I can see clearly now, can you?

I spent this past weekend at Transparency Camp West, at the Google campus in Mountain View, CA.  I went expecting to be surrounded by my fellow policy wonks, but surprisingly they didn’t make up the bulk of attendees.  Most of the folks in attendance seemed to be developers looking to market their web applications.  There were some marked exceptions, primarily from outside of the US.  I had some fascinating conversations with Ilya Ponomarev, a member of Russia’s State Duma (parliament) and Chair of the Parliament’s High-Tech Development Subcommittee, Daniela Silva, a graduate student from San Paolo, Brazil, Pedro Valente, a Yahoo! employee working out of their Brazilian office and Jonahtan Adir, a senior policy advisor to Israel’s President, to name just a few.

The focus of the weekend was primarily on federal transparency.  My interest is primarily on local and state government.  I am also a serious data junkie, so my ears perked up whenever I overheard a conversation about data.   During one of my many data-centric conversations, one of the tech folks asked me what kind of data I would like to see used in his web application.  My immediate response was budget data.  The techie looked at me blankly and said that budgets only involved entering numbers, and really wasn’t very interesting.  He then asked me again what data would be most useful to me.  Ilya was also part of the conversation and his explanation on the importance of budget data was met with a similar dismissal.  That is when I knew I wasn’t in Kansas anymore.

Budgets are not spreadsheets or columns of numbers.  Budgets are policy documents.  Budgets are where the rubber meets the road; where priorities are put to the test.  Budget Hero is a great exercise in matching your priorities to federal expenditures. A politician may talk a good game, but validation comes only when we get to peek behind the curtain (apparently I am in a Wizard of Oz kind of mood today).

Think of your own personal budget.  There are times when your spending behavior is consonant with your values.  For example, buying locally sourced and organic foods, even if they are a bit more expensive than the produce grown in Chile or Mexico.  From time to time, we all find ourselves facing a disjuncture between our values and our spending behavior.  Usually it is small, like eating junk food when you didn’t have time to make lunch.

Other times the disjuncture has a significant budget impact.  For example, If you had decided to purchase a Suburban because you have a large family and need a lot of space to haul them and their stuff around, then your spending behavior is consonant with your needs. However, if you decide to buy a Prius because of its great fuel efficiency, and instead purchase a Suburban that gets 14 MPG, your spending behavior is not consonant with your values. Neither the Prius nor the Suburban are inherently good or bad.  They each serve their own purpose. The problem only arises when you say one thing and do another.

I wish I could say I only had that conversation with one person who was an anomaly.  Sadly, I cannot.  What I can say is that many of those calling for transparency are doing so without a clear sense of what or why. No one I spoke to could truly articulate what they meant by transparency.  The most common answer can be summed up in the Sunlight Foundation’s mission statement:

The Sunlight Foundation is committed to helping citizens, bloggers and journalists be their own best watchdogs, by improving access to existing information and digitizing new information, and by creating new tools and Web sites to enable all of us to collaborate in fostering greater transparency.

At first glance, the mission sounds like it has meaning.  But when I took the time to parse it, I still wasn’t able to answer the basic question of what or why.  The mission makes no reference to improving transparency in government.  Any connection to government is implicit, forcing people to apply their own interpretation–ensuring a Tower of Babel with no common language.  Nor does the mission statement address the question of why.  The most effective mission statements are written in such a way that all stakeholders will know when the mission has been achieved.  The classic example of a good mission statement is the March of Dimes.  The March of Dimes was created to fight polio, a mission in which they succeeded, having supported the development and distribution of  the polio vaccine.   It seems to me that the transparency conversation can only move forward when we have developed broad consensus on what should be transparent and why.

