts on total business sales, wealth or personal income can affect government revenues by expanding or contracting the tax base. Impacts on employment and associated population levels can affect government expenditures by changing demand for public services. Discussion of tax impacts starts with the obvious reality of lost property tax base for St. Louis County, the City of Fenton, and other taxing districts in the area. The following table summarizes taxable assessed valuations for top property tax payers in the county for 2000 and 2009. Table 13: Taxable Assessed Values for Top Taxpayers in St. Louis County
Taxpayer AmerenUE Daimler/Chrysler Duke Realty Boeing Missouri American Water Co. Ford Motor Co. THF Realty AT&T Southwestern Bell Pfizer, Inc. Laclede Gas Company Monsanto Westfield Corp.
Source: St. Louis County Assessor

2009 Taxable Assessed Value Taxable Share of Assessed Value Rank County $306,473,531 1 1.3% $184,560,030 2 0.8% $169,086,090 3 0.7% $165,205,820 4 0.7% $85,289,810 5 0.4% $79,258,100 $70,671,984 $70,600,750 $64,751,360 $62,427,300 6 7 8 9 10 0.3% 0.3%

2000 Taxable Assessed Value Taxable Share of Assessed Value Rank County $244,390,823 1 1.5% $183,416,760 3 1.1% $83,104,850 4 0.5% $233,895,050 2 1.4% $65,066,810 10 0.4% $79,447,470 5 0.5%

$77,636,544 0.3% 0.3% 0.3%

0.5%

$75,815,210 $74,721,110

7 8

0.5% 0.5%

The table speaks to the many changes that have occurred in the county, particularly in the automotive sector with the loss of Ford Motor Company and its $79 million assessed value. More important was the loss of Chrysler and its 2009 taxable assessed value of $184.5 million, making it the second largest tax payer in terms of assessed value in the county for both 2000 and 2009. AECOM used IMPLAN to estimate the tax impacts based upon a particular change in the economy. Tax impacts are divided into State/Local and Federal government agencies and are estimated based

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upon the level of direct effect and the industries either directly or indirectly affected. The following data sources are used by Minnesota IMPLAN Group to model the tax impacts: Bureau of Economic Analysis national income and product accounts (NIPA) values; Consumer Expenditure Survey (CES); and Annual Survey of State and Local Government Finances (SLGF).

The estimated Federal and State/Local tax impacts are reported as follows in terms of revenues generated or lost: Indirect Business Taxes (IBT): This includes state and local shares of sales, property, motor vehicle license and severance taxes. IBT does not include employer contributions for social insurance (e.g., Social Security, unemployment insurance, etc.) and taxes on income. Households: Major components of this category include income, motor vehicle license and property taxes. It also includes select nontax sources like fines or fees. Corporations: This category includes corporate dividends and profit taxes. Employee compensation: This includes the employee share of the social insurance tax and employer-paid payroll taxes like social security, unemployment taxes, etc.

The table below summarizes the estimated state and local fiscal impacts from the direct employment loss at the North and South plants (6,365 total jobs). After accounting for local and state revenue losses from employee compensation, business taxes, household and corporate taxes, the estimated state and local fiscal impact in is estimated at $454 million in 2011 dollars. The largest share of this impact is in the form of indirect business taxes at nearly $319 million, followed by household taxes including property, income and other fees estimated at $74 million. Table 14: State and Local Fiscal Impacts, 2011
Revenue Source Employee Compensation Indirect Business Tax Households Corporations Total
Source: IMPLAN

State and Local Taxes (millions) $6.9 $318.8 $74.1 $54.4 $454.2

Broader Economic Impact Discussion

Aside from the numeric calculations of impact noted above, our interviews documented other impacts associated with the closure of Chrysler. These impacts relate to municipalities, school districts, fire districts, and the broader real estate sector.

Municipal Impacts
Each unit of government was impacted in different ways by the plant closure. The magnitude of impact for local units of government relates largely to the significance to each unit of the direct tax benefits associated with either the Chrysler operation or its associated suppliers.

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City of Fenton
As a result of the closure, City revenues are down about 10 percent, with operating budgets falling from about $6.2 million down to about $5.2 million. Impact included direct tax revenue reductions due to closure (Chrysler was the second largest tax payer in St. Louis County), as well as arguably more important losses in sales taxes due to indirect and induced impacts. The impact has been mitigated to a certain extent by several factors, including the recent opening of a new hospital (SSM / St. Clair Health Center), and a local policy decision made in 2004 to be less financially dependent on Chryslers assembly operations.

Pacific, Missouri
This City was impacted significantly by the closure of the Integram seating assembly facility, which employed over 800 people, and closure of the Ventra Group site (bumpers), with a loss of 75 positions. The building which housed Integram has been released to an aerosol manufacturer, with the potential for 200 jobs. Reportedly, 12 former Integram employees have been hired by this plant. The City also experienced a significant indirect impact from the closure, in that City sales taxes increased significantly by 2009 as the recession reached its zenith. Overall City sales tax collections for 2010 ($660,000) have fallen below 2004 levels ($756,635). City property taxes were modestly impacted, because taxes for these sites were abated as part of past incentive packages.

Eureka, Missouri
Visteon was in the process of opening an assembly site in Eureka as the recession hit. Although they had leased space and built out the facility, employees were never hired. The 80,000 square foot facility was subsequently released to a printing firm. Interviews with Eureka staff confirmed that the community weathered the recession in reasonable shape, due in part to sales taxes generated by Wal-Mart and the local Six Flags amusement park.

Rockwood School District

The primary impact to the Rockwood School District due to the closure was the loss of $4 million in property tax revenue. This loss was made up through the Hancock Amendment, which spread the lost tax base impact over the remaining tax payers in the community. Essentially, the school districts tax revenue maintained stability because remaining property tax payers in the district made up the difference.

Real Estate Impact Discussion

A key reality of the past three years is the difficulty in separating the impact of the broader economic recession from the closure of Chryslers facilities in St. Louis. The following chart highlights how overall deliveries of office, industrial, and retail space have changed over the years. In general, deliveries of space have slowed considerably since 2008, with retail and industrial space being particularly hard hit. Overall, the impact on local real estate markets cannot be understated. On a three year moving average basis, the amount of new commercial space built from 2009 to 2011 (about 500,000 square feet in all three sectors) is the single lowest amount in the past 30 years. The prior low point was set in 1993 with a three year average of about 1.2 million square feet built in all three sectors.

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In the past three decades, beginning in 1982, new retail, office, and industrial construction in the St. Louis Region has increased by an average of 6.8 million square feet annually. During this time the largest growth took place during the first 10 years of the past 30. However, growth in new construction has decreased by nearly 20 percent since that time. Opening in 1959, the North and South Chrysler Assembly plants employed thousands and occupied valuable real estate for decades. In 2008 and 2009, these plants were closed, rendering the 5 million square feet of developed real estate out of date and out of mode. Currently, the former Chrysler sites have been demolished and vacated. In order for these sites to be reused, a significant amount of new retail, office and industrial space must be delivered to the St. Louis Region. Assuming that in the future, nearly 7 percent of all new retail, office and industrial construction taking place in the St. Louis Region will be distributed to the site of the former Chrysler plants, it will take approximately 12 years to redevelop the 5 million square feet that was demolished following the Chrysler plant shutdown. This projection was based on the average rate of new construction in St. Louis for the past ten years; however, if the projection was based on a thirty year average of new construction, redevelopment of the former Chrysler site would take place in nearly 10.5 years. Although, given the volatility in the US economy and real estate market, a more conservative assumption may envisage a longer period of time to fully redevelop this site. Figure 6: Commercial Real Estate Construction Trends Since 1982
14

12

10

Millions of Square Feet

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: CoStar

Retail

Office

Industrial

These combined events have impacted local industrial markets (including warehouse, manufacturing, and flex space) in key ways.

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2011

Figure 7: Industrial Real Estate Market Metrics, 1st Qtr 2011

Airport Chesterfield/Hwy-40 Earth City Fenton Hanley Illinois Innerbelt E of 170 Innerbelt W of 170 North County South County St Charles County St Louis City North St Louis City South West County Westport
Source: CoStar

Share of Inventory Share of Vacancy

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

The following two charts evaluate office and industrial market vacancy levels, as well as shares of inventory and vacant space. The first chart looks at industrial space, followed by office and retail. These figures illustrate relationships between market share of occupied space versus vacant space. For example, the North St. Louis City submarket constitutes the largest

share of inventory, about 17 percent, with a comparable level of vacancy. Figure 8: Office Real Estate Market Metrics, 1st Qtr 2011 At the same time, Fenton supports a higher share of Brentwood/Maplewood Share of Vacancy vacant space (about 5%) Bridgeton/I-70 compared to its share of CBD inventory (about 3%). This Chesterfield/Hwy-40 differential reflects the Clayton impact of Chrysler and its Creve Coeur/Hwy-67 supplier base in the Earth City/Riverport community. It also Fenton reinforces the notion that I-270/Maryland Heights I-270/Olive Blvd the loss of Chrysler has Illinois reduced Fentons Kirkwood/Frontenac competitive position as a Manchester/I-270 destination office market, North County given that the demolition of South County Chrysler has removed about St Charles County five million square feet of St Louis City space from this submarket. West County The current vacancy level in Fenton for industrial space 0.0% 2.5% 5.0% 7.5% 10.0% 12.5%15.0%17.5% 20.0%22.5%25.0% 27.5%30.0%32.5% Source: CoStar is about 11 percent, one of the highest vacancy rates in the Region, with an overall market average vacancy of about 8 percent.
Airport Share of Inventory

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Figure 9: Retail Real Estate Market Metrics, 1st Qtr 2011

Calhoun County Share of Inventory Central St Louis Cnty Franklin County Jefferson County Lincoln County Metro East Illinois NE Metro Illinois North St Louis County Outer Metro Illinois Outer Monroe County Outer St Louis County SE Metro Illinois South St Louis County St Charles County St Louis City SW St Louis County West St Louis County 0.0% 2.5% 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% 22.5% Share of Vacancy

Source: CoStar

The above charts for office and retail markets paint a different picture for Fenton and the Region. On the office side, Fenton remains a smaller market, with about 2.5 percent of area office inventory, and a smaller percentage of vacant office space, less than two percent of Regional inventory. The majority of Regional office space is in the downtown CBD area, with 22 percent of inventory and more than 30 percent of vacant inventory. For retail, Fenton is captured as part of the Southwest St. Louis County market, which currently supports about five percent of total inventory, with a slightly higher percentage of vacant inventory. From a retail standpoint, levels of vacancy in North St. Louis County and St. Charles County are notable. The Fenton industrial market was particularly hard hit by the closure. From analysis of industrial and flex (office/showroom) data provide by CoStar, it was noted that the impact of the Chrysler closure is also nuanced by the reality that soon after both plants were closed and demolition started, these plants were removed from marketable inventory by real estate brokers. As such, marketable inventory through the first quarter of 2010 was about 13.9 million square feet. When Chrysler was removed from marketable inventory by CoStar in the second quarter of 2010, marketable inventory dropped to 8.9 million square feet.

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Figure 10: Fenton Industrial Market Vacancy Trend, 1st Qtr 2011
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
2006 1Q 2006 2Q 2006 3Q 2006 4Q 2007 1Q 2007 2Q 2007 3Q 2007 4Q 2008 1Q 2008 2Q 2008 3Q 2008 4Q 2009 1Q 2009 2Q 2009 3Q 2009 4Q 2010 1Q 2010 2Q 2010 3Q 2010 4Q 2011 1Q

Source: CoStar

Fenton remains hard hit by the closure of Chrysler. Current industrial vacancy is about 11 percent, which is the second highest vacancy level in the Region as of the first quarter 2011. A total of about 1 million square feet is vacant, out of a total inventory of 8.9 million square feet. Before the Chrysler plant demolition started, vacancy levels had increased from 6.3 to 40 percent, as of the third quarter of 2009. The following chart highlights this trend. Vacancy levels are also impacted by available space, which is occupied but being marketed as available. Current analysis shows that available space in the Fenton industrial market is an additional 1.9 million square feet. When vacant and available space is combined, about 20 percent of inventory would be included. Figure 11: Fenton Industrial Market Rent Trends, Through 1st Qtr 2011
$8.00 $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Source: CoStar

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Reported average NNN industrial rents in Fenton are now slightly under $5.00 per square foot as shown in the following chart. While still higher than the current Region average of $4.20 per square foot, it is well below highs sustained in 2006, when NNN rents of $6.49 per square foot were achieved. The rate of decrease in rents from third quarter of 2006 is significant, decreasing at an annualized rate of 6.6 percent. The rate of decrease since the third quarter of 2008 is worse, about 17 percent on an annualized basis, reflecting a decrease in average rents from $7.33 down to $4.94 per square foot. While Fenton does not charge a local property tax, other taxing entities would be impacted gradually by this rate of decreases, as lower occupancies and rents begin to reflect themselves in lower assessed valuations. A small portion of vacated space has been backfilled, with leases signed by firms such as Leinco Technologies (68 jobs in Fenton), as well as Plaze, Inc, in Pacific (100 to 200 jobs), and Cenveo Printing in Eureka (200 jobs consolidated). In total, we estimate that the closure of Chrysler directly impacted 5 million square feet of space in the two plants, as well as an additional 2 million square feet of space in supplier-leased buildings. While these losses are significant in the context of submarkets around Fenton, where Chrysler accounted for about 35 percent of a 13 million square foot industrial base, across the Region, seven million square feet is about three percent of the entire Region industrial base of about 260 million square feet. The second point to be made here is that the impact of Chrysler is really measured in terms of the output generated within the assembly buildings. For greater clarity regarding the status of supplier sites, the following table summarizes information reported from brokerage sites regarding current occupancies for noted properties. Out of a total of 2.7 million square feet of space shown below, about 43 percent is currently occupied. Key vacant spaces include the large 500,000 square foot site used by Syncreon and LSI adjacent to the Chrysler site. Table 15: 2011 Vacancy Status of Key Supplier Sites
Company Mahle Engine Components Lear Corporation Findlay Industries Decoma International / Exkor Mfg Johnson Controls Visteon Kace / HBPO North America Syncreon / Logistics Services Inc Lumbee Enterprises TRW Oakley Industries Ventra Group Dakkota Integrated Systems MSX International Permacel Automotive Textron Automotive
Source: CoStar, other brokerage sites

Address 14161 Manchester Rd. 45 Corporate Woods Dr. 18036 Eads Ave. 721 Prairie DuPont Dr. 13333 Lakefront Dr. 101 Workman Ct. 2501 Cassens Drive 2219 - 2231 Hitzert Ct. 1576 Fencorp Drive 2015 Corporate 44 Dr. 10360 Lake Bluff Dr. 800 Jefferson St. 3505 Tree Court Ind. Dr. 11425 Moog Dr. 1218 Central Ind. Ave. 11149 Lindbergh Bus Ct.

City Ballwin Bridgeton Chesterfield Dupo Bridgeton Eureka Fenton Fenton Fenton Fenton Green Park Pacific St. Louis St. Louis St. Louis St. Louis

Space (ft2) 216,139 126,400 78,976 160,000 189,555 220,000 127,464 534,600 42,000 84,404 142,800 221,110 100,000 230,800 137,484 91,896

Occupied (ft2) 0 0 78,976 60,000 0 220,000 29,892 0 42,000 0 117,900 221,110 100,000 198,300 91,896

Vacancy Rate 100% 100% 0% 63% 100% 0% 77% 100% 0% 100% 17% 0% 0% 14% 100% 0%

The following map summarizes estimated vacancy rates for industrial properties in Fenton, Missouri as of first quarter 2011.

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Figure 12: Vacancy Rates for Industrial Properties in Fenton, MO (Q1, 2011)

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Workforce Development Impacts

The workforce aspect of the Chrysler closure is a critical element of the overall study. The discussion begins with key metrics provided by the State of Missouri related to Workforce Adjustment and Retraining Act Notices (WARN) regarding impacted workers: 4,478 workers were affected by the elimination of shifts and eventual closure of both plants. Closure process was spread between November 2007 and June 2009. 4,169 Chrysler workers filed Trade Act Claims 600 to 650 workers transferred to other Chrysler plants (some still reside in the Region). 99 percent of UAW workers were transferred, retired, or took early retirement buyouts. Information related to buyouts is as follows:
South Plant Jobs 228 95 444 122 889 North Plant Jobs 140 73 1,062 1,275

Table 16: Chrysler Employee Status Changes, 2008-2009

South Plant Retired (IPR) Early Retirement (SER) Buyout / quit (V-TEP) Skilled Trades buyouts Subtotal
Source: UAW

From focus groups and interviews, several critical elements related to workforce were defined: Local Chrysler workers were a unique group, with younger workers who may or may not be UAW, as well as older workers who are close to retirement. The work force was diverse in race, gender, and educational attainment. The workforce was distributed across the Region, with a majority on the Missouri side of the river, as noted previously. Many of the former workers were generationally connected to Chrysler going back to the 1940s. Workers moved their families from city to city as plants opened and closed. Interviews suggested that as many as three generations of former Chrysler workers live in Pacific, MO. Continuing in this tradition, a number of workers now work at the Kokomo and Rockford Chrysler facilities, even as their residence remains in the St. Louis area. While the buyout packages for UAW employees were considerable (greater than $100,000 in value), interviews suggest that many former employees are probably running out of money now. While the closure was seen as a forced buyout which allowed many to collect unemployment benefits, even these resources would also now be running out. The analysis highlighted the reality of temporary part-time (TPT) workers who amounted to as many as 800 positions on an ongoing basis. Interviews suggested that during hunting seasons, TPT requirements would surge significantly. Overall, many TPT people who lost their jobs didnt get benefits or buyout packages. A minority of the estimated 2,500 lost supplier jobs were UAW linked and received buyouts. For the non-UAW people, unemployment insurance and retraining funding were the key supports.

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99 percent of people who didnt relocate were eligible for $13,000 in Trade Adjustment Assistance (TAA) for retraining. In addition, many Chrysler workers got an additional $10,000 for retraining (Workforce Investment Act, or WIA). While these programs were helpful, they also came with constraints. Interviews suggested that the program constraints limited the ability of former workers to pursue 2+ year associate or bachelors degree programs. For example, medical training was more difficult for former workers as these jobs require prerequisite courses which are harder to accomplish in the context of the limited re-training funds available from TAA and WIA. Interviews suggested that a majority of former line workers went into other types of training HVAC repair, electronics training, and truck driving school however, many did not find jobs. Employees who were in skilled trades had better luck finding work. Part of this related to timing, in that the closure of the Ford Plant in Hazelwood created a surge in worker re-training, many of whom went into HVAC repair. On a broader level, the recession meant that there were fewer opportunities for Chrysler workers. Placement rates are now slowly getting better, but still low (25%) according to workforce development officials. Boeing has had success working with former Chrysler workers.

To highlight where workers sought training, we evaluated data from St. Louis County Workforce Development, an organization which managed a majority (but not all) of training for former Chrysler workers. The following figure highlights the percentage share of workers who went through some form of training, ranging from single classes to more advanced computer certifications, to associate, bachelors and masters degrees. Figure 13: Training Focus for Former Chrysler Workers in St. Louis County
Associate Degree Bachelors Degree Masters Degree Building Maintenance Automotive Maintenance / Repair Business Administration Precision Welding & Fabrication Computer Systems & Networking Culinary Arts Electrical HVAC Accounting Legal / Criminal Justice Cosmetology Human Services General Studies Supply Chain Management Aviation Repair Training Nursing & Health Care Primary Education Truck Driving / Heavy Equipment Operation Other Sectors 0%
Source: St. Louis County Workforce Development

3%

5%

8%

10%

13%

15%

18%

20%

Most notable in the following chart is the relatively small share of workers who completed a two- or four- year advanced degree, 14.5 percent of the sample. For comparative purposes, across the entire St. Louis Region, about 8 percent of people have an associate degree, 18 percent have a bachelors

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degree, and an additional 12 percent have an advanced degree. This distinction reinforces that the Chrysler workforce is different from the population as a whole. Within the remaining 85 percent of the sample, 51 percent went into four specific fields, including electrical, computer systems and networking, nursing and health care, and HVAC training. Nursing and health care was the single largest area of re-training, with about 20 percent of the sample covered. Key issues that underlie these trends include: While some certification programs for software and networking can generate salary levels equal to associate or bachelor degrees, the majority of pay levels associated with training programs are lower, significantly below pay levels at Chrysler. Interviews suggested that a portion of Chrysler workers expected the plants to re-open at some point, which influenced their choices regarding re-training. While the clear focus of the primary educational system is to prepare people for college (since many careers require a four-year degree), for St. Louis, only about 37 percent of residents achieve at least an associate degree. As such, there is a clear workforce development question, in that workforce preparation is becoming more important than educational attainment.

For a broader perspective on the breakdown of job losses, the following table summarizes decreased employment by occupation for people employed in the transportation equipment sector in Ohio, Indiana, and Michigan between 2006 and 2009. The table reinforces the importance of production and assembly jobs for this sector, representing about 25 percent of a total decrease of 232,332 positions in the three states over the noted period. Table 17: Tri-State Employment Loss in Transportation Equipment MFG, 2006 to 2009
Title Team Assemblers and Fabricators Production Workers, All Other Cutting, Punching, and Press Machine Operators Inspectors, Testers, Sorters, Samplers, and Weighers First-Line Supervisors/Managers Machinists Tool and Die Makers Engineers, All Other Industrial Engineers Industrial Truck and Tractor Operators Maintenance and Repair Workers, General Industrial Machinery Mechanics Mechanical Engineers Welders, Cutters, Solderers, and Brazers Laborers and Freight, Stock, and Material Movers, Hand Molding, Coremaking, and Casting Machine Operators Business Operations Specialists, All Other Multiple Machine Tool Operators Electricians Sub-Total Other Occupations Total, All Occupations
Source: UAW

Loss % of Total -57,403 25% -9,676 4% -8,146 4% -7,432 3% -6,940 3% -6,823 3% -6,728 3% -6,585 3% -5,224 2% -5,019 2% -3,531 2% -3,401 1% -3,362 1% -3,277 1% -3,150 1% -3,106 1% -3,097 1% -2,830 1% -2,792 1% -148,522 64% -83,813 36% -232,335 100%

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Chrysler Employee Focus Group Insights

As part of this study, AECOM contracted with Vector Communications to conduct three focus groups with displaced Chrysler workers, business owners and other industry representatives in Fenton and immediate surrounding jurisdictions. The goal of the focus groups was to ensure that the issues, values and desires of those directly impacted are reflected in the final strategy action plan. The meetings were designed to obtain information about how workers and businesses have been impacted by the plants closure and how they have adjusted to it. They were also used to determine what programs have been successful, in helping workers and businesses overcome these impacts. During March and April 2011, three focus groups were held involving a total of 28 people. Two focus groups consisted of 16 former Chrysler employees (six women and ten men) and took place at the Fenton Regional Collaboration Center. Participants were from throughout the Region and had previously worked in Chryslers assembly divisions. Group A contained nine participants, six of whom had taken Chrysler retirement packages, one who had several part-time jobs and two who had returned to school or received certification but were unemployed. Those who received retirement packages considered themselves unemployed as well. There were seven participants in Group B. Six were employed. Two of them work with the Fenton Regional Collaboration Center (the Center), three are employment counselors at St. Louis Community College and one was re-employed with a Regional manufacturing company. The seventh participant was chronically unemployed. At the time of the focus group, six of the employed workers were experiencing possible future layoffs or relocations due to the Centers closing, grants expiring and the manufacturing companys relocating out of the Region. The third focus group involved 12 representatives from the Fenton area business community. Participants were recruited from the Fenton Area Chamber of Commerce membership roster and the meeting was held at the organizations office. They represented the following industries: hotel and tourism; municipal government; food service; real estate; education; and financial services. Of the participants, two were entrepreneurs, one a fire district chief and the remaining were managers or directors at larger organizations. The information gathered from the three focus groups centered on several recurring themes. The greatest impact of the plants closure was on participants earning ability. Those who were displaced workers continue to struggle with finding new employment, while businesses are laboriously reorganizing their strategies to adjust to a significantly reduced customer base. The result of the impacts left the entire community figuring out the new normal, as displaced workers, residents and businesses try to maintain a sense of identity without Chrysler. Networks and neighborhoods are becoming less stable, at the same time people are more reliant on these networks for support. When participants were asked about the obstacles hindering their efforts to get back to work or business, themes emerged that reflected both interpersonal and systematic causes. Interpersonal hindrances were in the areas of computer skills, age and education. Workers had not been actively conscious of these areas before the plants closure because they believed Chrysler would continue to be their employer long-term. In addition, systematic themes surfaced, such as workers limited access to vital employment information, business startup loans requiring high-risk collateral and outdated business regulations and policies from area municipalities and the state. An interesting factor for these groups was a sense of being discriminated against due to their previous employment with

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Chrysler. As a Region, workers believed that they would benefit from a repositioning campaign casting them as vital assets to employers. In a tough economic environment, many businesses have closed and workers have left the workforce by retirement or lack of opportunity. Increasingly, workers and surviving businesses are expanding their geographical boundaries outside of the Fenton area and the Region, as local jobs and customers are becoming scarcer. To prepare for the next wave of viable jobs, displaced workers are exploring new opportunities like green technology training. However, these jobs are developing slowly within the Region. Not only are employees getting new training, but businesses are also taking on new opportunities. Areas like green certifications have enticed area businesses that want to be specialized and positioned above the competition as they compete for a very limited customer pool. Focus group participants were asked about the support they have received in overcoming obstacles and getting back to work. A few themes that emerged were: the reliance of workers on the Fenton Regional Collaboration Center, which was established to assist laid-off workers affected by the closing of Chryslers Fenton assembly plants; the effectiveness of the Fenton Area Chamber of Commerce; and the availability of assistance grant money. While each group had accessed a variety of help through their adjustment process, these three areas were discussed the most. Other support mechanisms included tax incentive programs for employee education and training and green certification programs for individuals and businesses. Finally, participants were asked to brainstorm additional ideas that could help workers and businesses around the Region. Themes included: positioning the area and workers as assets to employers through marketing and advertising; aggressively attracting other job producing industries; reviewing outdated business regulations to bring them into a post-Chrysler environment; and intensifying the focus on promising opportunities like the Midwest China Hub and enterprise zones.

Broader Context
The analysis also reinforced the unique nature of work in an auto assembly plant. Interviews with former employees stressed the following: The Chrysler plants employed thousands of people per shift, with significant turnover at shift changes, which creates unique logistical challenges. Working on the assembly line involves doing the same thing, the same way, in the same order, over and over and over again. You could have a job that involves going to go to the car, sitting down to install five bolts then stand up, turn around and face the vehicle, bend over and snap two different wires together at two places. If the build is 450 jobs a day, you sat down and stood up 450 times, installed 2,250 bolts turned around and bent over 450 times and finally used the same two fingers to snap two wires together 900 times per day. A factory of 5,000 employees is the size a small rural town. Just like any town, you are going to have good people, bad people, happy people, sad people. Sometimes people have good days and sometimes they have bad days. In the end, they are communities unto themselves, who are together for years. When someone passes away, the town mourns, but when the entire community is decimated, outsiders call it an economic adjustment.

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72

Economic Base Recession & Recovery

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Core Findings
To provide a proper national context for the St. Louis Regional Economic Adjustment Strategic Plan, AECOM evaluated broader economic metrics related to how the US is recovering from the recession. Key points include: From October 2008 to June 2011, total US employment decreased by nearly 5.4 million jobs. For the first time since 1975, the Housing Price Index began to drop, falling nearly 15 percent from the first quarter of 2007 to the first quarter of 2011. As of 2010, nearly 1,700 financial institutions either closed or were merged with other financial institutions across the country. In 2009, all US financial institutions held a total of approximately $540 million of underperforming assets on their balance sheets. At the time, about 80 percent of these assets were derived from real estate securitized loans. Throughout the past 10 years, both mortgage debt and consumer credit have increased at nearly the same pace; however, consumer credit has begun to decrease in recent months, whereas mortgage debt continues to trend at levels equivalent to 2007 levels, parallel with the height of the US housing bubble. In 2010, auto production levels in the US were the lowest they have been in past 25 years. Individuals 65 years of age and older are expected to increase to over 70 million, noting a total increase of nearly 80 percent since 2010. Looking over the past 200 years of westward expansion of the US, the period from 2000 to 2010 saw a remarkably slow rate of movement in the center of the US population, comparable to levels achieved between 1920 and 1930. This lack of mobility is a key challenge for the country

Introduction
In 2008, the United States economy officially entered a recession. Economists consider this recession as a generational recession, or in other words, a severe economic event which happens infrequently and has a range of impacts much greater than a normal business cycle. More so, this experience has been described as the deepest economic recession since the Great Depression. While there are myriad elements accounting for the cause of the current economic downturn, the underlying cause is generally recognized as the excessive expansion of credit issuance coupled with a contraction of economic activity and combined with the realities of government policy which favored

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home ownership while also deregulating financial and banking services. Severe reactions rippled throughout the US consumer sector, a sector driving growth and health of the nations economy. Credit losses and economic weakness ignited uncertainty and panic within financial markets, which inturn added another layer to the national economic problem, thus accelerating the deterioration of the US economy which began to be felt sometime between 2007 and 2008. Arguably, the Midwestern US felt pressures sooner than the rest of the country. In 2006, industrial sectors slowed, at first by stagnation in the home construction industry and then sweeping throughout various industries following the collapse of Lehman Brothers in September 2008. This event marks one of the most profound periods of economic distress in recorded history. By October 2008, financial markets in the US and overseas essentially stopped working, industries shutdown, layoffs spiked, and the unemployment rate dramatically accelerated. Many cornerstones of the US economy, such as the automobile industry, were weakened to the point of bankruptcy and in some cases operations were terminated entirely. As a result, these deep impacts have caused fissures within the foundation of the US economy, likely to create long-lasting implications for many sectors, for many years to come. For example: Over the years, the US approach to economic growth can be best described as creative destruction: allowing firms to go bankrupt and then redeploying resources in new ways. Looking back to the last significant recession in the early 1980s, it is notable that many companies that are taken for granted today were formed out of this last period of dramatic instability. Some may expect the same from the current economic recession. Dramatic growth in home prices between 2004 and 2007 effectively dampened the initial wave of the Baby Boomer generations housing transition, which may have otherwise happened. Subsequent impacts on retirement savings also suggest that many Boomers will need to remain in the workforce, which raises a unique set of workforce development challenges.

An additional concern is the broader impact of the recession on the public sector relative to tax implications. Across the US, property value growth has halted and begun to decrease. When combined with decreases in sales tax revenue and a general slowdown in development, the period from 2009 to 2014 may prove to be the most difficult years that the public sector has faced in recent history. While some public sector entities are better positioned to ride out these years, other entities will struggle with insolvency unless restructuring efforts are undertaken. While recent events have proved dramatic with respect to financial implications and behavioral economic trends, there are signs of improving economic activity. In the later months of 2010, the US economy began to show signs of recovery, specifically: Following a contraction within the financial market, the market itself is showing signs of stability; however, economic activity is yet to increase due to tight access to capital for consumers and businesses. Some benefits of Federal stimulus have begun to emerge, resulting in limited economic activity as seen in employment, wages and housing prices. At the same time, the influence of policy levers is now weakening. Employment has experienced static movement throughout 2010 and since January 2011, the US has seen gradual increases in hiring, boosting total employment each month.

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Reaching a peak in the first quarter of 2010, the national unemployment rate has begun to bounce back, dropping over one percentage point from the beginning of 2010 to quarter four of 2010. Following years of dramatic growth in the price of homes from 2004 to 2007, home prices in the US decreased at staggering rates from 2006 to 2009; however, though home prices continue to lose value, in 2010 home values did not decrease at as slow a pace as they did in 2008 and 2009.

As some economists believe that the US is recovering, there are certain factors that will cause lagtime, resulting in a slower recovery than what may have been anticipated. While some segments of the US economy are improving, overarching factors may indicate a slow moving process towards a full recovery of the nations financial system. In the following section, AECOM will provide a broad overview of the current national economic outlook. Most metrics will be analyzed based on how much the US has recovered since the housing and financial collapse. Throughout the next two sections, AECOM employed various source data reporting general economic statistics. This data was used to interpret key indications of local, regional and national economic conditions. Many concepts and underlying assumptions vary among the sources that were used; therefore, AECOM has provided a brief description of each source that has been referenced throughout these sections: Bureau of Labor Statistics (BLS) Sources: Local Area Unemployment Statistics (LAUS) LAUS data is defined as a Federal-State cooperative effort of prepared employment and unemployment totals, which are aggregated and extrapolated for real time public use. LAUS data may be considered the widest measure of employment data; the LAUS produces data for multiple geographic levels. Current Employment Statistics (CES) Produced for the nation as well as state and regional geographies, the CES is a monthly survey documenting detailed industry data on employment, hours worked, and earnings. Quarterly Census of Employment and Wages (QCEW) This source reports a quarterly count of employment and wages tabulated through surveys of employers. The QCEW covers 98 percent of all US jobs and is available at the county, regional, state and national levels by industry sector.

United States Census Bureau Source: Local Employment Dynamics (LED) LED data is a program designed to develop new information about local labor market conditions. LED data is available at the county, sub-county, and most notably the local level (i.e., census tract). The metrics that are covered in the LED source are job creation, turnover, and earnings by industry and gender.

Financial Institutions
The health of financial institutions is measured by a number of factors, one notable factor being the amount of bad debt a single bank or financial institution is carrying; in other words, what proportion of a banks total assets are made up of loans or leases that are delinquent/underperforming (i.e., assets past due 30-90 days, assets past due 90 or more days, or assets in nonaccrual status). The following charts below look at all commercial banks and financial institutions that are insured or assisted by FDIC. The first chart depicts the total amount of financial assets of all banks in the nation. From 2002 to 2010, total financial assets in the US have increased by an annualized rate of six percent, peaking

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in 2008 at approximately $1.4 trillion. Since 2008, assets have decreased slightly and leveled off by 2010. The next figure tracks the growth of total assets by banks in Missouri. Figure 14: US Banks Total Assets, 2002-2010
(trillions) $15 $14 $13 $12 $11 $10 $9 $8 2002 2003 2004 2005 2006 2007 2008 2009 2010 $8 $9 $11 $10 $12 $14 $13 $13 $13

Source: FDIC

US Total Assests

Figure 15: Missouri Banks Total Assets, 2002-2010

(billions) $150 $140 $130 $120 $110 $100 $90 $80 $70 2002 Source: FDIC 2003 2004 2005 2006 2007 2008 2009 2010 $87 $80 $98 $92 $107 $114 $138 $129 $129

Missouri Total Assests

Total bank assets peaked in 2009, nearing $140 billion. Since then, Missouri has experienced a sharper decline than the US; however, total assets continue to remain substantially higher than all years prior to 2009. However, overall, from 2002 to 2010, Missouri is trending at the same pace as the US, increasing at an annualized rate of 6 percent. The next chart illustrates the total amount of underperforming assets as a share of total bank assets, while also showing the growth of underperforming assets which were secured by real estate products as a share of total underperforming assets in the US and Missouri.

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Figure 16: Underperforming Assets in US and Missouri Financial Institutions, 2002-2010

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0%
2002 2003 2004 2005 2006 2007 2008 2009 2010

Missouri Underperforming Assets Source: FDIC

US Underperforming Assets

Underperforming Real Estate Assets

Factors that may suggest the overall rise in underperforming assets among FDIC banks are the amount of underperforming real estate secured assets. Also represented in the chart above is the share of underperforming real estate assets in both the US and Missouri: In the US, from 2002 to 2010, underperforming real estate assets increased at an annualized rate of 27 percent. In Missouri, underperforming real estate assets increased at an annualized rate of 20 percent. As compared to the US, Missouri banks are not experiencing the same rate of inflow of underperforming real estate assets; however, what is troubling is that the share of underperforming real estate assets is increasing in Missouri as well as the US. While Missouri banks have experienced a larger share of underperforming real estate assets to the total underperforming assets over time, underperforming real estate assets, at the national level, have grown at a more rapid pace from 2002 to 2010, during which time the share of underperforming real estate assets has increased at an annualized rate of 8 percent in the US and 4 percent in Missouri. While the US is accruing underperforming assets at a faster pace than Missouri, as of 2010, the proportion of underperforming real estate secured assets in Missouri made up more of the total proportion of ailing assets. In 2010, the total share of underperforming real estate assets was 85 percent in Missouri and 80 percent in the US.

Consumer Borrowing
As the nations economic recovery approaches year two, it remains weak, only improving at a slow pace. Among other things, the current slow pace of recovery is due to the arduous process of deleveraging, as financial institutions and individuals chip away at massive amounts of debt. The following chart shows the amount of national debt as measured by consumer credit and mortgages.

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Figure 17: National Debt Types, 2004-2011

(All $ = Trillions) $2.7 $2.6 $2.5 $2.4 $2.3 $2.2 $2.1 $2.0 $1.9 $11.5 $11.0 $10.5 $10.0 $9.5 $9.0 $8.5 $8.0 $7.5

2004

2005

2006

2007

2008

2009

2010

Consumer Credit (left axis) Source: Federal Reserve

Mortgage Debt (right axis)

In the early months of 2011, consumer loans (excluding property), shifted upwards despite anti-credit attitudes born out of the recession; while at the end of 2010, mortgage debt has decreased slightly but is still far above 2005 levels. The data from the cross-currents is telling, suggesting a possible rise in confidence and income to boost some forms of consumer credit. Notable statistics include: Despite a 1.89 percent annual decrease following a peak in home mortgage debt in 2007, home mortgage debt in the US has increased at an annualized rate of 4.14 percent from 2004 to 2010. This increase accounts for an actual net increase of nearly $2.3 trillion. 2008 marked the peak for which institutions extended credit (excluding property) to consumers. Onwards, consumer credit has decreased at an annualized rate of 1.9 percent, a net total of about $145 billion in two plus years, nearing pre-recession levels.

As consumer credit converges on relative stability, mortgage debt remains the weakest part of the overall credit market. According to an article published in the Economist in May 2011, in coming years, mortgage lending standards are likely to tighten. New rules being developed could require mortgage lending institutions to retain at least five percent of newly originated mortgages, where in the past it was routine for banks to sell off 100 percent; borrower down-payment commitments will grow.

Housing
Housing market conditions are a strong indication of economic health, more so, the pace of economic recovery. An all-inclusive measure of the housing market is home values and the cost paid at transaction. The Housing Price Index (HPI), tracked by the Federal Housing Finance Agency, measures the movement of single family house prices. The HPI is a weighted, repeat sales index on the same properties in 363 metro areas across the United States. Data is collected by reviewing repeat mortgage transactions on single family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.

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2011

Figure 18: Percent Change in the US Housing Price Index, 1981-2010

12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0%
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: U.S. Federal Housing Finance Agency

Changes in housing prices since 1981 are shown in the following chart. Historical data was included in this time frame to provide a scale portraying the former trends in the US housing market, prior to the year 2000. Some important events that emerged were: From 2000 to 2005, the national HPI accelerated upward by 45 percent, the quickest and most sensational appreciation in home values in US history. Home values have continued to depreciate, producing staggering decreases from 2007 to 2011, at which time the nations HPI decelerated by 15 percent. Now hovering near prerecession levels in 2005, home values in the US are decreasing at a slower rate than prior years, indicating signs of improvement in the economy.

Employment
Commonly cited as a leading metric gauging economic health, employment, as defined by the US Bureau of Labor Statistics (BLS), includes the total number of persons on establishment payrolls employed full- or part-time; including, intermittent employees, workers on sick leave, workers on paid holiday, and striking workers who are paid. Excluded from this measurement are proprietors, selfemployed, unpaid family or volunteer workers, farm workers, and domestic workers.

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Figure 19: National Employment, March 1990-2011

(Thousands)

150,000 130,000 110,000 90,000 70,000 50,000 30,000 10,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Goods Producing Source: BLS - CES Private Service Providing Government
(Thousands)

The following chart shows the US average annual total employment from 1990-2011 (as of June) for aggregated industry sectors. During this time period, total employment increased by approximately 21 million, increasing at an annualized growth rate of 0.84 percent. While the annualized growth rate over this period of time has shown an upward trend, employment has decreased the past several years.

The US experienced the most dramatic decrease in employment from the middle of 2008 to the middle of 2010. Within this three year stretch, total employment decreased at an annualized rate of 3 percent. In June of 2009, the Goods Processing industry sector lost nearly 3.1 million jobs; the Private Service Providing industry sector lost nearly 3.8 million jobs, while the Government sector saw an increase of 67,000 jobs. However, there are signs of recovery, from June of 2010 to June of 2011, the United States economy has gained nearly 1.2 million jobs. Pending for the future may be the loss of government jobs, due to overbearing debt at all levels of government. The chart below shows cyclical unemployment in the US, downward shifts in employment and upward shifts in the unemployment rate as of the second quarter from 2000 through 2011. Figure 20: Total Employment vs. Unemployment Rate, 2nd Quarter 2000-2011
139,000 138,000 137,000 136,000 135,000 134,000 133,000 132,000 131,000 130,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q2 Average Source: BLS - CES & QCEW Unemployment Rate

10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%

Cyclical unemployment is the by-product of a weak economy. The onset of the recession occurred somewhere between 2007 and 2008 during the collapse of the US housing market, followed by the peak, when financial institutions froze credit. During the time of recession, the 2008 total employment was nearly 136 million in the second

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quarter of that year. However, the 2008 quarter two unemployment rate of 5.2 percent was just beginning to rise, not peaking until quarter two of 2010, at 9.5 percent. It should be noted that the unemployment rate jumped to 10 percent in quarter one of 2010, reaching 10.4 percent, and marking the first time in 27 years, since quarter two of 1983 that the unemployment rate in the US jumped over 10 percent. Employment numbers reached a low point in quarter two of 2010; at this time, there were approximately 130 million individuals in the US labor force, about a nine-percent drop from the peak in quarter two of 2008. Concurrently, the nations unemployment rate was also at its peak. It should be noted that in a healthy economy, a positive unemployment rate may be considered a good thing. It is an indication of a fluid available workforce, as well as potential for growth. Therefore, static unemployment, at some lower capacity, is healthy. In other words, a positive unemployment rate is the price paid for technological and personal socioeconomic advancement, taking into account structural unemployment (i.e., factory layoffs) and frictional unemployment (i.e., individuals moving between industries and locations).

Occupational Education Requirements

In todays economy, most occupations require a postsecondary degree award/certification or equivalent training. According to the Bureau of Labor Statistics occupation projections from 2008 (base year) to 2018, nearly one-third of all new job openings will require some sort of post-secondary degree. The following table summarizes BLS projections for occupations experiencing the most growth, as well as those experiencing the greatest decline. Insights include: Short- and moderate-term on-the-job training will be required by more than half of the top 30 growth occupations; of the top 30, 17 occupations indicate this as being a minimum requirement for education or training needed to become fully qualified for that occupation. Of the bottom 30 declining occupations, 90 percent require at least short- and moderate-term on-the-job training. Of the top 30 occupations experiencing the most growth, nearly one quarter will require at least a bachelors degree in the next ten years. The bottom 30, declining occupations, are ones that have not historically required any sort of post-secondary education.
Top 30 Growing Occupations 3.3% 16.7% 40.0% 6.7% 10.0% 16.7% 6.7% Bottom 30 Declining Occupations 6.7% 33.3% 57.0% 3.3% 0.0% 0.0% 0.0%

Table 18: Education Requirements for Projected Top and Bottom 30 Occupations (2008-2018)
Requirement Long-term on-the-job training Moderate-term on-the-job training Short-term on-the-job training Work experience in a related occupation Associate's degree or Certification Bachelor's Degree or Higher Doctoral or Professional Degree
Source: BLS Economic News Release

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Boomer Retirements
Defined by the US Census, Baby Boomers are individuals that were born in the post-World War II demographic birth boom, between 1946 and 1964. Population projections from 2000 to 2030 are shown below. Figure 21: Population Growth Projection (1990-2030) Currently, the oldest Baby Boomers (born in 1946) will turn 400 65 years old in 2011, the 350 youngest (born in 1964) are 300 currently 47 years old. By 2029, 250 all of the Baby Boomer 200 generation will be 65 and older, 150 the oldest individuals will be age 100 83. Not until 2031, when the youngest individuals of the 50 Boomer generation are 67 years old, will all individuals within this cohort be eligible for full Social Security benefits. As Baby Under 20 20 to 64 65 and Older Boomers enter their retirement Source: Census *Projection years, some economists believe that there will be a wide range of implications on the country. The projected growth of the older population in the US may present challenges to policy makers and programs (i.e. Social Security and Medicare). Additionally, the aging population may affect the government, businesses, health-care providers, and families.
(Millions)

2010*

2020*

Trends in labor force participation among the elderly will have an important impact on the economy and dependency in the future. Some of these impacts will affect: The accumulation of credits for pensions, annuities, Medicare and Social Security benefits. The preemption of time and energy of adult children in supporting parents as dependents. As boomers reach retirement age they will be dependent on different sources of income, including a Social Security fund that will deplete as more individual become eligible. Patterns in labor force involvement in the past 50 years suggest that there is a declining trend in median age of retirement; however, with the recession affecting the savings of many boomers, some economists anticipate those reaching 65 (the official retirement age) to remain in the workforce. As the economy begins to slowly recover and grow, a workforce swollen with the Baby Boomer cohort may mean fewer jobs for younger workers, as well as those who became unemployed during the recession.

