Eagle-Star Technology Corridor

If We Build It, Will They Come?

By Sharon Fisher, 1-01-09

A number of localities have tried to recreate the magic that resulted in locations such as Silicon Valley in California and Route 128 in Massachusetts. Now it’s Idaho’s turn.

More than 100 Idaho business executives and politicians want to turn some 79,000 acres of land in Idaho, about 20 miles northwest of Boise, into the Eagle-Star High-Tech Corridor, named after the two cities involved.

According to the Idaho Statesman, ESTech is headed by Lloyd Mahaffey, who also heads up Idaho’s Economic Advisory Council, which “provides private-sector guidance to the Idaho Department of Commerce, which has its own recruiting efforts. Some commerce department officials have been involved in getting ESTech off the ground, including Director Don Dietrich and Brian Dickens, administrator of the commercial innovation division” – formerly the Office of Science and Technology.

Part of what made Silicon Valley successful is that it became known as a “cluster”—companies in the same industry or otherwise linked through customer, supplier, or similar relationships, representing a critical mass of skill, information, relationship, and infrastructure in a given field—as described by Michael Porter in his seminal 1995 article “The Competitive Advantage to the Inner City” in Harvard Business Review. This builds a critical mass of such companies, not only giving them more resources but giving workers more choices in employment.

It’s the lack of this cluster factor, which the ESTech project is trying to correct, that has limited growth in Boise, because it has primarily a couple of major high-tech employers: Hewlett-Packard and Micron, which have each gone through layoffs this year.

Proponents note that “the region’s temperate climate and multitude of outdoor activities; the State of Idaho’s progressive business posture; its sound, high-tech educational infrastructure; and solid, regional venture capitalist opportunities,” calling it “an attractive place for the companies’ leaders, workers and families to work and play.” Richard Florida‘s book, The Rise of the Creative Class, also suggested that members of what he called “the creative class”—including high-tech workers—would migrate to smaller cities with good outdoor recreational opportunities.

The Brookings Institute is also looking at the Mountain West as the next area for high-tech innovation, but noting that the areas may require help in the following four areas: infrastructure, innovation, human capital, and quality places. And unfortunately for Idaho, it’s not listed as one of the five places Brookings sees as most ripe for high-tech development.

Moreover, it isn’t clear how much ESTech is going to help.

Representative Mike Moyle (R-Star) is, according to the Statesman, supportive of the project, but his focus appears to be on attracting new companies by allowing county officials to exempt an incoming company from property taxes for up to five years, and more generally cutting corporate and personal income tax rates. 

The thing is, numerous studies – both within and outside Idaho – have shown that, by and large, companies don’t make their decisions on where to locate and relocate based on taxes. Author Florida noted that people don’t go where the jobs are – jobs go where the people are, the skilled people that the jobs need. And those people are moving to places with metropolitan amenities, lots of outdoor recreational activities – which Idaho has in abundance – but also to places with a broad educational system for themselves and their children and an open social environment.

Companies that made decisions based on tax purposes weren’t invested in the community, and were just as likely to move on down the road if they got a better offer from another region. All the proof we need is right here in our back yard – Micron was given a big tax break a few years back, and is still laying off people and setting up facilities outside Idaho.

TechConnect, Idaho’s business catalyst program, did a survey in 2007 of companies about their biggest problems and needs, and the biggest barrier they had – after availability of health care – was finding a skilled workforce. “All of the tax structures (property, income, capital gains, and sales) were in the bottom half of the barrier ratings,” the report noted.

Chris Blanchard noted on TechBoise, a blog for the technology community, that “one of the most high-profile site selection cases of the last few years was the siting of the Boeing 7E7 plant in 2003. As is typical in the site selection process, Boeing listed twenty-six things that they would consider in selecting the site. Only once in that list did they mention the word taxes. All of the most important items to Boeing were publicly financed services and infrastructure.” (Emphasis his.) Focusing on taxes is “a prescription for failure,” he said.

In addition, while the region is interested in attracting the high-tech community, it is not clear to what degree the state is also interested. Governor C.L. “Butch” Otter this year shut down the Governor’s Science and Technology Advisory Council, and TechConnect itself has retained funding only at the last minute for the last several budgeting cycles. (“Knowledge of innovation companies among elected leaders” was the third-highest barrier that the TechConnect survey found) A number of the state’s part-time legislators are in the agricultural industry, and some long-time Idaho residents see high-tech as attracting more outsiders—perhaps even, eek, Californians.

The other question is, where is southwestern Idaho’s high-tech community in this project? The majority of the participants are Eagle business people, and in some ways, the group seems way too insular. “The Eagle chamber director appears to be championing a development project that her husband is heading up,” noted one commenter to the Statesman story. “The chair of a group that provides private sector guidance to the Idaho Department of Commerce and several state agency employees appear to be deeply involved in this project as well. Does this feel like a conflict of interest to anyone? So who owns the land within this corridor anyway?”

Similarly, how much does this group know about the needs of technology companies?  ESTech’s board of directors does include Dr. Norris Krueger, who has been involved in entrepreneurial technology, and Mahaffey was reportedly an Apple executive. But there are a number of names that seem conspicuous by their absence:
• Rick Ritter, the head of TechConnect
• Mark Solon, head of local venture capital firm Highway 12 Ventures
• Tac Anderson, Blanchard, George Seybold, or any of the other members of TechBoise
• Brian Cronin, Russ Fulcher, or any of the other legislators with some amount of technology background or experience, who could conceivably help Idaho’s state government more technology-friendly
• Paul Hiller, head of Boise Valley Economic Partnership, an arm of the Boise Metro Chamber intended to help bringing businesses to the Valley

For that matter, why isn’t this a BVEP venture in the first place? That organization has been working for several years, with a number of local cities (including Eagle), to set up “clusters” just like this – a medical cluster in Meridian and so on. It already has $5 million, while ESTech is attempting to raise $100,000 to fund itself. Doesn’t it make sense to do this through an existing group, leveraging the resources it already has, rather than setting up a parallel organization?

It’s great to be working to attract well-paying, clean, high-tech jobs to this area. It just isn’t clear that this is the right way to do it.

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