DRAFT SOUTH BEND INVESTMENT PROSPECTUS A Platform for Action Prepared by NEW LOCALISM ADVISORS in collaboration with THE CITY OF SOUTH BEND Funded by ACCELERATOR FOR AMERICA SOUTH BEND INVESTMENT PROSPECTUS
CONTENTS 3 The Urban Investment Prospectus: Purpose 4 The Urban Investment Prospectus: Content 5 Geography of Opportunity Zones 6 Opportunity Zone Focus 7 Social and Economic Overview 8 Population Growth 9 City Employment Profile 10 Largest Non-Government Employers 11 Location of Largest Non-Government Employers 12 VC-Backed Companies Past Ten Years 13 VC-Backed Capital Invested by Primary Industry Sector 19 Opportunity Zones in South Bend 20 Typology of Opportunity Zone by Census Tracts (Methodology) 21 Typology Visualization by Census Tracts 22 From Census Tracts to Use, Location and Demography (Market Mental Map) 23 Building an Entrepreneurial Ecosystem 24 CBD and Innovation District 25 The Notre Dame Strategy 26 The Heartland Ventures Strategy 27 Transformative Capital Investments 14 Geography of Employment 15 Employment Growth 16 Public School Talent Pipeline 17 Key Takeaways from Quantitative and Qualitative Research: Strengths 18 Key Takeaways from Quantitative and Qualitative Research: Challenges SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 2
THE URBAN INVESTMENT PROSPECTUS: PURPOSE 1 2 3 Help city market its Opportunity Zones to local, regional and national investors Help city organize its assets to have maximum economic and social impact Help city organize stakeholders around unified vision of inclusive growth SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 3
THE URBAN INVESTMENT PROSPECTUS: CONTENT GROWTH Quantitative and qualitative dive into a city to discover its core growth assets and opportunities CAPITAL DEMAND A format for identifying investable projects and propositions INCLUSION Focus on human capital, job connections, and wealth creation PLACE MAKING Commentary on the essential must do s to re-knit spatial and social fabric INSTITUTIONAL CAPACITY Recommendations on institution building options to expedite growth and inclusion SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 4
GEOGRAPHY OF OPPORTUNITY ZONES POPULATION 2010 POPULATION 2016 % CHANGE SQ. MILES MSA 319,224 319,491 0.1% 970 City 101,168 101,735 1% 42 Zones 8,985 8,621 (4.1%) 4 South Bend, Mishawaka Metropolitan Area South Bend South Bend Opportunity Zones Source: US Census American Community Survey SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 5
OPPORTUNITY ZONE FOCUS 5 37 14% O-ZONE TRACTS SOUTH BEND TRACTS OF ALL TRACTS 8,621 101,037 9% O-ZONE POPULATION CITY POPULATION OF THE POPULATION Source: US Census American Community Survey SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 6
SOCIAL AND ECONOMIC OVERVIEW Metro, City, Opportunity Zones BLACK HISPANIC FOREIGN POVERTY MEDIAN BORN HOUSHOLD INCOME % ED BA+ % SOME COLLEGE % NO HS DEGREE % UNDER 18 % OVER 65 UNEMPLOYMENT (MARCH 2018) Metro 12% 7% 6% 17% $46,489 26% 30% 12% 24% 15% 3.7% City 27% 15% 9% 27% $35,758 24% 28% 17% 28% 12% 3.9% O-Zones 34% 18% 7% 27% $32,147 25% 25% 21% 21% 11% N/A State (IN) 9% 7% 5% 15% $50,433 25% 29% 12% 24% 14% 3.3% US 13% 17% 13% 15% $55,322 30% 29% 13% 23% 15% 4.1% Source: US Census American Community Survey SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 7
POPULATION GROWTH Cities with 2010 population 101,000 104,000 10% 9% 8% 7% % CHANGE IN POPULATION SINCE 2010 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% 2010 Daly City, California 2011 2012 Antioch, California 2013 Richmond, California Palm Bay, Florida Burbank, California South Bend, Indiana Erie, Pennsylvania Flint, Michigan 2014 2015 2016 Source: US Census American Community Survey SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 8
CITY EMPLOYMENT PROFILE 2015 COUNT 2015 SHARE 2002 COUNT 2002 SHARE DIFFERENCE IN SHARE Health Care, Social Assistance & Educational Services 13,653 26.3% 15,467 24.9% 1.4% Trade, Transportation and Warehousing 9,179 17.7% 11,687 18.8% (1.2%) Manufacturing 7,360 14.2% 9,152 14.7% (0.6%) Professional & Business Services 7,061 13.6% 7,422 12.0% 1.6% Accommodation and Food Services 4,015 7.7% 3,310 5.3% 2.4% Public Administration 3,024 5.8% 3,478 5.6% 0.2% Construction, Mining & Utilities 2,190 4.2% 3,238 5.2% (1.0%) Information 1,295 2.5% 1,493 2.4% 0.1% Finance and Insurance 1,201 2.3% 3,073 5.0% (2.6%) Source: U.S.Census Bureau, Center for Economic Study. Longitudinal Employer-Household Dynamics SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 9
LARGEST NON-GOVERNEMNT EMPLOYERS EMPLOYER TYPE OF BUSINESS APPROXIMATE NUMBER OF EMPLOYEES University of Notre Dame Beacon Health System Saint Joseph Health System Indiana University South Bend AM General Honeywell Press Ganey Liberty Mutual Insurance Higher education Health care Health care Higher education Manufacturing Manufacturing Health care measurement Insurance 5,802 4,683 2,626 1,277 800 700 694 650 Source: St. Joseph County Chamber of Commerce (August 2015) SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 10
