by Amanda Rohrer
December 2015
In June of 2014 the Green Line, a light rail train connecting downtown Minneapolis and downtown Saint Paul, opened to the public after several years of construction and more years of planning and debate. Stakeholders hoped for economic benefits beyond making transportation more efficient, but measuring the economic effects is a challenging proposition. It's difficult to distinguish analytically between effects resulting from the construction or running of a train and those of the economic cycle or broader industry effects. For example, major public investment occurred in conjunction with Green Line route selection: Wilder Research, Twins Ballpark, Vikings stadium, Saints Ballpark, Union Depot remodel, and the Gopher Stadium. These are substantial expenditures with highly visible and well-used end products that may not have occurred without the concurrent light rail development. But because government bodies have a significant role, different parties may weight their economic significance differently. This analysis is a survey of the employment data near the Green Line - it endeavors to relate growth in a narrowly defined region to the period of construction, but is not comprehensive enough to determine if the Green Line is a success or failure from an economic standpoint.
In the Labor Market Information office our primary data sources focus on employment and business establishment data, therefore this analysis will look at what changes we've seen in the available data and what economic implications those may have. There are limitations to these metrics - while businesses rarely add employment unless they're thriving, the role of workers varies quite a bit by industry. Some businesses are very sensitive to business cycles and location factors, others are largely stable. The timing of the Green Line construction occurred simultaneously with economic recovery, and isolating infrastructure effects from economic cycle effects is tricky. The location of the Green Line connects two downtowns; there is no way of knowing if growth is a result of boom in one or both of them or related to transit accessibility.
There is a natural comparison between the Blue Line and the Green Line, but the two are very distinct. The Blue Line is designed much more for park and ride, with destination connections like airport, MOA and downtown Minneapolis. There is broad spacing between stops, and some stretches of the line are sparsely populated. The Green Line is more like a streetcar, with stops roughly every half mile, and connects both downtowns along an established commercial corridor. Instead of expansive parking lots, there is on-street metered parking, and rather than office parks and destination retail, there is a mix of small and large employers and different economic uses of property.
For analysis purposes there are six geographic summary areas. The first is the area that falls within one half-mile of any station on the Green Line - roughly the area that people would walk to after riding the train. This area is indicated by line fill. The half-mile zone has been further sub-divided into the area near stops that already existed as part of the Hiawatha (now Blue) Line and the area near newly opened stops. By separating the two we may be able to compare employment trends that are a result of outside factors with those that are a product of new development. While Downtown Minneapolis is unique in the state for the concentration and mix of companies, its closest comparison is downtown Saint Paul, so while matching the areas up is imperfect, it's better than any other option. The new area is indicated by vertical lines and the old area is horizontal lines in the first geographic summary area.
A larger buffer zone of one mile is the next area, designated by dots. It includes all of the half-mile zone, but is larger to pick up trends that reach a little further. The 7-county metro region is also included as well as the statewide totals for comparison. The metro and the state are areas published on our website and are aggregated differently than the smaller areas because of the way the data are collected and aggregated. Because they're so large, this is unlikely to have a dramatic effect on this analysis, but is worth noting.
For each area, data were compared for three time periods: second quarter 2014, the last quarter before the Green Line opened, second quarter 2015, the period where the Green line had been opened for a year, and second quarter 2010, before construction began. Comparing all second quarter data should minimize seasonal effects.
Although the concept of a business establishment may seem very straightforward, the way it's tracked and defined can vary quite a bit between data sources. In the Quarterly Census of Employment and Wages (QCEW), which is built on Unemployment Insurance (UI) data and uses similar definitions, a business is designated by a UI Account number. For each account number, there are also reporting units. Generally separate locations of the same business are assigned different reporting units, so for the purposes of this analysis a business establishment is each distinct UI Account and Reporting Unit combination. In some cases particularly large businesses will report departments under different reporting units, even if they're housed in the same building complex. There are also occasional oddities where a business may be reporting incorrectly, not breaking out data by location. While these can create problems in analyzing very small areas, for the size of these areas the aggregate counts should be reliable.
Before, during, and immediately after construction various analyses of the project were published. Each report has a different aim and scope. This one is no different. LMI largely tracks employment, and the goal of this report is to track changes to employment and industry mix in the broader Green Line region.
Because government employment is insulated against the effects of the construction the counts of businesses used are only Private establishments. Government agencies are excluded.