The following anecdote really captures the problem.  A person at Transparency Camp said he wanted the federal government to give him a receipt like he would get at a hotel or a restaurant.  Further discussion clarified that what he was really asking for was a breakdown of how the hotel determined its price.  He wanted his receipts to include the following:

Hotel room – $100

• Percentage of front desk staff time required for check in and check out – $xx.00
• Percentage of cleaning staff time to clean the lobby, lobby furniture, hallways, elevators, public restrooms – $xx.00
• Percentage cost of cleaning supplies to clean the same – $xx.00
• Percentage of cleaning staff time to clean the hotel room – $xx.00
• Percentage cost of cleaning supplies to clean the same – $xx.00
• Percentage of cost for cleaning cart to carry clean linens and collect dirty ones – $xx.00
• Percentage of purchase price for little shampoo bottles and soap – $xx.00
• Percentage of cost to trash hauler for little shampoo bottles, soap and any other trash generated by guest – - $xx.00
• Percentage of cost for in-room coffeemaker – $xx.00
• Cost of coffee, tea, sugar, whitener, stir sticks to use with coffeemaker – $xx.00
• Upfront cost of stocking inventory for minibar – $xx.00
• Percentage of loss from guests who do not pay for using mini bar items – $xx.00

The list goes on and on, but I am going to stop there because I think I have made my point.

If hotels had to generate receipts like that for every customer, even Motel 6 rooms would cost hundreds and hundreds of dollars.  The amount of staff time that would be required to generate receipts like that is mind-boggling. And it couldn’t just be done once. Supply prices change on a regular basis. Receipts would need to be generated for the precise length of time guests were in their rooms. A guest who checks in at 3pm will use more water and utilities than someone who checks in at 8pm (I really am having way too much fun generating these lists of expenses). We don’t always want a fine, detailed accounting of how our money is spent. Not when fine details are just not worth the cost of generating them.

Public budgets are the same way.  Do we really want to use our tax dollars used to track down every incremental cost included in every expenditure? Public information laws require governments at all levels to disclose their budgets.  For the locals who read this blog, City of Portland, Multnomah County and Metro have budget pages on their websites.  Want to do some additional analysis yourself? Fortunately several jurisdictions (including the federal government) offer easy access to APIs.

I am all in favor of volunteers and voluntarily-funded organizations (aka non-profits) creating applications using the data already available through APIs.  I support anyone’s desire to drill down into the minutiae of budgetary data.  What concerns me is when we criticize government for not doing the fine-grained analysis for us.  I see that as serious misappropriation of tax dollars.

Real Costs and Responsibilities

Every time we have to choose between options, we face a decision-making point between immediate gratification and long-term consequences.  For example, buying the cheaper printer with the more expensive ink cartridges or eating that treat that you know will add bulges to where you want them least.   There is a dedicated part of our brain (the frontal cortex) devoted to making choices and recognizing the consequences of our actions. However, the frontal cortex does not inherently distinguish between short and long-term consequences. That is a learned behavior.

We, as a country, are beginning to factor the impact of our choices on global climate change.  Individuals may choose to walk or bike rather than drive or to bring a reusable bag to the grocery store.  Large organizations, including both businesses and governments, are choosing to purchase energy from renewable sources and purchase products with recycled content.  Analysts are refining methodologies that allow us to quantitatively compare short and longer term costs. These methodologies are variously called Life Cycle Costing or Life Cycle Analysis, but the concept is the same regardless of what it is called. (you can see some of City of Portland’s life cycle costing policies here).

I find it surprising how infrequently these same methodologies are applied to funding the public sector.  As a public budget wonk, I have heard the same conversation repeated every year since I took my first budget and finance class in 1995. The year is important because I have only watched the budget process in a post-Measure 5 Oregon. A typical conversation begins with an explanation of  how funding scheduled preventive maintenance is much more cost-effective than emergency repairs or replacement.  Or that schools need adequate funding that includes education in the arts in order to produce a skilled workforce for the future. The vast majority of politicians understand this argument, and try to sell it to their constituency.  All too often, citizens only consider the short term and complain about wasteful spending.

In Oregon and California, voters have tried to reign in public spending through tax abatement ballot measures.  It took a couple of decades, but now education and public infrastructure are so badly deteriorated that they require impossibly large budgets to correct. California’s Proposition 13, the progenitor of Measures 5, 47 and 50 in Oregon, has placed the 8th largest economy in the world on the verge of bankruptcy, and forced them to pay their creditors with IOU’s.  I am not the only one who has connected the dots, so has Peter Aldous in New Scientist:

…the pernicious effects of Proposition 13, passed in 1978. A populist constitutional amendment that capped property taxes, it has created a hole in state finances that gaped wide this year as recession bit into tax revenues. By limiting local school boards’ ability to raise funds from property taxes, it also turned a public education system that once led the nation into one of the worst in the US.