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2030*

1990

2000

Population Center
The population center is defined as the geographical location that represents the centroid of a regions population. As there are shifts in population and migration, the population center shifts as well. Throughout history, the US population center has shifted in a line with southwesterly tones. The National Mean Center of Population, determined by the US Census Bureau, is established by determining the place where an imaginary, flat, weightless and rigid map of the US would be in perfect balance. More clearly, the mean center is the geographic point where the US would be in perfect balance if each of the 308.7 million citizens weighed exactly the same. Since 1790, the population center has shifted west, reflecting the settling of the frontier, where waves of individuals began to immigrate west and south. According to the Census, the current location in Texas County, Missouri has traveled nearly 1,000 miles from the original center in 1790, Kent County, Maryland. The following figure shows the direction the National Mean Center of Population has traveled since 1790. The mean center has passed through the St. Louis Region on three occasions from 1960 to 1980, in Clinton County, IL; St. Clair County, IL; and Jefferson County, MO; in addition, the nations population center fell in Crawford County, MO in 1990. Figure 22: US Census Map of Population US Center, 1790-2010

The chart below tracks the number of miles that the mean center of US population has shifted to the southwest since 1790; thus, the ten-year rate of movement. Particularly notable in the following chart is the slower rate of movement during times of national economic turmoil; for example, between 1920 and 1940 the average rate of southwesterly movement was nearly 2 miles annually. This is significant, in that the rate of movement between 2000 and 2010, about 3 miles per year, which compares to trends from previous periods where the national economy was stressed. On average, the population center moved nearly 5 miles southwest annually since 1790.

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Figure 23: Population Center Distance Traveled SW (1790-2010)

1790-1800 1800-1810 1810-1820 1820-1830 1830-1840 1840-1850 1850-1860 1860-1870 1870-1880 1880-1890 1890-1900 1900-1910 1910-1920 1920-1930 1930-1940 1940-1950 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 0
Source: US Census

20

40

60

80

Southwest Movement (Miles)

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Economic Base St. Louis Region

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Core Findings
To provide a proper local economic context for the St. Louis Regional Economic Adjustment Strategic Plan, AECOM evaluated local metrics related to how the St. Louis Region is recovering from the recession. Key points include: The Region offers competitive wages, with relevant levels of educational attainment, with a generally competitive business tax climate. For PhD level researchers, the St. Louis Region supports a significant level of activity. While the St. Louis Regions low cost of living may be seen as a competitive advantage, which has been described as a key selling point for attracting young professionals to the Region, population growth within the Region suggests otherwise. Low cost of living regions, experiencing growth, are ones that are considered to be centers of innovation, and technology communities; additionally, these regions are considered to be assets to their host states as well as the nation. Compared to the US (28 percent), the St. Louis Region ranks higher in the amount of individuals age 25+ of the total population that have acquired at least a Bachelors degree (29 percent); however, the rate of individuals who are age 25+ who have only completed high school or equivalent (GED) is troubling (nearly 28 percent of this population). While job growth since 2010 has been notable (with the St. Louis Region adding about 3,000 new jobs per month) as the local economy stabilizes, there is concern about the Region resuming its longer-term growth rate which is lower than many of its peer metropolitan regions. The analysis suggests that, at current longer term growth rates, the Region will fall out of the top 20 metropolitan areas by 2030 in terms of population. Sustaining current growth rates will require more deliberate steps to maintain economic growth, in part through policies that can sustain the current pace of export growth for the Region. The analysis shows that people aged 0 to 24 are declining as a share of the Region population, while workers at or approaching retirement, specifically those aged 55 to 64 and 65+ are growing as a share of the Regional population. According to US Census data, the St. Louis Region is more dependent on larger companies than the US average. For the US, 61 percent of firms are concentrated in businesses with one to four employees. Across the Region, the comparable factor is 55 percent. The difference largely relates to the presence of larger companies with greater than 100 employees.

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The St. Louis Regional economy is diversified, supported by sectors such as professional services, health and education services, leisure and hospitality, and financial services, all of which anchor the Region. At the same time, sectors such as information, transportation and warehousing, and manufacturing seem slightly under-developed. Clean technology industry segments are often thought of as the future of industrial trade in the US; thought of as an evolution into industries focused on developing clean, renewable sources of energy, increasing energy efficiency, and conserving resources with limited supply which harm the ecosystem. Relative to the US, there are several clean tech industry segments showing strength in the St. Louis Region, including scientific and R&D industries, private hospitals, and surgical & medical instrument industries. In the past, the St. Louis Region has been described as fragmented and over-governed. Currently, for every 2,700 individuals there is one single unit of government; however, compared to the US average there is 3,500 individuals per one governmental unit. This is problematic for many reasons, having implications on taxes, local policies, infrastructure development, political strife, to name just some instances. While Lambert St. Louis International Airport is clearly performing below its historic levels due to the loss of hub status, the analysis shows that Lambert is still performing well amongst its regional peers, which include Cincinnati and Indianapolis in terms of passenger traffic. Reflecting the loss of Chrysler, the St. Louis Region has taken a significant hit in terms of lost employment and gross regional product. Replacing these lost positions will need to be a priority for the Region. While national reports highlight crime issues for the City of St. Louis, analysis of FBI data clearly shows that the St. Louis Region experiences levels of violent crime that are below other areas, such as Kansas City or Memphis. Although the Region has debated the question of right to work, our analysis of states which are either open shops or closed shops suggests that, in fact, the State of Missouri has positioned itself in between these two markets, as reflected in wage levels which are generally competitive.

St. Louis Region Economic Base Discussion

In the context of how the St. Louis Region adjusts to the loss of Chrysler, the process must begin with a clear discussion of economic strengths and weaknesses of the St. Louis Region, as well as appropriate context for how the Region compares to other benchmark regions. Understanding historical demographic and economic factors will also help shape opportunities for reuse of the Chrysler site. Demographic and economic conditions have been classified according to whether or not they are considered strength or weaknesses when it comes to regional business development. The primary study area for this analysis is the St. Louis Region, a sixteen-county region that includes the counties of Franklin, Jefferson, Lincoln, St. Charles, St. Louis, Warren, Washington in Missouri; in Illinois, Bond, Calhoun, Clinton, Jersey, Macoupin, Madison, Monroe and St. Clair counties, as well as the City of St. Louis located on the Missouri side of the Mississippi River.

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Patterns of Population Decentralization

The following table looks at population growth rates by individual counties within the St. Louis Region, to see how population distribution across the Region is changing. The data suggests the population base of the Region is moving away from St. Louis County, Macoupin County (IL) and the City of St. Louis toward outlying areas. While the Region population grew by an annualized rate of 0.4 percent between 2000 and 2010, rates of growth varied within the Region. Population fell in St. Louis County (0.2%), Macoupin County (0.3%) and the City of St. Louis (0.9%). Most of the outlying counties in Missouri and Illinois experienced positive population growth. Population growth was most notable in Lincoln, Warren and St. Charles Counties, where population grew by 98,212, at an annualized growth of 2.8 percent.
Total Population 2010 CAGR 319,294 -0.9% 998,954 -0.2% 101,492 0.8% 218,733 1.0% 52,566 3.0% 360,485 2.4% 32,513 2.9% 25,195 0.8% 17,768 0.1% 5,089 0.0% 37,762 0.6% 22,985 0.6% 47,765 -0.3% 269,282 0.4% 32,957 1.8% 270,056 0.5% 2,812,896 0.4% Population Share 2000 2010 Point Shift 12.9% 11.4% -1.6% 37.7% 35.5% -2.1% 3.5% 3.6% 0.1% 7.3% 7.8% 0.4% 1.4% 1.9% 0.4% 10.5% 12.8% 2.3% 0.9% 1.2% 0.2% 0.9% 0.9% 0.0% 0.7% 0.6% 0.0% 0.2% 0.2% 0.0% 1.3% 1.3% 0.0% 0.8% 0.8% 0.0% 1.8% 1.7% -0.1% 9.6% 9.6% 0.0% 1.0% 1.2% 0.1% 9.5% 9.6% 0.1% 100% 100%

Table 19: St. Louis Region Population Growth (2000-2010)

County St. Louis City, MO St. Louis County, MO Franklin County, MO Jefferson County, MO Lincoln County, MO St. Charles County, MO Warren County, MO Washington County, MO Bond County, IL Calhoun County, IL Clinton County, IL Jersey County, IL Macoupin County, IL Madison County, IL Monroe County, IL St. Clair County, IL Regional Total
Source: Census

2000 348,189 1,016,315 93,807 198,099 38,944 283,883 24,525 23,344 17,633 5,084 35,535 21,668 49,019 258,941 27,619 256,082 2,698,687

Net Change -28,895 -17,361 7,685 20,634 13,622 76,602 7,988 1,851 135 5 2,227 1,317 -1,254 10,341 5,338 13,974 114,209

Cost of Living
The cost of living index is a measure of the relative price for goods and services participating in areas for a mid-management (middle-class) standard of living. Nationally, the composite index always equals 100, and each regional index represents a share of the national measure. While the cost of living index does not measure inflation, it compares prices at a single point in time, excluding taxes. The composite cost of living index is a measure that fluctuates based on the change in population, labor force, and a number of other factors; the following table illustrates the relationship that population and labor force movement have on the cost of living in the St. Louis Region. Findings: Not breaching a score of 100 in either 2000 or 2010, the cost of living in the St. Louis Region decreased at an annualized rate of 0.67 percent; where in 2000, the index read 96.7 and in 2010 the index dropped to 90.4.

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St. Louis Regions cost of living decrease may be explained by the slow pace of population and labor force growth. From 2000 to 2010, the St. Louis Region population grew at an annual rate of 0.42 percent, and labor force grew at an even slower pace of 0.09 percent annually; in fact, during this ten year time span, unemployment grew by nearly 11 percent annually.
2000 97 2,698,687 1,423,746 1,373,227 50,519 2010 90 2,812,896 1,435,946 1,293,624 142,322 CAGR -0.67% 0.42% 0.09% -0.60% 10.91%

Table 20: Change in Cost of Living vs. Change in Population and Labor Force, 2000-2010
Cost of Living Index Population Labor Force Employment Unemployment

Source: ACCRA, BLS and Census

Changing Household Structure

Change in household structure from 1990 to 2010 for the US and the St. Louis Region are below. Figure 24: Changes in Household Structure, 1990 to 2010
Male householder
1.6% 2.6% 1.7% 1.6% 8.3% 7.7% 7.6% 6.3% 26.3%

Families w/ children

Female householder

Married couple

19.9% 26.7% 20.1%

Families w/o Axis children Title

5.9%

Other

9.0% 5.7% 8.3% 27.8% 26.7% 28.4% 31.5% 4.3%

Married couple

Nonfamily

Other

6.3% 5.3% 5.4% 25.8%

Persons living alone

Axis Title

29.0% 24.6% 26.8%

St. Louis 1990 Source: Census

St. Louis 2010

US 1990

US 2010

Findings include: The share of married families with children is expected to decrease by nearly 6.6 percent in the US and 6.4 percent in the St. Louis Region. Persons living alone in the St. Louis Region are expected to grow by an actual 3.2 percent, from 25.8 percent to 29 percent, while nationally this segment will increase by 2.2 percent.

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Married couples without children are projected to grow faster at the national level, as this share increases by 3.1 percent nationally. In the St. Louis Region, married couples without children will be 1.1 percent less in 2010 than what it was in 1990.

Age Shifts
The decline in household size reveals a shifting age distribution across the Region. Based on historical Census data and future projections produced by ESRI, the following chart presents the share of the St. Louis Region population by age. Figure 25: Share of the St. Louis Region by Age, 2000-2015
60% 50% 40% 30% 20% 10% 0%
0-24 2000 25-64 2010 2015 65+

Source: ESRI

Younger people, those between the ages of 0 and 24, are declining as a share of the Regional population. From 2000 to the 2015 projection, individuals between the ages of 0-24 in the St. Louis Region are expected to decline at an annualized rate of 0.44 percent from 2000 to 2015. At the same time, residents at or approaching retirement, specifically those aged 65 and older, are growing as a share of the Regional population. This trend has implications for the future available labor force if the supply of younger workers is not sufficient to offset the rate at which older workers retire. Segments expected to grow through 2015 are groups older than 55. In 2000, almost nine percent of the population was between the ages of 55 and 64. This is expected to increase to a projected 13 percent by 2015, growing at an annualized rate of 3.2 percent.

High School Performance

Receiving a high school diploma is a societal expectation, shaping an individuals course for socioeconomic success in the United States. According to many education professionals, completing high school on-time is an indicator of success later in life. Additionally, it is a precursor to size of the future workforce as well as the skills they may bring. At the same time, the rate of individuals choosing not to finish their high school careers prior to graduation is an alarming trend. As the number of citizens who drop out of high school increases, the labor force will grow at a slower pace. Those individuals lacking a high school diploma will struggle to assimilate and succeed in modern society. Whether students are from rural areas or urban areas, individuals who choose to drop out share similar characteristics, according to the Missouri Department of Education. Indications can include failure of classes and unearned credits, substance abuse issues, low self-esteem, and a disconnection from engaging in school activities and relationships with peers. Individuals who have dropped out share similar characteristics in their home lives as well. Dropout rates in both the City of St. Louis and St. Louis County compared to the State of Missouri can be found in the following chart.

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Figure 26: High School Drop Out Rate (2006-2010)

5.5% 5.3% 4.9% 5.4%

5.0%

4.5%

4.4% 4.3%

4.0%

3.8% 3.6%

3.9% 3.7% 3.5%

3.5%

3.0% 2006 2007 Missouri 2008 2009 2010

St. Louis (Aggregate of County and City)

Source: Missouri Deptartment of Education

The analysis revealed that from 2006 to 2010, Missouris high school dropout rate was lower than the high school dropout rate in St. Louis (County and City). Overall, the rate of high school dropouts in the State of Missouri is decreasing; from 2006 to 2010 at an annualized rate of 2.0 percent. At the same time, drop outs from public schools in St. Louis County and City increased, growing at an

annualized rate of 0.7.

Labor Force
The labor force is defined as all workers aged 16 and over that are either working or are actively seeking work. This naturally excludes most high school students, stay-at-home parents, retirees, individuals on medical leave, or other people who choose not to work. The following figure explores the annual labor force, employment and unemployment rate in the St. Louis Region from May 2000 through May 2011. Between May of 2000 and May of 2007, the Regional labor force grew by approximately 32,726. Unemployment began increasing during the summer of 2007; however, the labor force experienced little change from 2007 to 2008. Trends for 2009 through 2011 are reflective of the impact of the recession. Figure 27: St. Louis Region Labor Force, May 2000-2011
Thousands

1,450 1,400 1,350 1,300 1,250 1,200

10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Employment Source: BLS - LAUS

Unemployment

Unemployment Rate

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2011

Super Sector Employment Growth

According to monthly BLS data on non-farm payrolls, between January 2009 and June 2011 the St. Louis Region added a total of 14,000 jobs. The table below shows changes in employment by sector, highlighting how overall employment has begun to recover toward pre-recession levels, shown below in January of 2008 at 1.34 million non-farm positions. Regional employment bottomed out at about 1.26 million positions in January of 2010, with some sectors lagging others in the recovery. By this measure of employment, the Region needs to create an additional 27,000 jobs to recover to the January 2008 threshold. Cells highlighted in yellow speak to the time period where sector growth started to occur. For example, Education and Health Services has been growing steadily through the forecast period, while the Information sector has been declining through June of 2011. Table 21: Non-Farm Employment, St. Louis Region Jan. 2008-June 2011 (thousands of jobs)
Sector Mining, Logging and Construction Manufacturing Durable Goods Non-Durable Goods Wholesale Trade Retail Trade Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government Total Private Goods Producing Service-Providing Private Service Providing Total Non-Farm Source: BLS - CES Jan 2008 76 130 80 50 63 148 49 30 80 194 208 135 57 171 1,170 206 1,135 964 1,341 Jan 2009 64 120 73 48 61 140 49 31 78 184 212 131 56 173 1,126 185 1,115 942 1,299 Jan 2010 55 105 62 43 59 137 46 30 79 179 219 128 55 172 1,090 160 1,102 929 1,262 Jan 2011 55 105 63 43 59 136 47 29 79 180 224 132 55 171 1,100 160 1,112 941 1,272 June 2011 64 110 66 44 62 140 49 29 79 186 224 148 58 166 1,147 174 1,140 974 1,313

The following table summarizes details regarding growth by sector with analysis of monthly growth rates, as well as total and monthly increases. Since January 2010, manufacturing has begun to pick up, adding positions at a rate of 283 jobs per month. Education and Health Services and Leisure and Hospitality both remain as key anchors for the Region having avoided decline over the past four years while adding the largest number of jobs over the noted period, 17,000 jobs and 14,000 jobs respectively. On the other hand, Information and Government have lost jobs since January 2010, in addition to not experiencing growth in the past four years, declining by a total of nearly 2,000 jobs and 5,000 jobs, respectively. Overall, Regional job growth since January 2010 has rebounded, at a monthly rate of about 2,900 jobs per month. Drivers of job growth include exports, which have grown strongly over the past year, partially on the Missouri side of the Mississippi River.

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Table 22: Change in Non-Farm Employment, St. Louis Region Jan. 2008-June 2011 Months of Total Monthly Sector Growth Increase Increase Mining, Logging and Construction 19 (12,700) (302) Manufacturing 14 (19,700) (469) Durable Goods 17 (13,300) (317) Non-Durable Goods 12 (6,400) (152) Wholesale Trade 18 (1,300) (31) Retail Trade 23 (8,500) (202) Transportation and Utilities 22 (200) (5) Information 12 (1,700) (40) Financial Activities 22 (1,100) (26) Professional and Business Services 19 (8,200) (195) Education and Health Services 23 16,900 402 Leisure and Hospitality 20 13,600 324 Other Services 19 800 19 Government 27 (5,000) (119) Total Private 24 (526) Goods Producing 15 (32,400) (771) Service-Providing 27 5,300 126 Private Service Providing 27 10,300 245 Total Non-Farm 25 (27,100) (645)
Source: BLS CES

As of 1991, the finance industry in the St. Louis Region has performed relatively well; however, manufacturing has lost jobs in recent years. The decade began and ended within an uneasy climate for nations economy, disrupted by the September 11th terrorist attacks in 2001, and the recession in 2008 through 2011. A comparative look at total employment growth in relation to the manufacturing and financial industries within the St. Louis Region during the month of June follows. Figure 28: Selected Super Sector Employment Growth, June 1991-2011
10% 5% 0% -5% -10% -15% -20%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Private Source: BLS - CES Manufacturing Financial Activities

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Overall, while Regional employment is recovering, the total decrease in lost jobs since 2008 is significant, at almost 60,000 positions. For the Region to sustain a lasting recovery, growth in the manufacturing is as important as other sectors, such as finance. Other findings include: Regional manufacturing employment peaked in 1990 with about 210,000 positions. Since then, manufacturing employment reached a low in February of 2011, at approximately 105,000 positions. Since February of 2011, manufacturing has added nearly 870 jobs per month. Finance jobs have remained constant, maintaining employment totals near 76,000 annually in the past 20 years, with slight fluctuation from year to year. Since January of 2010, the Finance Super Sector has grown by nearly 0.8 percent; however, from January of 2011 to June of 2011, the finance industry has slightly dipped, losing nearly 47 jobs per month in the past six months. Since January of 2010, the private sector has increased at an annualized rate of 1.5 percent adding nearly 3,200 jobs monthly during this time.

Employment by Firm Size

Data from the US Census Bureau explores employment trends by firm size tracking the number of firms, establishments, employment and payroll. We examined the St. Louis firm and employment data relative to the United States for 2001 and 2008, the most current data available. More than half of all workers in the US work in firms with more than 500 employees. In 2008, 50.6 percent of all workers, 61.2 million people, were employed in large firms. However, firms with less than 5 employees made up 61 percent of all companies, employing nearly 6.1 million people in the US. This segment of the labor market has grown considerably since 2001. Most significant is that employment at firms with fewer than 5 workers grew faster than any other firm size both nationally and in the St. Louis Region. Since 2001, employment at these small companies grew at a compound annual growth rate of 1.1 percent nationally. This compares to 0.9 percent employment growth for firms with more than 500 workers. Table 23: Firms and Employment by Firm Size, 2001-2008 (in thousands)
2001 Firm Size Firms United States 0-4 3,402 5-9 1,019 10-19 616 20-99 518 100-499 85 500+ 17 Total 5,658 St. Louis Region 0-4 29.1 5-9 9.5 10-19 6.0 20-99 5.8 100-499 1.5 500+ 2.0 Total 53.9 Jobs 5,630 6,698 8,275 20,370 16,410 57,678 115,061 49.5 62.0 81.1 222.3 171.9 633.9 1,220.6 Firms 3,618 1,044 633 526 90 18 5,930 31.1 9.5 6.1 6.0 1.6 2.1 56.6 2008 Jobs 6,086 6,878 8,497 20,685 17,548 61,210 120,904 53.1 62.7 81.7 221.7 179.3 663.9 1,262.4 CAGR 2001-2008 Firms Jobs 0.9% 0.3% 0.4% 0.2% 0.8% 0.9% 0.7% 1.0% 0.1% 0.2% 0.4% 1.2% 0.6% 0.7% 1.1% 0.4% 0.4% 0.2% 1.0% 0.9% 0.7% 1.0% 0.2% 0.1% 0.0% 0.6% 0.7% 0.5%

Source: US Census Bureau

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In the St. Louis Region, there were more than 56,600 places of work employing nearly 1.3 million people during 2008. Job growth was slightly slower in the Region than nationally. Similar to national trends, more than half of St. Louis companies employ fewer than 5 workers, though it is a smaller share, 55 percent, and the majority of workers (51.9%) work in firms with more than 500 employees. Figure 29: St. Louis Firms as Share of US by Firm Size What is interesting to note in this data is that there is 12% an over-representation of 10% large firms in St. Louis. 8% Overall, 1 percent of all the firms in the US are located 6% in the St. Louis Region. 4% However, in 2008, 11.5 2% percent of the firms with 0% more than 500 workers 0-4 5-9 10-19 20-99 100-499 500+ were located there. Of the nearly 18,500 firms in the 2001 2008 US with more than 500 Source: U.S. Census Bureau employees, 2,100 were located in the St. Louis Region during 2008. Of the 2,100 St. Louis firms with more than 500 employees, the largest concentrations are in retail trade with 358 large firms and wholesale trade with 357 firms. Combined, one-third of the largest firms are in these two sectors.
14%

Super Sector Wage Growth

The following figure depicts annualized growth of total employment and average weekly earnings of production employees per industry super sector from April 2008 to April 2011. This figure only includes the super sectors that were made available by the US Bureau of Labor Statistics. Figure 30: Selected Super Sector Wage and Employment Annual Growth (2008-2011)
0.4% 9.4% -1.3% -1.9% -0.9% -3.1% -1.5% -1.7% -5.9% -6.2% -8.5% 2.2%
Source: BLS - CES Employment Wage

Finance

RT

WT

TTU

Manf

MLC

Employment in the Mining, Logging and Construction (MLC) super sector has decreased at an annualized rate of 8.5 percent since 2008, the greatest annualized decrease of all the super sectors measured; however, in the same period of time, average weekly wages have increased by 2.2 percent annually, only wages in the financial activities super

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sector have grown at a faster rate, where wages increased by 9.4 percent annually and employment increased by 0.4 percent annually. As of 2008, manufacturing employment in the St. Louis Region has decreased by 5.9 percent annually, losing 158,000 jobs within that time period. Average weekly wages also decreased by 6.2 percent annually during that period. In June of 2008, production employees earned, on average, $906 weekly while in 2011, wages dropped to $737 weekly.

Industrial Sector Analysis

To evaluate changes in Regional employment, wages and output, AECOM used IMPLAN, proprietary software developed by the Minnesota IMPLAN Group (MIG). To generate these estimates, MIG assembles data from the Bureau of Labor and Statistics (BLS), County Business Patterns and the Bureau of Economic Analysiss (BEA) Regional Economic Information System (REIS). IMPLANs employment and wage estimates are slightly different than those from traditional government data sources. Whereas the BLS estimates include just wage and salaried employees, IMPLAN estimates also include self-employed workers, both full- and part-time. For this reason, employment and wage estimates from IMPLAN may be slightly larger for industry sectors like finance, law, accounting and other office-using sectors characterized by a large number of self-employed workers. Employment and Wages The change in the economy from producing goods to providing service has been well documented. The chart below shows the magnitude of this change in recent years for St. Louis, Missouri and the United States. Figure 31: Share of Goods Producing Jobs, 2001-2009

St. Louis

2001 St. Louis 2009 2001 Missouri 2009

Missouri

United States 2001 United States 2009 0%

Source: IMPLAN

20%

40%

60%

80%

100%

Service Providing

Goods Producing

In the St. Louis Region, 17.5 percent of all jobs during 2001 were in good producing sectors which include agriculture, mining and construction. By 2009 this had fallen to 14 percent mirroring state and national trends. However, the drop in share was slightly higher for the Region than Missouri (3.3 percent) though somewhat smaller than the drop in share experienced in the United States, 3.8 percent.

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Table 24: St. Louis Region Employment, 2001-2009

Super Sector Goods Producing Natural Resources and Mining Construction Manufacturing

Next we look more in depth at employment shifts since 2001. In 2009, there were 1.65 million people working in the Region, which includes self-employed. This is a slight decrease from Service Providing 1,386,350 1,421,870 0.3% 2001 when there were 1.68 Trade, Transportation and Utilities 312,920 286,220 -1.1% Information 34,870 30,890 -1.5% million people working in the Financial Activities 135,010 170,180 2.9% Region. While some of the Professional and Business Services 245,450 248,720 0.2% decline can be explained by the Education and Health Services 213,830 243,730 1.6% economic downturn, there is Leisure and Hospitality 160,770 165,190 0.3% also a fundamental restructuring Other Services 104,550 92,980 -1.5% of the local economy with a Government 178,950 183,960 0.3% declining manufacturing sector and a growing service sector in Total 1,680,180 1,653,040 -0.2% the St. Louis Region. The Source: IMPLAN largest loss in the number of jobs was in manufacturing. By 2009, there were nearly 49,000 fewer people working in this sector than in 2001. This represents an average annual decline of 4.3 percent over this time period. At the same time, the number of people working in financial activities (which includes real estate) grew by a compound annual growth rate (CAGR) of 2.9 percent, adding more than 35,000 jobs, the majority of which (79%) were in real estate. For comparison, job growth was stagnant in Missouri over this same time period and there was a slight gain nationally. Similar to St. Louis, there were considerable job losses in manufacturing, though they are larger in the Region than the state and nationally. Table 25: Change in Employment, 2001-2009 CAGR
Super Sector Goods Producing Natural Resources and Mining Construction Manufacturing Service Providing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government St. Louis -3.0% -1.4% -1.4% -4.3% 0.3% -1.1% -1.5% 2.9% 0.2% 1.6% 0.3% -1.5% 0.3% Missouri -2.2% -1.2% -0.8% -3.5% 0.5% -0.4% -1.8% 2.1% 0.8% 1.8% 0.1% -1.1% 0.8% US -2.5% -0.6% -1.3% -3.9% 0.8% -0.3% -1.8% 2.5% 0.8% 2.7% 0.5% 0.0% 0.8%

2001 293,830 22,130 107,980 163,720

2009 231,170 19,760 96,380 115,030

CAGR -3.0% -1.4% -1.4% -4.3%

The following table shows the CAGR for employment in each sector. The retail sector was particularly hard hit during the recession, though job losses were larger in St. Louis than in Missouri and the US. Additionally, in sectors that experienced growth nationally and in the state did not always grow as much in the St. Louis Region.

The average wage grew by 3.7 percent annually from 2001 to 2009, ahead of inflation for St. Louis which grew at an average Total -0.2% 0.0% 0.3% annual rate of 2.2 percent over this Source: IMPLAN same time period. Although employment shrank in the manufacturing sector, wages grew by 5.6 percent annually. The average

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wage in this sector was more than $78,000, considerably higher than the metro average of $46,290. Utilities paid among the highest wages in the Region and experienced strong growth over this period, but relatively few people work in this sector. Also worth noting, the average wage in the real estate sector, with the large gains in employment, fell 3.4 percent annually from 2001 to 2009. The following table also shows how average wages in the St. Louis Region are growing at a faster rate in many sectors than Missouri and the US. The following table also shows how average wages in the St. Louis Region are growing at a faster rate in many sectors than Missouri and the US. For example, average wages for trade, transportation and utility jobs grew 4.0 percent annually from 2001 in St. Louis compared to 3.3 percent in Missouri and 3.1 percent in the US. The average wage for retail jobs increased an average of 5.6 percent per year from 2001 to 2009 in the St. Louis Region compared to 3.7 percent in Missouri and 3.1 percent in the US. In fact, the average wage in this sector ($30,140) is also higher in St. Louis than state ($25,410) and national ($27,410) averages as well. Table 26: St. Louis Region Average Wages, 2001-2009
Super Sector Goods Producing Natural Resources and Mining Construction Manufacturing Service Providing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government Total
Source: IMPLAN

St. Louis Region 2001 2009 $42,810 $59,620 $10,900 $12,890 $37,460 $47,140 $50,650 $78,100 $33,000 $33,240 $59,610 $29,780 $42,520 $32,530 $14,600 $17,690 $42,830 $34,720 $44,120 $45,550 $83,400 $32,410 $54,520 $45,110 $21,240 $27,020 $59,940 $46,290

St. Louis 4.2% 2.1% 2.9% 5.6% 3.7% 4.0% 4.3% 1.1% 3.2% 4.2% 4.8% 5.4% 4.3% 3.7%

CAGR Missouri 3.1% 2.0% 1.7% 4.5% 3.8% 3.3% 4.6% 2.0% 2.8% 4.2% 5.0% 6.4% 4.4% 3.6%

US 3.3% 5.8% 2.1% 4.3% 3.4% 3.1% 3.2% 0.8% 2.9% 4.1% 5.0% 3.6% 4.7% 3.3%

Employment Concentration Location quotients compare levels of employment between a defined market area to that of a larger base in order to gauge the concentration of a particular good or service. Underlying location quotients is the assumption that the local market should have the same distribution of workers as the larger study area. This may not always be the case, however, since factors such as climate, local tradition or custom can exert an influence on the demand for a specific good or service. A location quotient higher than 1 means that the local economy has a larger than expected share of jobs and indicates that the sector is likely exporting those goods and services outside of the local market; the industry is more concentrated in the region than the larger study area. A location quotient of 1 indicates that the sector is performing sufficiently to meet local demand for the given good or service. A location quotient less than 1 indicates that the number of jobs is proportionally lower than the larger market and is likely importing goods and services to meet local demand; the industry is less concentrated in the study area

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than the comparison area. Industries exporting products are considered highly valuable for economic development. Here we examine employment in the St. Louis Region relative to the US for selected sectors. Location quotient comparisons over time, from 2001 to 2009, shows if a sector has become more or less concentrated in the Region relative to the country. AECOM evaluated more than 400 industry sectors that power the Regional economy, studying both traditional sectors as well as evolving industry clusters for 2001 and 2009 using IMPLAN. The distinction between sector and cluster is important, as clusters of industries tend to be more closely interconnected geographically, creating greater critical mass of resources and skills. Our analysis focuses on sectors in which the Region is particularly strong, those that need improving, and manufacturing. Data from IMPLAN has shown that the manufacturing sector in the St. Louis Region has lost nearly 49,000 jobs from 2001 to 2009, an average annual decline of 4.3 percent. However, despite these dramatic declines, manufacturing remains a dominant industry in the Region with more than 115,000 people employed in manufacturing sectors, 7 percent of all jobs throughout the Region. The following chart highlights select manufacturing sectors in which the Region excels as compared to the national economy. For example, the location quotient for breweries and distilleries was quite high in both 2001 and 2009. This is due to the larger share of jobs in the Region in those two sectors as compared to the US. In 2001, 0.02 percent of all jobs in the US were in these two sectors which remained unchanged in 2009. However, in the St. Louis Region, 0.2 percent of all jobs in 2009 were in the breweries and distilleries, more than nine times as high a share as the US. Because the industry is over represented in the Region, the location quotients are considerably high. While employment in this sector declined in both the Region and the US, it declined at a much faster rate nationally than regionally. Note that a declining location quotient does not necessarily indicate a loss in the number of jobs, just that the share of jobs in the Region relative to the US fell. Figure 32: LQs for St. Louis Manufacturing Relative to the US, 2001 and 2009
*Soybean processing *Medicinal & botanical *Fertilizer & pesticides *Oilseed farming Auto assembly *Organic chemicals Aircraft parts & assembly *Soap & cleaning compounds Ammunition / ordinance Breweries & distilleries 0.0
Source: IMPLAN

2.0

4.0 2001

6.0 2009

8.0

10.0

The next chart looks at sectors with strong location quotients relative to the US meaning that the share of jobs in the Region is greater than the share of jobs nationally.

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Figure 33: LQs for St. Louis Sectors that Show Strength Relative to the US, 2001 and 2009 Private colleges and universities employed *Surgical & med. instruments more than 29,000 residents during 2001 and *Private hospitals grew to nearly 37,000 by *Scientific R & D 2009. As a relative share Civic, social, & prof. orgs of Regional employment, Data processing & hosting jobs at colleges and Business support svcs universities made up 2.2 Mgmt. of companies percent of all jobs in the Private colleges & univ. Region in 2009 compared to 1.7 percent in 2001. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Nationally, these jobs Source: IMPLAN 2001 2009 made up less than 1 percent of 2009 employment resulting in a Regional location quotient of 2.4.
Securities & investments

Figure 34: LQs for St. Louis Sectors that Need to Improve Relative to the US, 2001 and 2009
All food processing Mgmt./scientific consulting Air transportation Warehousing Software development Computer sys. programming Rail transportation Truck transportation 0.00
Source: IMPLAN

0.25

0.50

0.75 2001

1.00 2009

1.25

1.50

AECOM also examined certain sectors of the Region that could improve, meaning that their location quotient relative to the national share was less than 1 and/or has been declining over time. Air transportation is the most notable in the following chart with the location quotient dropping by nearly half from 1.4 to 0.76 by 2009.

AECOM also looked at the location quotients for clean technology (clean tech), a sector growing in importance both nationally and in the Regional economy. A recent study by The Pew Charitable Trusts, The Clean Energy Economy, found that jobs in the developing clean energy sector grew at a faster rate than US jobs overall from 1998 to 2007. Businesses in clean tech segments are focused on developing clean, renewable sources of energy, increasing energy efficiency, reducing greenhouse gas emissions that cause global warming, and conserving water and other natural resources. There are several indicators that this sector will continue to grow in importance including: Public policy decisions at the federal, state and local levels regarding vehicle emissions, fuel efficiency and environmental conservation, for example. Consumers are more conscious about environmental issues, sustainability and energy independence.

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Both public and private sectors are directing resources into these segments.

According to The Pew report, the clean energy economy comprises five categories shown below.

While the sectors that make up these categories may change over time, the categories themselves will not. Currently, the following 11 industry sectors represent the production categories of the clean tech industry as shown below.
Alternative Fuel Vehicles Biomass / Waste-to-Energy Construction Environment Components Distributor Environment Components Manufacturing Fuel Cells and Batteries Solar Power Waste Disposal Water Purification Wind Power

In 2007, there were 68,200 businesses across the US employing nearly 770,000 people in clean tech. In Missouri, there were 1,062 businesses employing 11,714 people. Between 1998 and 2007, clean tech jobs grew 5.4 percent compared to 2.1 percent for total jobs in the State. Table 27: Clean Energy Economy, 2007
Job growth, 1998-2007 Clean Total -2.5% -2.5% 5.4% 2.1% 9.1% 3.7%

Illinois Missouri US

Firms 2,176 1,062 68,203

Jobs 28,395 11,714 770,385

Source: The Pew Charitable Trusts, 2009

Industry Output While employment changes are an indication of industry growth or decline, employment does not tell the whole story. Output is another key measure of economic health and refers to the value of industry production similar to Gross Domestic Product (GDP). The following tables look at changes in output by industry sector between 2001 and 2009 to identify industries that are driving economic growth versus decline in the Region.

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Table 28: St. Louis Region Output (in millions), 2001-2009

Super Sector Goods Producing Natural Resources and Mining Construction Manufacturing Service Providing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government Total
Source: IMPLAN

2001 $62,584 $1,737 $10,247 $50,599 $114,820 $28,186 $10,016 $19,014 $18,946 $15,143 $6,846 $7,215 $9,454 $177,404

2009 $79,055 $2,373 $12,572 $64,110 $155,870 $34,767 $11,790 $26,725 $28,925 $22,304 $10,363 $6,255 $14,741 $234,925

CAGR 3.0% 4.0% 2.6% 3.0% 3.9% 2.7% 2.1% 4.3% 5.4% 5.0% 5.3% -1.8% 5.7% 3.6%

Gross output across all Region industry sectors grew by a compound annual growth rate of 3.6 percent from 2001, reaching $234.9 billion in 2009, despite overall employment declines. The largest contributor to overall output in the St. Louis Region is manufacturing at $64.1 billion during 2009. Trade, transportation and utilities follow with $34.8 billion. In general, service providing sectors grew at a faster rate than goods producing. The super Sector with the fastest growing output was government which includes local, state and federal employees. Another common measure of economic health is output per job which is a measure of productivity. Manufacturing not only has the largest output per job, it grew at the fastest rate since 2001, 7.6 percent annually. Every manufacturing job produced $557,350 in output during 2009, which reflects both the growing output created in this sector as well as declining employment over this period. Table 29: St. Louis Region Output per Job, 2001-2009
Super Sector Goods Producing Natural Resources and Mining Construction Manufacturing Service Providing Trade, Transportation and Utilities Information Financial Activities Professional and Business Services Education and Health Services Leisure and Hospitality Other Services Government Total
Source: IMPLAN

2001 $212,990 $78,500 $94,900 $309,050 $82,820 $90,070 $287,240 $140,840 $77,190 $70,820 $42,580 $69,010 $52,830 $105,590

2009 $341,970 $120,070 $130,430 $557,350 $109,620 $121,470 $381,740 $157,040 $116,290 $91,510 $62,730 $67,270 $80,130 $142,120

CAGR 6.1% 5.5% 4.1% 7.6% 3.6% 3.8% 3.6% 1.4% 5.3% 3.3% 5.0% -0.3% 5.3% 3.8%

Within the service providing sectors, information has the highest output per job at $381,740 in 2009. This sector includes publishing, the motion picture industry, sound recording, broadcasting, telecommunications and data processing.

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Business Development Regional industry clusters like financial services and R&D have been critical to the Regions employment growth. To assess the recent growth of the Regions existing industry clusters, the following figure summarizes new cluster employment by year, as identified by the St. Louis Regional Chamber and Growth Association. The data reveals that since 2005, financial services has been the top driver of new employment in the Region. Since 2005, new employment in financial services has represented 48 percent of new cluster employment. This is followed by information technology and advanced manufacturing at 16.8 and 13.6 percent respectively. While employment growth in plant and life sciences and transportation/distribution has represented only a modest share of new cluster employment, their employment impact extends beyond their direct employment, a trend that is explored below by looking at individual industry multipliers. Figure 35: Business Development by Industry Cluster
7,000
Transportation and Distribution

6,000 5,000 4,000 3,000 2,000 1,000 0 2005 2006 2007 2008

R&D Plant and Life Sciences Information Technology Headquarters Financial Services Advanced Manufacturing

2009

2010

Source: St. Louis Regional Chamber & Growth Association

Industry Integration While employment and output are ways to measure the overall strength of industries in an economy, there are two other indicators to show how integrated these industries are within the economy the regional purchase coefficient and multipliers. The regional purchase coefficient (RPC) estimates how much of local purchases are met by local sellers. Multipliers, for both output and employment, measure the ripple effect of spending by an industry on goods, services and wages. Larger values for both the RPC and multipliers indicate more integration within the local economy. However, there may be some industries that have very large RPCs and multipliers, but are relatively small in terms of total employment and output. RPCs and multipliers for a sector will differ by study area and may change from year to year depending on their supply chain in the area. Here we concentrate on private sectors with largest output and employment in the St. Louis Region during 2009. The following table shows the output and jobs for each sector as well as the RPC, output

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and employment multipliers. The RPC indicates the share of spending that occurs within the Region by the particular sector. The output multiplier shows for each dollar of direct impact what the total impact was in St. Louis Region during 2009. The employment multiplier shows the number of total jobs that would be supported in the economy with a $1 million investment. Therefore, a $1 million investment by firms that construct new nonresidential structures would be spent 100 percent within the Region since the RPC is equal to 1. The total economic impact of that direct investment would be $1.93 million (with $0.93 million in indirect and induced impacts) and 14.77 jobs throughout the Regional economy, across all sectors. Table 30: Industrial Integration of Top Performing Private Sectors, St. Louis Region 2009
Sector Goods Producing Construction Construction of new nonresidential structures Manufacturing Petroleum refineries Light truck and utility vehicle manufacturing Aircraft manufacturing Service Providing Trade, Transportation and Utilities Wholesale trade businesses Retail Stores - General merchandise Information Telecommunications Financial Activities Real estate establishments Professional and Business Services Management of companies and enterprises Education and Health Services Private junior colleges, colleges, universities, and professional schools Offices of physicians, dentists, and other health practitioners Private hospitals Nursing and residential care facilities Leisure and Hospitality Food services and drinking places
Source: IMPLAN

Output (millions)

Jobs

RPC

Multipliers Output Jobs

$4,278 $6,791 $5,812 $5,227

34,140 810 3,010 10,980

1.00 0.93 0.37 0.97

1.93 1.68 1.49 1.50

14.77 2.74 3.35 5.23

$13,408 $1,520 $6,229 $7,630 $7,516 $3,202 $5,421 $7,743 $1,697 $6,499

64,700 29,980 12,430 76,320 37,140 36,880 42,600 60,080 30,850 115,760

1.00 0.95 0.57 0.70 0.80 0.80 0.95 0.90 0.90 0.87

1.80 1.67 1.61 1.40 1.93 2.00 2.03 2.03 1.98 1.83

10.92 25.03 6.20 13.09 12.17 18.91 15.85 15.68 25.86 23.92

There are sectors in the St. Louis Region that have higher multipliers, such as vegetable and melon farming which has an output multiplier of 2.36. However, with $20.1 million in output and 80 jobs, it is a relatively small part of the overall Regional economy. Performing arts companies have one of the largest employment multipliers. For every $1 million in direct impact during 2009, 57.6 jobs are created throughout St. Louis. This sector had $91.3 million in total output and employed nearly 4,400 people. Due to the nature of this sector, many of these jobs were likely part-time or seasonal.

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New Residential Building St. Louis Region

To further explore the impact of the current recession on the residential housing market, the figure below looks at the number of single family and multi-family residential building permits issued annually in the St. Louis Region. Figure 36: Residential Building Permits Issued in the St. Louis Region Between 1990 and 2009, 145,400 permits were 14,000 issued for residential units 12,000 in the Region- the majority 10,000 of these units, roughly 85 8,000 percent, were for single 6,000 family residential units. Since 2004, the number of 4,000 building permits issued in 2,000 the Region has declined. Between 2004 and 2009, permits issued for single Single Family Multi-Family Source: Census and multi- family units declined from 15,286 units to 4,918, an annualized decline of 21 percent. This decline, however, has been more dramatic for single family construction as opposed to multi-family.
16,000
1990 1995 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

To further explore Regional shifts in residential construction, the following chart looks at the share of new housing permits by county. Additionally, data for St. Louis County and the City of St. Louis have been extrapolated to depict the how residential construction has shifted from 1990 to 2009 in these particular areas. Figure 37: New Permits by Geography Over this twenty year period, a pattern of 1999 residential development towards outlying areas is 2001 clear. St. Louis County 2003 declined as a share of 2005 Regional residential 2007 construction. Total residential units in St. 2009 Louis County declined 65.0% 70.0% 75.0% 80.0% 85.0% 90.0% 95.0% 100.0% from 33 percent of the Other MSA Counties St. Louis County, MO City of St. Louis Regional total in 1990 to Source: Census just 12 percent in 2009. As the population center of the Region, residential permits in the City of St. Louis have represented only a small share of the Regional total. However, even as the City of St. Louis represents a smaller share of the total Regional residential construction, the share of residential permits have increased at an annualized growth rate about four percent in the City of St. Louis from 1990 to 2009; noting as of 2009, residential development represented five percent of the Regions total. Other Regional
1990

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2009

counties, particularly St. Charles County, Missouri and St. Clair County, Illinois, grew as a share of Regional residential permits. During this period, St. Charles grew by 8 percentage points from 21 percent of new residential permits to 29 percent in 2009. Similarly, St. Clair County grew by 10 percent from 8 percent of new permits to 18 percent in 2009.