During construction the number of establishments along the Green Line dropped precipitously. The entire metro was struggling, with a decline of 2 percent in the number of firms, but the new portion of the line saw a decline of 4.5 percent of firms or 119 fewer establishments located in the area. While some may have moved temporarily or permanently this is a significantly larger drop than in the metro as a whole. Near the established stops, the number of firms remained stable. In the larger one-mile area, declines were on par with metro-wide change, indicating that construction took a measurable toll on the businesses operating in the near vicinity of the Green Line.
Interestingly, the effects lingered beyond the construction period. The change in the number of establishments fell another 2.4 percent, 61 establishments, from second quarter 2014 to second quarter 2015 in the construction zone. The zone around the established stops again fared better, falling only 0.7 percent or 21 establishments. Metro-wide the number of establishments fell 1 percent, and the larger one mile zone fell 1.7 percent. While it appears that the particular time period was a little rough on the urban center generally, the construction zone did not see an immediate boom in the number of new businesses as soon as the rail line opened. It should be noted, however, that development takes time, and some planned new businesses may not yet be opened even a year later.
| Table 1: Private Establishments, Growth through Time | |||||
|---|---|---|---|---|---|
| - | 2010 | 2014 | 2015 | 2010-2014 % Change | 2014-2015 % Change |
| Old | 3,116 | 3,115 | 3,094 | 0.0% | -0.7% |
| New | 2,657 | 2,538 | 2,477 | -4.5% | -2.4% |
| Half mile | 5,773 | 5,653 | 5,571 | -2.1% | -1.5% |
| One mile | 8,053 | 7,888 | 7,756 | -2.0% | -1.7% |
| 7 County Metro | 77,789 | 76,209 | 75,429 | -2.0% | -1.0% |
| Statewide | 154,737 | 156,892 | 156,823 | 1.4% | 0.0% |
Despite the declines in the number of establishments, employment grew through this time period. Statewide, there was a 7.6 percent increase from second quarter 2010 to second quarter 2014, and it was mirrored with similar growth in the 7 County Metro and near the established Blue Line stops. Predictably, the construction zone saw only a 2.7 percent increase, substantially lower than the state and comparison area. The one-mile zone also saw less growth - only 4.4 percent (10,653 jobs) for the period. This may be a result of the particular industry mix in that region or may be a result of delayed development because of the construction.
| Table 2: Total Private Employment, Growth through Time | |||||
|---|---|---|---|---|---|
| - | 2010 | 2014 | 2015 | 2010-2014 % Change | 2014-2015 % Change |
| Old | 109,094 | 116,954 | 117,982 | 7.2% | 0.9% |
| New | 77,355 | 79,419 | 81,742 | 2.7% | 2.9% |
| Half mile | 186,449 | 196,373 | 199,724 | 5.3% | 1.7% |
| One mile | 240,980 | 251,653 | 255,685 | 4.4% | 1.6% |
| 7 County Metro | 1,346,564 | 1,450,454 | 1,479,515 | 7.7% | 2.0% |
| Statewide | 2,197,330 | 2,364,880 | 2,412,004 | 7.6% | 2.0% |
In the period immediately following construction, the first year the Green Line was operating, private employment actually outpaced growth in all other areas of analysis. Private employment grew 2.9 percent (2,323 jobs) in the former construction zone, compared to 0.9 percent growth around the established stops and 2.0 percent in the metro and statewide.
The change in what industries are most represented in our areas of analysis also illuminates some trends. For Table 3 employment in all ownerships, which includes both private employment and government employment, was used. The two largest industries in the construction zone are Educational and Health Services and Public Administration. With 40.9 percent and 21.9 percent of current employment respectively, these two both dwarf all other industries and are substantially more significant to the region than in the metro as a whole, where they make up 26.0 percent and 7.4 percent of employment. With the bulk of both the Saint Paul city government and State Capital employment included in the area, the high proportion of Public Administration employment is to be expected. Hospitals and colleges, such as the University of Minnesota's main campus, that serve the broader region also like the central location of the line both for their employees and their clients, so those are well-represented as well.