Just as Proposition 13 destroyed California’s exemplary public K-12 and higher education system, Measure 5 destroyed what was once an excellent public K-12 system in Portland.

We need to take a deep breath and remember that government’s role is one of stewardship.  Government is supposed to function as our frontal cortex and consider the long-term consequences when expending public resources. It is not sound fiscal management to circumvent the process and manage tax policy through citizen initiatives and referenda. Our role as citizens is to actively engage with our government and elect people we trust because we are the primary check on the system.  Those that complain about inept or corrupt politicians should take action with their votes. That is the core of democracy.

We should use California’s fiscal crisis as an object lesson and consider both the long and short term implications of tax reform.  Change won’t happen overnight, but it can happen over time.  Just as we have started down the road to reduce the impact of global climate change, we can apply the same strategies to adequately funding our public infrastructure.

You make me so proud!

Today the Portland Development Commission (PDC) brought their Economic Development Strategy to City Council for approval. That simple sentence does not reflect how important an accomplishment this was. This is the first economic development strategy the City has had for the past 15 years. This is the first time I have seen Council really walk their talk on economic development.

Nor does it fairly represent process that got us to this point. In the initial draft of the strategy, small business didn’t warrant a mention until the very end.  Software development was always an area of focus, but in a “same old story” kind of way.  Because we were invited to the table (ok, we had to ask to be invited, but we did ultimately get an invitation) Portland’s small business community significantly raised our visibility from that initial draft to the version unanimously approved today.  Because small business had a seat at the table, those closest to my heart, namely the open source mobile and startup communities, were given the opportunity to demonstrate our value to the local economy. Ultimately, we made the software development cluster much more inclusive.

So why did I ask for folks to join me at today’s City Council session?  The Mayor and PDC are only two pieces of the puzzle. As someone pointed out to me after sitting through hours (I kid you not, this was a loooong meeting) of invited testimony, no one spoke on behalf of the software cluster (one of only 4 clusters focused on in the strategy).  So our community, and more importantly, our economic contribution to Portland, remains invisible to most of the people in that room.

Even though we offered no testimony, we had the largest representation from any industry. City Council and their staff knew most of the folks in that room today (myself included) because we are the ones who show up at every one of these meetings.  We are all pretty clear on what perspective each of us represents and  know what is going to be said before any of us open our mouths. Actions speak louder than words. The open source, mobile and startup (seriously, we need a better moniker) representatives who came to today’s meeting sent a very clear message. We are here and we are ready to take our seat at the table.

The hard work still lies ahead of us.  A strategy is no more than a stack of paper.  Implementation, funding and metrics are where the rubber really hits the road.  So even though we might still have to ask for a seat at the table, I feel confident that our request will be granted.

Sorry that you missed today’s fun?  You can watch PDC’s video summary here, or the hours of testimony here.

Visibility Matters

One of the many reasons I love Portland so much is the accessibility of our City government.  Over the past decade or so, with very few exceptions, I have been able to meet with City Commissioners to discuss issues of public policy.  And when I talk about accessibility, I am talking about me as an interested citizen, not me as a representative of an influential organization. Whether or not I was able to sway anyone with my arguments, I always felt heard, and that is what matters the most, at least from my perspective.

I say this because I watched the evolution of the Portland Development Commission’s (PDC) Economic Development Strategy over the past few months. I have read the drafts, attended presentations to a range of business groups, from  the Economic Development Cabinet, the Small Business Advisory Council to Greenlight Greater Portland.  I have both seen and heard how the voices of small business and the open source tech community changed the strategy for the better.  You can read more about the small business and tech community’s participation in the process here, and here.  You can also read what Rick Turoczy had to say on Silicon Florist here and here.

