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Home / Articles / News / Features /  Shadow Economy
04.04.12.cover

Shadow Economy

Eight years ago, Santa Fe’s economic development plan was supposed to change the game. What happened?

April 4, 2012, 12:00 am

 It’s late afternoon in March, and spring is blooming. Roughly 50 of Santa Fe’s movers and shakers are gathered in a small building that resembles a slick, revamped old church, with bright white walls culminating into a triangular point in the center of the ceiling. Creative Santa Fe, the arts and culture nonprofit whose broad mission is to improve the city’s “creative economy,” is announcing a new direction after seven years of inaction, mostly on the city’s dime. 


“Despite a weak economy and the fact that cities across the globe are suffering, there are no excuses for not starting to make things better here and now,” Bill Miller, Creative Santa Fe’s new board chairman, tells the crowd.


In many ways, this grand unveiling and its accompanying sense of optimism hearken back to a similar event, eight years ago this month: the introduction of the economic development plan that was heralded as a game-changing blueprint for Santa Fe’s future. In April 2004, at the Lensic Performing Arts Center, Austin, Texas-based Angelou Economics presented the plan that has guided—or was supposed to have guided—all of Santa Fe’s economic decisions ever since. 


Today, the city has achieved only a fraction of the Angelou plan’s objectives. And Creative Santa Fe, one of the key outgrowths of the Angelou plan, is widely seen as failing to live up to its original mission: to be an umbrella organization for Santa Fe’s arts and cultural community. 


“We poured a lot of money into it, and it essentially accomplished nothing,” Diane Karp, executive director of the Santa Fe Art Institute, tells SFR. 


In many ways, Creative Santa Fe’s mixed results are a microcosm of the city’s attempts to implement the Angelou plan. Despite the high hopes both initiatives generated, neither has come close to producing the vibrant, creative, diversified economy to which city officials publicly aspire.


But both the city’s economic development team and Creative Santa Fe’s new leadership are hoping to begin anew. Miller, who helped save Creative Santa Fe last fall, is helping to spearhead a new project called Imagined Futures, which seeks to strengthen Santa Fe’s creative economy through lectures, outreach and panel discussions in a model that draws inspiration from the Aspen Institute. 


Still, the success of Imagined Futures—as well as the success of the city’s economic development efforts generally—depends on a variety of factors, including political motivation, implementation methods and community involvement. And in both cases, city and nonprofit leaders would do well to learn from the lessons of the Angelou plan.

Although now eight years old, the Angelou plan is just the latest in a long line of Santa Fe’s attempts to reinvent itself. When the main railroad line bypassed Santa Fe in the late 1800s, the city embarked on a century’s worth of brainstorming bold ideas to survive. This effort resulted in the famed 1912 Plan, which led to the creation of the historic districts, tourist attractions and cultural festivals that still define the city today. 


City Councilor Rebecca Wurzburger, who played a leading role in eventually commissioning Angelou to draft the plan, says no one event led to a realization to draft a new economic strategy. 


But she does recall witnessing a failed City Council proposal in 2002 to make a historic overlay district for a relatively large part of the city. The overlay proposal, which would have created additional obstacles to development in the area, sought zero input from the business community. To Wurzburger, it was yet another sign that the city needed new thinking to guide its decisions. 


“That was just an example of the fact that it was time for the business community to have a voice in our decisions,” she tells SFR.


In 2003, Angelou Economics won a $95,000 bid to develop a new economic strategy for Santa Fe. The resulting plan incorporated a year’s worth of research and input from approximately 1,500 area residents through interviews and focus groups. 


“A lot of what we put into these plans, it’s great stuff,” Angelos Angelou, the principal executive officer of Angelou Economics, tells SFR. “But it all depends on execution.”


Since the Angelou plan’s approval, the city has moved in three directions: creating new initiatives based on the plan’s recommendations, many of which failed; tweaking around the edges by building off existing programs; and failing to follow through on several other recommendations. Lillian Montoya-Rael, who does consulting work for the city, came up with a list last spring tracking how many of the plan’s recommendations have been realized. According to Montoya-Rael’s analysis, of the Angelou plan’s 28 recommendations, the city has realized just eight (for the full list at bottom of article). And some of those, such as ensuring the city is “fun and attractive to young, creative people,” are arguable. 


The Angelou plan breaks down its recommendations into five broad categories. What follows is SFR’s (admittedly unscientific) analysis of the city’s successes and failures in implementing the Angelou plan since its approval in 2004. One could argue that every economic development decision in Santa Fe since then can be traced back to Angelou, but after looking over the plan, SFR found that many of its specific suggestions have yet to be realized.