St. Louis Economic Overview

In 2009, the gross Regional product (GRP) for the Region was $132.8 billion, which represents about one percent of total US GRP. Since 1997, US GRP has grown at a compound annual growth rate (CAGR) of 4.7 percent through 2009. This compares to a CAGR of 3.8 percent for St. Louis GRP over the same time period. The following chart compares the cumulative annual growth rate in gross regional product over three year intervals for the St. Louis Region and the United States. Figure 38: Compound Average Growth Rate in Gross Regional Product GRP growth for the US has outpaced the St. Louis Region for all intervals except the most recent. Between 2006 and 2009, which includes a recession, the GRP in St. Louis Region grew at an average annual rate of 3.2 percent. This compares to a national average growth rate of 2.3 percent annually over this same time period.

6.6% 5.2% 4.5% 3.7%

6.3%

3.2% 2.6% 2.3%

1997-2000

2000-2003 St. Louis MSA

2003-2006 U.S.

2006-2009

Source: IMPLAN

Another way to assess economic growth is to look at final demand, that is, the consumption of goods and services produced in the Region. Specifically AECOM looked at households, state/local government and the federal government as consumers. Other contributors to final demand include capital expenditures and exports which are offset by imports and institutional sales. Combined, these three consumer groups purchased nearly $119 billion in goods and services throughout the St. Louis Region during 2009. Demand for these consumer groups grew at an average annual rate of 3.3 percent since the $80 billion consumed during 1997. This compares to national growth of 5.4 percent annually over the same time period. What is interesting to note is how the distribution of demand has changed over this time period as shown below. In 1997, household demand represented 72.2 percent of demand among these three consumer groups in the St. Louis Region. This increased to 80 percent by 2009. Demand by state and local government grew at an average annual rate of 4.8 percent and increased its share from 10.9 percent to 13 percent.

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Figure 39: Change in Demand Generators Most notable is the change in federal demand 1997 dropping from 16.8 percent in 1997 to 7 2009 percent by 2009. This occurs at a time demand by the federal government 1997 grew. Between 1997 and 2009, federal demand 2009 decreased four percent annually in the St. Louis 0% 20% 40% 60% 80% 100% Region but increased Households State/Local government Federal government nationally at an average rate of 6.8 percent per Source: IMPLAN year. Nationally, the share of federal demand increased from 7.3 percent nationally to 8.5 percent. Federal government purchases are divided between defense, non-defense, and investment. Federal defense purchases are those made to support national defense this includes uniformed military services and coast guard. Goods and services range from food for troops to missile launchers. Non-defense purchases are made to supply all other government administrative functions. Investment consists of all Federal government demand for capital goods. Payments made to other governmental units are transfers, as opposed to consumption of commodities. Figure 40: Gross Regional Product for the St. Louis Region by State for Select Years (billions) We also examined these trends for Missouri and $120 Illinois counties. $100 According to data from $80 IMPLAN, approximately 75 $60 percent of the Region population lives in the $40 Missouri counties and 82 $20 percent of the labor force $0 works there. The Missouri 1997 2000 2003 2006 2009 share of the Regional GRP Missouri counties Illinois counties has been fairly consistent at 84 percent. In 2009, the Source: IMPLAN GRP for the Region was $132.8 billion of which $111.5 billion was produced in Missouri counties and $21.3 billion in Illinois counties. Since 1997, the GRP has grown slightly faster in Missouri (an average of 3.9% per year through 2009) compared to Illinois counties (3.8% annually).
$140
U.S. St. Louis MSA

In terms of final demand, the distribution among the major consumer groups, households, state/local government and federal government is quite different in Missouri and Illinois as shown below.

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Figure 41: Distribution of Demand in Illinois and Missouri Counties In Missouri counties, household demand increased from 71 percent of demand among the three consumer groups in 1997 to nearly 82 percent by 2009. The most significant change was the drop in federal demand from almost 19 percent in 1997 to 4.5 percent in 2009. For the Illinois counties, demand by the federal government increased its share over
Illinois Counties Missouri Counties

1997

2009

1997

2009

0%

20%

40%

60%

80%

100%

Households
Source: IMPLAN

State/Local government

Federal government

this same time period to 15 percent, up from 9.4 percent in 1997. Federal spending can be further examined by type of goods and services purchased. In the Illinois counties of the Region, the majority of the spending is for defense purposes. However, the growth in federal spending in Illinois counties is due to investment. This includes construction of new facilities ($95 million) but also included $16 million for search, detection and navigation instruments and $13 million for custom computer programming services. From 1997 to 2009, there was a significant decline in federal spending on defense in the Missouri counties of the Region. Table 31: Federal Government Spending, St. Louis Region (millions) In 1997, the federal government spent $7.5 billion on defense, primarily Illinois counties aircraft ($2.7 billion) and aircraft and 1997 $194 $963 $11 $1,168 missile equipment ($1.1 billion). In 2009 $594 $1,985 $174 $2,753 2009, it only spent $88.4 million on Missouri counties aircraft purchases for defense 1997 $1,162 $7,528 $3,274 $11,964 purposes in Missouri counties of the 2009 $1,562 $1,419 $274 $3,255 Region. This may reflect federal restructuring on defense spending as St. Louis Region well as the consolidation of McDonnell 1997 $1,355 $8,491 $3,285 $13,131 Douglas and Boeing. There was also a 2009 $2,156 $3,404 $448 $6,008 significant decline in investment CAGR spending. In 1997, the federal Illinois 9.8% 6.2% 26.2% 7.4% government spent $3.3 billion in Missouri 2.5% -13.0% -18.7% -10.3% St. Louis Region 3.9% -7.3% -15.3% -6.3% investment on things such as new Source: IMPLAN facilities ($859.5 million), aircraft ($398 million) and electronic computers ($396 million). Investment fell to $274.2 million in 2009 with only $107.5 million on construction of new facilities.
Defense Investment Total NonDefense

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Data from IMPLAN also allows us to explore the inter-dependence of Illinois and Missouri counties by looking at exports. In this case, exports are to regions outside of the study area and can be either foreign or domestic. In 2009, the Region exported approximately $81 billion of goods and services. When examining the Regional economy by Illinois and Missouri counties, the exports between the states is obvious as shown in the table below. Missouri counties of the Region exported $76 billion worth of goods and services during 2009. Table 32: Intra-Regional Trade as Shown through Exports (billions)
Exports St. Louis Region Illinois counties in Region Missouri counties in Region Illinois + Missouri counties Intra-regional trade
Source: IMPLAN

1997 $55.3 $13.1 $47.0 $60.1 $4.8

2000 $60.3 $15.7 $51.0 $66.8 $6.5

2003 $64.8 $14.3 $57.8 $72.1 $7.3

2006 $79.4 $15.7 $72.7 $88.4 $9.1

2009 $80.9 $16.9 $76.0 $92.9 $12.0

CAGR 3.2% 2.1% 4.1% 3.7% 7.8%

There was an additional $16.9 billion exported from Illinois counties. Since the Regional total is $80.9 billion, the difference is what Illinois and Missouri counties exported to each other. In 2009, that amounted to $12 billion. While exports have been growing throughout the Region, exports between Illinois and Missouri have been growing at a much faster rate, a CAGR of 7.8 percent since 1997. Data from the 2007 Commodity Flow Survey indicates that just over $9 billion of goods were exchanged within the Region during 2007. Missouri counties in the Region imported nearly $4.6 billion of goods from the Illinois counties in the Region. Illinois counties imported approximately $4.5 billion from the Missouri counties. Of the $27.4 billion imported in Illinois counties, 16.3 percent came from Missouri counties. Of the $96.8 billion of imported goods to the Missouri counties, 4.7 percent came from Illinois counties in the Region. Table 33: Interstate Trade in the St. Louis Region (millions), 2007
Destination within St. Louis Region Illinois counties, total imports Imported from Missouri counties in Region Share of total imports Missouri counties, total imports Imported from Illinois counties in Region Share of total imports
Source: US Department of Transportation

2002 $16,773 $2,745 16.4% $68,842 $2,645 3.8%

2007 $27,371 $4,471 16.3% $96,823 $4,553 4.7%

CAGR 10.3% 10.2%

7.1% 11.5%

The amount of goods being imported to the Illinois counties of the Region has grown at a compound annual growth rate of 10.3 percent from 2002 to 2007. This compares to a CAGR of 7.1 percent for Missouri counties. However, interstate trade to Missouri from Illinois within the Region has grown at 11.5 percent over this time period compared to 10.2 percent for goods traveling from Missouri to Illinois counties within the Region. Data was not readily available to examine what goods are being exchanged between Illinois and Missouri counties within the Region. However, the Commodity Flow Survey from the US Department of Transportation does provide information on the value of goods that the counties are exporting. The

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largest sectors are provided with some detail for 2007 in the following table. Agricultural products are not included in this data set. Table 34: Select Goods Exported from the St. Louis Region by State, 2007
Value (millions) St. Louis Region (IL counties) Manufacturing Petroleum and coal products manufacturing Chemical manufacturing Primary metal manufacturing Fabricated metal product manufacturing Wholesale trade Merchant wholesalers, durable goods Merchant wholesalers, nondurable goods St. Louis Region (MO counties) Manufacturing Food manufacturing Beverage and tobacco product manufacturing Paper manufacturing Printing and related support activities Chemical manufacturing Plastics and rubber products manufacturing Primary metal manufacturing Fabricated metal product manufacturing Machinery manufacturing Transportation equipment manufacturing Miscellaneous manufacturing Wholesale trade Merchant wholesalers, durable goods Merchant wholesalers, nondurable goods Warehousing and storage Corporate, subsidiary, and regional managing offices
Source: US Department of Transportation

$25,767 $17,560 $1,198 $3,817 $1,194 $6,343 $2,390 $3,953

$46,646 $1,878 $2,480 $1,140 $1,183 $10,138 $1,525 $1,156 $2,191 $3,238 $17,646 $1,026 $40,126 $15,514 $24,612 $1,155 $3,548

The Illinois counties in the Region exported approximately $33 billion of goods during 2007, of which $25.8 billion was manufactured goods. Petroleum and coal products made up nearly half of total exports from Illinois counties with $17.6 billion. Missouri counties in the Region exported approximately $95 billion of which $46.6 billion was in manufactured goods and $40.1 billion was wholesale trade. Non-durable goods in wholesale made up the largest share of exports at $24.6 billion in 2007. This category includes paper products, sundries, drugs, groceries and chemical products. The US Census Bureau tracks and reports data on US exports by state of origin. The following table shows the top ten counties Illinois and Missouri export to as well as the value of those goods for 2007 to 2010. Canada, Mexico and China receive the largest share of exports from both Illinois and Missouri, however, that share has been decreasing from Missouri. Exports from Illinois to China grew at a compound annual growth rate of 17.5 percent over this time period reaching nearly $3.2 billion in 2010.

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Table 35: Value of Exports from Illinois and Missouri, 2007 to 2010 (millions)
Rank 1 2 3 4 5 6 7 8 9 10 Country Total Illinois Exports Canada Mexico China Australia Germany Brazil Japan United Kingdom Belgium Singapore Total Missouri Exports Canada Mexico China Korea, South Japan Belgium Singapore Germany Brazil United Kingdom 2007 48,896 13,472 3,629 1,959 2,234 2,334 1,379 2,214 2,225 1,662 979 13,484 5,031 1,354 1,016 1,252 659 424 125 310 222 345 2008 53,677 14,925 4,260 2,513 2,424 2,224 1,907 2,365 1,852 1,652 1,201 12,852 4,331 1,327 944 1,007 696 333 141 386 256 366 2009 41,626 12,125 3,550 2,470 1,595 2,009 1,246 1,779 1,991 929 877 9,522 3,240 1,034 688 275 531 232 190 385 262 297 2010 50,058 15,021 4,268 3,178 2,373 2,187 2,066 1,841 1,695 1,158 1,146 12,926 3,996 1,304 987 655 596 476 372 345 329 306

1 2 3 4 5 6 7 8 9 10

Source: US Census Bureau

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St. Louis Region Benchmark Comparative Analysis

To place the St. Louis Regional economy in a relevant context, it has been measured against the State of Missouri, the US, and similar-sized metropolitan areas, including the regions of Indianapolis, Memphis, Kansas City, Columbus, OH, and Cincinnati. In some cases, the St. Louis Region will be benchmarked against other top ranked Regions that will be mutually exclusive to the particular analysis corresponding to the data point. Within the following discussion, most figures and context will include a comparable analysis of one or more types of the benchmark geographies mentioned above. The St. Louis Regions demographic and economic base analysis will shape opportunities for nearterm growth at the North and South assembly plants. Trends and growth rates for population, education, employment and other metrics have been benchmarked against the state to assess the Regions performance and inform a set of relevant implications for the defined market.

Units of Government
According to the US Census, Missouri ranks sixth in among states in the number of local governments. As of 2007, within Missouri there were a total 3,723 units of local government; of these, the collection of local governments include county governments, sub county governments (municipalities and townships), and special purpose local governments (school district governments and special district governments). With the exception of the City of St. Louis, the entire state is encompassed by county governments. For the purposes of the Census, the City of St. Louis is counted as a county, rather than municipality, and St. Louis County is a county government, excluding the citys land area. The figure below is a per capita measurement of local government; for example, the number of individuals governed by one body of government. Figure 42: Per Capita Units of Government
12,000 10,000 8,000 6,000 4,000 2,000 0 Cincinatti Source: Census Columbus Indianapolis Kansas City Memphis St. Louis Missouri US 4,847 5,217 3,903 3,042 2,760 1,609 3,449 10,788

Population Per Unit of Government

Some interesting points were revealed: As depicted in the figure, Memphis, on one end of the spectrum, is showing that per every one unit of local government, there are nearly 11,000 citizens, while the St. Louis Region is showing that per every one unit of local government, there are approximately 3,000 citizens represented. Compared to the benchmark Regions and the nation, the St. Louis Region has the lowest constituency per single unit of government (2,760); the State of Missouri, at 1,609, is below the St.

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Louis Region by nearly 1,000 citizens. As constituencies shrink per one unit of government, there is a possibility of over-governance and a duplication of services. This may be true for both the State of Missouri and the St. Louis Region.

Population and Households

The table below summarizes changes in the St. Louis Region population between 2000 and 2010, compared to the State of Missouri, the US, and to the benchmark Regions. Some notable facts are: When compared to the State of Missouri, growing at CAGR of 0.7 percent from 1990 to 2010, the St. Louis Region is growing at nearly half the speed. When compared to the US, growing at an annualized rate of 1.1 percent, the pace of population growth more than doubles the St. Louis Region. While all of the comparable benchmarks have experienced population growth from 2000 to 2010, at an annualized growth rate of 0.4 percent from 1990 to 2010, St. Louis is growing at half the pace of the comparable benchmark Regions. Growing at the quickest pace is Indianapolis, with an annualized growth rate of 1.4 percent.
2000 1,979,202 1,612,694 1,525,104 1,827,069 1,205,204 2,698,687 5,595,211 281,421,906 2010 2,098,576 1,836,536 1,756,241 2,025,910 1,316,100 2,812,896 5,988,927 312,471,327 CAGR 0.6% 1.3% 1.4% 1.0% 0.9% 0.4% 0.7% 1.1% Net Change 119,374 223,842 231,137 198,841 110,896 114,209 393,716 31,049,421

Table 36: Population Growth, 2000-2010

Cincinnati Columbus Indianapolis Kansas City Memphis St. Louis Missouri United States

Source: US Census Bureau

While the population of the St. Louis Region grew by 114,209 between 2000 and 2010, the annualized rate of growth was less than modest when compared to the State of Missouri, the nation, and benchmark Regions.

Population Rank
The following table is a depiction of the top 30 Regions in the US as of the year 2000, and how they will change if growth continues at their specific current rate. About 2.6 million people lived in the St. Louis metropolitan area in 2000. That number jumped to 2.8 million in 2010. The rate of growth in this Region is not keeping pace with other comparable sized Regions. In the current scenario, if growth continues at a rate of 0.4 percent, the St. Louis Region, currently ranked 18th in total population among Regions, will drop to the 20th position in 2020, and drop out of the top 20 by 2030, ranking 26 by this time.

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Table 37: Rank of Top 30 Regions by Population (2000-2030)

Metropolitan Statistical Area New York Los Angeles Chicago Philadelphia Dallas Miami Washington DC Houston Detroit Boston Atlanta San Francisco Riverside Phoenix Seattle Minneapolis San Diego St. Louis Baltimore Pittsburgh Tampa Denver Cleveland Cincinnati Portland Kansas City Sacramento San Jose San Antonio Orlando
Key: White Blue Lowest Value/Highest Rank (Region = Rank 1) Midpoint Value/Midpoint Rank (Region = Rank 15)

2000 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

2010 Rank 1 2 3 5 4 8 7 6 12 10 9 11 13 14 15 16 17 18 20 22 19 21 28 27 23 29 24 31 25 26

2020 Rank 1 2 3 8 4 9 7 5 14 12 6 13 10 11 15 16 17 20 21 29 18 19 34 30 26 31 25 35 24 22

2030 Rank 1 2 3 11 4 10 7 5 16 12 6 13 8 9 14 15 19 26 27 35 18 21 37 30 28 29 24 36 22 20

CAGR 0.3% 0.4% 0.4% 0.5% 2.1% 1.1% 1.5% 2.3% -0.4% 0.4% 2.2% 0.5% 2.6% 2.6% 1.2% 1.0% 1.0% 0.4% 0.6% -0.3% 1.5% 1.6% -0.3% 0.6% 1.4% 1.0% 1.8% 0.6% 2.3% 2.6%

Green Highest Value/Lowest Rank (Region = Rank 30) Source: US Census Bureau

Cost of Living-Comparison to Benchmark Regions

The cost of living index of top technology communities (i.e., San Jose, CA Silicon Valley, etc.), as well as some of the top tier Regions in the US can be found in the table below. The table illustrates several interesting points: The St. Louis Regions composite cost of living score is the third lowest among selected cities, at 91.3, above only Pittsburgh, at 91.5, and Dallas, at 91.8. The St. Louis Region was ranked 20 out of the top 20 Regions in terms of total population, but it will drop from the top 20 by year 2030, if growth continues at its current pace. Therefore, it appears that the St. Louis Region is growing at the same pace of metro areas like Los Angeles

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and New York; however, comparatively, the cost of living and total population size in either of those two metro areas is substantially greater than is in the St. Louis Region. Ranking in the bottom 3 in terms of cost of living, the St. Louis Region does not appear to be growing at the pace of its counterparts in this measure. In fact, the Regions population growth is more in line with Pittsburgh, a metro area experiencing a population decline of 0.3 percent annually, as well as producing the lowest cost of living score at 91.5, when compared to the group. Other notable Regions with lower cost of living scores are Dallas and Houston, producing cost of living scores of 91.8 and 92.1, with population growing at annual rates of 2.1 percent and 2.3 percent. These figures suggest that, unlike the St. Louis Region, even as population growth surges, cost of living stays below the national average.
Composite Index 100% 91.3 Grocery Items 13% 97.3 Transportation 10% 94.0 Health Care 4% 99.1 Misc. Goods 33% 98.7

Table 38: Top Regions Cost of Living (Quarter 1, 2011)

Housing 29% 74.4 Utilities 10% 102.4

US Composite St. Louis, MO-IL

Comparable Technology Communities Charlotte, NC 93.0 Austin, TX 93.4 Raleigh, NC 95.1 Orlando, FL 97.2 Richmond, VA 102.6 San Jose, CA 150.0 Major US Metro Areas Houston, TX 90.5 Detroit, MI 90.6 Tampa, FL 92.2 Cincinnati, OH 93.3 Pittsburgh, PA 94.2 Atlanta, GA 95.2 Dallas, TX 95.8 Phoenix, AZ 96.2 Cleveland, OH 103.8 Denver, CO 106.4 Miami-Dade County, FL 107.7 Portland, OR 111.1 Chicago, IL 115.3 Seattle, WA 120.0 Philadelphia, PA 126.2 San Diego, CA 130.8 Los Angeles, CA 133.6 Boston, MA 137.6 Washington-Arlington141.0 Alexandria, DC-VA San Francisco, CA 163.6 New York, NY 218.4

98.1 83.6 99.6 99.1 108.1 110.0 83.9 90.5 97.4 103.8 104.3 96.4 100.8 108.8 111.8 103.5 109.6 108.8 112.5 111.9 125.5 104.7 106.5 120.5 110.7 113.1 154.8

84.1 79.2 82.2 79.6 101.1 238.1 84.2 78.3 78.8 81.6 75.9 91.0 75.7 81.7 96.5 112.5 112.8 123.6 133.4 134.4 140.7 189.2 197.3 157.6 231.0 279.6 397.9

96.2 101.9 103.8 107.2 111.7 137.9 88.3 103.0 96.3 102.1 99.2 89.4 109.3 102.7 101.9 90.3 93.2 91.6 96.6 89.9 130.3 112.3 111.0 146.4 100.7 90.8 158.9

98.9 101.3 98.4 101.4 100.7 118.7 94.8 97.9 103.2 95.1 111.8 98.2 103.6 108.9 101.7 96.4 112.1 114.6 118.4 112.4 109.6 112.7 109.3 107.1 108.0 110.9 119.7

109.0 96.9 94.7 96.9 104.5 116.3 98.1 93.2 97.7 101.7 95.0 98.9 104.7 104.4 106.0 107.6 104.6 115.3 107.1 116.1 105.8 113.5 110.5 121.9 102.0 112.7 130.3

94.0 104.6 101.0 107.8 99.1 105.6 97.2 95.1 96.6 95.1 99.4 99.0 104.0 97.2 107.9 110.1 106.0 105.5 106.3 122.4 119.9 102.9 105.2 135.2 100.8 126.1 144.3

Source: The Council for Community and Economic Research (C2ER)

The metro areas experiencing the most population growth are Charlotte, NC; Austin, TX; and Raleigh, NC; additionally, these Regions are technology communities or those which foster creativity, are

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centers of innovation and represent important socio-economic assets to the region, state and nation. Comparatively, the St. Louis Region has a lower cost of living among these metro areas, however, in Charlotte, Austin and Raleigh, neither Region exceeds the national composite score of 100, indicating that while these regions are growing at paces more than doubling the St. Louis Region, they can continue to stay affordable while generating competition, technology innovation and sustaining longterm growth for their regions.

Bank Deposit Analysis

For this analysis, AECOM reviewed total deposits made to Federal Deposit Insurance Corporation (FDIC) insured commercial bank regional offices, comparing the St. Louis Region to the defined benchmark regions from 2000 to 2010. According to the FDIC, all deposits made to regional bank offices refer to a range of products, such as demand deposits, money market deposits, other savings deposits and time deposits. The figure below represents the total amount of deposited assets per capita, implying the amount of personal wealth within each region studied and considers how personal wealth has changed from the year 2000 to 2010. Figure 43: Per Capita Regional Bank Deposits From 2000 to 2010, the St. Louis Region maintained a larger amount of total deposits within the Region when compared to benchmark regions in 2000, reporting a total of approximately $38 billion, increasing to approximately $71 billion by 2010. Cincinnati reported the next highest totals in both 2000 and 2010, at nearly $32 billion 2000 2010 and $57 billion Source: FDIC & Census respectively. Personal wealth, as defined by per capita deposits made to commercial banks within the region was the highest in Cincinnati between the year 2000 and 2010, at $16,133 and $27,047; however, more interesting is the fact that, relative to the benchmark regions from 2000 to 2010, the St. Louis Region moved from fourth place, at $13,930 per capita, to second place, at $25,280 per capita. From 2000 to 2010, the St. Louis Region experienced the quickest growth in per capita deposits made within the Region, at an annualized rate of 6.1 percent and a total net growth of $11,349 per capita. Columbus slightly trailed the St. Louis Region, growing at an annualized rate of 5.8 percent, followed by Cincinnati at an annualized rate of 5.3 percent.
Columbus Indianapolis Cincinnati Kansas City Memphis St. Louis
$28,000 $26,000 $24,000 $22,000 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000

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Technology Readiness
The chart below is measurement of per capita broadband technology accessible to the St. Louis Region, compared to the benchmark Regions, the State of Missouri and the nation. Broadband refers to a signaling method that supports a wide range of frequencies transferring sound, image and data. In an ever evolving world, technology is a strong indication of economic and academic progress, or vice versa. Moving forward, urban centers and states will require the bandwidth and technological preparedness to stay competitive nationally and internationally. Figure 44: Broadband Accessibility Compared to all US metro areas in bandwidth 98.0% accessibility, the St. Louis 96.0% Region ranked 144th in 94.0% per capita wireline (fiber 92.0% optic) coverage, and 234th in per capita wireless 90.0% coverage. Relative to the 88.0% benchmark Regions, the St. Louis Region has less per capita wireless and wireline coverage than all Wireless Wireline (Fiber Optic) Source: Broadband USA Regions surveyed, at 98.4 percent for wireless and 96.8 percent for wireline; however, compared to the State of Missouri and the nation, bandwidth coverage is greater in the St. Louis Region.
100.0%
Indianapolis Columbus Memphis Cincinnati Kansas City Missouri

Broadband and information technology access is critical to state and local economies. Economic development, energy efficiency and advances in health care will become ever more dependent on adequate broadband technology, as well as the knowledge and tools to leverage that infrastructure. Being at the top in terms of bandwidth, speed and coverage will allow trade areas to remain viable and competitive now and in the future.

Housing
Housing starts and building permits are both considered as leading economic indicators, that is, a measurable economic factor that changes before the economy starts to follow a particular pattern. As home prices have fallen and credit markets tightened, the number of permits issued for new housing units nationwide has declined. The growth and decline of the number of residential permits issued prior to 2005, and following decline in the market are presented below. Between 1995 and 2005, the number of residential building permits issued in the St. Louis Region grew from about 11,500 to almost 15,500, at an overall rate of 35 percent, nearly on pace with the US, growing at 42 percent. Following the rupture of the housing bubble, the number of permits in the St. Louis Region declined from approximately 15,506 in 2005 to 5,452 in 2010, an overall decline of 65 percent during this five-year period. Within this same period, the number of permits issued for new housing starts in the US declined at a slightly faster rate, at 68 percent: Growth in residential building permits issued in the St. Louis Region between 1995 and 2005 (35%) exceeded growth in Missouri (13%), while lagging slightly behind growth in new housing

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St. Louis

US

permit issued in the US (42%). Of the Regions surveyed, the St. Louis Region was the second highest for residential permit growth behind Kansas City (36%). Following 2005, decline in residential building permits issued in the St. Louis Region (65%) was comparable to declines nationally (68%). More so, the St. Louis Region experienced a less robust decline overall when compared to the other Regions surveyed, which ranged from a low of 75 percent in Cincinnati to a high of 83 percent in Kansas City.

Figure 45: Change in Residential Building Permits Issued, 1995-2010

Year 2005

Chart Title

17,000 15,000 13,000 11,000 9,000 7,000 5,000 3,000 1,000

Year 1995

Year 2007 Year 2010

Memphis

St. Louis Source: Census

Kansas City

Cincinnati

Columbus

Indianapolis

Housing Price Index Analysis

The Housing Price Index (HPI) is a quarterly measure of the movement of single family house prices. As tracked by the US Federal Housing Finance Agency, the HPI is a weighted, repeat sales index, measuring appraisals and all transactions on the same properties in 363 metro areas across the United States. Data is collected by reviewing repeat mortgage transactions on single family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975. The chart below compares the annual percent change in HPI in the St. Louis Region to other US cities and nationwide. The following trends are noted: Historic increases in the St. Louis Regions HPI exceeded increases of benchmark Regions as well as statewide. Between the first quarter of 2000 and the St. Louis Regions market peak in the first quarter of 2008, the Regions HPI increased by 33 percent. From the first quarter of 2005 to the first quarter of 2011, the St. Louis Region experienced a less dramatic decline in their HPI, at 6.6 percent, than the nation, at 9.3 percent, the State of Missouri, at 6.6 percent, and Memphis, at 9.8 percent. While still experiencing a decline in home prices, the St. Louis Regions decline was less dramatic from the first quarter of 2010 to first quarter of 2011 when compared to the year prior, the most dramatic single year decline in the Regions as well as the nations history.

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Figure 46: Change in Housing Price Index (1991-2011)

12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% St. Louis Memphis Kansas City Cincinnati Columbus Indianapolis MO US
Source: U.S. Federal Housing Finance Agency

Employment
The figure below looks at annualized changes in employment prior to, and following the onset of downturn in the US economy, comparing how each benchmark region is recovering from the downturn by measuring percent change in employment from May 2007 to May 2011. Figure 47: Annualized Emp. Change: Recession 05/07 to 05/10 & Recovery 05/10 to 05/11
St. Louis Memphis Kansas City Indianapolis Columbus Cincinnati US Missouri
Source: BLS - LAUS

-2.0% -2.3% -1.5% -2.7% -0.7% -1.4% -1.5% -1.9%

May '07 to May '10

1.9% 2.8% 0.6% 1.7% 1.0% 0.5% 0.4% 1.6%

May '10 to May '11

The above chart shows that, from May 2007 to May 2010, the Region saw annual 2 percent decrease in employment, slightly higher than the average of the other metro areas compared, annually decrease at 1.7 percent rate. Statewide employment decreased at slightly slower pace, while the US decreased

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at a slower pace during this period. From May 2010 to May 2011, employment levels in all the benchmark regions began to recover. Moreover, the St. Louis Region recovered at a pace second only to Memphis. Compared to the US, recovering by 0.4 percent since May 2010, the St. Louis Region is recovering at a rate more than tripling the US. The figure below is a performance measurement of employment growth in the St. Louis Region, compared to employment in the benchmark geographies. Figure 48: Change in Employment Relative to Benchmarks (2008 to 2011) Since September of 2008, at the onset of the US recession, employment in the St. Louis Region appears to be performing better than all of the benchmarks, with the exception of Columbus. For example, while employment in the St. Louis Region decreased at a rate of 1.8 percent during this time period, employment in the state of Missouri, the US, and the
STL
Memphis Kansas City Indianapolis Columbus Cincinnati US Missouri
Source: BLS - LAUS

0.9% 0.9% 4.1% -0.5% 1.4% 1.9% 0.2%

comparable Regions, other than Columbus, decreased at a quicker rate.

Unemployment
As the economy continues to rebound from the ill effects caused by the recession, the Region seems to be doing better than most of the benchmarks. The figure below compares current unemployment rates by Region and percentage point shift from May, 2007, ultimately measuring how each economy is moving towards recovery. Figure 49: Current Unemployment Rate (May, 2011)
Indianapolis Columbus Cincinnati Kansas City Memphis St. Louis US Missouri 0.0%
Source: BLS - LAUS

3.7% 4.4% 4.7% 4.7% 4.7% 4.8% 4.3% 4.8% 2.0% 4.0%

4.1% 3.0% 3.8% 3.7% 5.4% 3.8% 4.4% 4.5% 6.0% 8.0% 10.0%

Prior to closure of the South Chrysler Plant in October 2008, unemployment in the St. Louis Region was greater than all of the benchmark areas surveyed, at 4.8 percent in May of 2007. Following closure of the South and North Chrysler Plants, rates of unemployment again increased in the St. Louis

Unemployment Rate May 2007

Increase as of May 2007

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Region. Unemployment in all of the comparable Regions, the state and the US spiked during this time as well. Currently, with the exception of Memphis, the state of Missouri, and the nation, unemployment rates in the St. Louis Region were the highest. The unemployment rate ranged from a low of 7.4 percent in Columbus, to a high of 10.1 percent in Memphis. Since its peak rate of unemployment in February 2010 at 11 percent, the unemployment rate in the St. Louis Region has declined by 2.4 percentage points.

Private Sector Weekly Wages

Changes in private sector weekly wages among the St. Louis Region and benchmarks are shown in the table below, which is a look at quarter four actual average weekly wages by year, in order to gauge how they have responded within the context of the recession. Table 39: Private Sector Weekly Wage (2001-2010)
St. Louis Kansas City Memphis Cincinnati Columbus Indianapolis US 2001 $739 $725 $700 $714 $699 $719 $730 2005 $820 $806 $797 $811 $785 $801 $829 2008 $1,008 $895 $870 $878 $850 $857 $920 2010 $946 $943 $940 $941 $902 $899 $973

Source: BLS - QCEW

From 2001 to 2010, the average private sector weekly wage in the St. Louis Region grew from $739 in 2001 to $946 in the fourth quarter of 2010, at an annualized increase of 2.5 percent. This is in comparison to an average annualized increase of 2.7 percent increase across the benchmark Regions. The US private sector weekly wage has increased by 2.9 percent, only slightly higher than private sector weekly wages in St. Louis.

As of quarter four of 2010, the St. Louis Regions average weekly wage in the private sector was below the US average; however, St. Louis tends to fluctuate to levels above and below the US on a regular basis, whereas in 2001 average weekly wages were $739 in the St. Louis Region and $730 in the US. Compared to the regional benchmark average, St. Louis has remained a leader in the past decade. Figure 50: Change in Private Sector Weekly Wage, 2001-2010

28% 21% 14% 7% 0% -7%

2001-2005 Source: BLS - QCEW

2005-2008

2008-2010

The adjacent chart looks more closely at change in the private sector average weekly wage between the fourth quarter of 2001, to the fourth quarter of 2005, to the fourth quarter of 2008, and the to the fourth quarter of 2010, and following the closure of the South Chrysler plant. Between 2001 and 2010, the average private sector wage in the St. Louis Region grew by 28 percent over the nine year period. This rate of growth

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lagged comparable regions where growth ranged from a low of 29 percent in Columbus, to a high of 34 percent in Memphis. Average weekly wages increased faster in the St. Louis Region compared to Indianapolis. Between the fourth quarter of 2008 and the fourth quarter of 2010, the St. Louis Region was the only area that experienced a decline in average private sector weekly wages when compared to the benchmark regions and the US, falling by 6 percent during this time period.

Income Growth
Per capita personal income measures money received on a regular basis from wages, in addition to government and business transfer payments and interest. The following figure summarizes inflationadjusted per capita personal income for the St. Louis Region as compared to benchmark jurisdictions over a ten-year period. Figure 51: Per Capita Personal Income (1999-2009) In 2009, per capita personal income in the St. Memphis Louis Region was $41,152, considerably Kansas City higher than Missouris Indianapolis statewide per capita Columbus personal income at $36,181, and nationally at Cincinnati $39,606. Other than the Missouri US and State of Missouri, United States the St. Louis Regions per capita personal income $30,000 $32,000 $34,000 $36,000 $38,000 $40,000 $42,000 annualized growth rate 1999 2009 Source: BEA & BLS - CPI was the highest of the metropolitan benchmarks areas surveyed. After adjusting for inflation, per capita personal income in the Region grew by an annualized rate of 0.44 percent, as compared to an average annual decline of 0.02 percent across the other metro areas, with the highest being Kansas City, growing at an annualized rate of 0.24 percent, and the least being Indianapolis, decreasing at an annualized rate of 0.24 percent.
St. Louis

Figure 52: Annualized Growth - Per Capita Personal Income

St. Louis Memphis Kansas City Indianapolis Columbus Cincinnati Missouri United States
Source: BEA & BLS - CPI

0.51% 0.26% 0.30% -0.17% -0.04% -0.12% 0.63% 0.77%

While per capita personal income in the St. Louis Region exceeds US average, the Regions per capita personal income is slipping against US average. During this period, the St. Louis Regions share of per capita personal income nationwide declined from 105 percent of US average

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to 103 percent. Comparable Regions during the same period decreased substantially; in comparison to the US, per capita personal incomes in Indianapolis have decreased the most, at 9.5 percent.

Industrial Space
Advantageously located, the St. Louis Region sits at the confluence of the Missouri and Mississippi Rivers, and is connected to the surrounding area by a series of interstate highways as well as freight railroad lines. However, based on a review of industrial property in the St. Louis Region, it does not appear that the Region is performing as well as it should be as a major warehousing and distribution center in the United States. The table below provides an overview of the St. Louis Regions industrial property inventory compared to the selected benchmark regions. Relative to the benchmark regions, the St. Louis Region has the second most industrial properties, the second most total space per square foot, the second most occupied space per square foot, and second highest rent per square foot. Figure 53: Industrial Property Inventory
Area Cincinnati Columbus Indianapolis Kansas City Memphis St. Louis
Source: CoStar

Properties 6,534 4,868 5,103 6,091 3,093 6,020

Total Space (in ft2) 298,570,627 265,748,028 251,591,758 248,321,914 219,322,046 269,148,499

Total Occupied Space (in ft2) 270,548,663 237,584,076 234,604,271 230,536,708 192,861,859 246,895,823

Vacant Space (in ft2) 28,021,964 28,163,952 16,987,487 17,785,206 26,460,187 22,252,676

Vacancy Rate 9.4% 10.6% 6.8% 7.2% 12.1% 8.3%

Average Rent per ft2 $3.18 $2.88 $3.50 $4.64 $3.06 $3.81

At first glance, it appears that the St. Louis Region is performing adequately with respect to its advantageous location, and in comparison to the benchmark regions. However, the St. Louis Region employs the highest number of individuals in the Trade, Transportation, and Utilities Super Sector. Furthermore, the St. Louis Region employs nearly 50,000 more individuals in the Trade, Transportation, and Utilities Super Sector than Cincinnati, the region with the next highest amount of employees in this super sector. Figure 54: Industrial Space per Employee per S.F. TTU Super Sector (Q1, 2011)
1,547 1,510 1,370 1,405 1,285 1,107

Cincinnatti Columbus Indianapolis Kansas City Memphis

Source: CoStar & BLS - CES

St. Louis

The adjacent chart portrays the amount of industrial space per employee in the Trade, Transportation, and Utilities Super Sector, measured against the benchmark regions. Adequate space is a valuable attraction for logistics, warehousing, supply-chain, and distribution related industries when

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considering locating or relocating operations however, in the context of its superior location advantages, the St. Louis Region it does not appear to have the appropriate supply of industrial space per employee. The average amount of industrial space per employee in the Trade, Transportation and Utilities Super Sector was 1,107 square feet, whereas all five of the benchmark regions ranked higher, with Cincinnati posting the highest per employee average, at 1,547 square feet. Therefore, it could be assumed that the St. Louis Region is not living up to its potential in terms of the total supply of industrial space juxtaposed to the number of employees in industries requiring more industrial property space.

Educational Attainment
The education of the St. Louis workforce will influence the Regions business mix moving forward, and help inform how new jobs may take the place of the jobs lost due to the closing of the Chrysler assembly plants. Figure 52 examines the St. Louis Regions share of population aged 25 years and older by educational attainment as compared to the State of Missouri, the nation and benchmark Regions. Figure 55: Share of Population Age 25+ by Education Attainment (2009) In 2009, nearly 63 percent of the St. Louis Regions United States population of individuals Missouri 25 years of age and older did not possess a higherSt. Louis level degree (i.e. Memphis Associates, Bachelors, Masters, or Doctorate). Kansas City St. Louis was below the Indianapolis national and state averages for this measure; Columbus however, St. Louis was in Cincinnati the middle of the pack High School or GED Associates Bachelors Masters Doctorate & Professional when compared to Source: Census benchmark Regions, where Cincinnati and Memphis show higher a number of individuals 25 and over without any sort of degree. The data reveals several other notable points:
0% 10% 20% 30% 40% 50% 60% 70%

Slightly more than 35 percent of the St. Louis Regions residents hold at least an Associates Bachelors, Masters or PhD, exceeding the state average, at 30 percent, and the US average, at 33 percent. A key difference separating St. Louis from the rest of the benchmarks is the concentration of Bachelors and Masters/Professional degree holders in the St. Louis Region. The St. Louis Region is in fourth place, ahead of only Cincinnati and Memphis, in its share of population with a college education. The percent of population with a college education ranged from a low of 28 percent in Memphis to a high of 38 percent in Columbus. Compared to the benchmark Regions, Missouri and the US, the St. Louis Region has the lowest share of individuals that have graduated high school or received a GED, at 27.6 percent. Of the benchmark Regions, Cincinnati has the largest share of individuals who have received a high

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school diploma or GED, at 32 percent. Thirty-two percent of individuals in the State of Missouri also have obtained at least this level of education. The following figure further explores education by focusing on both doctorate (PhD, EdD) and professional (MD, DDS, DVM, LLB, JD) degrees per capita. These post-secondary degrees are important to business investment as they drive research and development, which in turn drives innovation and business growth. Figure 56: Doctorate and Professional Degrees Per Capita (2009)
United States Missouri St. Louis Memphis Kansas City Indianapolis Columbus Cincinnati 0.00% Source: Census 0.50% 1.00% 1.50% 2.00% 2.50% 2.64% 3.00% 3.50% 2.37% 2.81% 3.11% 3.31% 2.54% 3.11% 3.10%

In St. Louis, 3.11 percent of the population 25 years and older hold either a doctorate or professional degree. Indianapolis has the same share whereas Columbus is slightly higher at 3.31 percent. However, the share of adults with doctorate and professional degrees in the St. Louis Region is greater than the

State of Missouri and slightly greater than the nation. St. Louis has the second highest concentration of doctorate and professional degrees among adults 25 and older compared to benchmark Regions. At 1.13 percent of the total population 25 years of age and older, St. Louis is behind only the Columbus Region, at 1.21 percent. Compared to the nation, St. Louis is lagging a bit, however, doctorate degrees per capita in the State of Missouri trail the St. Louis Region by a considerable margin. Other than Indianapolis and Columbus, the St. Louis Region has the largest share of professional degrees, at 1.99 percent; this share is greater than both the State of Missouri and the nation as well. As the St. Louis Region continues to move forward, an important component to economic recovery will be the ability to meet the demand for a suitable labor force. Accordingly, some of the most critical strategies leading the Region out of the recession and on a path for recovering from the Chrysler plant closures will likely be centered around education and workforce development. As of 2009, educational attainment was average compared to the benchmark metro areas, but leading the State of Missouri and the nation. In transition from the recession and the closure of the North and South Chrysler plants, it will be important for the Region to develop strategies that encourage the attainment of higher level education. The education and experiences that will be needed in the future range from degree-bearing higher education programs as well as various training programs and certification programs. The following chart illustrates the change in real gross domestic product within the benchmark Regions, the State of Missouri, and the nation as measured by the Bureau of Economic Analysis (BEA). The BEA defines the gross domestic product as a true and real measure of the economic status of regions and the nation, providing a factual account regarding economic activity and growth. Typically, the real GDP constantly grows, rarely declining from the previous years level. For example,

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from 2001 to 2008, Regional GDP grew at an annualized rate of 3.7 percent; faster than only Cincinnati and Columbus. From 2008 to 2009, real GDP declined in the St. Louis Region by 2.9 percent, which was the greatest decline of all of the benchmarks surveyed. Overall, in the past 9 years, the St. Louis Region grew slower than the majority of benchmark Regions, the State of Missouri and the US, while in 2009, declined quicker than all benchmarks surveyed. Figure 57: Percent Change in Real GDP (2001-2009)

8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0%

Columbus

Indianapolis

Cincinnati

Missouri

Source: BEA

Violent Crimes Discussion

There is a perception among many that St. Louis is a dangerous environment. While there are risks associated with many metropolitan regions, when compared to the benchmark cities, the St. Louis Region, in fact, is not the most dangerous. The Federal Bureau of Investigation (FBI) compiles crime statistics from local municipalities and aggregates the statistics for comparison as shown in the following table. The most recent figures available by the FBI are 2009 figures. On a per 100,000 resident basis, the Region is not the most dangerous of the comparable cities as shown in the following table. For the category of murder, the rates range for many communities between 1 and 7, however, there are Regions in which the rate is near 10 and a few cases where the rate increases. In the table below, the 2009 crime rates for murder and non-negligent manslaughter was 7.4 in the St. Louis Region, down from 7.7 in 2007.