LOCATION OF LARGEST NON-GOVERNMENT EMPLOYERS 1. University of Notre Dame 2. Beacon Health System 3. Saint Joseph Health System 4. Indiana University South Bend 1 3 5. AM General 6. Honeywell 6 2 5 7 4 8 7. Press Ganey 8. Liberty Mutual Insurance SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 11
VC-BACKED COMPANIES PAST TEN YEARS Capital Invested Deal Count $12.0M $11.2M 8 $10.0M 7 7 6 $8.0M $7.8M 5 $6.5M $6.0M 4 3 3 3 3 3 $4.0M 2 2 $2.0M $0.00M 1 $1.2M 1 $0.27M $0.82M 1 $0.5M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $0.7M 1 0 Source: Pitchbook SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 12
VC-BACKED CAPITAL INVESTED BY PRIMARY INDUSTRY SECTOR B2C Healthcare Information Technology $15.0M $12.0M $9.0M $6.0M $3.0M $0.00M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Pitchbook SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 13
GEOGRAPHY OF EMPLOYMENT 72% of those employed in South Bend live outside the city 64% of those living in South Bend work outside the city Source: U.S.Census Bureau, Center for Economic Study. Longitudinal Employer- Household Dynamics SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 14
EMPLOYMENT GROWTH 2% 0% % DIFFERENCE IN SOUTH BEND SINCE 2002-2% -4% -6% -8% -10% -12% -14% -16% -18% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: U.S.Census Bureau, Center for Economic Study. Longitudinal Employer-Household Dynamics SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 15
PUBLIC SCHOOL TALENT PIPELINE 36% Enrollment in High-Quality Early Childhood Programs (St. Joseph County) Years 2016 2017 26% 4th Graders Passing ISTEP Math & Lang Arts 26% 8th Graders Passing IREAD-3: Indiana Reading Evaluation and Determination Kindergarten ready is the percent of all screened incoming Kindergarteners who meet readiness to learn standards based on adaptive, cognitive, motor, communication, and social-emotional skills. ISTEP Math & Lang Arts 79% High School Cohort Graduation Rate N/A College and career readiness not available Source: Indiana Early Learning Advisory Committee SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 16
KEY TAKEAWAYS FROM QUANTITATIVE AND QUALITATIVE RESEARCH Strengths Five decades of population loss are leveling off and there is a general sense of optimism in the city Consistent job losses in the city have turned around during the past several years S&P recently assigned the city an AA rating; pension plan funding is manageable, and the city has a rainy day fund Notre Dame, with its global brand and $12 billion endowment is investing in new companies in the city; US News ranks Notre Dame #18 among national universities Potential competitive advantage around big data analytics given Notre Dame, IU South Bend, local fiber optics and power substation capacity Multiple innovation hubs (Innovation Park, Ignition Park, Renaissance District) emerged over past decade City has developed a strategy for managing abandoned properties Evidence of central business demand for multifamily market rate housing and modest number of new market rate sales housing City is engaged in regional and national networks (e.g. Central Indiana Partnership, MetroLab Network) and has potential to reach further into Indiana philanthropic capacity (e.g. Lumina, Lilly) SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 17
KEY TAKEAWAYS FROM QUANTITATIVE AND QUALITATIVE RESEARCH Challenges Employment and income growth has lagged behind many peer cities since the end of the great recession While city s finances are well managed, the fiscal base provides limited flexibility Notre Dame investments, while growing, are modest compared to the potential of university networks Traditional neighborhood community development entities, with a few exceptions, are not strong Limited local institutional philanthropy and modest per capita giving City needs a defined cradle to career strategy that includes a stronger community college presence There is no agreed upon post-industrial narrative regarding the growth of the city Entrepreneurial ecosystem remains weak in terms of aggregate activity Urban renewal, deindustrialization, and recession left swaths of city land vacant and abandoned SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 18
OPPORTUNITY ZONES IN SOUTH BEND SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 19