The industries that are most under-represented relative to the metro as a whole are Construction, Manufacturing, and Professional and Business Services. Construction and Manufacturing tend to need large areas that are zoned differently than the commercial areas along the Green Line, and the industries tend to be less in need of a central location since customers are unlikely to come to their offices. Professional and Business Services is located either in the prestige area in downtown Minneapolis or in the suburbs where businesses can build a corporate headquarters to their specifications. This is reflected in the proportion for the zone around established Minneapolis stops - at 29.4 percent of employment, Professional and Business Services is substantially more significant than in the metro as a whole (14.8 percent).
| Table 3: Employment by Industry for Selected Areas, Second Quarter 2010, Second Quarter 2014, Second Quarter 2015 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industry | Old | New | 7 County Metro | |||||||||
| 2015 | 2010% | 2014% | 2015% | 2015 | 2010% | 2014% | 2015% | 2015 | 2010% | 2014% | 2015% | |
| Natural Resources and Mining | 1 | 0.0% | 0.0% | 0.0% | 24 | 0.0% | 0.0% | 0.0% | 4,031 | 0.3% | 0.2% | 0.2% |
| Construction | 4,076 | 2.8% | 2.6% | 2.7% | 2,128 | 1.2% | 1.3% | 1.3% | 71,790 | 3.1% | 3.5% | 3.8% |
| Manufacturing | 711 | 1.2% | 0.7% | 0.5% | 2,491 | 1.7% | 1.5% | 1.6% | 168,426 | 9.0% | 8.9% | 9.0% |
| Trade, Transportation,and Utilities | 11,661 | 9.1% | 7.8% | 7.6% | 9,291 | 5.9% | 5.6% | 5.8% | 323,498 | 17.6% | 17.3% | 17.2% |
| Information | 9,440 | 6.6% | 6.0% | 6.2% | 5,220 | 3.3% | 3.2% | 3.3% | 41,559 | 2.5% | 2.3% | 2.2% |
| Financial Activities | 28,320 | 18.4% | 18.1% | 18.6% | 11,626 | 6.3% | 7.5% | 7.3% | 136,748 | 7.5% | 7.2% | 7.3% |
| Professional and Business Services | 44,832 | 27.3% | 29.9% | 29.4% | 16,137 | 10.7% | 10.4% | 10.1% | 277,741 | 14.3% | 14.8% | 14.8% |
| Educational and Health Services | 13,409 | 9.4% | 9.5% | 8.8% | 65,429 | 40.1% | 40.4% | 40.9% | 489,471 | 25.8% | 26.1% | 26.0% |
| Leisure and Hospitality | 14,602 | 9.1% | 9.1% | 9.6% | 9,660 | 6.2% | 5.6% | 6.0% | 172,781 | 9.0% | 9.2% | 9.2% |
| Other Services | 2,598 | 1.6% | 1.8% | 1.7% | 2,998 | 2.2% | 2.0% | 1.9% | 56,400 | 3.0% | 3.0% | 3.0% |
| Public Administration | 22,844 | 14.5% | 14.6% | 15.0% | 35,152 | 22.4% | 22.4% | 21.9% | 138,828 | 7.9% | 7.4% | 7.4% |
Perhaps even more important than the industry mix overall is how it has changed through time. In the construction zone the share of employment in Professional and Business Services has been on the decline, falling from 10.7 percent of employment to 10.1 percent. Leisure and Hospitality and Trade, Transportation, and Utilities both fell in 2014 but bounced back to nearly 2010 levels by 2015. Since Leisure and Hospitality includes restaurants, which were likely very sensitive to being made inaccessible by construction, this trend is a good sign. Financial Activities had a reverse trend, but that is likely more reflective of the declines elsewhere, since Financial Activities are larger businesses in this area and are somewhat insulated against construction effects. Educational and Health Services, the largest industry in the area by a large margin, has been on a moderate growth trajectory and is driving the overall gains present in the area.
Although development continues near the Green Line, early indications are that employment in the region is not suffering, but it is changing. While before there was room for a mix of industries and a number of smaller businesses, the businesses that came out of the construction period most strongly were in the Educational and Health Services industry, which tend to be hospitals and other large employers. Public Administration also fared well despite the construction. In some respects this is a trend we'd expect based on our comparison area in downtown Minneapolis - independent of transit and construction projects, the region is also heavily weighted toward employment in Professional and Business Services, an industry that is similar to Education and Health Care in the area, since they're larger establishments and in a centralized location, and government employment. Given that these are the city centers of the largest cities in the largest metro of the state, employment for industries for which centralization is important will naturally be strongest in the area.
Following the growth of this area for a longer time will be necessary. It's difficult to say if University Avenue will bounce back to its former retail mix or if the train will precipitate the downtowns growing together.