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United States

Kansas City

Memphis

St. Louis

Table 40: Violent Crime Rates per 100,000 Residents, 2009

Area Memphis Kansas City St Louis Indianapolis Columbus Cincinnati Population 1,299,027 2,060,705 2,829,698 1,742,101 1,797,471 2,178,158 Murder and Non-Negligent Manslaughter 12.1 7.9 7.4 6.4 5.7 4.1 Forcible Rape 42.6 34 32.7 46.3 33.1 Robbery 352.2 145.8 147.8 239 220.3 164.4 Aggravated Assault 740 348.3 297.2 349.8 98.1 140.3

Source: FBI.gov

Missouri vs. State Benchmarks

The following subsection is a review of the State of Missouri vs. other US states. In many cases, analysis of the State of Missouri is helpful in understanding the broader implications for the St. Louis Region.

Competitive Business Tax Climate

Taxes directly impact a business bottom line. Generally speaking, states with lower tax burdens will be better advantaged for business investment compared to states with higher tax burdens. The following figure explores the competitiveness of the State of Missouri from the perspective of taxes in relation to other Midwest states. For this analysis, AECOM determined that Illinois, Ohio, Kentucky, Indiana, and Tennessee were viable benchmarks to compare tax indices. Figure 58: Business Climate (2010)
6.71 6.02

6.06

6.31

5.78

5.58

5.34

5.48

5.18

5.03

US = 5.0

5.03

5.05

5.22 4.16 5.00

4.97 4.60 4.50

4.34 3.98 4.69

4.68

3.98

4.39

3.54

3.84

2.70

Corporate Tax

Sales Tax

Unemployment Insurance Ohio Kentucky

2.70

Property Tax

3.06

Overall Score

Missouri Source: Tax Foundation

Illinois

Indiana

Tennessee

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5.79

As reported by the Tax Foundation in 2010, the scores are developed based upon US average (5.0) with each state falling either above or below this average; according to the Tax Foundation, the higher the score, the more favorable a states tax system is for business. Findings include: Missouris overall score of 5.48 reveals that it is considered a competitive location for business investment; other than Indiana, with an overall score of 5.79; Missouri had the highest overall score. Comparatively, when looking at each individual tax category, the State of Missouri is near the US average for sales tax and unemployment insurance, both with a share of 5.03, these categories may be seen as key challenges for Missouri. Corporate taxes (6.06) and property taxes (6.02) are key strengths for Missouri.

Unlike Missouris counterparts, no individual component of Missouris tax structure falls below the US average. While Missouri may not rank number one overall in any component category, being above average indicates that Missouri has a more favorable business tax system than most other states.

Tax Burden
The per capita state and local tax burden is a collection of various tax assessments placed on citizens. The levels and assessments themselves are subject to change over time; however, as a composite, the state and local tax burden measure, tabulated by the Tax Foundation, is made up of five components: 1) property taxes; 2) general sales taxes; 3) individual income taxes; 4) corporate income taxes; and 5) other taxes (including selective sales taxes on alcohol, tobacco, motor vehicles, utilities; licenses; severance taxes; stock transfer taxes; and estate/gift taxes). The pace of growth for the state and local tax rate burden in the State of Missouri compared to the US state average from 1999 to 2009 is shown below. Figure 59: State and Local Tax Burden vs. US (1999-2009)
10.0% 9.8% 9.6% 9.4% 9.2% 9.0% 8.8% 8.6% 8.4% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0

MO Per Capita Income MO Per Capita Tax Rate Source: Tax Foundation

US Per Capita Income US Per Capita Tax Rate

From 1999 to 2009, the tax burden for the State of Missouri trended, on average, 0.5 percent less than the US average. Within this time period, in 2008, Missouris per capita state and local tax

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rate peaked at 9.3 percent, whereas the US average also experienced a peak in 2008, reaching 9.9 percent. Since 1999, Missouris tax burden has decreased at an annualized rate of 0.2 percent, while the US average has increased at an annualized rate of 0.4 percent. From 1999 to 2009, Missouris average rank was 30 (1 being the highest) on a full scale of 51 (50 states plus the District of Columbia), indicating that overall, more than half of the states in US impose higher tax rates on their citizens than the State of Missouri.

States Pace of Recovery

The charts below depict the performance of individual states as of January of 2010, when employment bottomed out and unemployment peaked. Since that time, employment in the US has picked up and unemployment has decreased however, as the US is the composite of all of the states, these charts are a measurement of how much they have improved (increased employment) or worsened (increased unemployment), relative to the US. Key findings are described below: Figure 60: Change in Unemployment, Relative to US (01/2010-06/2011) From January of 2010, unemployment in Missouri decreased, however, at a pace 3.9 percent slower than the US (seen in the US figure below), whereas unemployment in Michigan and Indiana decreased at pace nearly doubling the US, at approximately 11 -10.2% percent during that time period. Missouris weak MO KS IN KY OH IA MI WI MN IL pace is second only to Source: BLS - LAUS Iowa, where unemployment increased by 1 percent overall, nearly 10 percent off the pace of the US.

10.9%

10.7%

3.3%

1.2%

Figure 61: Change in Employment, Relative to US (01/2010-06/2011)

3.2%

-3.9%

-2.6%

-0.7%

0.5%

2.7%

1.8% 1.3% 0.4%

US MO KS IN KY OH IA MI WI MN

1.7% 1.1% 0.3% 1.1% 1.0% 1.3%

IL

Source: BLS - LAUS

Similar to the above figure, relative to the US, the selected states increased employment at a faster pace than the US. During this time period, employment in Kentucky increased at a rate 3.2 percent faster than the US, whereas Missouri, while still improving at a better rate than the US, at

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a 1.3 percent faster pace, was near the average pace when compared to the benchmark states.

Policy Insights
The following section frames broader policy implications of key factors that will shape the regional economy in St. Louis. The bullets below are a description of the topics covered in the following section: Retail Fuel Costs Transit Oriented Development Comparisons of Right to Work & Closed Shop states

Retail Fuel Prices

Historically, retail gasoline prices and inflation (as measured by the Consumer Price Index for all urban consumers) are both economic measures indicating growth and the strength of the United States economy. Viewed from a long-term perspective, inflation tracks movements in global oil prices. Prices for oil and other energy commodities constitute a portion of the actual CPI, while other commodity prices have an effect on inflation as well. For example, as commodity prices rise (i.e. energy, food, and clothing) inflation reacts, thus increasing the cost of living, whereas when the retail prices for gasoline increases, the demand for gasoline decreases. The price in gasoline may also indicate a lifestyle change for many individuals who depend on the automobile, suggesting that as a person spends more to fuel their automobile, that person will spend less on other commodities, thus creating a reciprocal relationship between the change in fuel costs and the change in inflation over time. This notion is mirrored in intermodal cargo transit as well, suggesting that as retail diesel prices increase, the cost of intermodal transit will become a financial burden for both private corporations as well as government entities essentially any entity shipping cargo by heavy truck. The historical annualized change in the US price of retail regular and retail diesel gasoline, compared to the change in inflation from 1994 to 2011 is below. Figure 62: Annualized Growth - Retail Fuel vs. Inflation (Month of March, 1994-2011) From March 1994 to March 2011, both regular and diesel gas prices in the US have 7.7% increased at an annual growth rate of 7.7 percent, while inflation in the US has 7.7% increased at an annual growth rate of 2.5 percent over the same period of time. While both regular and diesel fuel are growing at the 2.5% same rate annually, since 1999 retail diesel fuels costs have outgrown retail regular fuel Reguler Diesel Consumer Price Index costs by a slight margin, 12 percent to 11.3 Source: EIA & BLS percent. More staggeringly, since 2009 retail fuel costs for both regular and diesel have grown at annualized rates of 35 percent for regular and nearly 37 percent for diesel, while inflation actually dipped below average, growing at 1.5 percent annually.

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Overall, retail fuel prices tend to fluctuate at a more dramatic scale than inflation. As of April 2011, current regular prices were $3.79 per gallon, while retail diesel prices were $4.06. Additionally, economists believe that rising gas prices will have a negative effect on consumer confidence, sapping consumer spending and slowing the pace of economic growth in the US garnering a fear that heightened fuel prices will depress the US economy further, slowing the pace of recovery. However, the fact remains that while retail gasoline prices and commodity prices continue to grow at the current pace, economic recovery may be slowed, potentially causing a reduction in consumption of goods and a shift in personal transportation habits, negatively affecting the demand for oil. Furthermore, if fuel prices continue at the current trends, nearly doubling the growth of inflation, the economy may no longer be capable of absorbing higher retail energy costs, which may begin to affect the prices of other goods and services, such as food and waste transfer.

Transit Oriented Development

Transit-oriented development (TOD) is considered a mixed-use residential or commercial area designed to maximize access to public transit by developing high density neighborhoods within walking distance to a transit station. The chart below looks at the amount of households falling within 0.25 miles of transit stations supporting the St. Louis Region, compared to two other benchmark transit systems supporting the Chicago and Portland, Oregon regions. Figure 63: Share of Households within a Quarter Mile of Transit Stations
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 8.1% 7.9%

3.3%

3.3%

0.8%

0.9%

2000 Chicago Region Portland Region Source: ESRI

2010 St. Louis Region

In both 2000 and 2010, St. Louiss share of households within 0.25 miles of transit stations to total households within counties linked by transit was below 1 percent, while in the Chicago and Portland regions the share was much higher.

From 2000 to 2010, the share of households within 0.25 miles of a transit station in the St. Louis Region has increased at annualized rate of 0.25 percent; however, the Portland regions share of households within a quarter mile of transit stations increased at a slower pace annual rate of 0.11, while the Chicago regions share of households within a quarter mile of transit stations decreased at annualized rate of 0.31 percent. As the St. Louis Region experienced an increased share of households within a quarter mile of transit stations, growing at a faster pace than both Portland and Chicago, the overall proportion is much lower than both benchmark regions. With that known, this may be an indication that travelers live farther away from transit stations, or possibly ridership is not being maximized.

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State and Local Government Revenue

Local government bodies, including counties, cities, municipalities, school districts and special districts, are pivotal pieces, playing significant roles in lives of many and the nations economy. The following graph depicts an index derived from actual state and local revenues based on tax collections (inflation-adjusted) from 1988 (base year) to 2010. More so, this figure is a measurement of the fiscal stress that has been felt by state and local governing bodies. Figure 64: State and Local Government - Tax Collection Index (Base Year-1988 = 100)
200 180 160 140 120 100 80
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Census

State

Local

For this analysis it is important to understand how states and localities leverage revenues through tax collection. Speaking in terms of revenue generated by tax collections, states have collectively experienced more fiscal stress than their local counterparts due to a greater dependence on more volatile sources of revenue, such as income and sales taxes. Localities, on the other hand, generate revenue from a variety of sources. According to the US Congressional Budget Office, local governments rely on state aid about a third of total revenues, property taxes nearly a quarter of total revenues, sales and other taxes one tenth of total revenues, a small portion from fees and miscellaneous revenues, and less than one tenth from direct federal government aid. The chart exhibits a number of notable points: Since 1988 local government tax revenues grew in real (inflation-adjusted) terms at an annualized rate of 2.7 percent, while states have grown at an annualized rate of 1.6 percent. From the peak year in 2007, state tax collections, generating revenue, have dropped by a considerable margin, decreasing at an average rate of 4.8 percent annually. In contrast, local governments began to decrease by 2.6 percent annually from a peak in 2009 to 2010. Since 1991, local government tax collection has increased as a share of the total local and state tax collection revenues, whereas in 2001, making up 28 percent of the total share, jumping to 45 percent in 2010; concurrently, state governments tax collection revenue as a share of the total state and local tax collection revenues have decreased.

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The increase in local government revenue reflects specific policy decisions after September 11, 2001 to increase aid to local municipalities for emergency response.

Manufacturing in the US
In recent years, both labor and shipping costs in Asia have sharply risen. As the cost of doing business in Asia increases in some cases equal to US costs many companies with a primary distribution base in the US have begun to take notice; for example, a growing number of US companies including General Electric and Caterpillar are locating and re-locating some their production operations in the US. The process of relocating operations from Asia to the US, as a result of higher transportation costs and increasing wage rates has been described variously as reshoring, home-shoring, on-shoring, back-shoring, and repatriating. An indication of this shift has recently been corroborated with an increase in US manufacturing employment. Figure 65: Monthly Employment in US Manufacturing, January 1990 to July 2011
20,000 19,000 21 year trendline 18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Bureau of Labor Statistics

Right to Work Analysis

Right-to-work laws are statutes enforced by 22 US states. Enacted in mostly southern and western states, the right-to-work provisions are allowed under the Taft-Hartley Act which prohibits deals between labor unions and employers mandating membership or the payment of union dues/fees as a contingence of employment. The Taft-Hartley Act applies prior to or after the hiring process, thus mandating workplaces within right-to-work states to be open shops. As counterparty to right-to-work states, closed shop arrangements are between the state, enacting / mandating laws, one or more employer, and one or more worker organization, according to which an individual can only be employed or retain his or her job upon conditional membership to a specified labor union.

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Many believe that right-to-work laws have benefited those states that have enacted them while at the same time, believing that forced unionization (i.e., closed shop) reduces economic opportunity. While this may have been true early in the decade, the recession seemingly has impacted right-to-work states with the same severity as their counterparts. The figures below look at labor force metrics in a selection of right-to-work states (Arkansas, Kansas, Tennessee, and Texas) a selection of closed shop states (Illinois, Indiana, and Michigan) relative to Missouri, an historically closed shop state which recently has debated a statewide right-to-work policy. The first is a comparison analyzing total employment growth in the manufacturing Super Sector, while the second compares current average wages of production employees in this Super Sector. Figure 66: Manufacturing Employment - Right to Work vs. Closed Shop, April 2002-2011
CAGR 01-08 CAGR 08-11

-2.1% -2.6% -3.7% -4.9%

"Right to Work" States Source: BLS - CES

-5.2%

-5.3%
Missouri

"Closed Shop" States

Overall, the states included in this analysis experienced a mass decrease in manufacturing jobs from 2001 to 2011; however, right-to-work states decreased at an annualized rate of 3 percent, slower than closed shop states, decreasing at 4.1 percent annually, and the State of Missouri, decreasing at 3.4 percent annually. In this instance, Missouri trended more in line with right-to-work states. From 2001 to 2008, in the midst of the US recession, right-to-work states decreased at slower pace than unionized states, as well as Missouri. However, during this same period, closed shop states decreased at almost twice the speed, decreasing at 3.7 percent annually. From the height of the recession in 2008 to 2011, Missouri experienced the sharpest drop in manufacturing employment, decreasing at 5.3 percent annually, while right-to-work states dropped at an annual rate of 4.9 percent, and closed shop states dropped at 5.2 percent annually. The following figure looks at the average wage of production employees within the manufacturing Super Sector in right-to-work states relative to closed states, and the State of Missouri. Right-to-work states have experienced the quickest growth in wages, increasing by an annualized rate of 2.1 percent from 2003 to 2011, while the State of Missouri increased by only 0.29 percent over this same period of time. While right-to-work states are increasing at the quickest pace from 2003 to 2008, the average wage of the right-to-work states surveyed for this analysis lag the average wage of closed shop states surveyed, as well as the State of Missouri. More specifically, as of 2011, right-to-work states reached a high in terms of average wage however, at this level, average wages were still lower than 2003 levels for both closed shop states and the State of Missouri.

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Figure 67: Average Weekly Wage for Manufacturing- Right to Work vs. Closed Shop, 2003-2011
Year 2008 ($795) Year 2011 ($794)
Chart Title

$850
Year 2003 ($742)

$750
Year 2008 ($617)

$700 $650 $600 $550

Year 2003 ($570)

"Right to Work" Source : BLS - CES

Year 2011 ($675)

"Closed Shop"

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Year 2003 ($701)

Missouri

Year 2008 ($707)

$800

Year 2011 ($718)

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Industry White Papers

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Introduction
The following topics consider progressive innovations in energy, technology, manufacturing, human capital, and logistics. Each trending innovation is summarized in a white paper, highlighting the opportunities and implications for the St. Louis Region. White papers were developed looking at value-added opportunity areas that have potential for application within the St. Louis Region. A primary goal was to focus on trends that would diversify the Regional economy and drive job growth, allowing the St. Louis Region to stay competitive by capitalizing on advanced industry innovations in concert with the currently existing economic strengths of the Region. This section provides an overview of innovative ideas, addressing ways to improve the competitive position of the Region and as a response to the Chrysler dislocation, clarifying strengths, weaknesses, opportunities and threats that will influence the ideal strategic outcome. The white papers cover the following subjects: Automotive sector Venture capital and business investment programs and tools Renewable energy Biofuels Wind energy Computer science and information technology Innovations in technology Water intensive industries Containers on barge Asian market opportunities

These profiles are meant to provide an overview of the topics as they presently exist, as well as providing an indication of their future direction, and how they may be relevant for the St. Louis Region.

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Automotive Sector
Technically, auto assembly is comprised of parts manufacturing and vehicle manufacturing, ranging from small-parts plants supporting few workers to sizable assembly plants employing hundreds and even thousands of individuals. Types of vehicles manufactured include automobiles, sport-utility vehicles (SUVs), vans and pick-up trucks (light trucks), heavy duty trucks, buses, truck trailers, and motor homes. Manufacturing also includes parts such as engines, seats, breaks, and electrical systems. Overall, the largest sector of the auto assembly industry is the manufacturing of motor vehicle parts. The US auto industry began to feel the devastating effects of the recession as early as December 2007 at which time, new car purchases dropped considerably, spurring a reduction in automotive production. Consumption slowed, jobs were lost, and factories closed or consolidated. By 2009, two of the three domestic automakers (Chrysler and General Motors) were forced to reorganize, both filing for Chapter 11 bankruptcy. Even as domestic automakers are a critical fixture in auto production, this industry is evermore a global one, with many domestic automakers assembling vehicles with parts manufactured from outside of the US, as well as many foreign firms producing auto vehicles in US plants. Figure 68: Total Auto Production (Month of January, 1986-2011) The adjacent chart is a snapshot look of how the 13.0 auto assembly industry has performed in the past 11.0 and what the current trends are doing post9.0 recession. Total vehicle production of automobiles (cars), light trucks, and 7.0 heavy trucks ascended a peak in 2000, reaching 5.0 nearly 14 million units, which represents the 3.0 highest level of production by domestic automakers Total Auto Source: Federal Reserve seen in the past 25 years. Prior to 2000, vehicle production maintained a level of output above 10 million units annually, with the exception of 1990 through 1992. Other observations include:
(Millions)

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

The average output of vehicle production from 1989 to 1999, producing nearly 11 million units annually, was higher than the average output from 2001 to 2011, producing an average of 10.1 million units. Additionally, the total average annual production from 1986 to 2011 was 10.7 million units. These statistics indicate how negatively the recession affected domestic vehicle production. Prior to 2009, the lowest point in production was in 1990, when levels of output were nearly double what they were in 2009.

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2011

In the earliest years of vehicle production, automobiles represented the largest share of total vehicle production. Trends in motor vehicle production by type of auto vehicle, specifically examining the historical shift in production of automobiles and light trucks, are shown below. Figure 69: Auto Production by Vehicle Type (Month of January, 1986-2011)
Chart Title
(Millions) 8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Federal Reserve

Automobile

Light Truck

Notable findings: For eleven years prior to 1997, automobile production exhibited the larger share of total production; however, in 1997 light truck production broke that threshold, becoming and maintaining the larger share of total vehicle production from 1997 to 2011. Peaking production in 1986, at 8.2 million units of output, automobile production experienced an 86 percent decrease to the lowest point in production in 2009; moreover, light truck production peaked in 2004, at 7.84 million units, enduring a decrease of 70 percent to its lowest point in 2009. From 1986 to 2011, average production of cars and light trucks amounted to about 5.2 million units annually. As mentioned earlier, however, there was a major shift in the type of vehicle produced from a majority of automobiles to light trucks between 1996 and 1997.

Overall, this illustrates that during the collapse of the auto industry, automobile production was affected in a more negative way than light truck production. Domestic vehicle production is only now beginning to rebound following the worst recession in US history. While it is clear that St. Louis is no longer the automotive center that used to be, the Region still supports one assembly plant as well as a specialized workforce that can adapt to evolving manufacturing processes in the industry. The goal is

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to sustain existing assembly operations and supplier activity such that recovery can occur as automotive sales recover. For the moment, the auto sector is impacted by key realities: Although auto industry sales levels have recovered from historic lows in 2009, current production remains well below pre-recession levels which trended in the 9 million to 12 million units per year range. The resulting decrease in volume is a practical challenge for the Regional supplier base, which now needs to diversify. It has also impacted logistics providers, who are facing similar challenges. Although bankruptcy restructurings at Chrysler and GM have allowed these companies to approach profitability and reduce capacity, the industry is still challenged by the reality of overcapacity, particularly in export markets, as evidenced by the bankruptcy announcement at Saab. For the US market, further change is expected by 2013, when Mazda is reported to leave the US Market. Other future developments include the integration of more fuel-efficient vehicles in response to concern about US dependence on foreign oil, rising fuel costs, and energy efficiency derived from general environmental concerns. On July 29,, 2011, President Obama announced the administrations new fuel standards for all new light trucks and cars sold in the US. By 2025, all new cars and trucks, model years 2017-2025, will be required to meet a performance requirement equivalent to 54.5 miles per gallon (mpg); in addition, these vehicles must reduce emissions to 163 grams per mile. The White House projects that consumers will save nearly $1.7 trillion at the gas pump, the US will save 12 billion barrels of oil and eliminate 6 billion metric tons of carbon dioxide pollution. This requirement more than doubles the current Corporate Average Fuel Economy (CAFE) standard of 24.1 mpg, an active step in reducing the nations dependence on foreign oil and oil based fuel. This policy implies a structural change in the types of vehicles manufactured in the next 20 years and beyond, thus manifesting a potential demand for new investments in automobile production and retooling plants. The 2011 Japan tsunami exposed weaknesses in the supply chains for both US and Japanese manufacturers.

While the auto industry in the US remains challenged, the following elements also need to be kept in mind. Research shows that the major domestic and international auto producers are looking at their production processes to reduce the number of activities required to build a car, with the goal of streamlining the assembly line, reducing costs, waste, and the amount of time needed to complete fabrication. The biggest change in this area is the emerging role of Tier 1 auto suppliers, who now provide larger car components (called modules), such as dash boards, instrument panels, and seats to the big auto makers for final car assembly, as opposed to smaller individual car parts. While in the past, auto manufacturers had the in-house capacity to make all their car parts, economic realities have changed this practice. The Japanese auto makers were the first to move to outside parts suppliers, which led to the formation of Denso, Inc. now one of the largest Tier 1 suppliers, producing heating, ventilation, and air conditioning systems for American, Japanese, and European car makers. Firms such as Magna and Eaton are now in position to compete with the Big Three and assemble cars. The growth of Tier 1 suppliers is important for several reasons. First, to facilitate development of new models, the auto manufacturers are sharing more information with suppliers such as new car design information, with the expectation that the suppliers will develop in-house design and R&D capabilities

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to develop new components. As well, the contracts signed by the auto manufacturers are increasingly long-term, i.e. over the length of a model production run, with far greater emphasis on quality, compared to price. For the big auto companies, one additional benefit is that they are able to shift a larger share of factory retooling costs for new models to their Tier 1 suppliers. Industry experts expect the current period of rationalization in the supplier chain to continue, as companies find that they need to get bigger and more diversified to remain profitable. As a second notable process improvement example, suppliers are adapting traditional assembly approaches to reduce costs. In one example, a traditional steel fabrication production process, called roll-forming, could be adapted to build truck beds. Before roll-forming, the truck bed was stamped from a sheet of steel. The problems with stamping were that it required a heavier gauge steel which was more expensive, produced a product with inconsistent metal thickness and quality, and created excess waste. Sources indicated that the innovation of roll forming for this manufacturing process was significant in that it created a stronger, higher-quality product using lower gauge steel with lower cost, reduced weight and almost no excess waste. The innovation of this process is important in that it demonstrates that competitive forces in the auto industry are growing stronger, forcing companies to be more innovative, which requires investment in R&D. Just-in-time-Manufacturing (JIT) The Japanese car makers pioneered this manufacturing approach which requires the delivery of auto components and parts to the final assembly destination only as they are needed on a continual basis. The approach is significant because it reduces warehousing and overhead costs for the primary auto manufacturers and streamlines the production process. It also creates other benefits, reducing the number of Japanese suppliers and encouraging tighter links between these companies and the auto manufacturer which has simplified the process of organizing and planning the delivery of parts and components. Events related to the 2011 Tsunami aside, JIT remains a clear standard for vehicle production, offset by the broader strategic question for firms whose supply chains have grown too long over the past 10 years. The Car Platform Concept Car producers are in the process of developing car platforms, in which a basic auto frame can support a number of car design variations, with the ultimate goal of developing one frame to support designs in different countries. As one example, the Audi A4 and Volkswagen Passat passenger sedans share the same basic frame and engine components, while offering different amenities and extras to support their particular market segments. For Volkswagen, which owns Audi as well as Porsche, the benefits of sharing components between cars while preserving the distinct markets for each brand is significant, allowing them to reduce costs and generate increased economies of scale. At the same time, companies such as VW need to take care that the consumer can see differences between a VW and an Audi in terms of appearance, handling, value, and cost. As a related theme, these platforms are increasingly global in nature. Materials Auto makers are looking for stronger, lighter weight, lower cost materials, including composites, powdered metals, plastics, ceramics, and aluminum. Obviously, lighter-weight stronger materials are attractive to the industry, which is always aware of the fuel economy and car safety issues. Further research in this area is a key for the industry. The Nature of the Auto Industry This industry, which is highly capital intensive with associated high costs of entry, tends to discourage new entrants. Moreover, the industry is driven by a constant need for process innovation, i.e. finding cheaper and faster ways to build the same thing or make it better/safer. According to the Economist, these incremental innovations need to occur on a regular

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basis, driven by communication with suppliers and customers, whose needs and expectations change constantly. Given the high costs of producing autos, as noted above, more radical innovation tends to be discouraged. These more radical product innovations occur infrequently. On a broader level, because the auto industry pulls information and resources from so many areas (materials, computers, aerodynamics, design, engineering, etc.) linkages to other industries and areas of the country and world are significant, and create opportunities for spin-off of new ideas. The Great Recession One clear result of the recession is that the auto industry has retreated geographically back towards its core regional location, anchored by the I-75 and I-65 corridors (also known as Auto Alley), which extends down from Michigan to newer automotive locations in the southeast. The majority of plants that were closed were on the periphery of the system. AECOM also noted the potential for attraction of domestic auto industry R&D, partially through collaborative efforts among the big three domestic auto producers, but also through a growing segment of new, smaller start-up electric vehicle manufacturers including Coda Automotive, Tesla Motors, Fisker Automotive, and Global Electric Motor Cars. It is clear that the need for collaboration has grown, as cars and trucks are significantly more complex compared to 10 years ago. One platform for collaboration is the United States Council for Automotive Research (USCAR), an umbrella organization supported by General Motors, Ford, and Chrysler which structures collaborative groups or consortiums which focus on specific auto-related concepts. The organization currently has research programs in a large number of areas, including: Advanced powertrains Hydrogen and fuel cells Materials and composites Energy storage Electrical systems, software, and controls USCAR is also partnering with US automakers (including Tesla), energy producers, utilities, and the US Department of Energy to improve vehicle efficiency, infrastructure, engine performance, and use of advanced materials. The program called US Drive will encourage technical information exchange and implementation of new technologies. The US Department of Energy is taking a similar approach with trucks as well. The need for research in these areas is on-going. On the manufacturing side alone, there is work looking at new welding technologies for aluminum, and new machining and forming techniques for steel, including hydroforming and superplastic forming. Also under research are new and more environmentally friendly painting processes, and efforts to streamline and standardize electrical systems and connections in cars. This last point is part of two specific and evolving concerns with modern cars, which relate to their increasing complexity: Vehicle electrical distribution systems are complex, requiring as many as 2000 terminals, 300 connectors, up to 80 electronic control units, and 60 or more miniature light bulbs, which are not interchangeable between car platforms, or between companies. Newer models also come with more advanced computer systems and software, of which only a small portion relates to on-board entertainment systems. Of greater concern is the growing need / Aerodynamics Fasteners and adhesives Emissions

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use of software to manage vehicle performance, safety systems, systems communication, engine and break systems, electronic control units, and overall emissions. The 2010 recall of certain Toyota vehicles related in part to software concerns speaks to the growth of these systems. One last challenge which the transition to alternative fuels is impacting relates to the federal gasoline tax and the growth of plug-in electric vehicles. While the gasoline tax is the primary funding mechanism for federal road improvement programs, the arrival of electric vehicles creates an obvious dilemma for how funding for road improvements can be sustained. Policy conversations have included discussion of electric vehicles being assessed a special tax to offset road improvement costs. Implications for Missouri include: The State of Missouris Economic Development plan includes recommendations to look at statewide deployment of plug-in vehicles and charging stations. A review of ARRA stimulus investments related to electric drive and battery components indicates that Missouri benefited only modestly from this investment. Similar to past military base closure rounds, several impacted Midwestern states have formed more formalized partnerships to respond to the closures. One such program is called AMTEC, the Automotive Manufacturing Technical Education Collaborative. Since starting in 2005, the program has grown to include educational institutions in Alabama, Indiana, Kentucky, Michigan, Mississippi, Ohio, South Carolina, Tennessee, Texas, and Virginia. The program encourages collaboration between community and technical colleges and industry partners. Missouri does not appear to be a participant.

Venture Capital / Business Investment Programs and Tools

Capital formation for early stage investment in new and small businesses can be accomplished in a number of ways. Three key groupings of investment types are profiled in this section. Each of these has been used in varying ways and to a different extent in several states and regions in the US. The groupings are categorized as: Pre-seed and grant programs Investment and loan programs Venture and angel capital

Pre-Seed and Grant Programs

These programs are typically modest dollar amount tens of thousands to a couple hundred thousand dollars which aim to support early business and technology concept development. Some funds also leverage Federal research grants. Funds are non-recoverable and uses of funds include product research and development, product demonstration, pre-revenue and pre-feasibility activities, and support in securing other resources for business development and growth. While these programs have a net-negative financial cost, they are supportive of some of the earliest stages of business development which are often the most difficult to secure resources for. A drawback of this type of funding is that sometimes ideas which are funded do not have a viable commercial application as they are merely at an idea stage.

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Investment and Loan Programs

Investment and loan programs are often structured to return capital to the fund which can then be reused for continued business investment activities. Some of the more effective forms of these programs are highly attuned to the private sector which is valuable to the program for two main reasons: The private sector can help to guide the selection of businesses that get funding, and this insight may be valuable in selecting businesses most likely to succeed in the marketplace. When public sector investment is targeted to businesses with private sector potential, much larger sums of money can be leveraged from the initial public sector investment.

Equity and debt investments are sometimes made through fund of fund investments pools of capital managed by venture capital investors or special hybrid venture capital corporations. When leveraging private sector capital for additional sources of funds, such programs often turn to major regional banks with a vested interest in the community, organizations of regional businesses, pension and retirement funds of area businesses, or CAPCOs (special tax-advantaged Certified Capital Companies funded by insurance companies which operate in the states). With respect to loans there are a number of structures to consider including taking the first-loss position in a loan structure, subsidized interest rates, or using loans as complements to other Small Business Administration (SBA) programs. Table 41: Reviewed Programs
State Ohio Program Entrepreneurial Signature Program Pre-Seed Fund Initiative Ohio Venture Capital Authority Ohio Technology Investment Tax Credit Program Florida Opportunity Fund Institute for the Commercialization of Public Research State University Research Commercialization Assistance Grant Program Commonwealth Seed Capital LLC Kentucky New Energy Ventures Fund Innovation and Commercialization Center Program Kentucky Enterprise Fund Maryland Venture Fund Pacific Community Ventures Tri-County Economic Development Corporation Prospect Street Discovery Fund Queens County Overall Economic Development Corporation First Industries Fund Keystone Green Investment Strategy Ben Franklin Technology Partners Pennsylvania Angel Network Certified Capital Company (CAPCO) programs

Florida

Kentucky

Maryland California New York Pennsylvania

Other

Venture and Angel Capital

Venture Capital (VC) investment in the traditional sense has matured and evolved over the last several decades for a couple of key reasons. First, VC now is generally more risk averse, seeking investments in companies in later stages of development with somewhat proven concepts, and is now less likely to be regionally specific. Second, the quantity of capital many VC funds are mandated to

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invest requires focus on larger deal types of $500,000 and $1 million and greater, whereas most early stage companies require capitalization below this threshold. As a result, early stage and pre-seed investment below the $500,000 and $1 million threshold is increasingly filled by Angel Investment networks and funds of relatively affluent individuals, sometimes coupled with one or more of the aforementioned program types. Angel investor groups often have regional or quasi-philanthropic or civic-oriented mandates for investments. This is to say that they seek return on capital but balance this need with other mandatespecific goals such as businesses in particular communities or which fit a certain profile unlikely to be met by VC funds. Some examples include the SDSU/Brookings Angel Fund which helps fund preseed and concept stage enterprises in the upper Midwest that are located in incubators with economic development (jobs) potential, and Robin Hood Ventures which focuses on early stage investment in new companies in the Philadelphia region. In some cases, and increasingly in recent years, such funds couple with public-sponsored programs (some mentioned previously) to provide a first-loss protection, co-investment, or tax advantaged investment status. A more recent proposal along these lines is the Angel Investment Tax Credit proposed for Pennsylvania which has the potential to benefit early stage capital formation. The Pennsylvania proposal would enable a 25 percent tax credit on funds invested in Pennsylvania startup businesses related to technology. Similar to other state tax credit programs, out-of-state investors can typically resell credits at a discount in secondary markets, and local investors with high state tax levels can achieve the full 25 percent credit less associated legal fees. Another example of policy moving towards support of early stage investment is Tennessees INCITE fund program. Tennessee has developed INCITE as a $50 million fund under its Department of Economic and Community Development to accomplish similar functions as angel funds, namely early-stage, seed, and coinvestment funding. It is important to note that the models for early stage business investments are evolving. Venture capital (VC) investment in the traditional sense has matured and evolved over the last several decades leaving more open the space for early stage investments of less than $1 million, which accounts for a notable share of new and small business capital needs. Increasingly, states and regional agencies or groups are moving to address this early stage need. As has been done to different extents in other states and regions, this process of early stage business investment can be enhanced and made more robust with co-investment by the public sector through first-loss protection, direct co-investment, tax advantaged investment status, or a combination of the three.

Renewable Energy
This section highlights trends in renewable energy development in the US. The industry has important implications for business growth in the Midwest, and in the St. Louis Region. For this section, AECOM reviewed the following industry and expert publications for a general overview of renewable energies: Energy Information Association (EIA) Encyclopedia of Energy Land Policy Institute The Christian Science Monitor

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Types of Energy Sources

Renewable energy encompasses a broad array of power generation sources. It generally refers to power derived from renewable sources such as wind and solar, as opposed to finite sources like oil. Renewable energy technologies turn renewable sources of fuel into usable forms of energy, most often electricity but also heat, chemicals, or mechanical power. Three areas of renewable energy are summarized below: Solar Solar energy is produced when the suns light and heat is captured to create energy. Solar energy may be used passively to heat and light buildings, or actively to generate electricity (solar photovoltaic) or heat (solar thermal). Solar power can be used both in smaller systems for the home and in large, utility-scale applications. While solar capacity is greatest in the US southwest, as technologies improve, solar is becoming more feasible as an alternative energy source in other US regions, including the Midwest. Wind Winds are created by uneven heating of the atmosphere by the sun, irregularities in the Earths topography, and the rotation of the Earth, and winds are also influenced by local terrain, bodies of water, weather patterns, vegetative cover and other factors. Harvested by wind turbines, wind energy is one of the top growing sources of energy in the US. Wind energy is produced when spinning blades around a central hub power a generator which produces electricity. There are a number of factors that determine the feasibility of wind energy development at a particular site, primarily wind speed. Between 2006 and 2030, wind generating capacity is projected to grow by an annualized rate of 9.5 percent, as compared to 0.8 percent for hydropower, and 3.8 percent for wood and biomass. Biofuels Biofuel is a gas or liquid fuel made from plant and animal materials (biomass) such as wood, wood waste, peat, railroad ties, wood sludge, agricultural waste, straw, fish oils, sludge waste, municipal solid waste and landfill gases. There are several types of biofuels. Two commonly produced in the Midwest are tied to corn and soybean bases, and include ethanol and biodiesel: Ethanol: Ethanol is an alcohol-based alternative fuel produced by fermenting and distilling starch crops that have been converted into simple sugars. Feedstock for this fuel includes corn, barley, and wheat. Ethanol can also be produced from cellulosic biomass such as trees and grasses and is called bioethanol. Although, as Ethanol was considered a long-term strategy for alternative fuel production in the US, in June 2011 the US Senate voted to end a $6 billion annual tax subsidy due to several consecutive years of poor production performance. Biodiesel: Biodiesel (fatty acid alkyl esters) is a diesel replacement fuel made from natural, renewable sources such as new and used vegetable oils and animal fats, and algal oil. Just like petroleum, biodiesel operates in compression-ignition engines. Soy-diesel is a blend of filtered and clarified crude soybean oil with diesel fuel and can contain up to 20 percent soybean or algal oil. Generally, oils must be converted to biodiesel in a process called transesterfication (adding alcohol to the oil) in order to be used effectively in a compression ignition engine.

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Demand
The use of renewable fuels nationwide continues to grow. The most recent release of energy consumption statistics reported that between 2004 and 2008, renewable energy consumption in the US grew by an annualized rate of 4.2 percent despite a 0.7 percent annualized decline in fossil fuel consumption. Of various renewable energy sources, wind was the top growth sector at an annualized rate of 40 percent, which was followed by biofuels at 28.7 percent and Solar Thermal/PV Energy at 10.5 percent. Several trends have supported growing demand for renewable energy in the US: Growing energy demand. Over the past thirty years, demand for energy in the US has been growing steadily, a trend driven by population increases and industrial growth. This growing demand has been particularly strong in electricity and liquid fuels. Concerns over climate change and energy independence. Growing concerns over the impact of fossil fuels on climate and a need for enhanced energy security and self-sufficiency is driving a shift in US energy policy in favor of renewable energies. Growing political support for renewable energy is based upon the premise that renewable energy will ultimately decrease greenhouse gas emissions, decrease US reliance on foreign oil, and bolster US agriculture. Incentives. Increasingly, federal, state and local governments are incentivizing renewable energy through the use of market and production-based incentives to help offset the price disadvantage renewable energies have over traditional fuels sources.

Market Barriers to Renewable Energy Development

Despite growing demand for renewable energy in the US, regulatory, economic and policy barriers continue to place renewable energies at a disadvantage when compared to traditional sources of energy like coal and natural gas. Among these disadvantages: Costs and pricing. Short-term cost driven decisions continue to hinder renewable energy development. Some have argued that public subsidies for traditional sources of fuel unfairly distort the market, placing renewable energies at a distinct price disadvantage. Higher initial capital costs. Higher initial capital costs as well as the potential for import taxes and duties on renewable energy technologies exacerbate up-front costs over traditional fuel sources. Infrastructure. Developing new renewable resources will require significant capital investments to upgrade and modernize the US energy infrastructure. Michigan, Texas and other US states are currently in the process of trying to remedy these constraints by investing in existing and new transmission grids. Restrictions on siting and construction. Siting wind turbines, photovoltaic installations, or biomass facilities may face significant opposition related to aesthetics or noise, particularly in urban areas. In addition, renewable energy facilities compete for land with agricultural, recreational, scenic, or development interests.

Advantages
Since the late 1990's, a series of studies have evaluated the employment opportunities that could be generated by the renewable-energy and energy-efficiency industries. These studies have consistently concluded that investments in renewable energy could provide significant benefits over traditional fossil resources through:

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Additional employment. As compared to coal-fired power plants, renewable energy components (i.e. wind towers) are smaller and increasingly produced locally rather than by out-of-state contractors. As such, more employment benefits accrue in-state. Further, renewable energy developments like wind farms rely upon a large number of installers, contractors, and laborers that cannot be outsourced, thus generating local economic benefits. New markets for existing industry. US manufacturers that have traditionally supplied the automotive, machinery and electrical industries are beginning to generate new employment and revenues by manufacturing renewable energy components, particularly in wind and solar. Brownfield reuse. Renewable energy is also becoming a way for communities to redevelop brownfields and other former industrial sites. Renewable energy development on brownfields is logical, especially when fragmented land ownership and local policy tends to limit renewable energy development on greenfields. Three characteristics tend to make brownfields particularly suited to renewable energy development: Proximity to grid transmission. Former industrial sites are often located in populated areas that can easily access the energy grid. Immediate energy demand. Urban brownfields are typically located in proximity to consumers and homeowners which may allow more localized energy supply. Available land with few current competing uses Job growth and economic stimulation, strengthening the competiveness of the US Reducing pollution and carbon emissions released into the Earths atmosphere Natural resource preservation and conservation

Role of the Public Sector

Compared to traditional sources of energy, most renewable energies are still in the early stages of technological development and have higher up-front costs. As such, financial incentives for the manufacture, purchase, and installation of alternative systems have become critical to near-term supply development. In addition to new and impending federal policies, individual states and municipalities have taken the lead to provide incentives and supportive policies for renewable energy development. These incentives and policies generally fall into one of three categories: Market-based. Market-based policies are structured to capitalize upon the inevitable growth in US energy consumption by mandating that a share of the increase in demand is provided by renewable sources. Direct initiatives to generate demand for renewables vary by state depending upon whether the state sets a hopeful goal for renewable energy use or mandates a specific result through a Renewable Portfolio Standard (RPS). Production-based. Production-based incentives provide direct financial benefit for the production of renewable energy in two primary ways: (1) income tax credits to producers based on the amount of energy generated; and (2) direct payments to producers based on the amount of energy generated. Non-production. Non-production incentives generally look to reduce construction or operational costs. These incentives commonly include provisions for accelerated depreciation of wind-related

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assets, tax credits based upon installation costs, property and sales tax reductions or exemptions, and permit expedition for siting of renewable energy developments.

Public Policies Currently in Place

Undoubtedly, to advance the clean energy agenda, public policy and public sector support is needed. Currently, renewable energy policies are underway at both the state and federal level in the form of comprehensive energy plans, renewable energy standards and energy efficiency metrics for the development of alternative fuels, waste reduction efforts and job training. Many levels of the public sector have adopted or considered the need and value for complementary renewable energy policies. Public policy supporting renewable energy is enforced at either the state or federal level, below is an overview of the current types as of 2009 of assistance programs in place: State Policies 46 states offer some type of incentive programs for corporations and residents to adopt energy efficiency systems, processes and equipment. 23 states offer loan financing for residential, commercial and industrial property owners for the purchase of energy efficient systems, processes, and equipment. 22 states as well as the District of Columbia offer rebate programs, promoting the installation of solar water heaters and solar panels for electricity generation. 29 states as well as the District of Columbia have mandated renewable energy policies requiring electricity providers to supply a minimum amount of power generated by renewable energy. 19 states have established standards for process of renewable energy generation, transmission and use. 23 states are partnering together in major regional initiatives to increase renewable energy generation and use, with the goal to reduce carbon pollution released by power plants. 14 states as well as the District of Columbia have adopted vehicle emission standards, requiring automakers to produce automobiles which will release fewer carbon emissions, in line with Californias vehicle emissions standards.

Federal Policies In the 1960's and 1970's, laws were enacted to assist recycling, waste reduction and waste management industries. The EPAs EnergyStar and WaterSense certification was enacted to certify commercial consumer products which conserve energy and water. In 2007, President George W. Bush signed a bill enacting the first congressionally mandated fuel efficiency policy for cars and light trucks (the Energy Independence and Security Act of 2007) expected to save consumers $25 billion, resulting in the savings of 1.1 billion barrels of oil per day. The 2009 American Recovery and Reinvestment Act (ARRA) federal stimulus bill included several clean energy provisions with multiple implications, such as renewable energy generation, energy efficient industry, green jobs, and investments. Within the bill there are billions of dollars allocated towards renewable energy and green practices; for example, $85 billion for energy and

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transportation; $21 billion for tax incentives for wind, solar, and other renewable energies; $30 billion for direct spending in clean/renewable energy programs (within this allocation $11 billion is dedicated for the modernization of the nations electricity grid), $2 billion for innovative battery technology, $6 billion for state and local government renewable energy efforts, $5 billion for home weatherization programs at the local level, $500 million for job training in renewable energy occupations, and $300 million for the purchase fuel efficient vehicles from American automobile companies for the new federal fleet.

