City Controller Alan Butkovitz, fresh off a triumphant re-election campaign, wasted little time in jump-starting his third term by announcing a plan to create 4,000 jobs.
Butkovitz contends the city could create those jobs through vigorous collaboration among the city’s 18 colleges and universities and the 16 major hospitals. In his plan, Butkovitz said that if these anchor institutions increased their spending by 25 percent, it could generate $642 in annual local spending and create $14 million in new tax revenue.
“If anchor institutions spend more of their non-payroll spending with local vendors, the economic impact of their spending will be greater. This is because more of the economic activity associated with their spending will take place within Philadelphia, thus benefitting Philadelphia vendors and supporting Philadelphia jobs,” read a portion of the “Survey of the Current and Potential Impact of Local Procurement by Philadelphia Anchor Institutions” report. “To provide some sense of the magnitude of additional impact associated with more localized spending by anchor institutions in Philadelphia, it is assumed that of the amounts currently spent with non-local vendors, 25 percent can be shifted to local vendors. In other words, if anchor institutions spend 40 percent with local vendors for a particular expenditure category (i.e. 60 percent with non-local vendors), then it is assumed that that can be increased to 55 percent (i.e. one-quarter of the 60 percent spent with non-local vendors, or 15 percent, is shifted from non-local vendors to local vendors).”
Butkovitz’ report forecasts that these institutions would generate the added jobs in three main spending avenues: $283 million through manufacturing, $192 million in real estate management and liquidation and lastly, $41 million in professional services and management.
The report, “Survey of the Current and Potential Impact of Local Procurement by Philadelphia Anchor Institutions,” also noted that if anchor institutions spend more of their non-payroll spending with local vendors, the economic impact of their spending will be greater.
“This is because more of the economic activity associated with their spending will take place within Philadelphia, thus benefitting Philadelphia vendors and supporting Philadelphia jobs. If it is assumed that of the amounts currently spent with non-local vendors, 25 percent can be shifted to local vendors, then anchor institutions will now spend $3.38 billion with local vendors (up $640 million from $2.74 billion), which is 64 percent of their total spending (up 12 percentage points from 52 percent). With this more localized spending comes a higher level of economic impact in Philadelphia: a total expenditure impact of about $5 billion per year, supporting about 32,000 jobs and generating over $100 million in annual tax revenues. In other words, more local [activity] in procurement by anchor institutions would yield meaningful economic gains for Philadelphia,” read a portion of the report. “Based on this data source and methodological approach, an estimate can be made of the amount, composition, and local [activity] of spending by anchor institutions in Philadelphia. It is estimated that anchor institutions in Philadelphia have a total annual operating budget of about $14 billion, of which about 38 percent, or $5.3 billion, is non-payroll spending and therefore represents procurement opportunities for which a local vendor may be used.
“Of that $5.3 billion in annual procurement opportunities, currently about 52 percent, or $2.7 billion, is with local vendors. This is a significant amount of potential and actual economic opportunity for Philadelphia-based businesses.”
Butkovitz said similar anchor institution-municipality plans are already in effect in Cleveland, Baltimore and Detroit that have already reaped rewards for those cities.
“This is a real and serious initiative for the city of Philadelphia. The local government’s role would be to coordinate and build relationships, to assist with financing enterprises and to create incentives for firms to locate here to meet the anchor demand,” Butkovitz said. “It’s happening in other cities that have far fewer resources and world-class institutions than we have in Philadelphia. We can establish the workings and agreements of this program now and then reap the benefits for years to come.”
Contact staff writer Damon C. Williams at (215) 893-5745 or email@example.com.