Here is what the mayor had to say about the importance of this plan:

This strategy, if approved by Council, will be the city’s first adopted economic development strategy in 15 years, and will serve as the blueprint to guide the city and region out of the most significant economic decline in over sixty years.  The plan strategically focuses on maximizing the competitive environment for businesses, spurring innovation and enhancing the vitality of our small business community.

It is now our turn to publicly support both Mayor Adams’ and PDC’s efforts by showing our support for the final plan.  On Wednesday, July 8th, I invite you to join me at 3:15 in Council Chambers on the second floor of City Hall (1221 SW 4^th ave, Portland, OR 97204) to demonstrate our support for the plan.

Planning on being there? Please R.S.V.P here or contact Clay Neal (clay.neal@ci.portland.or.us) or 503.823.4128.

I know this may be pushing some of you out of your comfort zone.  It is important enough to me and Portland’s small business community that I will do what I can to support those who want to show their support.  I will be waiting outside the 4th street entrance to City Hall starting at 2:45 on Wednesday.  Anyone is welcome to meet me there and we can walk in as a group at about 3:05.

Not able to make the meeting, but still want to show your support for the strategy?  You can submit written testimony by sending an email to kmoore-love@ci.portland.or.us. She is the Council Clerk and will distribute your testimony to all of City Council and make it part of the official record.

I look forward to seeing you on Wednesday.

It’s Either This or Rockband

We all deal with stress in our own ways.  Some people jog, some people play games, some people watch movies and then there is me.  I am managing my stress level by reading about public policy.  If you think about it, reading public policy to relax makes a certain amount of sense.  You start with a problem, outline the issues that led to the aforementioned problem and then identify solutions for the problem.  If the problem statement is well defined, causality is well substantiated and the solutions are at least theoretically achievable, it makes me happy.  This is usually a quiet and content kind of happiness because I can take comfort in the knowledge that at least somebody gets it.

If the problem statement is poorly defined, the arguments are weak, causality and correlation are referenced interchangeably and the solutions are ridiculous, then I get to annoy those around me (a trick I learned from David).  I stomp around angrily and people stupid enough to ask me what’s wrong get an earful. Someone who partially hears the discussion and asks what we are discussing gives me the opportunity get to rant to a second person. By then the first person has had time to process my rants and we all get into a heated discussion (I have found this last point to be true whether or not everyone in the conversation agrees).  Rinse and repeat until I have achieved full catharsis and can go back to what I was doing originally.

Either way, I win.

Anyway, I was poking around my RSS feeds this morning and I ran across a link to this article listing 2009’s best cities.  There are seemingly endless sets of “best cities” lists and I generally ignore them.  What caught my eye in this article was the criteria used: both the overall number of jobs and the likelihood that those jobs would be retained in a soft economy. At the Mayor’s Economic Recovery Cabinet meeting last week, it was very interesting to hear which industries were bouncing back and which were stagnant or losing additional jobs.  I wanted to see how Oregon would fare using the same criteria.

I poked around on Google Scholar and found this great publication, Working in Oregon, that contained analysis by both public and private sector economists. It offers some useful context for many of the perennial complaints about our commercial competitiveness and projected job growth.