Real Estate Considerations

Key considerations that firms face when deciding where to locate a wind farm or solar field: Incentives. Incentives including production tax credits, net metering and direct payments have become critical to luring renewable energy developments to their area. Increasingly, smaller units of government such as cities and counties are establishing their own renewable energy goals and portfolio standards. Entitlement. Entitlement is the legal method of obtaining approvals for the right to develop property for a particular use. Renewable energy developers must often endure a long, complicated and costly entitlement process to pursue their projects. Local governments and municipalities, however, can help facilitate renewable energy development by standardizing and streamlining the entitlement process for these projects. Environmental permitting. As with any type of energy facility, renewable energy developments may have environmental impacts including aesthetics, threats to wildlife and noise emission. Some renewable energy projects must comply with environmental standards or permitting prior to construction, a process which can be timely and time consuming. Ownership. There are three primary types of arrangements landowners and developers make regarding renewable energy development: 1) Leasing land: A renewable energy developer may lease or rent land for the life of the development; 2) Easements: An easement is a deed or will executed by the owner of a particular plot of land or air space to ensure a renewable energy developer adequate exposure to the wind or other resources; or 3) Land purchase: Renewable energy developers will sometimes purchase land outright to build their developments.

Future of Renewables
Renewable energy, especially solar and wind power, present significant growth opportunities in the US. By 2030, the EIA projects energy generated from solar will grow at an annualized rate of 9.1 percent followed closely by wind at 2.4 percent. According to projections by the US Department of Energy, of renewable energy sources, wind has the top growth potential in the East Central region, an area which includes the states of Michigan, Indiana, Ohio, Kentucky, West Virginia and Western Pennsylvania. The offshore wind resource of the Great Lakes places these states at a unique advantage for future wind energy development.

Biofuels
This section is a more expansive look at alternative fuel technology, specifically focusing on the growth of biodiesel fuel as a substitute for liquid petroleum. For the purposes of this section, AECOM conducted extensive research within the study area of biodiesel a renewable fuel designed for diesel

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engines derived from natural oils. The list of sources which were examined as a part of this effort include the following journals, magazines, federal and state government data bases, as well as private industry press and multimedia: US Energy Information Administration (EIA) Science Direct Renewable Energy and International Journal United States Department of Energy (DOE) United States Department of Agriculture (USDA) National Renewable Energy Laboratory (NREL) NASDAQ Bloomberg Archer Daniels & Midland Company (ADM) The National Biodiesel Board (NBB) Biomass Research & Development Board (BRDB) Christian Science Monitor Biodiesel Magazine Independent Bio-Products Introduction/Policy Problem

As a result of global population growth, increasing the amount of fuel consumption worldwide, the finite supply of oil reservoirs are currently depleting at a pace that is unsustainable environmentally and economically. Ancillary to this notion, the use of petroleum fuels has given rise to energy security concerns, contributions to climate change, and other environmental as well as economic challenges in the future. The US contains one-third of the worlds automobiles, consuming 25 percent of the worlds oil, annually using over 50 billion gallons of gasoline. The US economy depends on liquid fuels for transportation, principally derived from petroleum, to power cars, buses, trucks, locomotives, barges and airplanes. By 2030, the US Energy Information Administration projects that reliance on foreign oil will increase by 30 percent, while greenhouse gas emissions will increase by 40 percent. As a response to these growing concerns, alternative fuel research has become an initiative championed by the public and private sector alike. Leading the charge as a long-term alternative fuel strategy, biodiesel fuels have emerged as an innovative solution which will allow the US to withdraw its dependence on foreign oil production, while at the same time improving the nations economy by injecting new industries into the market, and contributing to the process of making the worlds natural environment a healthier place by reducing carbon emissions into the Earths atmosphere.

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Biodiesel Overview
The National Biodiesel Board (NBB) defines biodiesel and the biodiesel fuel blend as follows: Biodiesel is a fuel comprised of fatty acids recovered from vegetable oils or animal fats, meeting the requirements of ASTM (American Society for Testing Materials) standard specification for biodiesel fuel blend stock (B100) for middle distillate fuels. The biodiesel blend is the fuel blend meeting ASTM D6751 with petroleum-based diesel fuel, designated BXX, where XX equals the share percentage of biodiesel fuel mixed in the blend (i.e., B20 equals 20 percent biodiesel, 80 percent petroleum based).

Biodiesel is a clean burning alternative-liquid fuel capable of replacing conventional diesel fuel. While the purest biodiesel contains no petroleum, biodiesel fuel can be blended with petroleum. Current US Environmental Protection Agency (EPA) regulations mandate strict specifications to insure proper performance. The biodiesel fuel grade blend, ASTM D6751, is the only alternative energy fuel to have fully completed the health effects testing requirements of the 1990 Clean Air Act Amendments, registered under section 211(b).

Production
The rapid response of the biodiesel industry has been advanced by private sector innovation, supported by federal policies and state initiatives to sustain growth within the industry. Biodiesel is manufactured from domestic renewable oil feedstock resources such as animal fats, soybeans, algae and waste cooking oil. Near- and longer-term goals for biodiesel oil feedstock production include: Most of the biodiesel that is currently produced in the US made from oils derived from soybeans. Soybean feed stocks are currently in use and their yields have been increasing. However, soybean formulated biodiesel is considered a finite resource due to a limited supply of arable land. Considered by many as the future of alternative liquid biodiesel fuels, the next generation feed stocks are crops requiring further research and development (R&D) to commercialize, such as algae. These feed stocks are designed exclusively for biodiesel fuel production and are commonly referred to as energy crops, representing a key long-term component to the sustainable biodiesel industry.

Converting feedstock to biodiesel is done by employing a multistep process called transesterfication, which is simply described as the reaction of the feedstock with an alcohol such as methanol or ethanol in the presence of a catalyst to yield mono-alkyl esters (biodiesel) and glycerin. From there, this process requires precision and care to separate the finished biodiesel from glycerin, catalysts, soaps and any excess that may remain. Testing is the next step in the production process. Fuel grade biodiesel must comply with ASTM D6751 requirements. While conversion techniques and the feedstock used does not skew specification results one way or another, performance criteria may vary based upon the feedstock used. In order to qualify for tax incentives and credits, conformance to ASTM specifications is required.

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Innovation
Expanding biodiesel into the future will require a combination of policy, R&D, as well as public and private investment. The more prevalent innovations in this area are derived from the production of microalgae. Microalgae are very small aquatic plants, producing natural vegetable oils suitable for conversion to biodiesel fuel. Biodiesel manufactured from microalgae is considered the long-term strategy for transitioning from conventional diesel fuels to biodiesel fuels. Biodiesel produced from microalgae can be grown in circulated fresh water ponds on non-arable lane, as well as salt water and even wastewater, to prevent arable land and fresh water from being drawn away from food crops resulting in a low impact on food production and prices. Algal oils suitable for conversion into biodiesel produce potential yields 50 to 100 times greater than yields from soybean oils. Furthermore, biodiesel conversion productivity can be enhanced directly from the addition of waste CO2 from fossil-fuel powered plants and other high carbon emitting facilities, thus the sustainability theory is clear: large microalgae farms, located near carbon emitting plants, would not only yield a large volume of oil feedstock for biodiesel, but also recycle waste CO2 emissions and reduce their buildup in the Earths atmosphere. Procuring algal oils from microalgae involves several steps, which are summarized and listed below: Step 1: Growing algae in engineered ponds Step 2: Harvesting the biomass in settling ponds Step 3: Extracting the algal oils from the biomass Step 4: Converting the algal oil into biodiesel

Formerly, the Aquatic Species Program (ASP) researched innovations in alternative energies, focusing on microalgae as a source for biodiesel. The ASP was championed by the US Department of Energy from 1978 to 1996. Prompted by the middle-east oil crisis in the 1970s, the DOE discontinued research due to budget cutbacks and the relatively low cost of crude oil (about $20/barrel) in 1996; as the cost of crude oil dropped, alternative fuels could not stay competitive. The DOEs findings produced several important points. In summary, the DOE suggested that biodiesel, converted from microalgae, could easily serve as a reliable long-term substitute to conventional diesel. However, the major conclusion from their analysis explained that production costs for algal biodiesel were too high, implying that production costs were more than double that of crude oil. In this age of sustainability, engineering algae to churn out oil feedstock for biodiesel fuel has once again become a priority approach of the federal government as well as the private sector, but similar economic threats remain. Listed below, threats are identified as biological factors keeping the costs of production high, thus, requiring more innovation and R&D to become fully competitive in the open market: Algae farms require energy for controlling water temperature, harvesting cells, and supplying concentrated carbon dioxide needed to produce high yields of biomass. While scientists and engineers are taking positive steps, this process has not been standardized, therefore production costs remain high.

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Fertilizer is also a problem that needs an economical solution. For example, replacing conventional diesel with algal biodiesel would require nearly double the amount of the worlds fertilizer per year, in turn forcing prices up at the pump.

In order to reduce production costs, impacting distribution and end user costs, algae farmers and engineers must continue to make substantial reductions in cost through improvements and innovations in the engineering and production of algal biodiesel. Initially, economically viable algal-biodiesel commercialization will depend on government subsidies, global environmental policies, the future price of crude oil, and the optimization of biomass yields. Scenarios where an algal biodiesel market can maintain sustainability are ones where the cost of crude oil exceeds $100 per barrel in the US in 2011, the average weekly price for crude oil was estimated at nearly $100 per barrel, whereas the 2010 average weekly price for crude oil was nearly 3 percent less than the current price, $70 per barrel. While the US has experienced a steep rise in current crude oil prices, possibly influenced by a number of external factors (i.e., foreign military action, supply tightening, natural disaster, rise in global demand, reserve speculation, et. al.), economists believe that, in the short-term, demand is unlikely to stay dormant, thus allowing prices to reduce. However, recent activities such as the unreliability of crude oil demand impacting costs, in conjunction with global environmental awareness, a response to carbon emissions and global warming has inspired biotechnology companies, governments and farmers to develop carbon-neutral fuels processed from algae feedstock oil converted into biodiesel.

Recent Developments
Several biotech companies have begun to take the lead in developing algal biodiesel fuel. Independent Bio-Products (IPB), based in Ohio, developed a method for recovering carbon waste from power plants and manufacturing facilities, in order to heat raceway ponds (algae farms). Concurrently, IPB has designed a pond covering apparatus to maintain a constant temperature within algae ponds. Both developments are major breakthroughs in algal biodiesel technology, reducing energy costs for production, increasing efficiency, and allowing algae to be harvested year-round in both warm and cold weather geographies. Based on various reports, algae can produce more than 30 times the biodiesel feedstock per acre than soybeans. Additionally, innovations in algae feedstock production has allowed engineers to manufacture biodiesel, green diesel, and renewable biojet fuel powerful enough to provide energy for air travel. In May 2011, algae oil was converted into biojet fuel, a chemically indistinguishable alternative matching fossil-fuel based JP-8 jet fuel at a rate of 99 percent, and tested by the US Air force Research Laboratory at Wright Patterson Air Force Base near Dayton, OH. In June 2011, airlines gained support from ASTM international for the use of biojet fuel in passenger flights.

Airlines have researched alternatives to standard jet fuel for some time, and consider biojet fuel as a more efficient and cost effective fuel technology than electricity and ethanol. According to a spokesman from AirTran Airways, fuel processed from algae may comprise of as much as 50 percent of the total fuel burned to power passenger flights in the future.

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In order to increase the return on investments (ROI), many algae farming companies have developed other uses for algal feedstock, such as biodiesel and other biologically based lipid products. Furthermore, some companies are selling higher priced carotenoids and omega-3 fatty acids that are common in foods, while others are researching the use of algae proteins (separated in the lysing process) in livestock feed. For the time being, chemical commodities remain the most logical entry point for algae farming companies. However, to meet the long-term challenge of producing a viable, cost effective and competitive algae based biodiesel, government agencies and the private sector must work together to develop a qualified workforce, improve efficiencies by increasing drought and stress tolerance, increase fertilizer and water use efficiencies, and enact favorable policies and incentives that will guide the engineering, conversion and distribution process of the algae based biodiesel fuel market.

Case Study Examples

AECOM conducted a case study of two pilot algal bio-refinery programs. Each facility engaged in a bio-manufacturing process to produce multiple advanced bio-fuels. Sapphire Energy Integrated Algal Bio-Refinery (IABR): Sitting on 300 cultivated acres of land, the IABR facility is proposed to be developed near Columbus, New Mexico. Recycling approximately 56 metric tons of CO2 per day, the facility expects to produce approximately 1 million gallons per year of finished algal biodiesel fuel product. In full operational mode, the IABR facility will employ 30 workers to develop and run the facility, projecting the creation of 750 direct and indirect jobs by 2011, and 16,000 new green collar jobs by 2030. Overall, Sapphire IABRs goal is to demonstrate that algal oil conversion process scales with favorable economics. Formerly, Sapphire established credibility that algal oil can be successfully refined to produce liquid gasoline, diesel and jet fuel. In 2009, Sapphire participated in the first 2-engine 737800 2-hour test flight powered by synthetic jet fuel manufactured from algae. Solazyme Integrated Bio-refinery (SzIBR): Diesel Fuels from Heterotrophic Algae Located in Riverside, Pennsylvania, Solazymes technology transforms high-impact, domestic, renewable algae and other feed stocks to oil-based fuels which can leverage and remain fully compatible and competitive with the petroleum-based economy. Solazymes goal is to enhance national energy security and help the US to reach Renewable Fuel Standard (RFS) goals by displacing petroleum imports and sustaining bio-fuel compatibility with the existing petroleum refining, distribution, storage, retailing and vehicle infrastructure. The proposed project, in Riverside, will be the first commercial-scale bio-refinery facility, projecting the creation and preservation of 88 direct jobs and 256 indirect jobs annually. Bio-fuels derived from Solyzymes feed stocks are expected to reduce commercial-scale fossil fuel products by over 90 percent.

Wind Energy
This section begins with a brief overview and discusses the current capacity and uses of wind energy, the potential and future of wind energy and what potential implications the wind energy sector might have in the St. Louis Region. For this section, AECOM reviewed a selection of various sources, including: American Wind Energy Association (AWEA)

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US Energy Information Administration (EIA) National Renewable Energy Laboratory (NREL) International Economic Development Council (IEDC)

Overview
Throughout history, human civilizations have been capturing the power of the wind. Dating back to as early as 5000 B.C., humans have been utilizing wind energy to propel boats traveling about the Nile River and in 200 B.C., basic windmills were used for pumping water in China, while in Persia and the Middle East, vertical-axis windmills were used to grind grain, a practice that was used by the first American colonists. During the early twentieth century in American rural areas lacking electrical service, small windmills were used to generate electricity. This practice fell out of style as the US electrical grid spread to most rural areas by the 1930s. Today, wind energy generates electricity from wind turbines, which use elevated blades to collect kinetic energy stored within wind. Described simply, energy is generated as wind flows over the blades in order to create lift, thus setting them in motion. Subsequently, energy is produced from an electric generator which is fed from a drive shaft connected to the blades. The reemergence of wind energy began in the 1970s, when oil shortages had shifted focus from finite energy sources to renewable energies. By 1980, wind energy began to take shape in California where state policies encouraged R&D and use of renewable energy sources. By the 1990s, studies of global climate change emerged from labs and was recognized by the public as real threat to the worlds natural environment, as well as the future of human civilization. Due to its economic value and low carbon emissions, wind energy became a beacon of renewable energy. While wind energy is a popular alternative for electricity production in the US, nearly doubling its utilization between 2006 and 2008, many issues continue to hinder the growth of what is considered as a viable substitute to natural gas and coal. For example, policies, storage and cost competition with natural gas remain the most pronounced impediments to the growth of the wind energy sector. In particular, recent discoveries of shale gas have boosted US inventories and lowered prices, which has made wind energy less competitive in the short-term.

Current Capacity and Utilization

In comparison to other renewable energy resources, wind power has been the fastest growing source of new renewable energy in the past decade. From 1999 to 2010, the total capacity generated by installed wind turbines has increased at an annualized rate of 29 percent. As of the first quarter in 2011, the US wind power capacity was 41,400 MW, whereas the total US wind resource potential was 15 million MW, meaning that the US is harnessing less than 1 percent of its total wind potential. In 2009, wind energy accounted for nearly 2 percent of the nations electric power, and it is safe to assume that wind energy is a trend that will continue to grow. In a 2008 comparison of the total share of electricity generation from wind with other countries throughout the world, the US ranked below Germany at 6.5 percent, Ireland at 8.6 percent, Spain at 10.4 percent, Portugal at 12.6 percent, and Denmark at 19.2 percent; However, electricity generated from wind energy in the US will likely show increases in the years to come as renewable energy initiatives have been adopted by states and the federal government.

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Replacing wind energy with other forms of energy will not take place until a number of factors fall into place. Electricity from wind power is currently more expensive to produce than power plants burning fossil fuels, therefore favorable policies and incentives must continue to assist wind energy in order for this initiative to grow.

St. Louis Opportunities

Obviously, available wind resource will be a significant factor when developers determine where to locate future wind farms. Generally, the Midwest and Great Plains regions have good wind resource availability. Furthermore, Missouri and its surrounding states have a total undeveloped potential wind resource of nearly 5.7 million megawatts of energy, as shown in the following table. Table 42: State Wind Resource and Capacity Development, Q3 2010
State IA IL KS MN MO ND NE OK SD TN WI Total Installed Capacity(MW) 3,670 1,848 1,026 1,817 457 1,222 153 1,130 412 29 449 12,213 Estimated Total Resource (MW) 570,714 249,882 952,370 489,270 274,855 770,195 917,998 516,822 882,412 309 103,757 5,728,584 Installed Capacity as % of Total Potential 1% 1% 0% 0% 0% 0% 0% 0% 0% 9% 0% 12% Undeveloped Potential Resource (MW) 567,044 248,034 951,344 487,453 274,398 768,973 917,845 515,692 882,000 280 103,308 5,716,371

Source: AWEA

Missouri is located east of Kansas, south of Iowa, and north of Arkansas with the Mississippi River separating the state from Illinois and Kentucky to the east, and the state has a long tradition of manufacturing, particularly in chemicals, fabricated metals and transportation equipment. At the confluence of the Mississippi and Missouri River, the St. Louis Region is logistically in an advantageous location to capitalizing on the manufacturing and supply chain needs of the wind energy industry in the Midwest.

Computer Science and Information Technology

As digital data continues to amass exponentially, mandating the deployment of technologies capable of supporting and complementing big data sets, the development of compatible technologies has reshaped how the world operates. New developments such cloud computing have enabled businesses to relocate and reduce technology costs, usage patterns, and anticipate market trends, while at the same time creating new avenues for individuals to consume goods and services. The rapid and constant evolution and shifting of the digital environment raises serious questions regarding the way individuals, industries and governments will capitalize on opportunities emerging from the vast amount of information generated. This section will discuss new technologies reshaping the structure of the IT industry and the implications that these innovations have across all industry sectors. Specifically, AECOM will highlight three innovative IT processes: Big Data, Cloud Computing, and Bioinformatics.

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Big Data
The world contains an unimaginable amount of digital information which is getting ever vaster, ever more rapidly. This section is a review the worlds digital landscape, specifically looking at how the combined effects of emerging Internet technologies, increased computing power and storage, and instantaneous, pervasive digital communications have spawned new ways to manage and process information more effectively and efficiently. Introduction/Policy Problem Big Data can be defined as the characterization of the never-ending accumulation of all kinds of data. As it stands, global data is projected to grow by 40 percent annually. For the most part, big data is unstructured, described as data sets that are growing exponentially and that are too large or too raw for analysis using relational database techniques. To clarify, structured data sets are ones which are recognized by computers in standard formats such as word and/or number files only 5 percent of data that is generated is structured. Conversely, unstructured data sets are ones that are less easily retrievable and usable such as image, audio, and video files (et. al), representing the remainder of data that exists. Big data is not defined by a certain number of terabytes, but assumed that as technology advances, the size of data sets that qualify as big data will also increase, thus creating an inflation of data. Overview Big data is a growing torrent, expanding into every area sector of the global economy and capturing trillions of bytes of information about consumers, customers, suppliers and operations, as well as churning out a burgeoning volume of transactional data. Additionally, in the age of the Internet of Things, sensors have been embedded in the physical world. For example, sensors have been placed in mobile devices, smart energy meters, automobiles, and in industrial machines, generating data which is being transferred from machine to machine, in a sequence where individuals are tangential. Digital information created through the interaction of individuals with businesses generates a tremendous amount of digital exhaust data. For example, users communicating, browsing, buying, and searching creates enormous trails of data. Whereas traditional businesses typically have the capability to collect information about customers from purchase transactions or from surveys, internet companies have the luxury of being able to gather data from every interaction taking place on their sites, directly resulting in value creation derived from a deeper understanding of the market. Table 43: Data Unit Size Reference
Unit Bit (b) Byte (B) Kilobyte (KB) Megabyte (MB) Gigabyte (GB) Terabyte (TB) Size 1 or 0 8 bits 1,000 Bytes 1,000 KB 1,000 MB 1,000 GB What it Means Short for "binary digit, after the binary code (1 or 0) computers use to store and process data. Enough information to create and English letter or number in computer code. It is the basic unit of computing From "thousand" in Greek. One page typed text is 2 KB. From "large" in Greek. The complete works of Shakespeare total 5 MB. A typical pop song is about 4 MB From "giant" in Greek. A two-hour film can be compressed into 1-2 GB From "monster" in Greek. All catalogued books in America's Library of Congress total 15 TB.

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Petabyte (PB) Exabyte (EB) Zettabyte (ZB) Yottabyte (YB)

1,000 TB 1,000 PB 1,000 EB 1,000 ZB

All letters delivered by America's postal service this year will amount to around 5 PB. Google processes around 1 PB every hour. Equivalent to 10 billion copies of The Economist The total amount of information in existence this year is forecasted to be around 1.27 ZB. Currently too big to imagine.

Source: The Economist; Prefixes are set by an intergovernmental group, the International Bureau of Weights and Measures. Yotta and Zetta were added in 1991; terms for larger amounts have not been established

In 2010, estimates suggest that throughout the world all public and private industry sectors have generated and stored more than 7 exabytes of data on disk drives while in the same year, consumers stored more than six exabytes of data on personal computer devices such as computers, notebooks and mobile phones. At the current growth rates, data is physically impossible to store. In one instance, it has been estimated that health care providers discard nearly 90 percent of the data they generate. For the most part, healthcare facilities produce unstructured data such as real-time video feeds during surgery. As big data has made its way into every sector of the global economy, developed economies in countries such as the US and Europe currently have a larger potential to create value through the use of big data in the near-term. However, lying on the horizon is the enormous potential for developing economies to create value from big data. While the sheer volume of data produced is a global phenomenon, whether the amount of terabytes or petabytes (see table above) generated, the exact amount is less of an issue than the origins for which data is stored and how it is used. While many individuals at the user level are skeptical, regarding the constant collection of personal information as an intrusion, there is overwhelming evidence suggesting that big data is a significant value to the world, enhancing the productivity and competitive advantage of companies as well as allowing governments to function more efficiently. A few examples of big data capturing value include: If harnessed completely and subsequently managed creatively and effectively, some experts estimate the potential for a $300 billion added value to the US health care system. Experts believe there is a projected $600 billion in potential annual consumer surplus from using personal location data globally. For example, real-time traffic information displayed on a handheld global positioning systems (GPS) having the ability to inform navigation, thus creating a quantifiable per person consumer surplus through savings on time spent traveling in an automobile, as well as fuel consumption, equating to dollars spent on retail gasoline. Big data analysis methodologies allow private sector retailers the opportunity to increase operating margins by 60 percent. This can be done by utilizing big data to target and segment markets more accurately. In developed economies such as European economies, it has been estimated that governments could save upwards of $149 billion in capital budgets by improving operating efficiencies through the evaluation of big data sets.

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Certainly, as big data can be used in many ways to create value across all sectors of the global economy, both the public and private sectors need to address considerable challenges in order to fully capture the full potential of big data. For example: The US is currently lacking the capable workforce necessary to make the most of big data. According to MGI, the US is facing a shortage of an estimated 200,000 professionals possessing the requisite analytical abilities, as well as nearly 1.5 million managerial professionals needed to take advantage of value and efficiencies hidden within big data accumulation. An additional challenge, as a result of the sheer size of big data, is the need for an appropriate infrastructure capable of storing and processing big data. Similar to other essential components of production, much of the worlds modern economic activity, innovation, growth and development would not be possible but for the presence of big data.

Values and Benefits of Big Data In a report released in May 2011, MGI outlined five applicable methods for which big data can be utilized in order to capture kinetic potential and how value can be created and sustained in the future. Below are notes providing an overview of the broad applications referred to in this release, while at the same time offering implications of each methodology: Creating Transparency: This is a process of making big data more easily accessible to decision makers and key personnel. This can be done in the public sector by allowing data to be more accessible across divided and/or fragmented departments, thus cutting down on the time spent for research and processing. The private sector, on the other hand, specifically manufacturing, has the opportunity to significantly reduce time to market and improve quality by integrating data from R&D engineering and manufacturing units to enable concurrent engineering practices. Enabling experimentation: As more digital transactional data is generated, companies and organizations can collect more real time performance data, on everything including product inventories to personal sick days. Advanced information technology affords companies and organizations the instruments to conduct controlled experiments. The benefit of controlled experiments is to allow individuals the understanding and root causes for how variability in performance occurs and to improve performance based on these results. Population Segmentation: Well known in marketing, risk management, and policy formulation, market segmentation is enhanced by big data. This provides both the public and private sector the ability to deploy sophisticated techniques, such as real-time micro-segmentation, in order to advance information to target populations and subpopulations. Substituting human decision making with automated algorithms: With the goal in mind to minimize risks, unearth valuable insights and improve decision making, sophisticated analytics has been employed by both the public and private sector to optimize these processes by implanting automated algorithms accounting for the most likely probabilities. For example, those sectors having the capability of utilizing automated risk engines to indicate which candidates require further examination, or retailers employing algorithms to inform decisions, such as the fine-tuning of inventories, as well as the adjusting prices in response to real-time in-store and online sales transactions.

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Innovations in business, products, and services: Enabling public and private entities with the ability to develop and enhance new services or products, while in some instances developing entirely new business models, complemented by public policies and regulations, big data has transformed the marketplace in which economies function. For example, manufacturers have used data captured from embedded sensors in actual products to improve the development of newer, more advanced technological products. Additionally, emerging real-time location data has spawned an entirely new array of location based services from personal navigation to pricing property and casualty insurance based on driver tendencies.

Industry Sector Potential While all industry sectors have barriers, whether they are derived from lack of capital, policy constraints, or cultural differences, not all have the same potential to substantially gain value from the use of big data. Structurally, barriers appear to be higher for some sectors when compared to others, for example: Historically, computer, electronic products and information sectors have benefited from the use of big data, experiencing increases in productivity and profit. These industry sectors are in a position to continue to function as innovators and trend setters in managing, storing, and analyzing data in advanced manners, capitalizing on value opportunities by eliminating redundancies and unearthing trends hidden within big data sets. In order to realize a very strong potential benefit, both the finance/insurance and government sectors must overcome barriers prior to capitalizing on these assumptions. For example, both sectors are based on transactions derived from an intensive core customer audience, both have the opportunity to leverage big data by employing market segmentation techniques as well as employing automated algorithms. As these sectors experience elevated degrees of performance variance, the application of advanced analysis is necessary to extract more value from big data. Enhanced from a low priority data-driven mind-set, the education sector must overcome large structural barriers, hindering the sectors ability to capture worth from big data sets, in order to increase productivity in the education system. However, if barriers were trampled, the opportunity can be realized by performance based analysis of big data. For example, correlating academic achievements made by students with the variations in performance in teachers, establishing performance from a series of benchmarks. The manufacturing sector is poised to experience only modest value gains from the usage of big data sets. As a result of industry fragmentation, inter-company data sharing does not exist, therefore, value derived from big data is contingent on the ability with which companies can develop data pools, accessible across supply chains. Relative to size, value and importance, many consider that challenges existing in the US healthcare system are a result of low investments made in the sectors information technology (IT) infrastructure. Additionally, barriers exist in the form of personal record privacy, placing constraints on the ability for data to transfer freely between healthcare networks.

Issues to Overcome In order to capture the full potential of big data, there are several issues that first must be addressed. The points below shed light on some of the more apparent issues:

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As access to data becomes less and less challenged, many public policies tailing the expansion of digital data will become increasingly important in what may otherwise seem as an under-governed marketplace. Such policies might set the precedence for data exchange and usage, privacy, security, intellectual property, and liability. Technology lags the rate at which data is generated. In order to maximize big data potential, incompatible legacy systems must be replaced with a newly crafted infrastructure capable of meeting the standards necessary for extraction, transformation, and loading of large datasets from multiple sources. Understanding that big data represents a key used to unlock value, leaders in both the public and private sector must begin to focus energies on the development and employment of a skilled workforce worthy of mining datasets for complex insights, and allowing for a more informed decision making process. Data access will play a pivotal role in the future value of big data. Currently, no efficient third party sources exist as a pass-through for large aggregate data from one company to another. Fully realizing the potential of big data will require that, first and foremost, accessibility barriers must be overcome. Industry evolution in a big data world may be compared to the phrase, you are only as strong as your weakest link. This is true because in some cases industry sectors do not have the incentive to evolve for big data. Sectors with a relative lack of competitive intensity, derived from limited competitive pressures may not concern themselves with the benefits of big data, feeling as if the short-term investments are not worth, or do not support, the long-term gains. However, if optimizing big data is the goal, all sectors must adjust and restructure in concert in order to accomplish this goal.

To capitalize on the potential value of big data with maximum effectiveness will require the necessary policies in place, adequate infrastructure, reliable workforce, and a common belief that big data will create value for all industry sectors, in all areas of the world.

Cloud Computing
Cloud computing, a metaphor for the internet, is a catch-all term that describes data storage, processes, and computer functions taking place in a large data center rather than on a users individual computer or in a companys office. The paradigm which is cloud computing, is a highly scalable computing resource, often configured as distribution of data serviceable through a network. Cloud computing is a resource assisting the new uses of data. For most of the computer era, most computer work took place on individual units in homes and offices. Users ran programs installed on their computers and saved their data (documents, spreadsheets, photos, digital music) to their hard drives. While that is still the bedrock computer experience for many users, much computing takes place in vast server farms in data centers in remote locations. This is the essence of cloud computing: much of the important computing work takes place far from where the user sits, in large warehouses humming with thousands of servers, all working on queries from users around the globe. Examples of cloud computing are everywhere. For consumers, the most popular example is webbased e-mail like Yahoo! and Google mail. Rather than store individual e-mails and address books on

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a single computer, many (if not most) e-mail users prefer to access the service online, able to see their messages and send e-mail from any web browser. Their messages (data, really) are said to be stored in the cloud; actually, they are stored in one of Yahoo!s or Microsofts or Googles large data centers around the world. But consumers are not the whole story as many businesses operate critical functions in the cloud. One of the earliest examples of business cloud computing is Salesforce.com. The company has a basic programming architecture that can be adjusted to support almost any type of business that relies on multiple salespeople. The key advantage to using such a system is that Salesforce hosts the data on its own servers, while a companys users its salespeople use their web browsers to conduct business. Avon, which has a force of six million salespeople, is currently switching all its sales management to a cloud based system. Another important example is Amazon.com. During the companys massive expansion from online bookseller to online mega-mall, it bulked up its own data hosting and cloud computing. Today, Amazon offers other businesses (retailers and non-retailers) cloud computing services based on its own experience managing large amounts of information. Microsoft is developing a version of Windows called Azure that will allow developers to write and run applications in the cloud rather than on local servers. (Ironically, azure refers to a cloudless sky.) Microsoft, Yahoo!, Google, Amazon, and Apple are some of the major players in cloud computing. They offer services to the public built on their own extensive network of massive data centers. Other companies operate with more anonymity by building large data centers and renting out the use of their servers to companies to build their own applications. While Google might build a data center to offer Google applications like search, voice chat, documents, and e-mail, other IT developers might build a data center and then allow their clients to run whatever they like on the servers for a fee. Advantages There are a number of advantages to cloud computing. At its core, it is simply a matter of comparative advantage. It may be more sensible for Microsoft to build a massive data center and let hundreds or thousands of smaller companies take advantage of this architecture than to have these individual companies buy and maintain their own servers in their offices. In this way, Microsoft can specialize in buying equipment, maintaining it, powering it, cooling it, and replacing it as it ages. For a fee, its users can effectively outsource their server needs to Microsoft; they are renting their computing power rather than buying it. Still, there are some drawbacks. Many companies worry about privacy and data security, and there are legal considerations. If data is confidential, its presence on a server farm in another state may be considered a confidentiality violation. One solution is a private cloud, where a single company hosts all its own data in a cloud-like data center run by the companys own staff. While this loses some advantages of scale, it still shows other advantages of cloud computing and avoids data security issues. Users There are several types of users of cloud computing data centers:

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Global consumer service providers. These including Microsoft, Yahoo!, Google, Apple, Amazon.com, and other similar companies. They do not trust other companies to manage their data, therefore they build their own data centers in which to run their own applications. Global business service providers. The list of companies overlaps slightly, with Microsoft and Amazon especially. These companies offer smaller firms access to their technology. They generally provide some support or basic software (like Microsofts Azure). Data operators. Unlike Google or Microsoft, these operators have no product running on their machines; instead, they let small internet companies run their own businesses on their machines. Small businesses. These are the firms that take advantage of cloud computing services. It is possible for a small technology startup to get storage space, web hosting, and powerful computing capabilities for no capital investment and just a small fee. The world of software as a service and cloud computing has enabled many of these small companies to get started without seed capital, an IT department, or even office space.

Real Estate Considerations The main real estate implication is where to locate the massive data centers. There are several considerations that firms face when deciding where to locate a data center: Weather: Data centers generate massive amounts of heat, so the operators often spend almost as much on chilled water to cool the servers as they do on electricity for computing power. As a result, many location experts will look for cool climates. Data centers are being located in Iceland, Siberia, and in various underground locations to take advantage of the cool atmosphere. (Other locations are Oregon, Washington State, Chicago area, and Buffalo area.) Natural disasters: The data is extremely sensitive and uptime is very important. In May, Google Mail was shut down for two hours. T-Mobile users were without access to their data for a period of 24 hours because of an outage at a Microsoft data center. In both cases, the companies faced a global consumer backlash. While neither of these instances was caused by a natural disaster, the threat of hurricanes, earthquakes, or major power outages can threaten the stability of a data center. In the developing world, a volatile political climate can cause similar anxieties. Cost and availability of power: The data centers consume extreme quantities of power. Googles data center in Oregon requires as much power as 82,000 homes. Google, Yahoo, and Microsoft have all built data centers near the Columbia River in the Pacific Northwest a river that provides abundant, clean, and very inexpensive hydroelectric power. Other data centers often negotiate with local energy suppliers for preferred rates; in fact, providing cheap power is part of the recruitment process. Energy use in data centers is generally 500 watts per square foot, and each facility can be between 50,000 and 500,000 square feet. Fiber optics: Underground fiber optic cables are the highways of information, but not every location is in a prime place. Chicago, for example, is located near a major north-south and a major east-west fiber optic cable link; that made the Chicago region ideal for Microsofts $500 million data center in Northlake, Illinois. Both Google and Yahoo have worked with local governments to provide an extremely fast fiber optic network near planned data centers around the United States.

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Incentives: Local governments often pledge tax incentives to lure the firms to their area. State governments often negotiate with telecoms providers and electric utilities to provide preferred rates to the data operators. Discretion: A companys data center is a critical part of its company. Google, Microsoft, Yahoo!, and others are famously tight-lipped when it comes to details about their data centers. Microsoft will not reveal the exact location of its Chicago-area data center. Google shuns attention and publicity. Yahoo uses code names in the early stages of their location practices. Local governments need to be able to promise discretion and confidentiality in the entire process of recruiting a data center. Further, the companies need to be somewhat assured of some privacy and building security once their centers are developed. Geographic proximity to customers: Microsoft is considering building a data center in Siberia, but this will not be the ideal place to run its search engine. The servers need to be close to the end users, as delays of a few microseconds in delivering search results cause customer dissatisfaction. Major corporate users, therefore, like to spread their computing power so that they have wide geographic coverage.

Future of Data Centers In 2009, in the midst of the most severe economic recession since the Great Depression, data centers were a rare ray of sunshine in the technology economy. The industry changes very rapidly; shortly after Microsoft announced what it thought was the biggest data center in the world, its $500 million facility near Chicago, Apple announced a $1 billion facility in North Carolina. Future data center designs will become more modular, as there are greater efficiencies in power consumption and cooling that can yet take place. Some observers think the system of thousands of individual servers can be replaced by larger machines. But no matter the efficiencies, power consumption will be a large if not the primary concern of cloud computing stakeholders. The US currently dominates this market, but firms may look abroad to countries where energy is cheaper but also dirtier. Consumer firms like Google and Microsoft will always need to be near their customers, so they may look to power some of their own centers through alternative energy. Google is giving back some energy production from its data center in The Dalles, Oregon. Others may seek to power some of their servers with solar, wind, or geothermal energy.

Bioinformatics
Simply put, bioinformatics uses technology to increase our understanding of biological systems and processes, especially those as they relate to molecular genetics and genomics. According to the National Institutes of Health (NIH), bioinformatics is a scientific discipline that encompasses all aspects of biological information acquisition, processing, storage, distribution, analysis and interpretation that combines the tools and techniques of mathematical and computer science and biology with the aim of understanding the biological significance of a variety of data. This emerging field evolved from biotechnology. Once we began to unravel and understand our own genetic makeup, there was an almost immediate need for a way to collect, store and analyze this complex information. The underlying goals of bioinformatics are to explain normal biological processes and understand malfunctions of these processes. This will ultimately lead to advances in the diagnosis, treatment and prevention of many genetic diseases.

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This section provides a brief introduction to bioinformatics as well as real world applications and future trends and how they may be relevant for the St. Louis Region. The research is based on the following sources: National Center for Biotechnology Information European Bioinformatics Institute Global Industry Analysts, Inc.

Advances in biology coupled with advances in computing and statistical programming allowed for this science to rapidly evolve. The most widely recognized project that relies on bioinformatics is the Human Genome Project (HGP), begun in 1990 and led by the US Department of Energys Office of Science. Completed in 2003, according to the DOEs website, the goals of the project were to: Identify all the approximately 20,000 to 25,000 genes in human DNA Determine the sequences of the 3 billion chemical base pairs that make up human DNA Store this information in databases Improve tools for data analysis Transfer related technologies to the private sector and Address the ethical, legal, and social issues that may arise from the project

The first working draft of the entire human genome was completed in June 2000 with a high quality reference sequence completed three years later marking the end of the HGP. In the human genome, there are approximately three billion bases, the chemical building blocks of our DNA. In terms of computer storage, it takes three gigabytes to store the entire genome. This information is publicly available and stored by the National Center for Biotechnology Information in a database knows as GenBank, which is a data repository for publicly available nucleotide sequences for more than 380,000 organisms. Since inception, the number of bases in GenBank doubled every 18 months. Access to this complex information forms the foundation of the bioinformatics field according to several sources. As outlined by the European Bioinformatics Institute, there are many ways in which bioinformatics is being used today, most of which have their roots in genomics and the Human Genome Project. Molecular medicine Microbial genome applications Agriculture Animals Comparative studies

Future Development As with biotechnology, bioinformatics has been a key source of economic growth and employment with hundreds of pharmaceutical companies, biotech firms, research centers and university programs across the country. A 2011 report by Global Industry Analysts, Inc., found that the global bioinformatics market will reach $5 billion in the US by 2015. Growth in the sector is being driven by

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the demand for new drugs and significant development in the field of genomics, a set of advanced tools designed for large data acquisition and analysis. The success of the Human Genome Project and continued advancements in technology will only grow this sector further.

Innovations in Technology
Many cities have developed programs and support to encourage innovation in research and development, as it typically attracts higher wage employment, spin-off development, and related economic value added. Attraction of R&D activity is seen as a key route to expand an areas economic base, creating industries that foster productivity improvement and constant innovation, creating new spin-off businesses opportunities. Universities have been at the forefront of this effort, sponsoring the development of research parks all over the world. While many of these facilities have not met with the level of success envisioned by their creators, significant successes have also been achieved. Key insights include: A local university presence, with a more aggressive focus on creating links with industry and commerce, both formally and informally. Universities are important to R&D for several reasons. First, they are a source of new knowledge, particularly in basic science. Second, they offer the chance to create/train a local base of scientists and engineers with appropriate skills. Third, they can more aggressively support spin-off development, by allowing professors to develop outside research projects and new independent start-up companies. Reportedly, universities that focus largely on academics have a more difficult time facilitating these linkages with the private sector. For R&D activity to generate significant new spin-off job and business creation, there needs to be a local culture of innovation, with links between companies, and to other markets. The nature of the local economic base also drives spin-off potentials, particularly through larger companies. A competitive environment, with linkages to other regions and an ability to attract skilled employment, driven by area amenities and quality of life features as well as existing area companies. These amenities are important, both in initially attracting qualified employees and keeping them over the long term. Creation of local networks for information exchange. These networks need to evolve into more complex linkages between companies and with their subcontractors. To the extent that confidentiality and proprietary structures are in place to prevent information flow, these linkages will have more difficulty forming. Such links and networks also have an informal social component, as employees meet for social functions, talk, exchange ideas, etc. after business hours. Social networks become a key source of information exchange as well. The need for a regional approach to economic development and R&D attraction, combined with local understanding of existing area R&D activities, and a willingness to create policies at the local level which foster additional regional economic linkages. Bureaucratic issues and regulations can inhibit innovation and R&D success. The time factor the most successful R&D complexes, such as Silicon Valley, have taken many years to form and mature, suggesting that the critical need is to put the pieces in place and then let the kettle stew.

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Access to government research and development contracts. With changes in federal legislation, which now allow research conducted for government goals to benefit the private sector, the likelihood for spin offs is greater. The nature of the local economic base also defines potentials for R&D, particularly if the base is driven by industries that are stable or growing versus declining. The extent of local control in key industries is also a factor.

For this section, AECOM will discuss a series of advanced technologies, all of which have implications for how they will influence shifts in societies throughout the world. Many resources were examined in the development of this section, including: The Christian Science Monitor Public Broadcast Service Nova Science Now The Economist

Overview
For most of human civilization, the pace of innovation has grown at a pace slow enough that decades have passed by before a discovery would influence human life, culture, or the conduct of nations. Now, major innovations and changes are expected to take place several times within a decade, especially in developed countries. Some are obvious, such as the countless ways of communication, and some are not as obvious, such as the steady growth and power of the internet. The next innovations are ones that are unknown, or in some cases, believed to be unnecessary. However, before realizing it, these innovations are the ones taking society by surprise where societies and human activity would be helpless but for the existence of that innovation. In an age where computers have multiplied productivity, modern technological advances make millions of individuals wonder about technological limitations and which technologies will have the economic and social impacts comparable to that of the industrial revolution. The most bewitching and captivating innovations are often conceived without much societal impact while on the other hand, the everyday inventions such as the Haber-Bosch process harnessing the atmospheric abundance of nitrogen to create ammonia (fertilizer) eventually altered the fundamental economics of basic human need, changing the face of the planet forever. This section will focus on technologies that are destined to change the world; specifically exploring those that will cause a shift in the fundamental resource base for the commodities of the 21st century including technologies that will reduce bottlenecks in energy (i.e., dependence on oil and gas) and shortages in natural resources (i.e., lithium and rare earth metals used in batteries and electric motors). Additionally, this section will cover the implications that high tech innovations have on advanced manufacturing. Oftentimes, high tech innovations are slow to emerge due to the high costs of production; thus, there is a demand for advanced manufacturing the rapid, low cost development process needed to manufacture products with various complexities in design and function advanced manufacturing often includes products that are on the cutting edge of technology. Indeed, as many topics mentioned in this section will not live up to their world changing predictions, AECOM will provide a brief overview of some cutting edge technologies, produced in an advanced manufacturing process, and believed to have the best chance of survival, specifically:

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Battery Technology Low Energy Transistors Three-Dimensional Printing Quantum Dots

Battery Technology
As more and more innovations in renewable energy become viable, such as wind and solar power, the problem of wasted energy becomes apparent. An example of this problem has been experienced in the nations Pacific Northwest, when in 2011, the Bonneville Power Administration (BPA), a federal power agency in favor of electricity produced by federal dams, pushed private companies producing power generated from wind turbines off the electricity grid because they were already generating too much electricity from hydropower, and lacked a means to otherwise store excess generation capacity. Many engineers and clean energy experts relate the opportunity costs of clean energy as a major problem, which is exacerbated by the inability to store and reuse electric energy in an effective manner. However, recent developments in battery technology, such as an experimental battery printed on a paper thin substance thin-film printing is being discussed as an innovation capable of powering off-grid economies in developing countries. The process of printing batteries is technically known as roll-to-roll processing manufactured by printing ceramic electrolytes (a gel), with battery electrodes, onto a sheet of metal or plastic, passing from roll to roll on a printing machine, similar to the traditional printing press. Printed batteries could solve the problem of electricity storage, allowing electricity which is produced by wind or solar farms during the day, to be captured and used during idle times, such as night or windless moments. Currently, the cost and scale to manufacture lithium batteries to function in this manner is out of reach; additionally, it is believed that lithium batteries do not have the capacity to store enough energy needed to be utilized at a massive scale, suggesting the need for a technology capable of storing the overabundant energy. At the moment, experts would like to see the emergence of printed batteries as the technology capable of electricity storage.

