By Jim Hemberry and Mark Lamb
The Puget Sound region has become synonymous with world-class software development. Our region’s software cluster represents nearly a quarter of all wages paid in this field in North America.
But beyond this important concentration, other communities around the state are increasingly reliant on all sectors of the innovation economy for jobs, economic activity, and tax revenues.
Take Bothell. As the epicenter of Washington’s biomedical device industry, Bothell’s office parks are filled with biotech, biomedical, and medical device companies producing some of the most innovative and life-saving products used in hospitals and clinics around the world. Its Innovation Partnership Zone leverages public sector resources to incubate startups, develop training programs, and lure top talent.
East of the mountains, the small town of Quincy has diversified well beyond its traditional agricultural base. Within roughly three square miles, Quincy is home to six major data centers that digitally send and receive millions upon millions of retail transactions, financial records and other data files daily.
These developments haven’t just happened. In Bothell’s case a fertile technology climate has been improved by leveraging private investments with strategic public collaboration. Additionally, the University of Washington Bothell continues to expand, this year establishing its School of Science, Technology, Engineering, and Mathematics (STEM).
In Quincy, strategic tax incentives were a catalyst for data center development. From 2005-2007, when these incentives were first enacted, Microsoft, Yahoo, and Intuit constructed the initial phases of their data centers there. When the state’s Department of Revenue later ruled that these companies wouldn’t qualify for the sales tax exemptions on which they’d planned, they announced that they would have to scrap plans for additional phases and instead look elsewhere for more supportive construction and operating environments.
The Legislature then enacted new incentives specifically designed to promote data center development in rural Washington. Shortly thereafter, Microsoft and Yahoo were back, constructing additional phases of their existing centers. Dell, Sabey and Vantage also began constructing new facilities in the area.
Great jobs have been created, first to construct and now to operate local data centers. Local taxes increased by approximately 400 percent and the state collected an estimated $60 million-$70 million more from this additional economic activity.
The lesson is clear: if you want more of something, you provide incentives to support that activity. Remove the incentives and you’ll get less of the desired activity. It’s basic economics.
Washington is fortunate to have a dynamic technology industry sector which helps drive the state economy. Washington must actively work to create and maintain a supportive environment that enables entrepreneurial people and companies to convert their ideas into marketable new products and services.
That’s why Bothell, Quincy and 15 other cities formed the Technology Cities Coalition. Large and small, east and west, we are united by the crucial role that technology and innovation play in our local economies. Our effort complements the recently created Information Technology Coalition. Our two groups’ shared objectives are to build broader recognition of the benefits technology employers bring and to support public policies that allow innovative companies to continue expanding in Washington.
One important step is to renew tax incentives that spur research and development investments across the state, and others that help rural Washington compete for data center facilities and jobs. These incentives work.
Statewide information technology-related employment, spurred in part by these incentives, has grown approximately eight times as fast as the underlying economy over the past two decades. The industry now accounts for 27 percent of Washington jobs. Taxes paid by the industry are up 318 percent since incentive enactment in 1994, four times the growth of the overall economy.
Another key issue is education. For most tech employers, the most critical element for success is a highly trained and skilled workforce. But a recent study found that Washington has 25,000 jobs — 80 percent in technology and health care — that can’t be filled because potential employees lack the required skills. So the state must continue to enhance its K-12, higher education and workforce training programs and prioritize these investments in the budget.
Ensuring Washington’s economic vitality means keeping our eye on those sectors driving economic growth and making strategic public investments in our future — in targeted tax incentives and in human capital. The rewards are substantial — more jobs, more economic activity and more tax revenues at both state and local levels.
Jim Hemberry is mayor of Quincy and Mark Lamb is mayor of Bothell. Their cities are founding cities in the Washington’s Technology Cities Coalition. Other member cities include: Bellevue, Bellingham, Camas, Kennewick, Kirkland, Redmond, Renton, Richland, Sammamish, Seattle, Spokane, Tacoma and Vancouver.