• Oregon’s wages are low, on average. Oregon’s wages are lower than the national average, but typical of similar-sized economies on the West Coast.
• Wage gains since 2002 have generally equaled or exceeded CPI. The economic boom benefited workers at all income levels. The median wages across all earning quintiles (from the lowest-earning 1/5 to the highest earning 1/5) rose more rapidly than inflation in each year from 2002-2005.
• Oregon has a moderately diversified economy. Oregon ranks in the middle of all states in a measure of the diversity of the US economy.
• Oregon’s employment is concentrated in a few sectors as compared to the national economy. We have above-average employment in greenhouse and nursery production (there is a reason we are known as the Grass Capital of the World), logging and forestry, fruit and vegetable preserving , wood and paper product manufacturing and electronic component manufacturing. We have below average employment in petroleum and coal mining, textile and apparel manufacturing, chemical and pharmaceutical manufacturing, spectator sports organizations (also not news, Oregonians seem to prefer playing sports to watching them), and amusement parks and arcades.
• There are two categories of jobs that will be becoming available by 2016. Replacement job openings (those created by retiring boomers, or by others who have left the workforce) are almost twice the number of jobs created through growth.  The authors estimate that approximately 250,000 growth jobs will be created in Oregon between 2006 and 2016. They expect approximately 450,000 replacement jobs in that same time period.
• Job training is critical for filling both replacement and growth jobs. Employment projections were developed for 700 occupations, only 40 of which are going to be employing fewer people in 2016.  Six-hundred ninety five on those occupations will need newly trained workers to fill replacement jobs in the next 10 years.
• Only 1/4 of Oregon’s projected 700,000 job openings (both replacement & growth) will require post secondary-education. Job applicants for half of those jobs will need a post-secondary education is they want to be a competitive candidate for the job.
• Formal education is not all job applicants need to be competitive. Employers are attributing a labor shortage to employees who lack the most basic skills: coming to work on time, a willingness to work hard, a willingness to learn, basic communication and teamwork skills.  I see this as one of the easier education deficits to address.  These basic “life skills” can be easily integrated into middle and high school curriculum.
• Focusing resources on high-demand, high-wage jobs targets less than 40% of projected job openings between now and 2016. Should we be re-examining our job training and education programs to make sure that they really meet the need out there?

For the record, I did end up playing RockBand as well.

The Little Engine That Might

Anyone who has read this blog knows that I have significant issues with corporate executives’ ignorance of the implications of their actions on their employees and communities they serve.  My patience is shortest with the financial institutions whose greed led to the collapse of the worldwide economy.  I still wax poetic about the days when a family or a business could go to their local bank branch, and their credit was assessed based both on their financial situation as well as their social capital.  Historically, default rates drop significantly when social capital is factored in to underwriting decisions.

Obviously I was naive, but when we, CubeSpace,  started trying to negotiate with our landlord, US Bank, in August 2008, I had assumed that since they had accepted TARP money, they would show some flexibility to their tenants who were also being impacted by the economic downturn.  Instead, they turned a deaf ear to our repeated requests for negotiation for 10 months before threatening us with eviction.

From the outset, our letters to US Bank included offers to use our personal and professional networks to publicly thank US Bank for their cooperation by directing business and good will their way.  We once again reiterated our community involvement in what we thought was a last-ditch effort plea for mercy. That was when you all, members of the CubeSpace community, both near and far, proved that social capital remains a force to be reckoned with.

Your unexpected, massive and much appreciated (there really are just not words to tell you how appreciated) response to what I had intended as a farewell post changed the game completely.  Not only did US Bank feel the pressure to respond to our letter, but they did so with somewhat reasonable offers.  We believe that you, our community, are the ones to thank because of this little paragraph they included in their response:

US Bank does not view your comments regarding issues of public opinion and the Portland business community as productive. Please focus any future correspondence and negotiations on items that will bring the parties to an agreeable resolution.

No matter what comes next or how this story unfolds, you should all pat each other on the backs and raise a toast to yourselves for being a David to their Goliath and using Twitter as your slingshot.

We have received a truly overwhelming number of offers of cash, advice, support, meals and even a bakesale organized by a much beloved community member who is ten years old.  We have also been asked some very appropriate questions that we are struggling to answer. Questions like:

• How much money do we need to make a difference?
• How will we revise our business model to make sure we don’t end up back in this same situation a year from now?
• Would we consider moving to a small space?
• I am short on cash, what can I offer that will be of help?

The short answer is that we are struggling to answer those questions ourselves. David and I are emotionally drained. Since Tuesday, we have been on an emotional rollercoaster where we were facing a Sophie’s Choice where either option led to certain corporate and personal bankruptcy, and then experiencing an emotionally overwhelming loving and supporting response from you, our community, and being able now to visualize a light at the end of the tunnel.

CubeSpace’s survivability is obviously incredibly important to the community, and we are convening a meeting tomorrow (Sunday) to discuss legal, business and community implications of the two US Bank offers on the table. We appreciate your collective desire to know what, when and how right now. We are there with you. But please, bear with us as we take the time to review our options and make the decision that is best for all of us.