Low Energy Transistors

Arguably one of the greatest inventions of the 20th century, transistors, first released in the early 1950's, is a fundamental building block of all modern electronic devices. Since this time, the number of transistors on computer chips has doubled annually. This phenomenon is known as Moores Law, describing a long-term historical trend of computing power. As innovations in high-tech computer products increase, such as more efficient computers and intelligent devices, there is a need for new chips which will complement such instruments. Many scientists believe that the future of computer hardware/infrastructure (computers, servers, monitors, towers, etc.) will be replaced by smart-phones and tablets tapping into a cloud network; however, in order to fully realize this notion, the production of less energy-hungry chips is necessary. Currently, nanotechnologists are working on approaches to reduce power needs of computers by a factor of 100 to 1,000. One possible approach is the fabrication of chips with new materials, which are expected to require less power and conduct electricity more efficiently. Examples:

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Transistors made from graphene structurally, a one-atom thick planar sheet of bonded carbon atoms, packed in a honeycomb-like pattern have the potential to consume a tenth to a hundredth the power that current transistors consume. Carbon nanotubes are transistors which are carbon sheets rolled into a tube one thousandth the width of a red blood cell. Emitting different wavelengths of light energy, nanotubes are capable of forming low-power electronic screens.

Some experts believe that the full replacement of silicon to newly designed type of transistors in computer chips will take upwards of 30 years, costing approximately $100 billion. If and when new chips, derived from concepts such as graphene or nanotubes, break into the market, they are expected to appear first in high-end military, medical and aerospace applications. However, until that time, some questions remain; can new chips be mass produced in a highly productive manner, quickly enough, and at a competitive price?

Three-Dimensional Printing
Commonly, the laborious process of manufacturing metal or plastics can be referred to as subtractive, the process of cutting, drilling and bashing materials. Throughout history, it has been the goal of industry to produce in the most efficient manner possible; remarkably, many technological innovations have increased utilization, and cut down on processing time. However, innovators are always and will forever seek out any way to maximize profit and efficiency by employing new advanced methods. Initially intended to make prototypes, in recent years, scientists, engineers, and designers have been homing in on three-dimensional (3D) printing technology, which is an additive manufacturing process where three-dimensional objects are manufactured through a complex process of the successive layering of material. This process requires fewer raw materials; furthermore, because this method is driven from computer software communicating with 3D printers, each unit/item can be custom made without high retooling costs. Additionally, 3D printing can produce ready-made objects, requiring less assembly; for example, a tech student at the Massachusetts Institute of Technology (MIT) printed a fully assembled and fully functioning clock. 3D Manufacturing is redefining advanced manufacturing; printing parts and products has the potential reduce costs and risks, allowing companies to no longer rely on the mass production of items to recover fixed costs. While some objects still require machining upon finishing, the process of 3D printing would require only 10 percent of raw material that would be needed in mass production manufacturing. The 3D printing process only needs what materials are used as inputs, therefore, reducing material surplus. Additionally, 3D printing requires less energy than conventional factories; speed, on the other hand, is comparable at this point. The production of customized, low-volume and high-value components is unlikely to completely replace conventional mass production manufacturing; however, many experts believe that 3D printers have earned their spot in factories, working alongside milling machines, presses, foundries and plastic injection-molding machines, at the same time capable of taking on more work that had been previously done by those machines. A future with 3D printing implies that manufacturing will depend less on scale and more on quality.

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Quantum Dots
In todays world, curbing energy consumption is a goal of many scientists, researchers and engineers. Contrary to this notion is the worlds growing dependence on devices requiring screens (smart phones, televisions, monitors, tablets, displays, etc.). Most screen technology uses power-hungry liquid crystal displays (LCDs); however, innovations in display technology suggest the ability to be more energyefficient, more cost-effective and perform better than current technologies. Quantum-dots are semiconductor nanocrystals which emit a glow when exposed to an electrical current or light. Depending on the size and material they are made from, quantum dots can emit a variety of colors and can be controlled using an active matrix, having the ability to power quantum dots using a thin-film transistor, similar to that used for energy storage. Current researchers at Samsung Electronics have developed prototypes on glass as well as flexible plastic, suggesting the potential for screen technology. In order to produce prototypes, the process begins by coating a solution of quantum dots on a silicon plate and evaporating the solution; from this point the quantum-dot layer is pressed with a rigid-layered rubber stamp, and pressed onto the desired screen surface, either plastic or glass substrate, transferring the quantum-dots on the substrate surface. According to experts there are a number of issues to be solved prior to hitting the market for commercialization, suggesting power, longevity, functionality, cost and production issues. However, quantum-dot technology, when fully developed, has the potential to consume a fraction of the power LCD technology currently consumes (one-fifth), while promising to be brighter, longer-lasting, and potentially cost less than LCD or organic light-emitting diode (OLED) technologies.

Water Intensive Industries

The following section looks at water-dependent industries and their potential for growth in the St. Louis metropolitan Region. Access to clean water has become a critical issue affecting economic activity, development and business around the world. In certain parts of the world, water is becoming scarce due to climate change and population growth making it an even more valuable commodity since virtually every industry relies on it. Water contamination is another threat. Decreasing availability, increasing demand and declining quality make those areas with access to freshwater more valuable to water intensive industries. In addition, as water resources diminish, policymakers are increasingly focusing on regulating water use which has significant implications for businesses in regard to site selection and profitability. Information for the following section comes from several sources including policy centers, academic journals and the Missouri Department of Natural Resources. Below is a list of sources that were reviewed for this section: Missouri Department of Natural Resources Environmental Science and Technology Pacific Institute Water Reuse Association Water Environment Federation

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American Water Works Association US Geological Survey US Government Accountability Office

Demand vs. Supply Demand for water increases with population growth and associated economic development. According to a 2009 study by the Pacific Institute, freshwater consumption worldwide has more than doubled since World War II and is expected to rise another 25 percent by 2030. Much of the growth is the result of expected increase in the world population to 8 billion by 2030, up from 6.6 billion currently. At the same time, changes in precipitation patterns, diminishing glaciers and snowpack, higher temperatures, more severe droughts and warmer sea surface temperatures have been documented across the world, all of which negatively affect the water supply. According to the Pacific Institute, the percentage of global land classified as very dry has doubled since 1970. In the US, as reported in a 2005 report by the US Government Accountability Office, water managers in 36 states expect to face serious water shortages by 2015. Since water is a critical input for many industries, contamination and degradation can require significant costs to treat it before use. As the water supply worldwide has become increasingly strained, businesses are immediately affected in three ways: Higher costs for water. With diminishing supplies, water has become increasingly expensive for business. Areas with less expensive water supplies are advantaged for investment by waterintensive industries. Regulatory caps for water use. As supplies diminish, local, state and federal governments are implementing controls over water use by industry. Increasing demand for water-efficient products and technologies. Technologies and products that allow businesses to use water in a more efficient manner are benefiting businesses through lower water bills, reduced wastewater charges and lower energy costs.

As worldwide water supplies decline, regions with access to clean, fresh water are advantaged for growth in these water-intensive industries. Users Worldwide, agriculture accounts for more than two thirds of water use compared to 10 percent for residential use and 20 percent for industry. By 2025, the International Water Management Institute projects that one third of the worlds population, approximately 2 billion people, will live in countries or regions with water scarcity. This means that they may not have sufficient water resources to grow enough food. As reported in a 2008 article in The Economist, A Water Warning, it takes approximately 3,000-6,000 daily liters per capita for farming the food we eat. Biofuels, seen as a way to alleviate our overreliance on fossil fuels, have further burdened water supplies. It takes up to 9,100 liters of water to grow the soy for one liter of biodiesel and up to 4,000 liters for the corn to be processed into bioethanol. Recent rapid growth in biofuel production due in large part to significant government subsidies has raised concerns about the impacts on food production. As urbanization spreads, water has become even more critical to the world economy with industries relying upon clean, potable water for raw material processing, production and distribution. For many industries like biotech/pharmaceuticals, the largest share of their consumption is embedded in direct

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operations where it is used as a pasteurizing agent. Other industries use water for process of raw materials like food crops and metals where water is used for irrigation and dust control. A recent article published in the journal Environmental Science and Technology examined direct and indirect water withdrawals in the US by industrial sector. The following table shows the total water use for the top 10 sectors with the most water use in the US. Table 44: Sectors with the Largest Water Use, 2002 (billions of gallons)
Sector Power generation and supply Grain farming Food services and drinking places Animal (except poultry) slaughtering and processing General state and local government services Cattle ranching and farming Other animal food manufacturing Poultry and egg production Fruit farming Real estate
Source: Blackhurst, Hendrickson and Vidal (2010)

Direct 62,700 35,800 200 16 1,900 2,440 139 32 4,890 326

Indirect 183 399 8,770 8,680 6,620 5,850 5,630 5,650 277 4,820

Total 62,900 36,200 8,970 8,690 8,530 8,280 5,770 5,680 5,160 5,140

Similar to worldwide trends, power generation, agriculture and food processing are the largest water users. In the US, power generation and supply was the largest consumer of water with 62,900 billion gallons used either directly (water use by the sector itself) or indirectly (water used in the supply chain of the sector) during 2002. Power generation water use is primarily for cooling water and much of it is returned to the natural system, although there are evaporative losses in storage reservoirs. Residential or domestic water use constitutes 23,300 billion gallons per year. The Pacific Institute profiled eight industries that are highly dependent on water resources and assessed their water footprint. The water footprint is the total volume of freshwater that is used to produce the goods and services produced by the business. For each sector, they examined direct and indirect water use by type of water. Figure 70: Relative Water Footprint of Select Water-Intensive Industry Sectors

Source: Morrison 2009

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A summary of water-related industries with relevance to the St. Louis metropolitan area are discussed below: Beverage: Potable water is the primary and most important ingredient for the majority of beverage products, making beverage companies direct operations especially vulnerable to water availability and quality concerns. Beverage manufacturing requires high quality source water, putting the water use of this industry in direct competition with local populations and their drinking water needs. Biotech/Pharmaceuticals: The pharmaceutical industry relies upon water for raw material processing and in the production of basic chemicals. The availability of water in the Midwest has been key to pharmaceutical industry growth in states like Michigan and Indiana. Electric Power/Energy: The electric power industry uses considerable amounts of water although there are disparities in water usage between different types of power. For example, renewable energy sources like wind and solar typically consume small amounts of water as compared to nuclear, coal, hydropower and biofuels, where there is intensive water use for oil refinement, crop irrigation and for cooling. The Pacific Institute estimates that the electric power industry accounts for 39 percent of total freshwater withdrawals in the US. Food Manufacturing: Water plays a fundamental role in the food industry, the largest share of which is used for irrigation. Water is also relied upon during operations for meat and food processing, and in the product end-life for cooking and preparation of food products. Water availability in the food industry has a direct impact upon commodity prices.

Water Use in Missouri Every five years the US Geological Survey (USGS) collects data on water use for the US. According to this data, as reported by the Missouri Department of Natural Resources, water use outpaced the growth of Missouris population during the 1990s. Between 1990 and 2000, total statewide water use increased by nearly 26 percent while population increased 9 percent. Per capita water use grew from 1,358 gallons per person per day in 1990 to 1,470 per person per day in 2000. Table 45: Total Water Withdrawals for the St. Louis Region
Total withdrawals, in Mgal/d Share groundwater Share surface water Per capita total withdrawals, gal/d Share of total withdrawals by use Public Supply Domestic Industrial Irrigation Livestock Aquaculture Mining Thermoelectric
Source: US Geological Survey

2000 3,729.0 4% 96% 1,382

2005 3,968.1 3% 97% 1,428

13.0% 0.8% 1.6% 0.1% 0.2% 0.0% 0.4% 84.0%

11.8% 0.5% 1.1% 0.3% 0.2% 0.0% 0.3% 85.8%

AECOM examined the water use for the St. Louis Region for 2000 and 2005. In 2000, the St. Louis Region used 3.7 billion gallons per day of water. This increased to nearly 4 billion by 2005. Per capita use increased from 1,382 gallons per person per day to 1,428 gallons. The majority of the water came from surface water sources, 97 percent in 2005, the rest came from groundwater. Electrical generation is the largest user of water with nearly 86 percent of all water used in the Region. However, much of this water is used for cooling and then returned to the water source. Public supply was the next largest user with 12 percent of total withdrawals.

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Most water use concerns in Missouris Eastern region, in which the St. Louis Region is located, are urban in nature. The water infrastructure is aging, contaminants have been found in the supply, pollution resulting from barge traffic exists and heavy rain creates runoff which pollutes surface waters. How the St. Louis Region uses water is also important. One example of the abundance of water in the Region, and the challenges of managing it, relates to the current dewatering operation managed by the Illinois Department of Transportation, covering about 16 to 20 million gallons of groundwater which are pumped daily from more than 60 wells dewatering sections of I-64 and I-70 around the Tri-Level Interchange in East St. Louis, IL. The wells pump water to a centralized pump station at the IDOT Bowman St. Service Center where it is discharged to an unnamed drainage ditch that is tributary to Schoenberger Creek, and eventually the Mississippi River. There are currently efforts underway to evaluate the geothermal use of this water, which could support between 6,500 to 8,000 tons of heating and cooling capacity, or about 80 to 100 million BTU heating and cooling resource for industrial or business development. When compared with natural gas for heating, fuel savings could be about $750,000 annually with full utilization of the resource. Additional savings in air-conditioning during the summer season would increase the total savings to over $1 to $1.2 million per year. The key is that IDOT needs to continue to pump water out of the Tri-Level Interchange, or it will flood. A second factor related to water is a recent agreement between US EPA and the Metropolitan St. Louis Sewer District to invest about $4.7 billion over the next 20 years to fix challenges associated with combined sanitary and storm sewer overflows as well as illegal sanitary sewer bypasses, which have allowed untreated sewage to enter waterways such as River des Peres and the Mississippi. The program also requires investments in green infrastructure. Future of Water-Intensive Industries Industries like agriculture and foods will remain linked to water despite diminishing supplies worldwide. As the price of water increases and businesses seek to demonstrate a commitment to conservation and minimize consumption, they are implementing new policies and procedures: Dramatic increases in purification technologies. Food and beverage companies like CocaCola and Nestle are increasingly investing in water purification technologies to reuse grey water in their production processes. Negotiated water contracts with municipalities. Water-intensive industries are beginning to negotiate long-term water contracts with municipalities to ensure the future supply of fresh water. This action is to prevent water rights losses when groundwater supplies diminish in local wells. Investment in water delivery and management services. The agriculture industry is investing in water saving technologies like micro-irrigation, improved irrigation scheduling and water metering systems that deliver water on demand. Water conservation initiatives. Cities and countries worldwide under stress for water are increasingly blocking investment by water-intensive industries that do not implement some type of water saving technology or initiative. In response, companies like Kodak and Coca-Cola are implementing annualized water reduction targets and conservation initiatives. In St. Louis, Anheuser Busch, as part of its Better World commitment, has reduced water use by 34 percent in the last three years according to its website. By 2013 they want to reduce water use for beer and

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soft drinks to 3.5 hectoliters of water per hectoliter of production. Current levels are 3.6 hectoliters, but down from 4.04 hectoliters in 2010. Water Reuse In response to the threat of water shortages, water reuse is a potential way to offset demand. Many cities are implementing and encouraging residential and commercial conservation programs that include the use of reclaimed water. As the technology has advanced to make reclaimed water safer, water reuse has become more socially acceptable and affordable. According to the Environmental Protection Agency, more than 2 billion gallons of water per day are reused in the US and the volume is growing at an estimated 15 percent per year. Reused water is not for drinking. A white paper by American Water discusses the two ways in which water is reused: Non-potable (non-drinking) re-use which involves taking treated wastewater to use for agriculture and landscape irrigation (especially golf courses and parks), industrial use (such as cooling processes), construction, cement mixing, toilet flushing and fire protection; and Indirect reuse, which involves using wastewater to recharge ground water supplies. Indirect reuse, also called land application, allows treated wastewater to percolate down to aquifers to replenish water sources.

Non-potable reuse is already a widely accepted practice that will continue to grow, and indirect potable reuse is becoming an increasingly favored and applied method of reuse over discharging water into surface water, which ultimately evaporates or runs off into the ocean. In this section we discuss gray water and wastewater treatment and reuse. Gray water is untreated wastewater generated from activities such as bathing, washing dishes and laundry but does not contain human waste. According to a study by the American Water Works Association, Residential End Uses of Water, gray water can make up as much as 50 to 80 percent of residential water usage. However, without a dual plumbing system, most gray water is often combined with sewage which contains human waste. If separated, gray water can supply half of the landscape irrigation needs of the residence. It is also commonly used for toilet water. Gray water recycling can result in cost savings for the consumer, some water conservation in the local area as well as cost savings for wastewater treatment due to diversion. There are no national guidelines regarding the use of gray water since states are responsible for regulation of water and plumbing. Gray water use in the US is most prevalent in western and southern states. Both California and Arizona are among the states that have enacted legislation to allow gray water use. In total, 30 states have regulations allowing, prohibiting or regulating gray water use. Concern over the use of gray water due to health and safety reasons has limited its development. However, there is little research on the potential harmful effects of gray water, if any. Everyone generates wastewater. Wastewater, also referred to as black water or sewage, contains nutrients, pathogens, solids, chemicals and water. It must be treated before it can be returned to the environment. Treatment can occur in a decentralized way on a small scale such as on-site septic systems or at centralized systems used by municipalities. The amount and type of treatment is determined by how the water will be recycled. When there is a greater chance of human exposure to the water, more treatment is required. Unlike gray water, once treated, wastewater can be stored.

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Container-on-Barge (COB)
This white paper is intended to provide a general overview for the status of container-on- barge (COB) transportation, development initiatives, opportunities, and potential issues. The nascent industry involves trans-loading containers to and from standard hopper barges to take advantage of the United States vast inland waterway system. Its potential is reportedly greatest for select types of cargo while other types continue to evolve. Containerizable product is generally higher in value due to the cost level versus bulk transportation. In addition, barge transportation offers a lower travel speed that is partially offset by reduced congestion versus rail and truck modes. Cargo that can withstand the additional 1-2 week transit time can likely achieve cost savings over rail via West Coast ports. Furthermore, COB could help alleviate port, road, and rail congestion throughout the United States assuming that containers currently passing through seaports and travelling on domestic rail lines and roadways would shift to inland waterway transport routes outside of existing congested intermodal terminals.

Introduction
Containerization has been one of the major transportation trends of the last three decades. Growth in container throughput globally and in the United States has been substantial. US total container traffic more than doubled in volume between 1995 and 2010, from 22.3 to 42.3 million twenty-foot equivalent units (TEU). TEU are intermodal cargo containers approximately 20 feet long and 8 feet wide that can be easily transferred between different modes of transportation such as ships, trains and trucks. Asian trade accounts for a reported 24.4 percent of all US containers trade in 2010, with China comprising 40 percent of the total. This growth pattern of containerized shipments has created both issues and opportunities for businesses and locations involved in the container transportation industry. West Coast US ports have become severely congested, as the west coast handles approximately 75 percent of Asian trade with the United States. Ideally, the Trans-Pacific Ocean carriers prefer to only travel from Asia to the West Coast ports and back thereby reducing their total transit time. However, ports in Los Angeles, Long Beach, Oakland, Seattle, Tacoma, and elsewhere are approaching or have reached capacity levels. In many cases, it is not just a matter of increasing lift capacity at the ports as the movement of containers on rail and trucks is affecting cities passenger transportation and local communities as well. The container trip through the Panama Canal is a somewhat longer route for Trans-Pacific vessels, but container carriers have been forced to bypass the West Coast to a degree due to congestion, unloading at Gulf of Mexico or Atlantic ports in order to get to US population centers. In the Gulf of Mexico, the main container ports include Houston, New Orleans, and Gulfport, with new capacity in Mobile, Alabama. Houston receives the major share of containers due to its geographic proximity to the Canal and its major population and distribution center status. New Orleans, in particular, enjoys a robust break-bulk business because of its location and legacy as the sea port gateway into the river system. Additionally, six Class 1 railroads meet in or near New Orleans providing bulk carriers with an extensive network of potential connections with barge access to the inland waterway system and efficient rail access. Container ships have been reluctant to travel the 120 miles upriver and back as the journey is longer and more expensive than alternative Gulf locations and the regional accessible population is smaller.

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Current Status
COB is widely used in Europe and Asia as an efficient method of moving cargo from open water through the inland waterway system. One example is the development of the Rhine River inland waterway system. Canada also is increasingly using COB. In the United States, efforts have focused on expanding COB use and creating economies of scale within the waterway system opening the door for full economic benefit of COB. These efforts are being supported by the Federal Maritime Administration (MARAD) through initiatives and limited grant funding, as well as inland states with strategic locations along the river system and select middle America producers and consumers. Osprey Lines has provided COB transportation to a limited degree in the US. The original route involved domestic moves from New Orleans/Baton Rouge to Pittsburgh and vice versa. The success of this initial foray was reportedly moderate due, in large part, to the substantial travel time along the Ohio River. Based on the estimated 100 miles per day capacity of barge tows, the journey from the Gulf to the Ohio River is roughly 15 days in transit to Cairo, Illinois with an additional 15 days along the Ohio River to Pittsburgh. Osprey is currently operating inter-harbor COB moves within the Houston area port system. In addition, the company opened a COB terminal facility in Memphis. In addition to Osprey Lines service, the following are examples from MARAD of container-on-barge or short-sea shipping services operating in the United States: Coastal container service from New York to Boston James River COB service between Norfolk and Richmond, Virginia Great Lakes cargo runs Tacoma, Washington coastal movements Intracoastal waterway service from Houston to Pascagoula, Mississippi COB service from Port Manatee, FL to Brownsville, Texas

Infrastructure Requirements
Infrastructure investments in select areas are necessary to expand COB opportunities. However, moving a portion of the cargo transportation route from the nations road and rail system to the inland waterway system could result in less ongoing investment necessary to repair the road and rail framework. One container ship loading 2,500 containers and unloading 2,500 containers would create an estimated 220 miles of road traffic, 18 miles of double-stack rail traffic, and only 1 mile of barge traffic. The Port of Pittsburgh estimates that one tow of 15 barges equates to two-and-a half 100-car unit trains or 870 semi-trucks in terms of transport capacity. Many industry experts believe that the capital requirements necessary to facilitate COB movements are far less than the current ongoing requirements generated by moving cargo by rail and truck. Two proposals exist to build Gulf access transloading facilities at the mouth of the Mississippi River in Louisiana. Reportedly, these facilities would provide a necessary efficient link from the inland waterway system to the ocean carriers. Estimated up-front capital costs for these facilities range from $400 million to over $1 billion. The potential of COB, especially for export cargo, would increase if one of these facilities were constructed along with container handling capability on the inland waterways. Three tiers of existing and possible future inland ports would likely be needed to develop COB capacity to generate larger volume barge tows which could create economies of scale. The hub ports,

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or Level 1 ports, may be represented by Chicago, Memphis, Pittsburgh, and the Gulf of Mexico gateway. Buy-in and capacity development at these ports is likely key to achieve system-wide critical mass. Level 2, or intermediate ports, may include Louisville, St. Louis, Cincinnati, Minneapolis/St. Paul, etc. Finally, smaller ports with advantageous locations for rail and road connections along with large import/export companies with river system locations could add further value to the over-arching cargo transportation system. Concentrated industrial centers, e. g. steel mills and grain processors, might fit into this category. Additional infrastructure would be necessary upriver at trans-loading locations. Strategic locations would likely have to be set up along the river system to transfer the containers to/from efficient rail connections. Large manufacturers with riverfront locations could potentially operate their own facilities with capacity to load and unload container-filled barges. The estimated necessary equipment for these facilities could be substantial for major access points where gantry cranes would move containers directly from barge to rail and vice versa. For businesses or smaller operations, less equipment is required with some estimates as low as $8 to $10 million for necessary startup equipment including a reach-stacker crane.

Opportunities
COB transportation has the potential to generate opportunities for businesses and consumers. The predicted cost efficiencies are based on the following forecast advantages: Cheap daily barge rates compared to rail Recent high fuel costs would have less impact on overall transportation costs (MARAD estimates the number of ton miles per gallon of fuel at 514 for inland barges, 202 for rail, and 59 for trucks). Positive environmental impact (reduction of harmful emissions) of barge movement vs. truck and rail movements, most notably in urbanized areas. Possible heavier loading of containers depending on location of on- and offloading New transportation spokes along the rivers relieving massive congestion in sea ports and rail hubs Backhaul movements where currently empty containers are being shipped/railed because of a lack of export product possibly creates economic feasibility for containerized movement of agricultural product. Minimization of federal, state, and local responsibility for high-cost infrastructure renovation and replacement relative to rail and road transport. Possible future grant incentive similar to incentives currently provided to sea ports Anticipation of the impacts of US Army Corps of Engineers locks and dam projects along the Mississippi and Ohio Rivers.

Achieving a reduction in shipment costs from this method of transportation, US consumers will presumably be able to purchase imported goods at cheaper prices thus saving money while increasing aggregate demand.

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Asian Market Opportunities

Over the past three decades, remarkable economic growth has occurred in Asia, especially in the East Asian economies of China, India, Singapore, Thailand, Philippines, Indonesia, and Vietnam. The impacts of Asias rapid economic development on the US are multifaceted. In this white paper, AECOM will identify factors addressing ways to improve the competitive position of the US and as a response to the Asian market change, clarifying strengths and opportunities that will influence the ideal strategic outcome. The research is based on the following sources: World Bank Group Asian Development Bank Bureau of Labor Statistics, US Department of Labor US Census Bureau International Trade Commission National Bureau of Statistics of China Internet World Statistics Morgan Stanley Service as of June 2011

Introduction
The following topics are ones that are considered the economic development trends of Asian markets. Each trend is summarized, with discussion of opportunities, and implications for the US doing business in Asia. A primary goal was to focus on trends that will change the economic structures and provide opportunities. Current Asian economic situation The comparison of manufacturing in Asia and in US Economic trends in Asia and opportunities for the US Implications for the St. Louis Region

Current Asian Economic Situation

This section highlights the current economic situation in the high growth nations in Asia, including China, India, Vietnam, Thailand, Philippines, and Singapore. These nations have recovered strongly from the 2008-2009 global economic downturns, with 8.2 percent growth in 2010. In contrast, the major industrial economies grew only 2.2 percent in this period. Countries in Asia witnessed an impressive recovery in economic growth in 2010 following the 2008-2009 recession. In particular, many export-oriented economies started to grow positively in the third quarter of 2009. Exporting economies began their recoveries through intraregional sales to the large robust economies, particularly China which further encouraged its domestic demand with significant stimulus, and eventually to developed economies.

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Figure 71: Real GDP Growth Rate (selected countries)

15 13 11 9 7 5 3 1 1 3 China
Source: World Bank Group

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Singapore

Philippines

India

Thailand

Vietnam

Inflation Rates Inflationary pressures across Asia have been increasing in 2011 due both to the growth recovery and to price increases for imported food and energy. Most economies are forecast to see an increase in inflation in 2011. External supply-led increases in food and energy prices are slowing economic growth. As well, there are concerns that the excess liquidity resulting from monetary easing in developed economies could spill over into speculative asset price bubbles, as well as general inflation and real currency appreciation due to incomplete stabilization of capital inflows. The Chinese government has been attempting to manage this challenge for the last several quarters. Figure 72: Inflation Rates for Selected Countries, 2000-2010
25

20

15

10

0 2000 5 China
Source: World Bank Group

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Singapore

Philippines

India

Thailand

Vietnam

General consumption and demand for exports from Asian countries continues to be restrained as the economies recovery process continues. This can be seen from the fact that absolute GDP in these

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economies has yet to recover to pre-crisis levels. Sluggish recovery in the developed world is partly responsible for the lower export growth numbers being witnessed in the region in recent months. Exports It is clear that demand was an important factor in export recovery in the initial part of the crisis. The imports of China from major suppliers of parts and components in Asian countries fell several months prior to the time when the US began cutting its imports from China. In 2010, the Asia-Pacific region remained the worlds remittance-receiving region. India and China were the largest remittancereceiving countries in the Asia-Pacific region, followed by the Philippines, Vietnam and Indonesia. Figure 73: Merchandise Export Growth Rates
40

30

20

10

0 2000 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

20

30

China

India

Philippines

Singapore

Thailand

Vietnam

Source:U.S.CensusBureau

Manufacturing in Asia Compared to in the US

Historically, the reasons for manufacturing in Asia generally focused on reducing manufacturing costs, especially mass market products, as well as the fully evolved logistics pipeline that was created from Asian Markets to US ports such as LA-Long Beach. However, recently these labor cost advantages have begun to erode. Looking at prices overall, costs to locate manufacturing in Asian countries like China and India is now approximately twice what it was five years ago. While labor costs in Asia are still low in absolute terms, (hourly manufacturing pay in China is only $1.36, compared to $33.60 in the US), growth in labor and logistics costs are changing views about China in particular.

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Figure 74: Hourly Compensation Costs, MFG Employees in Regions, 2009 (US dollar)
45 40 35 30 25 20 15 10 5 0 US China Philippines East Asia(exclude Japan) Japan EuroArea

Source: Bureau of Labor Statistics, U.S. Department of Labor

Labor costs are rising in Asia, particularly China and India, where wealth is building and a middle class is being created. In China, wage increases for migrant workers are part of the driver in increased labor costs. The figure below summarizes growth in labor costs for noted markets since 2003. Figure 75: Hourly Manufacturing Costs in China, India and Philippines, 2003-2008
$1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 2003 2004 China
Source: World Bank Group

2005 India

2006 Philippines

2007

2008

Labor market conditions in manufacturing may tighten in Asia for several reasons: The overall education level has gone up, as younger Asians are seeking office jobs requiring less manual labor and work in better paying industries such as electronics. The change of demographics: China, the major manufacturing outsourcing country of the US, will have a further tightened labor market in the years ahead because of demographics. According to the National Bureau of Statistics of China, Chinese under age 14 made up 23 percent of the population in 2000 but are just 16.6 percent now. This means the portion of the population heading into the work force will decrease.

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Cheap labor has not been the only factor impacting the debate about imports from Asia. Inflation pressures have been real in Asia, especially in India. The rising Asian currencies against the dollar will increase import prices for Asian goods in the US. For example, Chinese Yuan is up 28 percent against the US dollar in the past six years. While a weak US dollar clearly helps US exporters, the stronger Yuan and the higher costs within China press upward on the costs of things US consumers have traditionally wanted, through discount retailers such as Wal-Mart. Figure 76: Change in Import Prices from Noted Markets to US, 2005-2011
25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 5.00% 10.00% 15.00% Japan AsianNICs* China Mexico EuropeanUnion 2006 2007 2008 2009 2010 2011

Source: Bureau of Labor Statistics, U.S. Department of Labor

* Asian NICs: Asian Newly Industrilized Countries, including China, Inida, Malaysia, Philippines andThailand

Other factors that influence inflationary pressures include: Increasing material prices: prices of cotton, leather, plastic and freight have surged, which is pressuring makers and retailers to push up their prices. The US consumer price index rose 3.6 percent in the year that ended in May. High shipping and transportation cost: Transportation costs have increased, with prices for 40foot containers from Asia to the US. Moreover, current political events in Egypt, Libya and the Middle East are pushing the cost of oil to record highs, which also significantly influenced shipping and transportation costs. Several sources indicate that ship captains are being urged to sail at slower speeds to reduce fuel consumption.

Poor Quality Control One of the largest disadvantages of outsourcing is undesirable results, as Asian countries do not have the same standards as the United States. In the event that the finished products do not meet quality standards, the manufacturing process must be repeated by a different vendor. It is not only a waste of time and materials, but very costly for the company who outsourced the project.

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Government Policies The Chinese Government listed the main problems for China in the path of economic development in Chinas 12th five year guideline (2011-2015) as unbalanced development and the imbalance between investment and consumption. The new five-year plan suggests that the economy will be pointed toward more sustainable and consumption-driven models linked with higher value-added sectors, such as education and innovation, and that manufacturing will no longer be a primary factor considered by Chinese government to stimulate the economic growth.

Economic Trends in Asia and Opportunities for the US

In this section, we highlight the economic trends in the Asian market and the opportunities for the United States to develop trade with Asia in order to stimulate local economics. Middle-class consumers are emerging very quickly in developing nations in Asia. As prominent drivers of growth and expanding consumer tendencies, the middle-class represents a force that may be characterized with higher incomes, advanced educational backgrounds and evolving appetites for global goods and services. Spending growth in Asia will likely be stimulated by middle-class consumers. According to a memo released by Morgan Stanley Smith Barney in June 2011, the transition from export-and investment-led economy to a more consumer friendly economy, will define the evolution and maturation of Asia realigning investments and the global middle-class. Table 46: Projected Middle-Class Spending, Compound Annual Growth Rate
2020 China India Japan US EU Other Asia 16% 25% 2% 0% 2% 8% 2030 12% 19% 1% 0% 1% 7%

Source: Morgan Stanley Service as of June 2011

Providing evidence supporting economic growth in Asian countries, the above table highlights annual growth rate projections of consumer spending. According to the table, consumer spending will increase by annual rate of 16 percent in China by 2020 and 12 percent annually by 2030. India will also see profound increases on annual basis; for example, by 2020, consumer spending is projected to increase by an annual rate of 25 percent, and an annual rate of 19 percent by 2030. Consumer spending growth in the US is projected to stay flat during this time period, and grow slightly in European counties. As future consumer spending in Asian counties is expected to increase, prompting more competition for goods and commodities (driving prices up), this transition may make western economies more unbalanced. For example, as the price for commodities increase, due to Chinese and Indian demand as well as scarcity, implies the need for the west to move more workers into export-driven sectors, but as the west transitions into more of a service-oriented economy, jobs in export-driven sectors may not be as freely available when looking 20 or 30 years into the future.

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Figure 77: Private Consumption as a Percentage of GDP, 2008

80% 70% 60% 50% 40% 30% 20% 10% 0% China Japan India US
Source: Morgan Stanley Service as of June 2011

71% 57%

55%

37%

Unlike the case of other developing countries, private consumption has proved to be a significant factor deciding Indias economic growth. Shown in the figure below, Indias consumption to GDP level (57 percent) is closer to that of developed nations, like the US (71 percent) and Japan (55 percent) than China (37 percent). However, if China were to fully realize its potential, they would shift from a leading producer of globally distributed foods to the worlds largest consumer. According to Morgan Stanley Smith Barney, Chinas middle class remains to be a smaller proportion of the Chinese population, at 12 percent; suggesting that without external factors, especially exports, the Chinese middle class might not be strong enough to solely drive Chinas rapid economic growth. Shifting Area of Spending As wealth increases, spending tends to shift away from necessities and more toward discretionary items. As the absolute size of a households budget increases, the relative share toward basic necessities, such as food and clothes, within those budgets decreases, while spending on luxury items, such as leisure, travel and health care, increases. Fast growth is projected in the following sections: Health Care Communications (e.g., Internet, mobile phones, PCs) Recreation (e.g., travel, casinos)

As wealth increases, spending trends to shift away from necessities and more toward discretionary items. Health Care The increasing demand for health care products (medical devices for hospitals, personal dietary supplements, etc.) provides export manufacturing opportunities for US companies. Middle-class consumers in emerging markets are likely to increase their spending on this category, in part reflecting inadequate public health care systems. According to recent studies by Morgan Stanley, consumer spending on health care in China is forecast to grow at a rate over 11 percent. Also, the trend should boost the market of medical devices, including diagnostic equipment used in hospitals, which has substantial growth potential.

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Figure 78: Health Expenditure Per Capita in Selected Asian Countries

$200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2001 2002 China
Source: World Bank Group

2003

2004

2005 India

2006 Philippines

2007

2008 Vietnam

2009

Thailand

Indias rapidly growing healthcare market is providing significant trade opportunities for US medical device firms. According to the India Healthcare and Pharmaceuticals Report, from 2005-2009, US exports of medical goods to India increased by 73 percent. The growth of US medical goods exports to India is expected to continue as a result of Indias growing middle-class, medical tourism industry, private-sector healthcare investment, and heightened government commitment to provide health services to the rural population. India generally assigns lower tariffs to finished medical devices which US firms specialize in manufacturing than to component parts. Tourism Outbound travel and tourism from Asia is growing quickly. With its increasing disposable incomes, liberalized economies, the rapid growth of low-cost airlines and the lowering of both physical and political borders, millions of Asians are able to travel overseas. In 2009 there was a nine-percent drop in outbound trips by Asians due to the impact from the worldwide economic downturn, but the region more than bounced back in 2010, according to the ITB World Travel Trends Report. Asian outbound travel showed strong growth of 15 percent over the first eight months and is expected to end the year showing a 14 percent rise over 2009. The booming outbound Asian markets for 2011 are expected to include China, South Korea and Malaysia, which are all increasing at more than 20 percent, while Taiwan, Japan, Singapore and India are also growing at double-digit rates. In terms of destinations, 76 percent of Asian trips are to countries within the region, while 13 percent are to Europe and only 10 percent to America, reportedly due to visa issues.

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Figure 79: Outbound Travelers from China and India (millions)

millions

60 50 40.9 40 30 20 10.5 10 0 2000 2001 2002 2003 2004 OutboundTravelersfromChina 2005 2006 2007 2008 OutboundTravelersfromIndia 2009 4.3 12.1 4.6 4.9 5.4 6.2 7.2 8.3 16.6 20.2 28.9 31 34.5 45.9 47.7

Source: National Bureau of Statistics of China, Indian Tour Operators Promotion Council

Chinas National Tourism Administration reports that the number of trips made by domestic tourists grew 12 percent in 2009 and is expected to have grown 14 percent in 2010, and 60 percent by 2015. Similar phenomena can be witnessed in India. Outbound traveling especially will increase largely in the future. In this case the US, with the second largest tourist arrivals rate by 2008, can expand travel business with Asian countries. The latest outbound tourism report by the China Tourism Academy said China will be the fourth largest source of outbound tourism in the world by 2020.

Advanced Manufacturing Exports

Asia, Europe, and North America together purchase over 80 percent of all US exports of advanced technology products. In 2006, Asia was the destination for about 40 percent, Europe about 26 percent, and Canada and Mexico together about 17 percent. Figure 80: US Exports to China and India ($ billions)
$ billions 100 90 80 70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 28.4 19.2 3.75 22.1 4.1 4.98 6.11 7.92 9.67 14.97 17.68 16.44 19.25 34.7 41.8 55.2 65.2 71.5 69.6

91.9

US export to China Source: U.S. International Trade Commission

US export to India

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Table 47: Top US Exports to China, 2010 ($ billions)

Rank 1 2 3 4 5 6 7 8 9 10 Commodity description Electrical machinery and equipment Power generation equipment Oil seeds and oleaginous fruits(fruits that contain oil) Aircraft and spacecraft optics and articles thereof Plastics and articles thereof Vehicles, excluding rail Inorganic and organic chemicals Pulp and paperboard Copper and articles thereof Volume 11.5 11.2 11 5.8 5.2 4.8 4.5 4.5 3 2.9 % change over 2009 21.9 33.6 18.1 8 31.2 10.5 134.4 34.2 22 62

Source: US International Trade Commission

Asia is a major export market for the United States which represents two of the top three US customers. The latest data show Taiwan among the top three customers in optoelectronics, flexible manufacturing, and nuclear technologies. China is among the top three customers in aerospace, advanced materials, computer software, electronics, and in information and communications. South Korea is among the top three in flexible manufacturing technologies and weapons. Malaysia is an important export market in electronics technologies. China and Singapore remain in the top ten US aerospace export markets and China became the second largest market for US export of aero-craft.

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Action Plan Priorities

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Introduction
Action Plan recommendations build from AECOM experience in regions that have been forced to adjust to the loss of a major employer, particularly through auto industry restructuring or military base / BRAC realignment. From this experience, it is clear that plans such as the St. Louis Regional Economic Adjustment Strategic Plan have a role to play in actively encouraging Regional stakeholders to resist passive reliance on the status quo, acknowledge challenges, and move forward. The need to embrace change is emphasized through current employment data from the US Bureau of Labor Statistics. Research shows that the St. Louis Region has been adding jobs at a rate of about 3,000 per month since January of 2010, which is faster than rates of job growth recovery in Columbus, Indianapolis, and Cincinnati, and well above job creation rates sustained by the Region between 2001 and 2007, during which time an average of only 50 new jobs per month was sustained. As such, while the Region is recovering at a notable pace, sustaining this pace into the future is the fundamental challenge. The Strategic Plan also acknowledges the critical need to actively manage public sector recovery from the Great Recession. Since the recession took hold in 2008, the public sector has been forced to contend with recurring fiscal challenges caused by simultaneous decreases in property and sales taxes, and state shared revenue. Although sales taxes have started to recover, underlying weakness in property values related to distressed assets as well as the reduced pace in housing construction will slow the pace of recovery. The bottom line is that many municipalities still find themselves operating with 5 to 10 percent less revenue compared to pre-recession levels. States such as Michigan have resorted to very aggressive policies to manage their fiscal situations, with budget priorities that include incentives to encourage municipal consolidations. While fiscal challenges have made it difficult to separate politics from policy at the national and state levels, limited resources at the municipal level have also led to a measure of self-interest by municipalities, a perspective which constrains the Regions ability to recover. Choices made in addressing these factors will dictate the future pace and success in achieving Regional economic development priorities. Put another way, and paraphrasing John Maynard Keynes, the difficulty for St. Louis lies not in the new ideas, but in escaping the old ones.

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Strategic Context
With St. Louis and the US now slowly emerging from the Great Recession, it is important to consider how local opportunities align with identified national economic development priorities, as identified by the US Economic Development Administration (EDA). These priorities include: 1. Is the program a national strategic priority? 2. Is it in an economically distressed or underserved market? 3. Is there a positive return on investment from EDA spending on the project? 4. Does it encourage regional collaboration? 5. Does it support public / private partnerships? Within these five priorities, there is a clear focus on efforts to bolster technology-led economic development, with a focus on support to small- and medium-sized businesses, aligned with efforts to improve global competitiveness and innovation through commercialization of research, and/or environmentally sustainable development. Also remarkable is the stated goal of encouraging regional collaboration and moving beyond existing governance silos, which is a specific challenge for the Region.

Strategic Priorities
With these priorities in mind, the Chrysler Regional Economic Adjustment Strategy has identified six goals that should become the basis for economic adjustment in the Region:

1. Sector Specific Research

AECOM notes the laudable success of the Regions Plant and Life Sciences cluster, which was established and grown by a deliberate, well-funded and supportive network of collaborative organizations and institutions, as well as private sector firms such as Monsanto. Plant and Life Sciences sectors include: Agricultural feed stocks and chemicals (including bio-fuels) Drugs and pharmaceuticals Medical services, medical devices and equipment Research, testing, and medical labs

Similar opportunities are now emerging locally in the evolving clean tech cluster, which covers an equally expansive array of traditional industry sectors with a general focus on the green economy. What makes the green economy difficult to capture is that while there are a number of industries that are specifically concerned with green activities, the majority of industry sectors and businesses that offer green products and services do so as part of a larger range of offerings. There are a number of terms associated with the green economy. The three most-often used terms are greentech, cleantech, and enviro/eco tech. While there is debate about the nuanced differences between these three terms, for the purposes of this report, the three may be used interchangeably to refer to technologies, products, and services, which produce similar or greater benefits as traditional technologies while minimizing the effects of their use on the natural environment and maximizing the

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efficient use of various natural resources, including water and energy. Key areas of emphasis include: Recycling, renewable energy and energy storage Information technology Green transportation Electric motors and lighting systems Building efficiency Green chemistry

Through supportive federal policy, research efforts in plant and life sciences and clean tech are converging, with considerable research focused on alternative energy (biofuels) and energy storage, with linkage to other industries such as agricultural products and chemicals, as well as research and testing, human / animal health, diagnostics, and plant sciences. With these overlaps in mind, we identified several areas for deeper investigation, focused on ways to expand evolving linkages between sectors: Build on recent announcements related to the formation of BioSTL, which will be supported by $30 million in committed funding from entities that include Washington University, BJC HealthCare, and the St. Louis Life Sciences Project. Funding will be used to support pre-seed and seed investments in the biosciences. Evaluate Regional opportunities in emerging fields related to advanced manufacturing, materials, and alternative energy, beginning with local firms such as Zoltek, MEMC Electronic Materials, GKN and Boeing. Other areas of focus should include wind power logistics and manufacturing support. Explore how the Regions available supply of fresh water and considerable logistical connections can be used to grow a more vertically integrated food processing sector. Evaluate how existing Regional capacity in Information Technology can be used to grow opportunities in bioinformatics. Firms in the Region such as Intuitive Genomics, now located at BRDG Park, are actively shaping the space where computer science, information technology, biology and medicine are converging. Research the role and need for leadership in potential sector clusters, using the existing Plant and Life Sciences cluster as a model.

