Things are weird right now.
Last week St. Paul’s Mayor Carter gave his State of the City and Governor Walz his State of the State. Mayor Carter celebrated the work underway intended to drive a vibrant, sustainable, and innovative St Paul, while the Governor outlined plans for a second “Minnesota Miracle.” At the federal level, President Biden positions himself for reelection, advancing big government – and bigger spending. Meanwhile, Minnesota experienced a net migration out of the state in 2022. The state’s unemployment rate fell again to 2.8% in March, even as the private sector lost 6100 jobs. Nationally, we have strong labor market data, and yet 75% of Americans are worried about widespread job losses. And we are wrestling over increasing the national debt ceiling. Again (the national debt recently topped $31T for the first time in U.S. history, just 8 months after it crossed $30T).
I’m just not sure business is picking up what the politicians are laying down. Do you feel me?
Regarding the City: The Star Tribune listed 6 takeaways; worth reviewing. Mayor Carter’s top priority right now is the proposed St. Paul's 1% local sales tax proposal, which would collect nearly $1 billion for street and park maintenance over 20 years. To pass, the tax would need to be approved by the Legislature and St. Paul voters — neither of which are done deals. As you know, the Chamber has testified in opposition to the proposal, which currently is not included in the House’s tax plan unveiled last week. Also ahead this year is a shake-up at the City Council, with all 7 members on the ballot this fall and just 3 members seeking reelection.
Regarding the State: like many of you I’m sure, I follow Blois Olson. I appreciate his thoughtful analysis of any number of policy issues. He offered his takeaways that I thought were particularly interesting. I responded specifically to his comments: “the Governor definitely made a decision to double down on a very progressive agenda….There’s a sense among many that the bets on paying for childcare, a 5th tax tier, spending the surplus, are risky. If they work, it’s a ‘miracle’ for our economy.” That said, “we’ve had net migration out of the state…we are in a state of transition….a lot of people don’t know if it will work.” Ultimately, the Governor wants to out-spend the surplus and increase the state’s budget by 30% to a total of $71B in the next biennium, including spending that will come with financials “tails.”
I don’t have any answers today. I’m looking at economic indicators and responding to trends (reactions?) I’m seeing from within the business community. And, again, things are weird. When policy issues or the economy are in “transition,” when business is uncertain of what’s ahead, so many – under the “abundance of caution” approach – retract. Retreat. Hunker down. I’m seeing that response now. Economic indicators are stable, business activity actually surged in March, the PMI is over 53 now…yet many businesses are “ducking.” To avoid what, I’m not yet sure.
See you in the trenches,
Let’s Talk Real Estate
Another unanticipated impact of the pandemic and current economic uncertainty is ahead: real shifts in the commercial real estate market. As I look for landmarks, those that can offer at least a 5-year “near term” view, commercial real estate is a bit of a “canary in the coal mine.” Macroeconomic forces that include high inflation, interest rate hikes, increased regulations, and this new hybrid work environment have thrust us into uncharted territory. And the very real challenge is that both real estate leases and new commercial developments reflect decisions being made now, with tails that can extend 5, 10, or 30 years. All of which require betting on a future we don’t yet see clearly. So it’s important to pay attention to what’s happening there. I ask a lot of questions of developers, real estate brokers, property owners, and commercial tenants. How are landlords and tenants negotiating leases for office space, and where? Where are commercial developments still starting – or not? For what kind of client?
In the office leasing space: this year leases, renegotiated for a short term to get tenants through the pandemic, are being reviewed again for the next lease term commitments.
New developments: where are they starting (or not) and who’s funding them?
Traditionally, real estate investments perform well in a rising interest rate environment. But so much more is going on right now. Developers and business owners/tenants alike are needing to execute on strategy that feels like a moving target. Despite economic headwinds, the pace of change will not ease – I just don’t yet have a good sense of what that change will look like. Will keep you posted as I learn more.