Education
Improving education, specifically K-12, is the first area the Angelou plan mentions, emphasizing its importance in creating a productive workforce. YouthWorks’ green jobs apprenticeship program is one of the city’s successes in that category. 


Executive Director Melynn Schuyler says the biggest complaint from businesses around the city is the difficulty of finding “an employable and trainable local staff.”
“If you don’t work with locals, don’t get them productive, meaningful work, they become a detriment to the community,” Schuyler says.


Each year, approximately 125 youths participate in the green jobs program, and about 60 percent of them land full-time employment, according to YouthWorks’ estimates. 


In 2009, the city gave YouthWorks $389,000—more than one-third of its budget. Between January and October 2010, the nonprofit placed 41 of its apprentices in the workplace, 13 of which included unsubsidized, full-time employment.


“What do people do when they drop out?” Schuyler asks. “We are one of the only organizations that kids can turn to.”


Her comment underscores how public education, which the Angelou plan says “will be as strong as possible because the community invests in it,” is still failing the city’s young people. As a district, Santa Fe Public Schools has the second-lowest graduation rate in a state that already ranks third-lowest for graduation rates in the nation. Those rates have also been rapidly declining since the Angelou plan: In 2004, 82 percent of SFPS students graduated from high school. Six years later, the rate had dropped to 62 percent. 


Often, when those unenviable numbers are brought up in front of city officials, they reply that city government has limited control over the situation. Montoya-Rael says a large part of the Angelou plan’s education recommendations, including more parent involvement, relied on the other public sectors involved with schools.


“Really, at the end of the day, city government has very little influence or ability to impact the education sector,” she says. “It’s really driven by school boards and boards of governments and parents.”


But community organizer Miguel Ángel Acosta, director of alternative high school Colegio Sin Fronteras, which helps older dropouts earn their General Educational Development certificates, says the city can still have an influence.  


“They have a lot of impact over what happens in children’s lives,” Acosta says. 


The city’s two largest public high schools are located in the south side—an area that is characterized by higher poverty rates and larger proportions of immigrants and is home to more than 40 percent of the city’s youths. 


Many of the educational nonprofits that the city funds on the south side are run by people who live outside the area, Acosta says, which is why they tend to leave when the economy gets bad. He cites as an example Girls Inc. of Santa Fe, the nonprofit that focuses on empowering young women, which closed down its south side location in 2010.


Outside Factors


It’s not that city bureaucrats have been ignoring Angelou for the past eight years. For one, the recession hit four years after the plan was published. Kathy McCormick, the former Housing and Community Development Director, came to the city in 2007, right as the national economy started to freefall. 


“Of course, state revenues and everything was declining,” McCormick tells SFR. 


In Santa Fe, that meant declining land use and sales tax revenues, both of which are earmarked for economic development. McCormick was also part of a massive turnover and restructuring of the city’s economic team that happened in the years following Angelou.


“There are a lot of different players involved in this conversation than in 2004,” city economic development consultant Lillian Montoya-Rael says. “It’s a different cast of characters.” 


As the recession loomed, the city’s new team, which included McCormick, Economic Development Specialist Kate Noble and neighborhood planner Charles Buki, attempted to adjust and update the goals of the Angelou plan. In slides he presented to the Economic Development Department, Buki bemoaned Santa Fe’s “paralytic planning” and “meeting culture”—ie the tendency to meet and never get plans done. 


“He was not afraid to say some difficult-to-hear truths,” Noble tells SFR. “I’ve never seen the likes of it in a large meeting in Santa Fe before or since.”




Entrepreneurship
The Angelou plan recommended encouraging entrepreneurship mainly by supporting the city’s existing business incubator and making business startup training widely available. By that measure, the city has followed up relatively well. 


In 1997, the City Council and Chamber of Commerce helped create the Santa Fe Business Incubator amid a realization that Santa Fe was losing its young people to places with more opportunities [cover story, March 14: “Laying Eggs”]. The incubator helps business startups, mostly from the tech field, by giving them the right contacts to succeed and a place to rent office space. One of the Angelou plan’s key recommendations involved maintaining support for the incubator. 


Since SFBI’s existence, the city has kept a contract with the incubator worth roughly $200,000 each year, which makes up the majority of the incubator’s budget. As a result, SFBI CEO Marie Longserre says 80 percent of the businesses that use the incubator still exist five years after their inception. She estimates that the incubator leases space to approximately 15 companies a year.