For those of you who have been hesitating to make a donation without more clarity from us, I understand and agree with your concern.  We have not cashed any checks or deposited any cash pending our decision.  If we decide CubeSpace will not make it, we will return all cash and destroy all checks. This includes any donations made through the savecubespacepdx.com PayPal account.  We know many of the donations have come from unemployed folks who really cannot afford to give anything.  If we are able to sustain CubeSpace, in some shape or form, we will gratefully accept what we know were heartfelt gifts. If we cannot keep CubeSpace going, we will return all contributions but retain the incredible support and love in which the gifts were given.

Things are going very fast and we will do out best to keep the community updated throughout the weekend.

In community,

Eva and David

Wonk meets Geeks

This week, as part  of his “100 businesses in 100 days” effort, Mayor Sam Adams wandered into the Wonderful World of Geeks when he met with Portland’s open source tech community to discuss his economic development strategy.  A diverse group of folks, including:  Rick Turoczy, Raven Zachary, Audrey Eschright, Scott Kveton, J-P Voillique, David Kominsky, myself, the Mayor and Skip Newberry (from the mayor’s office) gathered to discuss ways to support the ongoing economic development of Portland’s open source community and what can the City to do help meet those needs.

We began with a discussion of the strengths of Portland’s open source tech community.  Portland is incredibly fortunate in having community leaders who have done very well in creating a vast array of peer teaching/mentoring opportunities.  User groups, code sprints and events such as BarCamp provide opportunities for people to meet, share and develop ideas.  The type of opportunities that one normally only finds in the context of a large university setting.  What we lack are mentorship opportunities or the matchmaking necessary to bring together great coders with great businesspeople.  The most effective solution to the mentorship issue must come from within the community itself.  Better communication and collaboration is all that is needed to address that issue.

The communication and collaboration question naturally led to the mayor asking how to find the tech community.  The group responded with a resounding “Twitter,” all in unison. Sam acknowledged that Twitter was a great conversation medium, but too transitory. What he really needed in order to adequately understand, and therefore advocate for, Portland’s open source tech community is a census. The group readily offered their respective networks to start building a census of Portland’s tech community.

The mayor also asked what distinguished Portland’s community from other cities.  We came up with the following responses:

Telecommuting – We have all read about Portland’s “Brain Gain.” People move here from all over the world because of our high quality of life. What we rarely read about are the many new transplants who arrive with jobs. Portland is filled with people who work for companies based all over the world.  Anecdotally, we all knew several people who fit into this category. How many are there and where are their companies located? That’s what we need the census to find out.

Affordable domestic coders – It remains true that the hourly rate of overseas coders is significantly lower than even entry-level coders in the US. However, time zone, inter-cultural communication and code maintenance issues can make overseas coders more expensive in the long run.  Portland’s relatively low cost of living and highly skilled coders have made us an increasingly cost-effective alternative.

Geo-mapping/geo-location – Portland has more than its fair share of geo-location enthusiasts, as was evidenced by the success of the first WhereCamp event last year. This is a field with a huge amount of growth potential and Portland has an opportunity to make a name for itself here.

Mobile applications development – The hugely popular Obama Iphone application came out of Portland and that is only the tip of the iceberg. Portland has set the bar high for innovation in mobile application development, a field that remains in its infancy.  With its low barrier to entry, mobile application development is looking like another niche that Portland is looking to dominate.

So what can the mayor of Portland do to help support the open source community?

1. Advocate for open source solutions for government software – Governments have huge software needs, and proprietary software solutions require a significant up-front investment and updates are often delayed by other priorities.  Open source software has a much lower barrier to entry, and much of the cost can be split with other jurisdictions.  But, government bureaucracies, by their nature, are cautious and slow to accept change.  A champion, especially one in a highly influential position, can expedite the rate of change. Having the mayor champion open source software, especially in these challenging economic times, can make Portland a leader in the field.

2. Advocate for a variety of funding options – Many of us have grown tired of hearing about how Portland does not produce companies that interest VC funders.  If you want an earful on this subject, just go ask Rick Turoczy. However, what we also lack is access to the kind of startup capital that small businesses that want to remain small businesses need. Those companies where the founder(s) would like to make a living for themselves and their employees, but not make 30% on the original investment. This is another place where some targeted advocacy by our mayor could make a big difference.