See you in the trenches,
Today I’m going to encourage you to set aside some time to listen to someone else, on the topic of housing. In late March, The Minneapolis Fed Chair, Neel Kashkari, participated in a conversation moderated by Minnesota Housing Partnership’s Executive Director Anne Mavity. The conversation was fascinating and enlightening, as always, and I was particularly captivated by Chair Kashkari’s comments on barriers to building sufficient housing to meet the needs of Minnesotans. He describes it as, fundamentally, a supply problem: “we are simply not producing enough units, of all types, to meet the needs of families across our region.” And supply really matters for affordability. Based on research conducted with the Itasca Group, Kashkari could tell us that we need to produce 18K more units/year through 2030. That’s 30% above the current run rate. The key is to motivate private developers to do so. What gets in the way of that?
Kashkari went on to talk about extraordinary barriers, from communities resisting more people moving in, to regulations that make new development harder. The key regulatory barrier he discussed was rent control. He shared a chart comparing affordability to housing production, on which were plotted key regions within the 9th District. Key cities with rent control in place, such as San Francisco, Portland, and Boston (and MSP was in the mix as well), all reflect high cost/low supply. As Kashkari put it, rent control is SUCH an inhibitor to new supply coming online: “if we actually want to move the needle for working class families across Minnesota, we need to unleash a lot more supply. And every policy that I would look at, I would judge on, ‘is this going to help supply or not?’ And if it’s going to help supply, I’d give it serious consideration. If it’s going to be a barrier to supply, I’d be more cautious about that.”
The conversation continued across a wider range of topics, but this first really got my attention. Again, I encourage you to listen in!
See you in the trenches,
The Power of One
This past week I had a very interesting conversation with two female leaders from within the Hmong community. Among the topics we discussed was the desire and need for mentoring. Specifically, how to get more women – and more BIPOC women – into executive positions and Board rooms? How can we learn how to do it? This is not a new idea, of course, but I was captivated by the question, “What could WE do about this?” None of this is rocket science. It starts with relationship building, creating those “connections that count” which, as you know, is the cornerstone of all our work at the Chamber. More to come on this but today is a good day to reflect on this idea of mentoring. As we wrestle through big issues like systems change, policy change, economic change, we also have a most powerful opportunity for individual impact. The Power of One. One person, one moment, one conversation. And the beauty of one-on-one impact is that we can do it simply, can experience the benefits immediately, and can reap the rewards eternally.
I’m getting to the age at which I think about this kind of thing – is what I’m doing enough? Will I be proud of myself when I retire, when I look back at my life’s work? I submit to you that investments in one person at a time, through the Power of One, is the only way we can ASSURE ourselves of impact. Is the one thing we KNOW we can do, and we KNOW makes a difference. Who did I lift up? Can I think of at least one person’s life that is better because of me? The Power of One mindset can begin a revolution, one of connections, investments in others, helping others develop their own careers and lives. No matter your age, someone in your circle of influence needs you. Sometimes you’ll be the mentor, sometimes you’ll be the mentee. I know that’s true for me. I’ve pursued mentors with an unwavering diligence; and, as it turns out, I can add something to their lives as well. It becomes mutual.
Along that same vein, our March Lunch With Leaders, “March Mavericks,” was off the charts amazing. Over 140 people gathered to listen to 4 talented professional women talk about their journeys. My comments as I introduced those women: “if you are in the room and want a mentor, you have to ask. Truly amazing leaders, with a humble spirit, rarely know they are ‘mentor-worthy.’ You have to seek them out, tell them you’d like to develop a relationship with them, and then – with great discipline – schedule regular time with them.” And then, if someone calls YOU with such a request, lean into it! Both of you will be better for it, and we have much to teach one another.
On that note, if you admire a specific leader, a Power of One moment would be to nominate him or her for a HERBIE award! Nominations are open, in advance of our annual Foundation Luncheon on June 22. Don’t let a 5-minute nomination stop you from recognizing someone you admire! Link is HERE.
See you in the trenches,