Another suggestion in the entrepreneurship category was to “streamline the city’s permitting process for events.” From the experience of the After Hours Alliance’s promotion of the AHA Festival last year (which, full disclosure, SFR helped sponsor), the city still has a long way to go and may even have made things worse.   


Shannon Murphy, a founding member of AHA, says the biggest problem the weeklong festival, which was held in the Railyard in September, faced was with the city police department. 


“They wanted us to hire 15 off-duty police officers,” Murphy tells SFR. “Off-duty police officers cost $66 an hour. We didn’t even know about this until a month before the event, so we couldn’t go and raise the money.”


Murphy says she felt strongly pressured but ultimately had to tell the city no. She did eventually compromise, hiring two off-duty officers for two hours during dusk on a Saturday night, but they never showed up because of paperwork errors. Murphy stresses that the event was held at a city park, which she says should be patrolled by city police anyway. 


She also cites difficulty in obtaining city permits to sell alcohol at events, which she says is crucial to attracting attendees. The Santa Fe City Council recently tightened that restriction, passing a resolution limiting special dispenser permits to three per year [A-Sharp, March 28: “Man With A Plan”]. With AHA unable to sell alcohol, Second Street Brewery, which owns space in the Railyard, stepped in and took advantage, selling beer to the AHA festival attendees who could easily see the stage from its patio.


“We’re happy to contribute to economic development, but we had to go out and bust our asses to get volunteers for this stuff,” Murphy says. “We brought 2,000 people to one place, and we had no way to make money off of it.”


Infrastructure
Santa Fe Mayor David Coss cites the Angelou plan as a key factor in perhaps his biggest accomplishment as mayor: saving the College of Santa Fe. 


In 2009, the college needed a partner to cover its $35 million debt. After failed attempts to lure the University of New Mexico and New Mexico Highlands University, the college found a partner in Baltimore-based, for-profit Laureate Education. At that time, the city agreed to buy the college’s property with $30 million in bonds. The result is the Santa Fe University of Art and Design, which Coss says falls under Angelou’s vision of a “national center for arts and design.”


“If we hadn’t had the Angelou plan that said arts and culture were so important, we might have looked at it and said, ‘That’s unfortunate,’” Coss says. 


The Angelou plan said the arts and design center should be modeled after national research laboratories “only with art, rather than science, as its focus.” Its goals were to include providing design services for public-sector projects and creating a “one-of-a-kind program to promote Santa Fe’s arts, culture and design products.” In other words, they paint a picture of the center that is arguably more tied to the community than Santa Fe University is today. 


The city realized another Angelou goal by building a new convention center. Before Angelou, the city had been using an old gymnasium that simply wasn’t cutting it. 


“Before, when you had an event, you just had one big room,” City Manager Robert Romero tells SFR. “If you wanted to go from a meeting space to eat, you had to move people out and bring them back an hour later.”


The idea to replace the convention center had been around for two decades before the Angelou plan was drafted. Actual construction began in 2006 and was finished by 2008, to the tune of $65 million. 


“We got it in line right before the recession,” Coss tells SFR. 


The real benefits of convention centers aren’t the events themselves, but rather the visitors who spend their time and money in local restaurants, hotels and shops in town. The Angelou plan urged the city to build a convention center with small enough rooms to attract “more targeted events attended by executive-level individuals.”


But the convention center has yet to live up to that goal. A 2011 report by Radcliffe Co. compared Santa Fe’s convention business with that of Yakima, Wash., a city with a comparable budget, a small airport and approximately 16,000 more residents than Santa Fe. But despite having a larger Convention and Visitors Bureau budget and almost three times as much lodging to offer, in 2009, Santa Fe booked about one-quarter as many hotel rooms [news, Sept. 14, 2011:”Tourist Detraction”]. Still, events held at the convention center are increasing, and the CVB has already booked 3,000 more hotel rooms for the current fiscal year than it did for all of fiscal year 2011. 


Status Quo 


Before the Angelou plan’s drafting, several of the city’s gallery owners, artists and some community leaders who later became board members of Creative Santa Fe, took exception to what they saw as insufficient focus on the creative economy. 


“The report didn’t focus on Santa Fe’s real economic engine—arts and culture,” Diane Karp, executive director of the Santa Fe Art Institute, says. “We found it odd.” 


In response, the McCune Charitable Foundation commissioned the University of New Mexico’s Bureau of Business and Economic Research to conduct a study to show the effect of arts and culture on Santa Fe’s economy. 