2. Entrepreneurial / Small Business Development / Export Opportunities

AECOMs research has confirmed that the Region has traditionally been over-represented by large companies. The Region needs to adopt strategies to energize entrepreneurship and grow nascent companies that have potential to become new economic engines. Priorities include: Catalog all the Regional entities that are involved in entrepreneurship and develop a plan for enhanced easy access to existing area entrepreneurship resources. Educational institutions such as Wash U and SLU should be engaged.

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Evaluate the climate and capacity for entrepreneurial / small business development across the Region, defining local strengths and weaknesses, funding gaps and industry best practices. Missouri Enterprise and the Illinois Manufacturing Extension Service should have an important role in training and business development activities aimed at export markets. The future roles of these entities should be thoughtfully developed. Help local companies expand export opportunities to global markets, particularly in Asia and Latin America, building on experience with China Hub efforts. Research the technical feasibility of a large-scale Regional manufacturing incubator, and the potential role of local educational institutions in supporting the effort. Research the role and need for a civic champion to pursue additional cluster opportunities, using the existing Plant and Life Sciences cluster as a model. Conduct further studies to understand how evolving state legislation for MOSIRA can be used to support job creation in the Plant and Life Sciences and Clean Tech Clusters. Work with the Illinois and Missouri US Congressional delegations to determine whether existing district boundaries for organizations such as SBA, EDA, and FEMA can be redefined to better serve the Region. Work with local units of government to standardize planning and development regulations to ensure greater consistency and efficiency across jurisdictions.

3. Infrastructure Investments
While the Region purports to be an impressive location for logistics, with four interstates, six Class 1 railroads, and two major rivers, our analysis confirms that the linkages between modes remain too arbitrary. A renewed focus on infrastructure is essential if the Region is to respond to other major investments. There are already infrastructure investments underway that will benefit the Region beginning with about $1 billion that has been invested to upgrade rail capacity between Alton and Joliet (Illinois) for 110-mph passenger and freight service. With an estimated cost of $4.4 billion, the project raises obvious questions for how the Region connects with this evolving asset, given the reported poor condition of both Mississippi River railroad bridges. In the Chicago area, one of three places where all seven Class 1 railroads meet, significant bottlenecks are now being resolved through CREATE, as the railroad companies proved unwilling to address the issue. CREATE includes more than 70 specific projects, with a total investment of about $3 billion, to be funded through a public-private partnership. The $5.25 billion expansion of the Panama Canal is now underway and set to open in 2014. Once completed, the canal is expected to see an increase in container shipments, which have already grown considerably, from approximately 200,000 in 1995 to more than 4.5 million in 2009. The impact of the canal expansion relates in part to transit times, which will be enhanced for traffic bound to the US East Coast which would otherwise go through Suez. While shipment times from Asia to the US West Coast are shorter, the combined impact of rail transit time to the East Coast as well as current inefficiencies and bottlenecks (i.e., Chicago) in the US logistics system suggest that the Panama Canal will be competitive.

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In response to the Panama Canal project, the Norfolk Southern Railroad recently completed a major upgrade to the Heartland Corridor, which effectively doubled container-train capacity from Norfolk to Chicago. The project involved raising tunnel clearances on 28 tunnels and removal of 24 overhead obstructions in Virginia, West Virginia, Kentucky and Ohio, at an estimated cost of $191 million, shared between NS and impacted state governments. Improvements to corridors such as the Heartland is important, in that as the Panama Canal is further east than the mouth of the Mississippi River, it is anticipated that increased container traffic will shift to East Coast ports once the Panama Canal expansion is complete. Lastly, since 1999 BNSF has invested $800 million to increase capacity on its southern TransCon Line, which now provides double-track service from Los Angeles to both Chicago and St. Louis. Of 13 states served by this line, Missouri ranks about 7th in total annual carloads in 2009.

With these competitive forces in mind, Regional priorities should include: There are several freight movement bottlenecks that need to be addressed, beginning with existing rail bridges over the Mississippi. St. Louis should consider an effort similar to CREATE to improve connections between rail, truck and barge segments. Investigating ways to increase access to public transportation, particularly light rail and bus rapid transit. Analysis confirmed that less than 1% of Regional housing unit inventory falls within a 1/4mile distance of current light rail stations. With inevitable growth in gas prices, demand for walkable housing will drive greater interest in higher density transit-oriented development sites. Under a consent decree with US EPA, MSD has committed to invest $4.7 billion to upgrade storm water and sanitary systems in the Region to meet terms under the Clean Water Act of 1972. Nationally, other cities have re-worked storm water management systems to expand recreational amenities and revitalize communities, with cities such as San Antonio and Kansas City being obvious examples. The project in Kansas City along Brush Creek, completed in the 1990s, encouraged additional development along the corridor. We note that the St. Louis Arch reinvestment project includes important infrastructure and transportation access enhancements. The plan allows for a more deliberate connection between Illinois and Missouri, which is important from a policy standpoint. As Millennium Park in Chicago transformed an area and drove significant additional real estate development and tourism, so too could the Arch project help transform the Riverfront area.

4. Workforce Development
Workforce development remains a clear challenge for the Region, particularly the very practical challenge of preparing young people for future careers while also ensuring that they actually have practical skills to enter the workforce. Recommendations focus on the current structure of workforce development in St. Louis City and County, which clearly needs improvement: Build greater cooperation between St. Louis City and St. Louis County Workforce Investment Boards (WIBs) and intermediaries, including St. Louis Community College. Currently, St. Louis City and St. Louis County have separate WIBs, which creates an artificial barrier in Regional workforce efforts. Ensure that workforce development is aligned with the clear need for a focused business retention and expansion effort.

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Local companies need to be pulled into the workforce training process as partners. The success of Ranken Technical College in St. Louis is impressive in terms of linking corporate workforce needs with specialized training programs. The Ranken model should be a focus of further study and emulation. Sustain focus on early childhood education and support programs, as well as programs in math and science Further study of the applicability of Midwestern automotive adjustment programs such as the Automotive Manufacturing Technical Education Collaborative, which is an organization of educational institutions in communities across the country that have been impacted by auto industry restructuring. That the St. Louis Region does not appear to be a participant is notable, given the Regions traditional strength in automotive manufacturing.

Specific challenges with respect to workforce development reinforce the need for greater resources to fund City-County workforce development efforts, possibly including the use of a temporary economic development sales tax.

5. Regional Economic Development Leadership

There is a clear need for a more integrated and collaborative Regional economic development structure aligned deliberately with business retention and expansion efforts. Opportunities begin with leadership transitions now underway at RCGA, Metro / Bi-State, and East-West Gateway. With these transitions occurring simultaneously for the first time in 20 years, and acknowledging that the current structure of Regional economic development is quite complex, further in-depth research is needed to map out how the pieces of the Regional economic development puzzle can be better aligned to provide more seamless and integrated economic development services. Recommendations include: Continue to hold annual Regional economic development summits to set the agenda, identify priorities, develop funding strategies, and support follow-through. Enable the existing county-level economic development entities to prioritize Regional economic development around strategies to retain and grow existing businesses as a top priority. There is a clear need for a cohesive Regional platform for capturing and presenting data regarding successful business expansion and retention efforts; current reporting is fragmented. While challenging fiscal conditions make it difficult to broaden economic incentives, consideration should be given to a temporary economic development sales tax to fund pressing infrastructure and workforce development improvements. The role of SLCECs Economic Development Collaborative should be expanded as a mechanism for connecting with and establishing common goals among municipalities across St. Louis County. Conduct further research into the Bi-State Development Agencys ability to implement projects of Regional importance and provide collaborative economic leadership. Bi-State is the one Regional entity that has the legal ability to implement truly Regional projects. Evaluate the RCGAs current role and financial support for providing external marketing and attraction services. As part of this evaluation, AECOM recommends that consideration be given to clearly separating the traditional chamber and economic development functions within RCGA.

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Re-engage with Metro East economic development leaders, to ensure their participation in efforts which move the entire Region forward.

5. Enhanced City-County Collaboration

Enhanced collaboration between the City of St. Louis and St. Louis County must be a key outcome of this study. Our analysis, supported by 15 years of work experience across the Region, has reinforced two elements of prevailing wisdom. First, historically, there has been a general lack of cooperation and coordination between St. Louis City and St. Louis County in basic government services. Notable exceptions are the cooperation in functional areas such as the establishment of the Convention and Visitors Commission, Great Rivers Greenway, the Zoo-Museum District, the passage of the Metro sales tax and certain economic development initiatives. Second, it is clear that the City of St. Louis faces considerable structural challenges, including constrained financial resources as well as a fragmented and highly decentralized governance structure. With the outsized economic importance of St. Louis City and St. Louis County to the Region in mind, it is apparent to AECOM that these factors have combined to diminish the growth potential and competitive position of the Region nationally and globally. For the near-term, this analysis reinforces the practical need for a more integrated St. Louis City/St. Louis County economic and workforce development platform, with the goal of aligning specialized workforce training with business retention and expansion. In a similar fashion, consideration should be given to implementation of a joint St. Louis City/St. Louis County geographic information systems (GIS) platform to better support planning and economic development efforts. As a first step, the City of St. Louis GIS system needs to be improved to the level of St. Louis Countys current GIS system which is highly advanced. Over the long-term, significant attention needs to be focused on resolving fundamental structural, legal and financial challenges which the City of St. Louis faces. While it is clear that St. Louis City re-entry into St. Louis County (or other fundamental reorganization of government) will not address all of St. Louis Citys fiscal challenges, our experience suggests that the status quo is equally untenable. The same is true for St. Louis County, which now finds itself in a fiscal position that the City of St. Louis enjoyed roughly 50 years ago. The logical extrapolation of current trends raises concern over St. Louis Countys long-term ability to sustain its current standard of economic performance without fundamental change. In total, if the Region is to be competitive as a metropolitan area in the future, substantive further cooperation between the two jurisdictions is imperative. For this reason, we would argue that the executive and legislative leadership of both the City and County of St. Louis should actively engage in a long-term and phased strategy for transforming the St. Louis City/St. Louis County relationship over the next 20 years.

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Priority Sector Return on Investment Analysis

As Regional economic development leaders will be contending with limited resources in coming years, our approach includes a detailed analysis of industry sectors that stand to generate the biggest return on an initial investment of $25 million in each sector of the St. Louis Regional economy. We looked at the amount of that investment that would remain in the Region, how it is re-spent and how many jobs are supported by it. This was done in an effort to show how economic development incentives will yield different outcomes depending on where the investment is made. Research has shown that economic development efforts are more successful when built on a regions existing base industries and by fortifying industrial clusters that exist. By understanding how the local economy is currently working, economic development officials will be better able to capitalize on their competitive advantages when considering offering incentives for future development. Specifically the data here examines how the overall Region economy will grow with this investment directly and indirectly in terms of total output, employment and wages. AECOM used 2009 data from IMPLAN for the St. Louis Region for this analysis, the most current available. The IMPLAN data is not organized by NAICS. Instead IMPLAN uses the Bureau of Economic Analysiss Benchmark InputOutput Study from 20002 that classifies industries into 440 sectors. The focus of this analysis is on private sectors only.

Top Performing Sectors

The following table presents the top 20 performing private sectors in terms of output, jobs and wages. Often a top performing sector on one variable is also a top 20 sector variable on another. For example, the construction of other new nonresidential commercial and health care structures (which includes commercial buildings, warehouses, schools, hospitals, hotels, office buildings, etc.) had $2.5 billion in total output during 2009. The more than 21,000 workers earned $1 billion in wages. Table 48: Top Performing Private Sectors, St. Louis Region 2009
Sector 34 36 71 115 277 284 319 324 329 335 351 352 354 355 356 357 358 360 367 369 371 376 Description Construction of new nonresidential commercial structures Construction of other new nonresidential structures Breweries Petroleum refineries Light truck and utility vehicle manufacturing Aircraft manufacturing Wholesale trade businesses Retail Stores - Food and beverage Retail Stores - General merchandise Transport by truck Telecommunications Data processing, hosting, ISP, web search portals Monetary authorities and depository credit intermediation Non-depository credit intermediation and related activities Securities, commodity contracts, investments Insurance carriers Insurance agencies, brokerages, and related activities Real estate establishments Legal services Architectural, engineering, and related services Custom computer programming services Scientific research and development services Total Output (millions) $2,518 $4,278 $3,490 $6,791 $5,812 $5,227 $13,408 $1,443 $1,520 $2,802 $6,229 $2,491 $4,855 $3,553 $2,005 $4,112 $1,933 $7,630 $2,759 $2,152 $1,513 $2,483 Jobs (000) 21 34 2 1 3 11 65 24 30 20 12 5 19 9 29 14 12 76 17 18 13 13 Total Wages (millions) $1,005 $1,617 $399 $124 $622 $1,340 $4,686 $726 $782 $803 $1,108 $703 $1,210 $672 $902 $958 $839 $593 $1,050 $1,008 $844 $1,252

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Sector 381 382 386 388 392 394 397 398 413 425

Description Management of companies and enterprises Employment services Business support services Services to buildings and dwellings Private junior colleges, colleges, universities, schools Offices of physicians, dentists, and other health practitioners Private hospitals Nursing and residential care facilities Food services and drinking places Civic, social, professional, and similar organizations Subtotal Total all industries Share of total Top 20 sector Source: IMPLAN

Total Output (millions) $7,516 $1,491 $1,298 $1,656 $3,202 $5,421 $7,743 $1,697 $6,499 $1,509 $127,035 $246,257 51.6%

Jobs (000) 37 29 20 27 37 43 60 31 116 28 877 1,653 53.0%

Total Wages (millions) $3,970 $843 $653 $556 $1,733 $2,738 $3,534 $937 $2,212 $817 $41,233 $76,514 53.9%

There are nine such sectors that are top performing on all three variables. Retail sectors also appear since they employ thousands of workers however, they have comparatively low output and wages. In total there are 32 sectors that rank among the top twenty on one or more of these indicators. Combined, they had $127 billion in total output, nearly 52 percent of the total for all industries in the Region. They employed more than half (53%) of St. Louis workers and paid 54 percent of all the wages paid in the metro area during 2009. Using a $25 million investment as the direct impact in each sector, AECOM used the regional purchasing coefficients as well as multipliers for output, employment and wages to estimate the indirect and induced economic impacts measured in output, jobs and wages. The regional purchasing coefficient indicates what share of the goods and services purchased by a sector are made in the local study area. For retail sectors, we also applied the retail margins. The purchase price of a retail good includes the raw cost of the item along with mark ups for the retailer and wholesalers as well as costs for transporting and storing the product. Typically the item is not produced locally so only the portion of the spending that benefits the local economy is the retailer mark up and a portion of the transportation and storage costs. The retail margin represents that share of the purchaser cost that remains locally. In the St. Louis Region, the retail margins range from 16.4 percent to 48.1 percent as shown below. There are no retail margins for retail purchases made through catalogs or online. Table 49: Retail Margins in St. Louis Region, 2009
Sector 320 321 322 323 324 325 326 327 328 329 330 Retail Sector Motor vehicle and parts Furniture and home furnishings Electronics and appliances Building material and garden supply Food and beverage Health and personal care Gasoline stations Clothing and clothing accessories Sporting goods, hobby, book and music General merchandise Miscellaneous Margin 19.1% 48.1% 26.5% 32.6% 29.4% 30.8% 16.4% 47.9% 39.8% 27.3% 43.8%

Source: IMPLAN

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Our analysis does not include any construction impacts that may be associated with growing a sector with a $25 million investment. It should be noted that for some sectors, a significant investment may change the way firms operate in terms of purchasing goods and services from within the local study area. This analysis does not account for any such potential changes. Often, similar analyses focus solely on the output multipliers. While a valid measure of how many times a dollar spent by an industry circulates throughout the study area, it does not tell the whole story. The regional purchase coefficient (RPC) indicates how much of purchases by the sector are sourced by local sellers. For example, the RPC for aircraft manufacturing is 0.972 indicating that 97.2 percent of the goods and services it needs to produce its product are purchased in the Region. The following table shows the top twenty sectors for output multipliers, RPCs and the effective multipliers which account for both. To get a sense of the size of the industry, we also included total output from 2009. As shown below, some of the sectors with the largest output multipliers have low RPCs, many are also very small industries in the Region such as tree nut farming. Among sectors with the highest effective multiplier, only two also have one of the top 20 output multipliers. More relevant is the high RPC. Of the sectors with the highest effective multiplier, 14 also had the highest RPCs. Truck transportation is one of the top twenty private sectors in the Region and also has the top 20 multiplier, RPC, and effective multiplier, making it an attractive sector for further investment since it is well developed and yields a high return. Table 50: Private Sectors with Largest Multipliers and RPCs, St. Louis Region 2009
Sector 3 4 5 6 33 34 35 36 37 38 39 40 63 118 134 135 138 145 213 284 Description Vegetable and melon farming Fruit farming Tree nut farming Greenhouse, nursery, and floriculture production Water, sewage and other treatment and delivery systems Construction of new nonresidential commercial and health care structures Construction of new nonresidential manufacturing structures Construction of other new nonresidential structures Construction of new residential permanent site single- and multi-family structures Construction of other new residential structures Maintenance and repair construction of nonresidential structures Maintenance and repair construction of residential structures Cookie, cracker, and pasta manufacturing Petroleum lubricating oil and grease mfg In-vitro diagnostic substance manufacturing Biological product manufacturing Soap and cleaning compound manufacturing Laminated plastics plate, sheet (except packaging), and shape manufacturing Other commercial and service industry machinery manufacturing Aircraft manufacturing Total Output (millions) $20 $10 $1 $65 $213 $2,518 $710 $4,278 $1,765 $1,478 $1,265 $558 $281 $499 $53 $45 $2,235 $70 $376 $5,227 Output Multiplier 2.2436 2.3579 2.1627 2.0424 1.8061 1.8582 1.8158 1.9315 1.8685 1.8634 1.9156 1.8414 1.6909 2.0348 2.1621 2.0796 2.0624 1.7250 1.6826 1.5006 RPC 0.0222 0.0068 0.0004 0.0894 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0.9577 0.9962 0.6207 0.2607 0.7475 1.0000 0.9697 0.9724 Effective Multiplier 0.0498 0.0160 0.0008 0.1826 1.8061 1.8582 1.8158 1.9315 1.8685 1.8634 1.9156 1.8414 1.6193 2.0271 1.3420 0.5421 1.5417 1.7250 1.6316 1.4591

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Sector 295 309 319 333 334 335 337 353 359 363 369 372 379 384 394 397 399 400 402 404 405 419 423 424

Description Wood kitchen cabinet and countertop manufacturing Dental laboratories manufacturing Wholesale trade businesses Transport by rail Transport by water Transport by truck Transport by pipeline Other information services Funds, trusts, and other financial vehicles General and consumer goods rental Architectural, engineering, and related services Computer systems design services Veterinary services Office administrative services Offices of physicians, dentists, and other health practitioners Private hospitals Child day care services Individual and family services Performing arts companies Promoters of performing arts and sports Independent artists, writers, and performers Personal care services Religious organizations Grantmaking, giving, and social advocacy organizations

Total Output (millions) $122 $63 $13,408 $772 $482 $2,802 $35 $34 $635 $159 $2,152 $628 $197 $342 $5,421 $7,743 $416 $593 $91 $276 $44 $552 $394 $470

Output Multiplier 2.0577 1.9917 1.7987 1.9874 1.7482 2.0742 2.0442 2.0426 2.1773 2.0846 2.0285 2.3285 2.0349 2.0642 2.0280 2.0265 1.9524 1.9853 2.0773 2.0949 2.1182 2.0067 2.1932 2.0464

RPC 0.8327 0.9941 0.9960 1.0000 1.0000 1.0000 0.1287 0.1873 0.4867 0.6569 0.9000 0.8000 0.9353 0.5573 0.9500 0.9000 1.0000 0.9933 0.6311 0.8001 0.1870 0.9000 0.6443 0.7018

Effective Multiplier 1.7135 1.9798 1.7915 1.9874 1.7482 2.0742 0.2631 0.3827 1.0596 1.3693 1.8256 1.8628 1.9033 1.1504 1.9266 1.8239 1.9524 1.9720 1.3109 1.6761 0.3960 1.8061 1.4130 1.4362

Top 20 sector Bottom 20 sector Source: IMPLAN

The following table presents the sectors with the largest economic impact in terms of total output, jobs and wages with a $25 million investment. This includes both the direct, indirect and induced impacts. As shown above, the sectors with the largest economic impact are those with the largest effective multipliers which factor in both the output multiplier and the regional purchase coefficient. The largest total economic impact with a $25 million investment was the sector transportation by truck yielding a nearly $52 million total impact followed closely by petroleum lubricating oil and grease manufacturing with approximately $51 million. The sector yielding the highest number of jobs with a $25 million investment was private household operations with 1,890 jobs. This sector represents workers in private homes such as cooks, maids, butlers, nannies, gardeners and other maintenance workers. However similar to the output, the jobs are across all sectors, not just in the sector in which the direct investment occurs. They include both indirect and induced impacts.

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Table 51: Largest Economic Impacts in Private Sectors with $25 Million Investment
Sector 33 34 35 36 37 38 39 40 118 309 333 335 336 368 369 371 372 376 379 382 387 391 394 395 397 398 399 400 401 402 403 404 407 408 413 415 419 421 425 426 Description Water, sewage and other treatment and delivery systems Construction of new commercial and health care structures Construction of new nonresidential manufacturing structures Construction of other new nonresidential structures Construction of new residential permanent site single- and multi-family structures Construction of other new residential structures Maintenance and repair of nonresidential structures Maintenance and repair construction of residential structures Petroleum lubricating oil and grease manufacturing Dental laboratories manufacturing Transport by rail Transport by truck Transit and ground passenger transportation Accounting, tax preparation, bookkeeping, and payroll Architectural, engineering, and related services Custom computer programming services Computer systems design services Scientific research and development services Veterinary services Employment services Investigation and security services Private elementary and secondary schools Offices of physicians, dentists, and other health practitioners Home health care services Private hospitals Nursing and residential care facilities Child day care services Individual and family services Community food, housing, and other relief services, including rehabilitation services Performing arts companies Spectator sports companies Promoters of performing arts and sports and agents Fitness and recreational sports centers Bowling centers Food services and drinking places Car washes Personal care services Dry-cleaning and laundry services Civic, social, professional, and similar organizations Private household operations Total Impact (000) $45,154 $46,456 $45,395 $48,288 $46,712 $46,584 $47,889 $46,035 $50,678 $49,496 $49,684 $51,856 $37,609 $41,840 $45,641 $39,814 $46,570 $40,710 $47,581 $37,535 $37,107 $39,211 $48,165 $42,105 $45,596 $44,493 $48,810 $49,300 $44,020 $32,774 $42,568 $41,904 $41,651 $36,387 $39,614 $26,687 $45,152 $42,194 $40,619 $28,769 Jobs 270 370 380 370 310 320 390 380 110 500 230 370 550 390 370 330 460 270 580 530 600 620 380 540 350 580 840 930 680 910 380 670 760 530 520 640 600 600 530 1,890 Wages (000) $16,315 $18,920 $19,249 $18,823 $15,299 $15,691 $19,655 $18,117 $7,504 $23,341 $14,501 $17,550 $15,740 $19,334 $20,984 $19,442 $30,488 $19,511 $20,551 $19,657 $18,071 $19,999 $22,277 $20,710 $17,655 $19,761 $21,421 $24,776 $20,596 $13,131 $21,868 $12,793 $17,618 $12,577 $13,630 $11,658 $20,637 $24,169 $17,774 $19,450

Top 20 sector Source: IMPLAN

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These sectors may yield the largest impacts, but may not necessarily be the best investment of public incentives since they may not be as developed as other sectors. For example, the petroleum lubricating oil and grease manufacturing sector had nearly $500 million in output and employed 489 people, whereas transportation by truck had $2.8 billion in output and employed 20,000 people. However both sectors have high multipliers and very high RPCs indicating that much of their spending occurs within the Region.

Targeted Clusters for Economic Development

The St. Louis Regional Chamber and Growth Association (RCGA) currently serves as the lead economic development agency for the 16-county metropolitan area. They have identified 6 clusters targeted for economic development in the Region: Advanced medical technology Plant and medical sciences Advanced manufacturing Information technology Transportation and distribution Financial services

These clusters are well-established in the Region and there are resources within the Region to support their future growth. Here we briefly summarize each cluster and identify the IMPLAN sectors that form it. We then present the data to show the impact of a $25 million investment for each of the sectors within the cluster. Due to overlapping sectors, we grouped two clusters together advanced medical technology and plant and medical sciences and refer to this combined cluster as plant and medical sciences. Plant and Medical Sciences As identified by the St. Louis Regional Chamber & Growth Association (RCGA), companies in plant and medical sciences are engaged in the development and production of medicines, agricultural chemicals, organic chemical manufacturing, medical equipment manufacturing and research and development. This definition is more narrow than other approaches. As measured by IMPLAN, this cluster employed nearly 23,000 residents and had a total output of $10.3 billion in 2009. The average wage in this sector was $93,200. This sector has very high output per job and high average wages, but only employs 1.4 percent of the metro area workforce. Scientific research and development services generate one-quarter of the output and employ 55 percent of the workers in this cluster. Table 52: Plant and Medical Sciences Sectors, St. Louis Region 2009
Sector 120 121 122 125 126 130 131 Description Petrochemical manufacturing Industrial gas manufacturing Synthetic dye and pigment manufacturing All other basic inorganic chemical manufacturing Other basic organic chemical manufacturing Fertilizer manufacturing Pesticide and other agricultural chemical manufacturing Output (millions) $455 $48 $320 $318 $1,983 $199 $563 Jobs 80 40 420 410 1,290 120 300 Wages (millions) $15 $4 $57 $42 $115 $10 $29

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Sector 132 133 134 135 305 306 307 308 309 376

Description Medicinal and botanical manufacturing Pharmaceutical preparation manufacturing In-vitro diagnostic substance manufacturing Biological product (except diagnostic) manufacturing Surgical and medical instrument, laboratory and medical instrument manufacturing Surgical appliance and supplies manufacturing Dental equipment and supplies manufacturing Ophthalmic goods manufacturing Dental laboratories manufacturing Scientific research and development services Subtotal Total all sectors Share

Output (millions) $377 $2,307 $53 $45 $1,002 $54 $28 $37 $63 $2,483 $10,335 $246,257 4.2%

Jobs 780 2,040 120 60 3,330 210 140 150 800 12,600 22,880 1,653,035 1.4%

Wages (millions) $99 $184 $11 $6 $245 $12 $6 $9 $36 $1,252 $2,132 $76,514 2.8%

Source: IMPLAN

The following table shows the output multiplier and the regional purchase coefficient (RPC) for the sectors in the plant and medical sciences cluster. Dental laboratories manufacturing has the highest RPC with 99.4 percent of all goods and services purchased locally. This sector also has a large output multiplier at 1.99 giving the sector the largest effective multiplier in the cluster at 1.9798. For every dollar invested in this sector, the total economic output, the total dollars being spent throughout the Regional economy, would be approximately $1.98. As shown above, this sector employs approximately 800 workers and had $63 million in total output during 2009. Table 53: Performance Metrics for Plant and Medical Sciences, St. Louis Region 2009
Output multiplier 1.9440 1.9275 2.0334 1.7987 2.0310 1.8842 1.9159 1.9449 1.9899 2.1621 2.0796 1.8428 1.6772 Effective multiplier 1.1022 0.4271 1.2723 0.7811 1.0050 0.1833 0.5417 0.2558 1.4698 1.3420 0.5421 1.6904 0.2524 Impacts resulting from $25 million investment Total Impact Wages (000) Jobs (000) $27,556 50 $2,902 $10,678 $31,807 $19,527 $25,126 $4,582 $13,542 $6,396 $36,744 $33,551 $13,553 $42,261 $6,310 30 100 60 60 10 40 30 120 150 50 210 30 $1,887 $7,248 $4,109 $3,448 $681 $2,387 $1,916 $8,154 $9,859 $3,562 $12,643 $1,865

Sector 120 121 122 125 126 130 131 132 133 134 135 305 306

Description Petrochemical manufacturing Industrial gas manufacturing Synthetic dye and pigment manufacturing All other basic inorganic chemical manufacturing Other basic organic chemical manufacturing Fertilizer manufacturing Pesticide and other agricultural chemical mfg Medicinal and botanical manufacturing Pharmaceutical preparation manufacturing In-vitro diagnostic substance manufacturing Biological product (except diagnostic) manufacturing Surgical instrument, lab and medical instrument mfg Surgical appliance and

RPC 0.5670 0.2216 0.6257 0.4343 0.4949 0.0973 0.2827 0.1315 0.7386 0.6207 0.2607 0.9173 0.1505

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Sector 307 308 309 376

Description supplies manufacturing Dental equipment and supplies manufacturing Ophthalmic goods manufacturing Dental laboratories manufacturing Scientific research and development services

Output multiplier 1.6210 1.6772 1.9917 2.0355

RPC 0.6745 0.3139 0.9941 0.8000

Effective multiplier 1.0934 0.5264 1.9798 1.6284

Impacts resulting from $25 million investment Total Impact Wages (000) Jobs (000) $27,334 $13,160 $49,496 $40,710 160 70 500 270 $7,910 $3,900 $23,341 $19,511

Source: IMPLAN

The above table also shows the impact of $25 million in each sector of the plant and medical sciences cluster. Due to the low employment in several of these clusters, a $25 million investment yields few jobs. However output per job is quite high as shown earlier. Advanced Manufacturing Advanced manufacturing incorporates technology to produce high value added products and services as well as to streamline production and business processes. According to the RCGA, the St. Louis Region is well positioned for growth in the following key manufacturing sectors: Beverages Aerospace and parts Electrical equipment manufacturing and appliances Motor vehicles Computer and electronic products Primary metals

The top three sectors in advanced manufacturing are light truck manufacturing with $5.8 billion in output, aircraft manufacturing at $5.2 billion and breweries with $3.5 billion in output during 2009. These sectors are also the largest employers. Combined, the cluster generated $25 billion in output with 36,800 jobs paying an average wage of $107,550 during 2009. Advanced manufacturing sectors represented 10 percent of the total economic output in the Region. Table 54: Advanced Manufacturing Sectors, St. Louis Region 2009
Sector Description Beverages 70 Soft drink and ice manufacturing 71 Breweries 72 Wineries 73 Distilleries Primary Metals 170 Iron and steel mills and ferroalloy manufacturing 171 Steel product manufacturing from purchased steel 173 Secondary smelting and alloying of aluminum Output (millions) $1,024 $3,490 $52 $704 Jobs 1,540 2,500 180 490 Wages (millions) $89 $399 $4 $66

$1,510 $129 $107

1,260 210 110

$154 $15 $7

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Sector 174 176 177 178 179 180

Description Aluminum product manufacturing from purchased aluminum Primary smelting and refining of nonferrous metal Copper rolling, drawing, extruding and alloying Nonferrous metal (except copper and aluminum) rolling, drawing, extruding and alloying Ferrous metal foundries Nonferrous metal foundries

Output (millions) $168 $326 $1,593 $287 $217 $226

Jobs 270 360 1,500 410 950 1,000

Wages (millions) $18 $31 $126 $27 $59 $66

Computer and Electronic Products 234 Electronic computer manufacturing 236 Computer terminals and peripheral equipment 237 Telephone apparatus manufacturing 238 Broadcast and wireless communications equipment 239 Other communications equipment manufacturing 240 Audio and video equipment manufacturing 241 Electron tube manufacturing 243 Semiconductor and related device manufacturing 244 Electronic capacitor, resistor, coil, transformer 246 Printed circuit assembly (electronic assembly) manufacturing 247 Other electronic component manufacturing 248 Electro medical and electrotherapeutic apparatus 249 Search, detection, and navigation instruments 250 251 253 254 256 257 Automatic environmental control manufacturing Industrial process variable instruments manufacturing Electricity and signal testing instruments manufacturing Analytical laboratory instrument manufacturing Watch, clock, and other measuring and controlling device Software, audio, and video media for reproduction

$33 $29 $25 $18 $73 $14 $1 $512 $18 $242 $32 $9 $138 $109 $61 $24 $25 $50 $56

30 70 50 30 220 20 * 850 110 740 160 20 390 360 230 90 80 140 170

$3 $5 $4 $3 $13 $1 $0 $94 $5 $43 $10 $2 $27 $30 $14 $6 $4 $16 $16

Electrical Equipment and Appliances 259 Electric lamp bulb and part manufacturing 260 Lighting fixture manufacturing 261 Small electrical appliance manufacturing 262 Household cooking appliance manufacturing 266 Power, distribution, and specialty transformer manufacturing 267 Motor and generator manufacturing 268 Switchgear and switchboard apparatus manufacturing 269 Relay and industrial control manufacturing 270 Storage battery manufacturing 272 Communication and energy wire and cable manufacturing 273 Wiring device manufacturing 274 Carbon and graphite product manufacturing 275 All other miscellaneous electrical equipment Motor Vehicles 276 Automobile manufacturing 277 Light truck and utility vehicle manufacturing 279 Motor vehicle body manufacturing 280 Truck trailer manufacturing

$18 $48 $0 $52 $258 $335 $183 $46 $3 $4 $241 $3 $37

80 150 * 120 620 540 480 160 10 10 770 10 150

$4 $12 $0 $5 $44 $92 $44 $9 $1 $0 $49 $0 $10

$1 $5,812 $83 $169

* 3,010 290 580

$0 $622 $16 $49

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Sector 282 283

Description Travel trailer and camper manufacturing Motor vehicle parts manufacturing

Output (millions) $10 $742

Jobs 50 2,120

Wages (millions) $2 $116

Aerospace and Parts 284 Aircraft manufacturing 285 Aircraft engine and engine parts manufacturing 286 Other aircraft parts and auxiliary equipment manufacturing Subtotal Total all sectors Share
* Less than 10 jobs Source: IMPLAN

$5,227 $43 $601 $25,220 $246,257 10.2%

10,980 80 2,000 36,750 1,653,035 2.2%

$1,340 $6 $177 $3,955 $76,514 5.2%

The following table shows the performance metrics for sectors in the advanced manufacturing cluster as well as the impacts resulting from a $25 million investment. While the output multipliers are high for many of these sectors, peaking at 1.9454 for soft drink and ice manufacturing, the RPCs are low making the effective multiplier much smaller. For example, in soft drink manufacturing, the RPC is 0.0793 indicating that less than 8 percent of the goods and services needed to produce their product are purchased locally. Therefore the effective output multiplier becomes 0.1542. A $25 million investment in this sector yields a total economic output of $154,000. Aircraft manufacturing, however, had an effective multiplier of 1.4591 due in large part to its high RPC of 0.9724. This is a $5.2 billion sector employing nearly 11,000 residents in 2009. Table 55: Performance Metrics for Advanced Manufacturing, St. Louis Region 2009
Impacts resulting from $25 million investment Total Impact Wages (000) Jobs (000) $3,855 $6,628 $1,277 $3,456 10 20 10 10 $611 $1,188 $241 $534

Sector Description Beverages 70 Soft drink and ice manufacturing 71 Breweries 72 Wineries 73 Distilleries Primary Metals 170 Iron and steel mills and ferroalloy manufacturing 171 Steel product manufacturing from purchased steel 173 Secondary smelting and alloying of aluminum 174 Aluminum product manufacturing from purchased aluminum 176 Primary smelting and refining of nonferrous metal 177 Copper rolling, drawing, extruding and alloying 178 Nonferrous metal rolling, drawing, extruding and alloying 179 Ferrous metal foundries 180 Nonferrous metal foundries

Output multiplier 1.9454 1.4648 1.7890 1.3362

RPC 0.0793 0.1810 0.0285 0.1035

Effective multiplier 0.1542 0.2651 0.0511 0.1382

1.6997 1.5794 1.6909 1.4732 1.3159 1.4192 1.4746 1.7716 1.7493

0.0825 0.0989 0.0335 0.0327 0.0000 0.0756 0.0439 0.0010 0.0473

0.1402 0.1563 0.0566 0.0482 0.0000 0.1072 0.0647 0.0018 0.0827

$3,505 $3,907 $1,416 $1,205 $0 $2,681 $1,617 $46 $2,069

10 10 * * * 10 * * 10

$672 $750 $249 $210 $0 $401 $277 $14 $659

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Sector

Description

Output multiplier

RPC

Effective multiplier

Impacts resulting from $25 million investment Total Impact Wages (000) Jobs (000)

Computer and Electronic Products 234 Electronic computer manufacturing 236 Computer terminals and other computer peripheral equipment manufacturing 237 Telephone apparatus manufacturing 238 Broadcast and wireless communications equipment manufacturing 239 Other communications equipment manufacturing 240 Audio and video equipment manufacturing 241 Electron tube manufacturing 243 Semiconductor and related device manufacturing 244 Electronic capacitor, resistor, coil, transformer, manufacturing 246 Printed circuit assembly manufacturing 247 Other electronic component manufacturing 248 Electromedical and electrotherapeutic apparatus

1.4355 1.8143

0.0679 0.0198

0.0974 0.0359

$2,435 $898

10 *

$387 $218

1.6918 1.7183

0.2702 0.1576

0.4571 0.2708

$11,427 $6,770

40 30

$2,593 $1,653

1.7650 1.8515 1.8820 1.8099 1.8515 1.8760 1.9216 1.7487

0.7342 0.0340 0.1922 0.3541 0.4095 0.5068 0.2541 0.0999

1.2959 0.0630 0.3617 0.6409 0.7582 0.9508 0.4883 0.1747

$32,398 $1,576 $9,043 $16,023 $18,956 $23,769 $12,208 $4,367

150 10 40 60 120 100 70 20

$7,978 $341 $3,057 $4,084 $5,978 $5,687 $3,992 $1,110

249 250 251 253 254 256 257

Search, detection, and navigation instruments Automatic environmental control manufacturing Industrial process variable instruments manufacturing Electricity and signal testing instruments manufacturing Analytical laboratory instrument manufacturing Watch, clock, and other measuring and controlling device Software, audio, and video media for reproduction

1.8584 1.7314 1.8216 1.7236 1.8130 1.7574 1.8451

0.1994 0.6745 0.3194 0.1816 0.1749 0.2204 0.8025

0.3705 1.1678 0.5818 0.3130 0.3171 0.3874 1.4807

$9,262 $29,196 $14,546 $7,826 $7,927 $9,685 $37,016

40 140 70 40 40 40 170

$2,497 $9,016 $4,112 $2,244 $2,008 $3,160 $11,324

Electrical Equipment and Appliances 259 Electric lamp bulb and part manufacturing 260 Lighting fixture manufacturing 261 Small electrical appliance manufacturing 262 Household cooking appliance manufacturing 266 Power, distribution, and specialty transformer manufacturing

1.7681 1.6986 1.6336 1.6053 1.6121

0.0006 0.0006 0.0002 0.0142 0.4319

0.0010 0.0009 0.0003 0.0228 0.6963

$26 $24 $9 $571 $17,408

* * * * 70

$7 $7 $2 $106 $3,959

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Sector 267 268 269 270 272 273 274 275

Description Motor and generator manufacturing Switchgear and switchboard apparatus manufacturing Relay and industrial control manufacturing Storage battery manufacturing Communication and energy wire and cable manufacturing Wiring device manufacturing Carbon and graphite product manufacturing All other electrical equipment

Output multiplier 1.5348 1.6163 1.7564 1.6404 1.4432 1.5481 1.9367 1.8068

RPC 0.3141 0.4046 0.2086 0.0441 0.1683 0.0009 0.0851 0.4051

Effective multiplier 0.4820 0.6539 0.3664 0.0724 0.2429 0.0014 0.1648 0.7320

Impacts resulting from $25 million investment Total Impact Wages (000) Jobs (000) $12,050 40 $3,516 $16,347 $9,160 $1,810 $6,072 $35 $4,119 $18,300 70 40 10 20 * 20 100 $4,495 $2,379 $449 $841 $9 $884 $5,527

Motor Vehicles 276 Automobile manufacturing 277 Light truck and utility vehicle manufacturing 279 Motor vehicle body manufacturing 280 Truck trailer manufacturing 282 Travel trailer and camper manufacturing 283 Motor vehicle parts manufacturing

1.5239 1.4904 1.6058 1.6435 1.6474 1.6150

0.2296 0.3734 0.3330 0.5314 0.2120 0.2141

0.3499 0.5566 0.5348 0.8734 0.3492 0.3457

$8,747 $13,914 $13,369 $21,835 $8,729 $8,643

20 30 60 110 50 40

$978 $2,393 $3,251 $6,763 $2,101 $1,942

Aerospace and Parts 284 Aircraft manufacturing 285 Aircraft engine and engine parts manufacturing 286 Other aircraft parts
* Less than 10 jobs Source: IMPLAN

1.5006 1.2561 1.7414

0.9724 0.0456 0.5949

1.4591 0.0573 1.0360

$36,478 $1,433 $25,901

130 * 120

$10,123 $266 $8,041

Information Technology The information technology (IT) cluster includes sectors that develop, maintain and use computer systems, software and networks to process and distribute data. IT refers to anything related to computing technology such as networking, hardware, software, the Internet or the people that work with these technologies. The table below shows that the sectors making up this cluster generated $11.6 billion in total output during 2009, 4.7 percent of all Regional output. Telecommunication dominates this sector with $6.2 billion in output and more than 12,400 employees. Average wages were highest for the nearly 5,100 people working in the data processing sector at $139,000.

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Table 56: Information Technology Sectors, St. Louis Region 2009

Sector 350 351 352 353 371 372 373 Description Internet publishing and broadcasting Telecommunications Data processing, hosting, ISP, web search portals and related services Other information services Custom computer programming services Computer systems design services Other computer related services Subtotal Total all sectors Share of total
Source: IMPLAN

Output (millions) $63 $6,229 $2,491 $34 $1,513 $628 $595 $11,554 $246,257 4.7%

Jobs 580 12,430 5,060 530 12,830 7,840 2,860 42,140 1,653,035 2.5%

Wages (millions) $22 $1,108 $703 $17 $844 $527 $172 $3,394 $76,514 4.4%

Computer systems design services, though a very small sector in this cluster, yields the highest return on a $25 million investment with approximately $47 million in total impacts. In addition this investment would support 460 jobs paying an average wage of $65,700. Recall that these 460 jobs are throughout the Region, not just in the computer systems design services sector. Table 57: Performance Metrics for Information Technology, St. Louis Region 2009
Output Multiplier 1.8797 1.6067 1.6482 2.0426 1.9907 2.3285 1.6575 Effective Multiplier 0.3545 0.9126 0.4431 0.3827 1.5926 1.8628 1.3260 Impacts from $25 million investment Total Impact Wages (000) Jobs (000) $8,863 70 $3,398 $22,815 $11,079 $9,566 $39,814 $46,570 $33,151 90 50 110 330 460 200 $5,302 $3,341 $4,543 $19,442 $30,488 $11,607

Sector 350 351 352 353 371 372 373

Description Internet publishing and broadcasting Telecommunications Data processing, hosting, ISP, web search portals Other information services Custom computer programming services Computer systems design services Other computer svcs

RPC 0.1886 0.5680 0.2689 0.1873 0.8000 0.8000 0.8000

Source: IMPLAN

Transportation and Distribution St. Louis is a multi-modal transportation center with two airports, four interstate highways, six major railroads and lies at the confluence of the Mississippi, Missouri and Illinois rivers. According to the RCGA, there are more than 75 companies with distribution facilities in the St. Louis Region occupying more than 30 million square feet of space. While the RCGA included the US Postal Service in its definition of this cluster, we focused solely on private industries. According to 2009 data from IMPLAN, the transportation cluster as defined below employed 118,000 residents and generated $20.6 billion in output. Wholesale trade was the largest sector with $13.4 billion in output and 65,000 jobs.