TYPOLOGY OF OPPORTUNITY ZONE BY CENSUS TRACTS (Methodology) Methodology Utilized Longitudinal Employer-Household Dynamics (LEHD) data aggregated to the census tract level Calculated the ratio of jobs in the census tract to residents in the census tract Calculated the % of jobs in each tract that are construction, manufacturing, transportation and warehouse. Tracts >25% are flagged as industrial Utilized national dataset of hospitals and colleges/universities. Flagged tracts with hospitals with 300+ beds and/or universities/ colleges with 5000+ students as anchor tracts Typologies LEVEL 1 Tier 1 Job Centers: Tracts with jobs to residents ratio >10 Tier 2 Job Centers: Tracts with Jobs to residents ratio 2-10 Mixed Jobs/Residential: Tracts with jobs to residents ratio.8 2 Residential: Tracts with jobs to residents ratio <.8 LEVEL 2 Anchor Presence: hospitals with 300+ beds and/or universities/colleges with 5000+ students as anchor tracts Industrial Presence: Tracts where 20% of the jobs are classified as construction, manufacturing, transportation and warehouse with at least 1,000 jobs SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 20
TYPOLOGY VISUALIZATION BY CENSUS TRACTS Mixed Residential Tier 2 Job Center Tier 1 Job Center Anchor Presence Industrial Presence SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 21
FROM CENSUS TRACTS TO USE, LOCATION AND DEMOGRAPHY (Market Mental Map) The selection of the zones in South Bend provides an important opportunity to create an integrated CBD & Innovation District and increase the number of residential units throughout the area. In the case of South Bend, the equity opportunity requires accelerating skills throughout K-12 and career training including a re-energized Ivy Tech Community College. CBD & Innovation District SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 22
BUILDING AN ENTREPRENEURIAL ECOSYSTEM SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 23
CBD AND INNOVATION DISTRICT University of Notre Dame Notre Dame University of Notre Dame University of Notre Dame! " Holy Holy Cross College " Innovation Park Innovation Park Largest Employers Colleges/Universities Hospitals Hubs VC-Backed Companies! K Beacon Health System CBD & Innovation District CBD! AM General Brown Mackie College South Bend Brown Mackie College-South Bend "! Press Ganey Union Train Station!" Indiana Unversity South Bend Indiana University South Bend Ignition Park Ivy Tech Community College Northcentral Ivy Tech Community College-Northcentral " Source: Pitchbook SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 24
THE NOTRE DAME STRATEGY Facts Between fiscal year 2006 and fiscal year, 2016 university research spending grew from $78 million to $202 million From fiscal year 2011 through fiscal year, 2016 new patent applications grew by 160%, with 16 startups emerging based on licensed technology Notre Dame is investing in Innovation Park in South Bend, where 29 companies are currently operational and 15 companies have secured outside equity financing. There are 38 Notre Dame faculty working there. Strategy The Notre Dame business development and investment strategy consists of faculty research and commercialization; a strong alumni business and technology network & an enterprise fund made up of alumni investors The Notre Dame strategy is to use its network and capital to both import and build a local entrepreneurial ecosystem adapting the successful University of Utah model Ignition Park is home to Notre Dame s Turbo Machinery Lab (a $36 million partnership between Notre Dame and General Electric), drawing companies that support the aerospace industry SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 25
THE HEARTLAND VENTURES STRATEGY Facts The Midwest is underrepresented in terms of early stage investing and startup company activity The Midwest is rich in terms of mature companies that are profitable and may use smaller, entrepreneurial companies as part of their supply chain or as an operations vendor Strategy Heartland Ventures is a new venture capital fund that functions as a match maker between start up companies on the west coast that have received seed capital and have revenue and strong mature companies in the Midwest. They invest in companies that relocate to the Midwest (including South Bend) to gain significant customer relationships with local companies, thereby building their revenue. As with the Notre Dame strategy, Heartland is simultaneously importing and building a local ecosystem: functioning as a connector between mature companies and startups, west coast capital and local capital SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 26
TRANSFORMATIVE CAPITAL INVESTMENTS Philanthropy $250,000 Master Plan for the integrated CBD and Innovation Zone 1,000,000 to build an effective cradle to career strategy including R&D with high schools and Ivy Tech Real Estate Development (over next ten years) $50 million High risk acquisition and rehabilitation financing in support of new retail and multi-family housing Business Investment (over next ten years deal flow may come from zones in multiple mid-west cities) $50 million Early stage financing $100 million Growth Fund SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 27
SOUTH BEND INVESTMENT PROSPECTUS NEW LOCALISM ADVISORS 28