Organizations like the Santa Fe Gallery Association and key players in the hotel and restaurant industries—actors that benefit from Santa Fe’s economic status quo—played an active role in commissioning the study, BBER senior economist Jeff Mitchell says. On the other side were people looking to use the study as a way to confront and fix Santa Fe’s inconvenient truths about its arts market.


“I felt that tension very strongly there, around that report,” Mitchell says. 


Like the Angelou plan, the BBER study took a year and approximately $100,000 to complete. Among its findings were that Santa Fe County’s arts and culture industry generated $1 billion in revenue in 2002 while employing 17 percent of the county’s workforce and dishing out $231 million in wages. Less celebratory, however, were the facts that Santa Fe had lost one-third of its tourism market since the mid-1990s; growing wealth gaps were creating an affordability crisis for artists; and Santa Fe’s creative and commercial economies had been growing apart. 


But in the aftermath, Mitchell says, “The group that tended to see this as more of a marketing opportunity had a bigger say” in the resulting policies. 


Many agree that where the Angelou plan went wrong with arts and culture, the BBER study went right.




Community Development
The Angelou plan mentions the need for affordable housing to “retain young and creative individuals.” 


A report recently released by the Santa Fe Association of Realtors shows that for the first time in years, Santa Fe’s median home price matches its median income. But the recession also significantly scaled back housing development in Santa Fe, prompting the city to reduce its affordable-housing requirement for new developments from 30 percent to 20 percent. Either way, census data make clear that affordable housing alone isn’t doing the job when it comes to keeping young people in Santa Fe. 


In 2000, residents aged 20-35 made up about 19 percent of the city’s population; in 2010, that number had declined to approximately 16 percent. 


To help keep young entrepreneurs in the city, the Angelou plan recommends a “small business ombudsman” to serve as a one-stop shop for questions about city codes and regulations. In December—nearly eight years after the plan came out—the city hired Economic Development Division Director Fabian Trujillo to fill the role.   


Critics also say the city focused too heavily on the art economy in the wake of the Angelou plan. Santa Fe Chamber of Commerce President Simon Brackley is dubious about the art sector’s ability to stimulate the economy.


“It’s hard to get your arms around art as a jobs generator,” Brackley says.


The original iteration of Creative Santa Fe had its troubles. Funded with city contracts totaling $150,000 over three years, the nonprofit, which comprised a board of gallery owners in the city, was meant to connect and support the various sectors of Santa Fe’s creative industries. 


“The idea was to map the sectors and put them together,” Karp says. “A lot of us got together and worked on that. That wasn’t what the board wanted to do.”


It did succeed in helping lead the United Nations to certify Santa Fe as a “City of Crafts and Folk Art and a City of Design” in 2005. But Karp says the nonprofit lost its momentum, even as the city continued to fund it. “Instead of serving the creative sector, they were asking the sector to serve them,” she says. 


Another arts and culture focus was Design Week, a weeklong, city-sponsored event that first occurred in 2005 and dwindled in subsequent years. The event, also widely considered a failure, brought together people from various design-related industries to showcase their talents and help promote their products and ideas. To Brackley, Design Week was “under-attended, underfunded and under-marketed.” He also says it was too inclusive of too many industries. 


“We have an ego of a big city and the infrastructure of a small town,” Brackley says. “I think sometimes we want to start too big.”


Others saw the event as an example of using nonsense jargon under the guise of developing the economy. 


“It was part of this whole business of language of abstraction about all these things that are supposed to be new,” Stan Rosen, a retired labor professor who participated in drafting the city’s living wage ordinance, says. “It felt like a turd.”


During promotions for the event, former City Councilor Karen Heldmeyer remembers holding a “conversation with artists” with then-fellow councilor Miguel Chavez. She recalls hearing from a young woman who wanted the city to subsidize her housing, studio and a place to display her art, “but not to sell it because I am not commercial.” Heldmeyer attributes the failure of Design Week to “a lack of leadership coming from the top” of city government. 


“It leads to a lot of coordination problems,” Heldmeyer tells SFR. “It leads to people with their own special interests coming forth.”


Coss, for his part, characterizes the missteps of Creative Santa Fe and Design Week as learning experiences. 


“The only people that have never failed were people who’ve never done anything,” he says. 


The Angelou plan also allotted a section to “marketing and public relations,” with various recommendations. (On Montoya-Rael’s list, none of them are checked off.) The Santa Fe Convention and Visitors Bureau didn’t create a position specifically for promoting the city until late last month. CVB spokesman Steve Lewis says that, in years past, CVB approached the issue mostly from its sales department.