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Table 58: Transportation and Distribution Sectors, St. Louis Region 2009
Sector 319 332 333 334 335 336 337 338 339 340 Description Wholesale trade businesses Transport by air Transport by rail Transport by water Transport by truck Transit and ground passenger transportation Transport by pipeline Scenic and sightseeing Couriers and messengers Warehousing and storage Subtotal Total all sectors Share of total * Less than 100 jobs Source: IMPLAN Output (millions) $13,408 $995 $772 $482 $2,802 $314 $35 $571 $758 $497 $20,634 $246,257 8.4% Jobs 64,700 3,430 1,790 1,040 20,030 6,660 90 6,150 9,130 5,410 118,410 1,653,035 7.2% Wages (millions) $4,686 $290 $209 $70 $803 $144 $9 $333 $265 $261 $7,070 $76,514 9.2%

The RPCs for many of these sectors is at or close to 1, indicating that many of their purchases are made locally. With a high RPC combined with a high multiplier, the truck transportation sector yields the largest impact from a $25 million investment, nearly $52 million, followed by rail transportation. Table 59: Performance Metrics for Transportation and Distribution, St. Louis Region 2009
Output Multiplier 1.7987 1.9418 1.9874 1.7482 2.0742 1.8809 2.0442 1.9904 1.7923 1.8918 Effective Multiplier 1.7915 0.8971 1.9874 1.7482 2.0742 1.5044 0.2631 1.3939 1.2552 1.6071 Impacts from $25 million investment Total Impact Wages (000) Jobs (000) $44,787 270 $16,367 $22,428 $49,684 $43,705 $51,856 $37,609 $6,579 $34,847 $31,379 $40,177 100 230 200 370 550 30 330 300 380 $6,308 $14,501 $10,970 $17,550 $15,740 $1,811 $17,264 $10,436 $17,595

Sector 319 332 333 334 335 336 337 338 339 340

Description Wholesale trade businesses Transport by air Transport by rail Transport by water Transport by truck Transit and ground passenger transportation Transport by pipeline Scenic and sightseeing Couriers and messengers Warehousing and storage

RPC 0.9960 0.4620 1.0000 1.0000 1.0000 0.7998 0.1287 0.7003 0.7003 0.8495

Source: IMPLAN

Financial Services St. Louis serves as the regional financial hub and a national center of banking, finance and insurance. Financial sectors include banks, investment firms, insurance companies and real estate. The financial services cluster includes a diverse array of local, regional and national firms. Nearly 177,000 people work in this sector, representing more than 10 percent of the Regions workforce. The largest sector is real estate establishments with $7.6 billion in output and more than 76,300 people employed.

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Table 60: Financial Services Sectors, St. Louis Region 2009

Sector 354 355 356 357 358 359 360 368 Description Monetary authorities and depository credit intermediation activities Non-depository credit intermediation and related activities Securities, commodity contracts, investments, and related activities Insurance carriers Insurance agencies, brokerages, and related activities Funds, trusts, and other financial vehicles Real estate establishments Accounting, tax preparation, bookkeeping, and payroll services Subtotal Total all sectors Share of total
Source: IMPLAN

Output (millions) $4,855 $3,553 $2,005 $4,112 $1,933 $635 $7,630 $1,362 $26,085 $246,257 10.6%

Jobs 19,280 8,700 29,460 14,200 12,270 2,610 76,310 14,100 176,930 1,653,035 10.7%

Wages (millions) $1,210 $672 $902 $958 $839 $40 $593 $653 $5,867 $76,514 7.7%

Though real estate is one of the largest sectors in the financial services cluster, it has the lowest effective multiplier, attributed mostly to a low output multiplier. A $25 million investment in this sector generates a total economic impact of $24 million and 230 jobs. Accounting, tax preparation, bookkeeping and payroll services has a higher effective multiplier yielding a total impact of almost $42 million with a $25 million direct investment. Table 61: Performance Metrics for Financial Services, St. Louis Region 2009
Output Multiplier 1.8694 Effective Multiplier 1.3086 Impacts from $25 million investment Total Impact Wages (000) Jobs (000) $32,715 190 $9,672

Sector 354

355

356

357 358

359 360 368

Description Monetary authorities and depository credit intermediation activities Non-depository credit intermediation and related activities Securities, commodity contracts, investments, and related activities Insurance carriers Insurance agencies, brokerages, and related activities Funds, trusts, and other financial vehicles Real estate establishments Accounting, tax preparation, bookkeeping, and payroll services

RPC 0.7000

1.8615

0.7000

1.3030

$32,576

160

$8,494

1.9901

0.7000

1.3931

$34,827

400

$14,710

1.6479 1.8566

0.6824 0.6824

1.1246 1.2669

$28,114 $31,674

140 230

$8,242 $12,993

2.1773 1.3967 1.8596

0.4867 0.7000 0.9000

1.0596 0.9777 1.6736

$26,491 $24,443 $41,840

190 230 390

$6,921 $3,903 $19,334

Source: IMPLAN

Summary The following table presents those sectors in targeted clusters that generate the largest total impact with a $25 million investment or the largest number of jobs amongst all the sectors. Truck transportation has the largest total impact with $52 million followed by rail transportation with

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approximately $50 million in total impact. For each of these sectors, a $25 million investment would generate between 230 and 370 jobs. Total jobs and wages include the indirect and induced impacts as well, so jobs are generated throughout the economy, not just the sector. Table 62: Highest Return on $25 Million Investment Among Targeted Clusters
Sector Description Financial Services 356 Securities, commodity contracts, investments, and related activities 368 Accounting, tax preparation, bookkeeping, and payroll services Information Technology 371 Custom computer programming services 372 Computer systems design services Plant and Medical Sciences 305 Surgical and medical instrument, laboratory and medical instrument manufacturing 309 Dental laboratories manufacturing 376 Scientific research and development services Transportation and Distribution 319 Wholesale trade businesses 333 Transport by rail 334 Transport by water 335 Transport by truck 336 Transit and ground passenger transportation 338 Scenic and sightseeing transportation and support activities for transportation 339 Couriers and messengers 340 Warehousing and storage
Source: IMPLAN

Total Impact (000) $34,827

Jobs 400

Wages (000) $14,710

Output per Job $88,200

Average Wage $37,200

$41,840

390

$19,334

$107,500

$49,700

$39,814 $46,570

330 460

$19,442 $30,488

$121,300 $100,300

$59,200 $65,700

$42,261

210

$12,643

$204,200

$61,100

$49,496 $40,710

500 270

$23,341 $19,511

$98,500 $153,000

$46,500 $73,300

$44,787 $49,684 $43,705 $51,856 $37,609 $34,847

270 230 200 370 550 330

$16,367 $14,501 $10,970 $17,550 $15,740 $17,264

$164,700 $219,100 $213,700 $141,200 $68,600 $106,400

$60,200 $64,000 $53,600 $47,800 $28,700 $52,700

$31,379 $40,177

300 380

$10,436 $17,595

$103,200 $104,800

$34,300 $45,900

Recognizing that output and jobs are not the only measures of return on investment, we have also provided the average output per job and average wages. Output per job is highest in sectors where there is a lot of value added to the good or service produced. Among the top targeted sectors, rail transportation had the highest output per job generated from a $25 million investment at $219,100. Average wages ranged from a low of $28,700 in transit and ground passenger transportation to a high of $73,300 for jobs resulting from a $25 million investment in scientific research and development services.

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Key findings include: The largest output multipliers were for agricultural sectors which are very small in the St. Louis Region as a share of total output. Other sectors with large output multipliers are in manufacturing, finance and professional services. Sectors with the largest share of dollars being re-spent within the Region are labor intensive such as construction, utilities, some manufacturing sectors and social services. Truck transportation yielded the highest total impact with a $25 million investment, nearly $52 million. For every dollar invested in this sector, $1.07 is generated within the St. Louis Region to support production of this service. Among the sectors targeted for economic development by the St. Louis Regional Chamber and Growth Association, transportation (truck and rail) had the highest return. A $25 million investment in truck transportation would generate 370 jobs throughout the Region economy paying an average wage of $47,800. Impacts resulting from a $25 million investment in advanced manufacturing sectors resulted in surprisingly low impacts. While the output multipliers range from 1.6 to 1.9, the share of goods and services purchased locally by these firms (as measured by the regional purchase coefficient) are very low. To increase the return on investment and grow these impacts, investment needs to be made in the supplier networks of these firms so more of their dollars are spent within the Region.

Transportation Industry Linkage Analysis

AECOM examined the transportation industry in detail to assess the historical growth pattern, identify key customers and suppliers and highlight areas for potential future investment to facilitate further growth. This analysis will show the economic linkage between transportation sectors and the larger economy as well as highlight potential areas for investment in the industry. Although the transportation sector makes up a relatively small share of the St. Louis Region economy, it performs a vital role in the movement of goods in, out and through the metropolitan area. The City of St. Louis Port Authority, located on the Mississippi River above the Ohio River is the third largest inland port in the Midwest according to the RCGA. According to the Missouri Port Authority, the St. Louis facility operates more than 100 docking stations with 16 public terminals, containing 19.3 miles of riverbank. Other advantageous characteristics include the proximity to major interstates, the ease of access to the Illinois and Missouri Rivers, and unimpeded marine expressway between St. Louis and New Orleans, a route containing zero locks or dams. Primarily handling grain, coal, petroleum, and chemical products, the St. Louis port facility shipped an average of 31 million tons of cargo annually between 1998 and 2008. The chart below compares cargo handled by port facilities, both inland water ports (Huntington-Tristate, Pittsburgh, St. Louis, and Cincinnati) and seaports (South Louisiana). The chart reveals that the volume of cargo at the Huntington-Tristate port, located on the Ohio River, is growing at the quickest rate, at annual rate of 10.9 percent, handling an average of nearly 57 million tons of cargo annually. The port of St. Louis, however, is experiencing a decline in the volume of cargo that passes through its docks. For example, in 1998 the total volume of cargo handled by the

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St. Louis port was 31.8 million tons, whereas in 2008, the St. Louis port only handled 29.5 million tons. Overall, the St. Louis water port was still within the top 30 of all US ports in terms of tons of cargo handled on an annual basis, however, this rank has dropped from 21, in 1998, to 27 in 2008. Figure 81: Water Ports - Total Cargo Tonnage, 1998-2008
(Millions) 250 200 150 100 50 0 South Louisiana, Huntington Pittsburgh, PA St.Louis, MO and Cincinnati, OH LA (Rank #1) Tristate (Rank #8) (Rank #18) IL (Rank #27) (Rank #44) Source: USACOE 1998 2008 197

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69 53 25 42 32 30 12 13

Air Travel Analysis

The major airport in St. Louis is the Lambert International Airport. The following analysis will look at the benchmark regions, comparing the performance at each regions major airport to St. Louiss Lambert International Airport; overall, rating each airports strength in terms of destinations and passenger flow using data provided by the Federal Aviation Administration (FAA). The benchmark airports are Memphis International (MEM), Indianapolis International (IND), Columbus International (CMH), Cincinnati/Northern Kentucky International (CVG) and Kansas City International (MCI). Figure 82: Annual Passenger Enplanements, 1990-2030
Thousands

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010* 2012* 2014* 2016* 2018* 2020* 2022* 2024* 2026* 2028* 2030*

St. Louis Columbus

Source: FAA

Kansas City Cincinatti

Indianapolis Memphis

A high-level examination of historical annual passenger enplanement data for the Lambert airport compared to the benchmark airports follows. Lambert International Airport is projected to have the highest annual passenger enplanements among selected airports. Historically, Lambert International had significantly higher passenger volumes since it was the hub for TWA

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operations which ended with TWAs bankruptcy and merger with American Airlines. Following the 2001 merger, there is a visible drop in passenger enplanements as those operations were shifted to Americans OHare hub in Chicago.

Airport Key Destinations

The following section delves further into how the top 10 destinations for St. Louis Lambert Airport have changed since 2000. Figure 83: Lambert International Airport - Top 10 Destinations, 2000-2010
Thousands

700 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 Chi O'Hare Denver Phoenix 2005 2006 2007 2008 2009 2010 Atlanta Dallas FW Chi Midway Mississippi Dallas Detroit

Source: Transtats.bts.gov

There are a few key takeaways to be learned which will be illustrated in the following chart and discussion. The major change that occurred was the 2005 addition of Dallas to the destination airports, as this route now provides slightly over 200,000 annual passenger enplanements, likely on Southwest. The other change which occurred is the continuous decline in enplanements to OHare which began in 2000, decreasing at 600,000 annually, and in 2010 declining by 460,000. In 2006, Atlanta also saw significant gains in enplanements which have continued to increase through the recession.

Linkage Analysis
The primary tool for this analysis is the IMPLAN economic impact model. Widely used to gauge the economic impact of new local demand, such as a new factory or government spending, the IMPLAN model contains extensive data regarding how well firms are linked to others in a local economy. IMPLANs system of social accounts shows how dollars flow among various institutions: firms, households, government agencies as well as exports and imports. The metrics investigated during this portion of the analysis include the following:

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Total output Total commodity supply and demand Regional purchase and sales coefficients Domestic and foreign exports Indirect and induced economic multipliers (economic growth measures related to industries buying from other industries, as well as induced household spending derived from household income generated from a development) Commodity demand

AECOM examined the economic linkages between select transportation sectors in the St. Louis Region and the broader economy to understand the interdependence between industries. Using IMPLAN economic impact model data from years 2001 and 2009, AECOM analyzed these linkages within the local economy for air, rail, water and truck transportation as well as warehousing and storage and courier services. This definition of the sector is slightly different from the one used by the St. Louis Regional Chamber and Growth Association (RCGA). The metrics summarized in this section can be updated on an ongoing basis to provide current performance evaluation, system monitoring and benchmarking. Key findings include: Overall the transportation industry is growing. However, from 2001 to 2009 there was a dramatic decline in the air transportation sector as result of American Airlines purchasing TWA. However, there was strong growth in other sectors within this industry. The transportation sector is well integrated in the Regional economy. For most of the individual sectors, supply exceeds demand. Therefore local companies are importing demand from outside of the Region. However, there is excess demand in the St. Louis Region for both air transportation and warehousing as measured by commodity supply and demand. Therefore local consumers must go outside of the Region to meet their needs. Other indicators of integration are the regional purchase and sales coefficients which are close to 1 for most transportation sectors indicating that local buyers and sellers of the good are meeting in the local market. Regional sales coefficients, which indicate how much suppliers are selling locally could be improved for air and water transportation sectors. There is a disconnect in air transportation. The 2009 RPC is 0.46 indicating that local buyers spent 46 percent of their dollars locally. The RSC in 2009 is 0.56 meaning that local suppliers of air transportation made 56 percent of their sales to local consumers. Exports make up about one-quarter of transportation sector output, but that varies from a low of 1.9 percent for warehousing in 2009 to a high of 49.3 percent for water transportation. Exports grew most significantly for the water transportation sector, up from 20 percent of output in 2001. AECOM also examined the top goods and services needed (i.e., inputs) for each of the transportation sectors and what share were purchased within the Region. Opportunities for economic development exist when top inputs, such as railroad rolling stock for the rail transportation sector, are purchased outside of the Region.

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Transportation Sector
AECOM has identified several sectors within the transportation industry to track in this analysis. Because our primary data source is IMPLANs social accounting matrix, we are restricted to using industries tracked in this particular model which roughly align with three-digit NAICS codes. It is also important to note that data are collected by firms, and each firm belongs to one industry. Therefore, although a firm may provide many different services, it is classified in only one industry category. We examined the following sectors: Air Transportation (NAICS 481) This industry is comprised of air transportation for passengers and cargo on both scheduled and non-scheduled routes. Scheduled air transportation covers the largest part of the industry, including air cargo operations. Non-scheduled service can include both cargo and passengers and comprises general aviation for special, corporate, personal or other unscheduled aviation. This industry does not include courier services; see below. Rail Transportation (NAICS 482) This industry includes both short line and line haul railroads. Line haul railroads operate networks over wide geographic areas with multiple facilities throughout the US. Short line railroads are often confined to a small geographic area. This industry also includes passenger rail service. Water Transportation (NAICS 483) This industry includes firms that provide deep sea, Great Lakes, intra-coastal and inland water transportation, including freight. Truck Transportation (NAICS 484) The truck transportation industry includes firms that provide over the road freight transportation, usually in a trailer or standard shipping container. This includes local pickup and delivery, sorting, line haul and terminal operations. It also includes specialized freight trucking, which would be freight that has specialized requirements whether from a large size to refrigeration requirements, tankers or other type of special equipment. Couriers and Messengers (NAICS 492) These firms provide delivery of parcels, whether in one city or among different cities. A courier service primarily handles small parcels that can be picked up and delivered by hand large shipments of commodities, for example, would be handled by truck, rail, or by a specialized shipper. Firms in this industry can range from a messenger on bicycle in one city to a large international shipping network like UPS or FedEx. It does not include the postal service. Warehousing and Storage (NAICS 493) Firms in this industry primarily provide warehousing and storage to other firms; they do not sell goods to consumers or other businesses. Specialized warehousing is also included (such as refrigeration). These firms can sometimes provide a range of warehouse-related services, such as sorting, packing, order fulfillment and other logistical services.

Transportation Industry Output

Total output is the value of all goods and services provided by a particular industry or total revenue for the firm. The sum of all the industries in an economy is akin to GDP.

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Table 63: St. Louis Region Transportation Sector Output In 2001, the St. Louis Region had nearly $184 billion in total output which grew at a compound annual growth rate (CAGR) of 3.7 percent through 2009, reaching $246 billion. Output in the transportation sectors grew much slower at 1.2 percent annual over this same time period. The most significant contributing factor was the decline in air transportation. Trans World Total all industries $183,973 $246,257 3.7% Airlines (TWA) had its dominant hub at Note: Totals may not add due to rounding. Lambert Airport. However, when TWA was Source: IMPLAN purchased by American Airlines in 2001, which uses Chicagos OHare Airport as a hub, flights dropped off dramatically at Lambert and transatlantic service was discontinued. The transportation sector with the largest growth from 2001 to 2009 was water transportation which grew from $301 million to $482 million, a CAGR of 6.1 percent.
Sector Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage Total select industries CAGR -6.0% 3.3% 6.1% 3.3% 1.4% 4.7% 1.2% Total Output (millions) 2001 2009 $1,639 $995 $595 $772 $301 $482 $2,160 $2,802 $676 $758 $345 $497 $5,716 $6,306

As shown in the following chart, the transportation sector made up 2.3 percent of total industry output in the St. Louis Region during 2009, a drop from 2.7 percent in 2001. While declines occurred in both Missouri and the US for comparison, they were not as large as those experienced in St. Louis. However, the transportation sector in St. Louis still makes up a larger share of the overall economy than the national average of 2.2 percent. Compared to the St. Louis Region and the nation, the transportation sector in the state of Missouri constitutes a larger share of total output as a share of the total economy, experiencing a less profound decline than St. Louis or the US from 2001 to 2009. Strong growth in both rail and water transportation, with compound annual growth rates exceeding 8 percent annually in both sectors, can be attributed to the resilience of the transportation sector in the state of Missouri. Figure 84: Transportation Sector as a Share of Total Industry Output, 2001-2009
4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% St. Louis MSA
Source: IMPLAN

Missouri 2001 2009

U.S.

As noted previously, the air transportation sector has shrunk dramatically in the St. Louis Region. The following chart shows that in 2001, air transportation made up close to 0.9 percent of total output, $1.6 billion. This compares to 0.6 percent in Missouri and nearly 0.7 percent in the US. While air

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transportation decreased as a share of total output in Missouri and the US, it did not fall as much as in St. Louis. By 2009, air transportation made up only 0.4 percent of the Region output, $995 million. Figure 85: Air Transportation Sector as a Share of Total Industry Output, 2001-2009
1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% St. Louis MSA
Source: IMPLAN

Missouri 2001 2009

U.S.

Total Commodity Supply and Demand

Commodity supply and demand describes how much of a given commodity is made in the local area and compares it to how much is demanded by other local firms and households. It should be noted here that although commodity supply is closely related to total output, commodity supply measures the total amount produced by all sectors. Firms often produce several commodities and are classified according to their primary products. Here we focus on the commodities produced regardless of which sector produces them. For example, as shown above, the air transportation sector in the St. Louis Region produced $995 million in output during 2009. However, the total commodity supply is slightly more than $1 billion. The difference is attributed to $33.2 million in output produced by scenic and sightseeing transportation, i.e., helicopter and small plane tours. The majority of the commodities profiled are produced by the same sectors and the difference in all cases is made up by sightseeing. Table 64: Total Commodity Supplied and Demanded (millions)
Commodity Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage Total select industries Total all industries
Source: IMPLAN

Total Supplied 2001 2009 $1,694 $1,028 $607 $787 $304 $490 $2,186 $2,878 $677 $758 $346 $497 $5,814 $6,439 $187,292 $253,363

Total Demanded 2001 2009 $1,242 $1,237 $358 $660 $271 $249 $1,967 $2,444 $611 $753 $370 $574 $4,820 $5,918 $193,874 $254,619

Supply/Demand Ratio 2001 2009 1.00 0.83 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.93 0.87 1.00 1.00 0.97 1.00

The ratio of supply to demand shows whether a region has more or less of a given commodity than its firms and households are demanding. The ratio ranges from 0 to 1 with 1 indicating that the market is satisfied. A ratio lower than 1 indicates that there is more demand than local businesses can supply. A low ratio in this table means that local firms must look elsewhere to buy that commodity. The table

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above shows that by 2009, there was more demand for air transportation than was supplied in the Region, a dramatic shift from 2001 when the opposite was true. However, for most of these sectors, local demand could be met by local suppliers indicating that the transportation sector is well integrated within the local economy. In fact, since supply exceeds demand for most transportation commodities, the surplus goods and services are exported outside of the Region.

Regional Purchase and Sales Coefficients

The commodity supply/demand ratio does not say anything about whether local buyers and sellers actually meet in the marketplace. It only shows how much is supplied and how much is demanded. The regional purchase coefficient (RPC) estimates how much of local purchases are indeed sourced by local sellers. Conversely, the regional sales coefficient (RSC) estimates how much of a local sellers revenues come from local buyers. Even if the market is in balance, local buyers may choose to buy from outside of the region; local sellers may find customers elsewhere, as well. The RPC and RSC describe the extent to which local buyers and sellers make exchanges with other local firms. The RPC and RSC are scaled from 0 to 1. High values for the RPC and RSC indicate that industries are well-integrated with each other. The table below shows that the RPCs have been relatively stable within the St. Louis Regions transportation industry with growth occurring in water transportation. This means that a growing share of local demand for water transportation is being met by local producers, up from 90 percent to 100 percent. The regional sales coefficient (RSC) shows how much of a commodity being supplied in the local market is sold to local buyers. The RSC for water transportation fell from 0.8 to 0.51 over the same time period. Recall from above that the total amount of water transportation supplied grew while demand fell. If all of the local demand is being satisfied (i.e., the RPC = 1), the remainder of the supply is being exported outside of the Region. Therefore the amount sold locally will fall. Table 65: Regional Purchase and Sales Coefficients The RPC for air transportation at 0.46 indicates local buyers who Commodity required these services spent 46 Air transportation Rail transportation percent of their dollars locally in Water transportation 2001 and that 54 percent of demand Truck transportation in the local economy is being Couriers and messengers satisfied through imports. Recall Warehousing and storage that the commodity supply/demand Average ratio was 0.83 for air transportation Source: IMPLAN in 2009 meaning that 83 percent of demand could have been met by local suppliers. However, the 2009 RSC is 0.56 meaning that local suppliers of air transportation make 56 percent of their sales to local consumers. For industries that have a commodity supply/demand ratio at or near 1, the RPC is typically larger than the RSC as shown here. The ratio indicates that there is more supply than demand meaning that suppliers will have to go outside of the Region in order to sell their commodities. When the RSC is greater than the RPC, local firms and households demand more of these commodities than can be produced in the region. Sellers, who face a very large pool of buyers, can satisfy many of their sales
Regional Purchase Coefficient 2001 2009 0.46 0.46 1.00 1.00 0.90 1.00 1.00 1.00 0.70 0.70 0.92 0.85 0.81 0.84 Regional Sales Coefficient 2001 2009 0.34 0.56 0.59 0.84 0.80 0.51 0.90 0.85 0.63 0.70 0.99 0.98 0.68 0.79

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locally. By contrast, buyers, who all compete for relatively small pool of suppliers, must look elsewhere.

Domestic and Foreign Exports

Exports, both domestic and foreign, quantify the value of goods and services that are exported to other regions (domestic) or outside the US (foreign) by local sellers. Table 66: Total Exports In the St. Louis Region, exports make up approximately one-third of total output. This is slightly lower for the transportation sectors though it varies. Both water and truck transportation saw an increase from 2001 to 2009 whereas the share of Total all industries $61,547 $80,916 33.5% 32.9% exports for air transportation Source: IMPLAN fell. As a share of total output, exports in rail transportation made up 16.1 percent of total output in 2009, down from 41 percent in 2001.
Sector Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage Total select industries Total Exports 2001 2009 $1,084 $442 $244 $124 $60 $237 $217 $422 $248 $231 $5 $9 $1,857 $1,466 Share of Total Output 2001 2009 66.1% 44.4% 41.0% 16.1% 20.0% 49.3% 10.1% 15.1% 36.7% 30.4% 1.4% 1.9% 32.5% 23.2%

Although there was a declining share of total exports from 2001 to 2009, foreign exports increased over this time period, most significantly for water transportation and couriers. In 2001, domestic exports made up 68.8 percent of all exports in the transportation sector. By 2009 this had decreased to 43.5 percent. Although domestic imports decreased overall, there were two sectors that saw growth, water transportation and truck transportation. Table 67: Domestic and Foreign Exports ($ millions)
Sector Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage Total select industries Total all industries
NA = not applicable Source: IMPLAN

Domestic Exports 2001 2009 CAGR $807 $181 -17.0% $164 $34 -17.8% $0 $65 104.2% $58 $218 18.0% $248 $140 -6.9% $0 $0 NA $1,277 $638 -8.3% $50,689 $65,483 3.3%

Foreign Exports 2001 2009 CAGR $277 $261 -0.7% $79 $90 1.6% $60 $173 14.1% $160 $204 3.1% $0 $91 141.7% $5 $9 9.0% $580 $828 4.5% $10,858 $15,433 4.5%

Total imports in the transportation sector grew slightly over this period, though there were significant declines in air transportation.

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Table 68: Total Imports ($ millions)

Sector Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage Total select industries Total all industries
Source: IMPLAN

2001 $337 $108 $101 $204 $69 $24 $842 $39,242

2009 $136 $123 $168 $337 $51 $46 $861 $49,060

CAGR -10.7% 1.7% 6.7% 6.5% -3.8% 8.6% 0.3% 2.8%

Multipliers
The economic impact multiplier is the most succinct summary of how industries interact with each other. In general, a higher multiplier means that new business to firms in a given industry has a higher effect on the local economy than it would have previously. However, it should be noted that a smaller multiplier over time may simply represent a variety of factors, observable and not observable, and can be caused by things entirely out of control of the policymakers or even the business leaders in the area. For example, suppose an industry expands its production in the market area. If many of its inputs come from outside the study area, it is possible that the indirect multiplier for this industry may decrease. However, it is still better to have the industry expand since it will likely draw workers from the local area. Below we present indirect and induced multipliers. The indirect multiplier indicates the extent to which firms buy from other firms in the local study area. A high indirect multiplier indicates that the industry has a high level of local suppliers; a low multiplier suggests the opposite. The induced multipliers indicate the extent to which the local economy benefits by the employees of these firms having higher incomes which they re-spend in the economy on goods and services. As a result of the job losses in the air transportation sector, the induced multiplier decreased as a result of the lost wages. For rail transportation, the indirect multiplier grew from 0.35 in 2001 to 0.57 in 2009. This means for every $1 invested locally in this industry, there was an additional $0.22 recirculated throughout the Region as the rail industry became more integrated. This implies that more of its inputs are being purchased locally. In water transportation, the indirect multiplier shrank from 0.66 to 0.43 over this same time frame which reflects, in part, the higher share of imports used by this sector. Table 69: Indirect and Induced Output Multipliers (for each $1 direct impact)
2001 Indirect Induced Multiplier Multiplier 0.53 0.44 0.35 0.40 0.66 0.31 0.56 0.43 0.44 0.47 0.21 0.57 2009 Indirect Induced Multiplier Multiplier 0.55 0.39 0.57 0.41 0.43 0.31 0.57 0.50 0.37 0.43 0.30 0.59

Description Air transportation Rail transportation Water transportation Truck transportation Couriers and messengers Warehousing and storage
Source: IMPLAN

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Commodity Inputs and Imports

Commodity inputs are the goods and services the industry buys in order to produce its product. Each of the transportation sectors uses between 100 to 150 inputs. The following tables show the top 10 inputs for each transportation sector during 2009 as well as the share purchased locally which shows the types of local firms that are most affected by the presence of the transportation sector. The metrics included in his table are the following: Gross absorption coefficient This is the percentage of each $1 in industry outlay that is dedicated to a given input. Recall that not all of an industrys dollar goes toward other firms; some portion goes toward employee compensation, dividends, taxes, etc. Therefore, the gross absorption coefficients usually add up to 0.25 or 0.75. Gross inputs Based on the size of the industry, this is the amount, in millions of dollars, that the entire industry spends on a given commodity. Whereas the gross absorption coefficient measures how much of each dollar goes to a certain commodity, the gross input says how many dollars that is. For example, if an industry spends $1 million in total outlay, and the gross absorption coefficient for a given commodity is 0.02, then the gross input is $20,000. In other words, the industry spends 2 percent of its dollars on this commodity which equates to $20,000 in total spending. Regional absorption coefficient Similar to the gross absorption coefficient, this describes the percentage of $1 spent on a given commodity in the local study area. It will be some portion of the gross absorption coefficient. In the example above, if an industrys gross absorption coefficient is 0.02 and it spends half of that in the local study area, then its regional absorption coefficient is 0.01. Regional inputs Regional inputs describe the dollar amount of spending on a given commodity in the local study area. It is derived by multiplying the regional absorption coefficient by the industrys total output. Again, in the example above, the regional input would be $10,000; that is, the industry in question spends $20,000 on a given commodity, $10,000 of which is spent in the local study area.

In the table below, air transportation requires $541 million in inputs, approximately 54.4 percent of total output. Of these, nearly three-quarters (74.8%) are purchased locally. The largest input is refined petroleum products, $179 million, of which 93.3 percent of $167 million is purchased within the St. Louis Region. This is also the largest regional input for air transportation. Combined, the top ten inputs represent 88.9 percent of inputs needed. Table 70: Commodity Inputs, Air Transportation (inputs in $ millions)
Input Refined petroleum products Other aircraft parts and auxiliary equipment Scenic and sightseeing transportation services and support activities for transportation Aircraft Used and secondhand goods Commercial and industrial machinery and equipment rental and leasing services Gross Absorption 0.180 0.065 0.059 0.053 0.036 0.028 Gross Inputs $179 $64 $59 $53 $36 $27 RPC 93.3% 59.5% 70.0% 97.2% 0.0% 80.0% Regional Absorption 0.168 0.038 0.042 0.052 0.000 0.022 Regional Inputs $167 $38 $41 $51 $0 $22

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Input Restaurant, bar, and drinking place services Real estate buying and selling, leasing, managing, and related services Insurance Telecommunications Top Ten Inputs Total Commodity Demand
Source: IMPLAN

Gross Absorption 0.023 0.016 0.013 0.011 0.484 0.544

Gross Inputs $23 $16 $13 $11 $481 $541

RPC 86.7% 70.0% 68.2% 56.8% 76.1% 74.8%

Regional Absorption 0.020 0.011 0.009 0.006 0.368 0.407

Regional Inputs $20 $11 $9 $6 $366 $405

Table 71: Top Commodity Inputs, Rail Transportation (inputs in $ millions)

Input Refined petroleum products Non-depository credit intermediation and related services Commercial and industrial machinery and equipment rental and leasing services Maintained and repaired nonresidential structures Railroad rolling stock Securities, commodity contracts, investments, and related services Wholesale trade distribution services Dimension lumber and preserved wood products Accounting, tax preparation, bookkeeping, and payroll services Legal services Top Ten Inputs Total Commodity Demand
Source: IMPLAN

Gross Absorption 0.094 0.076 0.067 0.040 0.028 0.023 0.021 0.017 0.015 0.015 0.396 0.561

Gross Inputs $72 $58 $52 $31 $22 $18 $16 $13 $12 $12 $306 $433

RPC 93.3% 70.0% 80.0% 100.0 % 0.5% 70.0% 99.6% 17.7% 90.0% 90.0% 76.2% 71.5%

Regional Absorption 0.087 0.053 0.054 0.040 0.000 0.016 0.021 0.003 0.014 0.014 0.302 0.401

Regional Inputs $67 $41 $42 $31 $0 $12 $16 $2 $11 $11 $233 $310

Table 72: Commodity Inputs, Water Transportation (inputs in $ millions)

Input Scenic and sightseeing transportation services and support activities for transportation Used and secondhand goods Plates and fabricated structural products Real estate buying and selling, leasing, managing, and related services Couriers and messengers services Ships Insurance US Postal delivery services Waste management and remediation services Coated, engraved, heat treated products Top Ten Inputs Total Commodity Demand
Source: IMPLAN

Gross Absorption 0.116 0.088 0.082 0.065 0.049 0.039 0.038 0.024 0.022 0.015 0.540 0.678

Gross Inputs $56 $43 $40 $32 $24 $19 $19 $12 $11 $7 $260 $327

RPC 70.0% 0.0% 1.6% 70.0% 70.0% 0.2% 68.2% 75.0% 80.0% 24.8% 42.3% 48.5%

Regional Absorption 0.081 0.000 0.001 0.046 0.034 0.000 0.026 0.018 0.018 0.004 0.229 0.329

Regional Inputs $39 $0 $1 $22 $17 $0 $13 $9 $9 $2 $110 $158

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Table 73: Commodity Inputs, Truck Transportation (inputs in $ millions)

Input Refined petroleum products Truck transportation services Couriers and messengers services Insurance Employment services US Postal delivery services Motor vehicle parts Scenic and sightseeing transportation services and support activities for transportation Wholesale trade distribution services Real estate buying and selling, leasing, managing, and related services Top Ten Inputs Gross Absorption 0.122 0.053 0.051 0.038 0.026 0.025 0.022 0.019 0.017 0.014 0.390 Gross Inputs $343 $149 $144 $108 $74 $70 $62 $54 $49 $40 $1,09 2 $1,48 5 RPC 93.3% 100.0 % 70.0% 68.2% 80.0% 75.0% 21.4% 70.0% 99.6% 70.0% 80.8% Regional Absorption 0.114 0.053 0.036 0.026 0.021 0.019 0.005 0.013 0.017 0.010 0.315 Regional Inputs $320 $149 $101 $73 $59 $52 $13 $37 $49 $28 $883

Total Commodity Demand

Source: IMPLAN

0.530

77.3%

0.410

$1,148

Table 74: Commodity Inputs, Courier Services (inputs in $ millions)

Input Refined petroleum products Couriers and messengers services Scenic and sightseeing transportation services and support activities for transportation Aircraft Real estate buying and selling, leasing, managing, and related services Management of companies and enterprises Employment services Wholesale trade distribution services US Postal delivery services General and consumer goods rental services except video tapes and discs Top Ten Inputs Total Commodity Demand
Source: IMPLAN

Gross Absorption 0.113 0.022 0.018 0.015 0.014 0.014 0.013 0.012 0.011 0.009 0.240 0.333

Gross Inputs $86 $17 $13 $11 $11 $10 $10 $9 $8 $7 $182 $252

RPC 93.3% 70.0% 70.0% 97.2% 70.0% 80.0% 80.0% 99.6% 75.0% 65.7% 85.3% 80.0%

Regional Absorption 0.106 0.015 0.012 0.014 0.010 0.011 0.010 0.012 0.008 0.006 0.205 0.266

Regional Inputs $80 $12 $9 $11 $8 $8 $8 $9 $6 $4 $155 $202

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Table 75: Commodity Inputs, Warehousing

Input Real estate buying and selling, leasing, managing, and related services Warehousing and storage services Electricity, and distribution services Couriers and messengers services Employment services Refined petroleum products Wholesale trade distribution services Management of companies and enterprises Motor vehicle parts Insurance Top Ten Inputs Total Commodity Demand
Source: IMPLAN

Gross Absorption 0.058 0.054 0.021 0.014 0.009 0.009 0.009 0.008 0.008 0.008 0.198 0.321

Gross Inputs $29 $27 $11 $7 $5 $4 $4 $4 $4 $4 $99 $160

RPC 70.0% 85.0% 61.7% 70.0% 80.0% 93.3% 99.6% 80.0% 21.4% 68.2% 74.2% 71.4%

Regional Absorption 0.040 0.046 0.013 0.010 0.007 0.008 0.009 0.007 0.002 0.006 0.147 0.229

Regional Inputs $20 $23 $7 $5 $4 $4 $4 $3 $1 $3 $73 $114

The difference between gross inputs and regional inputs is the amount imported from outside of the local economy. For example, in the table above, the warehousing sector needs $160 million of goods and services to produce its product. Of that, $114 million comes from within the St. Louis Region. The remaining share is imported from outside of the Region. There are several instances where all of the commodity is imported which could represent economic development opportunities within the Region such as railroad rolling stock. The rail transportation sector needed $22 million of this input during 2009 and all of it was imported from outside the Region.

Industry Expenditures
The tables below show the various industries that buy the services of selected transportation industries. Whereas above, the tables showed where transportation industries spent their dollars, the tables below show where they get their dollars. The industries listed below are the customers of the logistics industry in the St. Louis Region. As above, there are usually more than one hundred industries that buy the services of any given transportation industry. For convenience, we list the top ten sorted by Gross Input, which is the amount spent by the industry listed. In many cases, the industry listed above roughly corresponds to the good or service being transported. For example, breweries are a key customer in several industries. This likely indicates that the product being shipped or stored is beer. A key exception is the top customer of rail transportation, electric power generation. This energy-intensive industry, in turn, buys (and likely requires shipment of) significant amounts of petroleum, coal natural gas, and similar energy products. The following table shows that monetary authorities are the largest local consumer of air transportation. During 2009, this industry spent a total of $26 million on air transportation, $12 million from local providers. For rail, water and truck transportation, all demand for local purchasers is met within the Region.

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Table 76: Industry Expenditure on Air Transportation (inputs in $ millions)

Description Monetary authorities and depository credit intermediation activities Wholesale trade businesses Non-depository credit intermediation and related activities Data processing, hosting, ISP, web search portals and related services Food services and drinking places US Postal Service Offices of physicians, dentists, and other health practitioners Telecommunications Architectural, engineering, and related services Private junior colleges, colleges, universities, and professional schools Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.005 0.002 0.006 0.006 0.002 0.012 0.002 0.002 0.004 0.003 0.043 0.723

Gross Inputs $26 $24 $20 $14 $12 $11 $11 $11 $9 $9 $147 $414

Regional Inputs $12 $11 $9 $7 $6 $5 $5 $5 $4 $4 $68 $191

Table 77: Industry Expenditure on Rail Transportation (inputs in $ millions)

Description Electric power generation, transmission, and distribution Iron and steel mills and ferroalloy manufacturing Flour milling and malt manufacturing Breweries Transport by truck Soybean and other oilseed processing Other basic organic chemical manufacturing Soap and cleaning compound manufacturing Dog and cat food manufacturing Petroleum refineries Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.039 0.030 0.067 0.009 0.011 0.037 0.008 0.007 0.013 0.002 0.224 1.372

Gross Inputs $67 $46 $40 $32 $31 $24 $17 $16 $15 $15 $301 $551

Regional Inputs $67 $46 $40 $32 $31 $24 $17 $16 $15 $15 $301 $551

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Table 78: Industry Expenditures on Water Transportation (inputs in $ millions)

Description Scientific research and development services Flour milling and malt manufacturing Petroleum refineries Soybean and other oilseed processing Iron and steel mills and ferroalloy manufacturing US Postal Service Copper rolling, drawing, extruding and alloying Other basic organic chemical manufacturing Construction of other new nonresidential structures Electric power generation, transmission, and distribution Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.010 0.035 0.001 0.005 0.001 0.002 0.001 0.001 0.000 0.001 0.056 0.120

Gross Inputs $24 $21 $4 $3 $2 $2 $1 $1 $1 $1 $61 $79

Regional Inputs $24 $21 $4 $3 $2 $2 $1 $1 $1 $1 $61 $79

Table 79: Industry Expenditure on Truck Transportation (inputs in $ millions)

Description Transport by truck Breweries Light truck and utility vehicle manufacturing Wholesale trade businesses Construction of other new nonresidential structures Petroleum refineries Ready-mix concrete manufacturing Iron and steel mills and ferroalloy manufacturing Food services and drinking places Construction of new residential permanent site single- and multi-family structures Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.053 0.020 0.010 0.004 0.012 0.007 0.123 0.030 0.007 0.021 0.286 4.716

Gross Inputs $149 $70 $56 $54 $50 $48 $45 $45 $43 $37 $596 $1,632

Regional Inputs $149 $70 $56 $54 $50 $48 $45 $45 $43 $37 $596 $1,632

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Table 80: Industry Expenditure on Courier Services (inputs in $ millions)

Description Wholesale trade businesses Transport by truck Scenic and sightseeing transportation and support activities for transportation Transport by water Business support services Couriers and messengers Private hospitals Accounting, tax preparation, bookkeeping, and payroll services Civic, social, professional, and similar organizations Monetary authorities and depository credit intermediation activities Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.017 0.051 0.046 0.049 0.015 0.022 0.001 0.007 0.006 0.002 0.216 0.624

Gross Inputs $228 $144 $26 $24 $19 $17 $10 $9 $9 $9 $494 $723

Regional Inputs $160 $101 $18 $17 $13 $12 $7 $6 $6 $6 $346 $506

Table 81: Industry Expenditures on Warehousing (inputs in $ millions)

Description Wholesale trade businesses Transport by truck Warehousing and storage Private hospitals Retail Stores - General merchandise Retail Stores - Food and beverage Retail Stores - Motor vehicle and parts Pharmaceutical preparation manufacturing Food services and drinking places Retail Nonstores - Direct and electronic sales Top ten Total industry demand
Source: IMPLAN

Gross Absorption 0.013 0.012 0.054 0.002 0.007 0.007 0.007 0.003 0.001 0.007 0.113 1.052

Gross Inputs $173 $33 $27 $14 $10 $10 $9 $7 $7 $7 $297 $533

Regional Inputs $147 $28 $23 $12 $9 $9 $7 $6 $6 $6 $252 $452

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Appendix

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General Limiting Conditions

Every reasonable effort has been made to ensure that the data contained in this report are accurate as of the date of this study; however, factors exist that are outside the control of AECOM and that may affect the estimates and/or projections noted herein. This study is based on estimates, assumptions and other information developed by AECOM from its independent research effort, general knowledge of the industry, and information provided by and consultations with the client and the client's representatives. No responsibility is assumed for inaccuracies in reporting by the client, the client's agent and representatives, or any other data source used in preparing or presenting this study. This report is based on information that was current as of September 2011 and AECOM has not undertaken any update of its research effort since such date. Because future events and circumstances, many of which are not known as of the date of this study, may affect the estimates contained therein, no warranty or representation is made by AECOM that any of the projected values or results contained in this study will actually be achieved. Possession of this study does not carry with it the right of publication thereof or to use the name of "AECOM" or Economics Research Associates in any manner without first obtaining the prior written consent of AECOM. No abstracting, excerpting or summarization of this study may be made without first obtaining the prior written consent of AECOM. Further, AECOM has served solely in the capacity of consultant and has not rendered any expert opinions. This report is not to be used in conjunction with any public or private offering of securities, debt, equity, or other similar purpose where it may be relied upon to any degree by any person other than the client, nor is any third party entitled to rely upon this report, without first obtaining the prior written consent of AECOM. This study may not be used for purposes other than that for which it is prepared or for which prior written consent has first been obtained from AECOM. Any changes made to the study, or any use of the study not specifically prescribed under agreement between the parties or otherwise expressly approved by AECOM, shall be at the sole risk of the party making such changes or adopting such use. This study is qualified in its entirety by, and should be considered in light of, these limitations, conditions and considerations.

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