In the end, everyone was pleased with the meeting.  The open source community representatives felt that both Sam and Skip understood the value that they bring to Portland and were eager to help where they could.  Skip commented that this had been one of the most productive of Sam’s business visits.  I attribute the meeting’s success to the attendees’ ability to articulate both their needs and what they had to offer.  There had been no pre-meeting prep or preliminary discussions.  Portland has a very self-aware and reflective open source community and that serves us very well.

Catching up

When I started this blog I set a goal of blogging at least once a week.  Obviously I have not met that goal.  But I have some good excuses and the intention of getting back on the weekly blogging wagon.

Here is a quick summary update of what I have been up to in the past month, sorted by degree of time suckage:

1. BarCamp – This is the 3rd year that we hosted BarCamp Portland and it is huge amount of work that culminates in a huge amount of fun.  BarCamp has nothing to do with alcohol (at least not directly) nor lawyers (once again, at least not directly).  It is an unconference, so there is no way to know what topics are going to come up for discussion.

2. Economic Recovery -In my ongoing efforts to help the Powers-that-Be understand small business’ role in the economy, I created this schematic, which I shared with Erin Flynn,  Portland Development Commission’s (PDC) Economic Development Director.   In that same conversation it became obvious that Ms. Flynn was not as familiar with the economic growth in Portland’s open source tech community as she would like.

Those of you who know me know that I rarely, if ever, sing the praises of PDC. But, I also believe in giving credit where credit is due.  To Erin Flynn’s credit, shortly after Andy Frazier (my Small Business Development Workgroup Co-Chair) and I met with her on a beautiful, warm Friday afternoon, she took action on our conversation.  The mayor has scheduled a meeting with several of Portland’s open source/high tech representatives to get their perspective on PDC’s Economic Development plan.  In other words, the precise voices that had been left out of the conversation.

3.  This past Saturday CubeSpace hosted Town Hall with State Senators Diane Rosenbaum and Ginny Burdick. Senator Ginny Burdick chairs and Diane Rosenbaum sits on the Senate’s Finance & Revenue Committee. I asked why state investment funds for high tech entrepreneurship are all targeted at companies looking for VC money.  I suggested that perhaps a revolving loan fund would better serve small tech companies whose focus is employment rather than selling for a huge profit. Increasing resources for startups not looking for VC money intrigued them. I have no idea whether this conversation will bear any fruit, regardless, I was pleased with their positive reception.

Not that things will be calming down any time soon, but I will try to get back on a more regular blogging schedule.

A sisyphian effort

A representative from the National Federation of Independent Business (NFIB) has targeted our zip code and is meeting with every business-owner. She asked for our thoughts on taxing gross (rather than net) income for businesses, specifically in reference to HB 2070 and HB 2119. Having not read the legislation, we rescheduled our meeting for yesterday.

Turns out to have been a good move on my part. Both bills address the issue of a corporate minimum tax, not changing the tax basis from net to gross revenues. HB 2070 focuses exclusively on “C” Corporations (the entity structure used least often by small businesses), with an exemption for corporations earning <$100,000. HB 2119 addressed both “C” and “S” Corporations, but with a graduated minimum based on net revenue.

In preparation for our meeting, I printed the 2 bills in question and highlighted the relevant sections for her.  Her response was that she is interested in our thoughts on NFIB’s entire lobbying agenda, and she had named those two bills as examples. We then inquired as to what issues are part of NFIB’s legislative agenda. I had already looked on their web site, and found nothing. She explained that she did not know and was only a go-between and offered me NFIB’s lobbyist’s direct number.

Since we couldn’t have an intelligent conversation about NFIB, we asked her what she was hearing from other business owners. Unsurprisingly health care was top of the list. I asked her what options the state legislature was exploring around health insurance affordability. She didn’t know and once again offered NFIB’s lobbyist’s direct number.

As she has targeted our zip code, I asked how NFIB rated our state legislators in regards to small business. She replied that with such a large territory, there is no way she could know anything about our legislators. I explained that all of 97214 shares the same set of legislators.