While the economic downturn played a significant role in turning the high hopes of the Angelou plan into low returns, so did an ultimate lack of will. 


Angelos Angelou says his firm lost touch with Santa Fe shortly after the plan was drafted. Other cities for which he’s drafted plans, such as Winston-Salem, NC, have kept in contact and are enacting their respective plans’ recommendations. 


Angelou Economics argues that its plan for Winston-Salem helped lead to $10 million in new grants, the creation of a “design incubator” and the opening of a Dell factory in the region. But as a whole, Winston-Salem’s poverty rates and unemployment have increased since the recession. 


A few months ago, Kris Swedin, former director of the City Economic Development Division and a Creative Santa Fe board member, contacted Angelou to tell him about CSF’s new direction, which includes a May 2012 event featuring representatives from the art communities of Buffalo, NY, and Glasgow, Scotland, to discuss ways to build affordable workspaces for artists in Santa Fe. 


Each of those cities endured economic collapse and then had to find ways to renew themselves. The conventional wisdom is that Santa Fe’s outdated economic model will break down if nothing is done to correct it. 


“Is there a model for invigoration before you go into a crisis?” Creative Santa Fe’s new Executive Director Clark Hulse asks. “If we cannot succeed in helping young people and cannot retain them, then we are going to have a crisis.”


Imagined Futures will culminate in an international conference and arts and culture festival planned for the fall of 2013. So far, Creative Santa Fe has received just $3,000 in city funding this year and maintains that it won’t expect additional financial support from the city. 


Just as Creative Santa Fe is exploring new directions, so too is the city as a whole. Initiatives such as MIX Santa Fe, the monthly event aimed at engaging young entrepreneurs and professionals, and the revitalization of St. Michael’s Drive, a neighborhood marked by empty warehouses and fast traffic, are increasingly gaining traction. But both also reflect goals—retaining young people; creating more business-friendly, mixed-use neighborhoods—that have been hovering at the edges of Santa Fe’s economic development efforts for close to a decade. Revamping St. Michael’s, for instance, has been discussed for years and still has a long way to go. 


“You can’t just snap your fingers and revitalize St. Michael’s Drive,” Economic Development Specialist Kate Noble says.


The same is true for the city’s overall economy. But as new initiatives arise, to some, they resemble the botched goals of yesteryear. 


To Heldmeyer, the CSF plan reeks of failed initiatives such as Design Week. An idea as ambitious as Imagined Futures will inevitably prompt requests for city funding, Heldmeyer says. 


“Everything old is new again,” Heldmeyer writes SFR in an email. “Maybe the city needs to reevaluate what’s already done. Otherwise, the only ones that profit are the consultants, who do their studies and go on their merry way.”   SFR

Below, read Lillian Montoya-Rael's original checklist for the Angelou plan objectives the city has and hasn't achieved (as of July 2011). Bullet points listed in bold were checked off as achieved on Montoya-Rael's list.

Workforce Development

  • Place value on education
  • Promote value of quality education
  • Develop inventory of workforce training programs
  • Link local economic development efforts with One-Stop Centers
  • Work with Santa Fe Community College to create programs aimed at needs of business

Business Development & Entrepreneurship

  • Financially support Santa Fe Business Incubator to offer customized business resources
  • Create access to capital for startups
  • Provide information about starting a business
  • Celebrate entrepreneurial success stories
  • Keep Santa Fe existing businesses strong
  • Support small business incubator certification program


Sites & Infrastructure

  • Make Santa Fe the water conservation and clean energy capital of the US
  • Provide better infrastructure and processes to support creative activities
  • Partner with Santa Fe County to solve infrastructure and site issues
  • Construct a new convention center
  • Create a National Center for Art & Design


Community Development

  • Adopt a more business-friendly attitude within city government
  • Expand small business ombudsman position (created in Dec. 2011)
  • Council goals for future development should drive decisions
  • Provide greater support to city Economic Development Division
  • Involve arts and culture in economic development
  • Ensure that Santa Fe has atmosphere that is fun and attractive to young, creative people


Marketing & Public Relations

  • Establish marketing roles for each organization involved in economic development
  • Create and adopt a single economic development brand
  • Better understand the target audiences
  • Gain local media support
  • Launch internal marketing
  • Implement external campaign
Editor's note: A previous version of this article identified CSF Board Chairman Bill Miller as "a hedge fund guru"--a reference to William H Miller. This reference has been removed; the CSF chairman is William A Miller. SFR regrets the error.

 

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