I found my exchange with NFIB so aggravating because they are asking irrelevant inflammatory questions of small business owners who are already stressed beyond belief. The uncertainly of this economy has left even the most seasoned entrepreneurs unsure of the best survival tactics. Nobody has time to assess the veracity of every piece of information that crosses his/her path, so self-defined experts can easily push their own agendas.

What we all need (small business owners in particular) are short factual bits of information. Twitter would be an ideal platform. 140 characters of information with a link for more detail. There is no shortage of Twitter accounts offering this information on a national level, but none focused on local issues. If I had endless time, I would enjoy providing this service because I think informed decisions are the best type of decisions. But I do not. I am one of those aforementioned over-stressed small business owners who happens to care deeply about civic engagement.

A Drop in the Bucket

Small businesses are the invisible engine that drives both our local and our national economy. The American Recovery and Reinvestment Act of 2009 allocated $730 million to support small businesses. That is 0.05% (yes, I do mean 5/10 of a percent) of the combined bailout total ($700 billion from the Bush administration and $787 billion from the Obama administration). Want a more current number? That is 1% of the amount AIG has received in bailout funds.

Our attention (and money) is almost always focused on large, international companies who employ thousands of people. But those companies employ less than of third of our nation’s employees—and only 15% of employees in Portland. Annually, over the past decade, 70% of net new jobs were created by small businesses.

How hard has the economic downturn been for small business? The U.S. Small Business Administration (SBA) typically guarantees about $20 billion in loans annually, new lending is trending below $10 billion this year.

Ok, enough with the complaining. What is the Treasury Department doing to support small businesses?

• Create a market for loans through the direct purchase of securities backed by SBA loans.

Lenders (want) need assurances that they are sharing risks they take by lending to small businesses. To allay this concern, the Treasury Department has raised the loan guarantees for SBA loans to 90% for SBA 7(a) loans.

Currently the federal SBA loan guarantees – up to 85 percent for loans at or below $150,000 and up to 75 percent for larger loans – have not been large enough to give banks the confidence they need to lend in the current economy.

Effective today (March 16, 2009) any who participates in the SBA 7(a) loan program can request the higher level of loan guarantee.

• Temporarily eliminate the up-front fees for 7(a) loans that lenders pass along to borrowers.

These fees can be as high as 3.75 percent for larger loans, which significantly increases the cost of borrowing for small businesses. For borrowers or lenders charged any of these fees on loans approved on or after February 17th, the SBA will provide a refund,

• Speed up the loan turn-around time.

The SBA pledges that complete loan applications will be turned around quickly by the SBA – usually in as little as two to three days.

• Incentivize private investment in small businesses.

75% of any capital gains derived from investments held for 5 years in small businesses will be tax-free.

There are also some important changes to the tax code affecting small businesses.

• Reducing Small Businesses’ Estimated Tax Payments.

Currently small businesses pay 110 percent of their previous year’s taxes in estimated taxes. The American Recovery and Reinvestment Act allows small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.

• Increase Tax Refunds for Small Businesses.

Businesses with gross receipts of up to $15 million can now “carry back” their losses for up to five years, effectively allowing them a rebate on taxes paid in previous years. The Joint Committee on Taxation estimates that this measure will increase liquidity for small businesses by $4.7 billion by September 30, 2009.

• Allowing small businesses to write off up to $250,000 of investment in “plant and equipment” .

Small businesses may immediately write off up to $250,000 of qualified investment in 2009. Small businesses may also take a larger tax deduction within the first year of a property’s purchase.

Reality test

I spoke to a small business lender at a community bank last week just after she got off a conference call with the SBA about rolling out the small business loads as laid out in the original legislation.  She said the call consisted primarily of lenders asking the SBA what was happening and when and the SBA responding by shrugging their virtual shoulders.  I know that the local community banks and credit unions are raring to go on the loan roll-out.  I also know that some of the larger banks are now advertising the number of SBA loans they have given in the past.  So, I am curious to see how smoothly this goes, but I am very happy to be pleasantly surprised.