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6 <br />irreplaceable one. A Smart Growth approach that does not include historic preservation <br />high on the agenda is stupid growth, period. <br />Heritage conservation is vital to sustainable development, but not just on the level of <br />environmental responsibility. Remember that the second component of the sustainable <br />development equation was economic responsibility. So let me give you some examples in <br />this area. <br />A frequently underappreciated component of historic buildings is their role as natural <br />incubators of small businesses. It isn't the Fortune 500 who are creating the net new jobs in <br />America. 85% of all net new jobs are created by firms employing less than 20 people. One <br />of the few costs firms of that size can control is occupancy costs -rents. In both downtowns <br />but especially in neighborhood commercial districts a major contribution to the local <br />economy is the relative affordability of older buildings. It is no accident that the creative, <br />imaginative, small start up firm isn't located in the corporate office "campus" the industrial <br />park or the shopping center -they simply cannot afford the rents there. Older and historic <br />commercial buildings play that role, nearly always with no subsidy or assistance of any <br />kind. <br />Pioneer Square in Seattle is one of the great historic commercial neighborhoods in America. <br />The business management association there did a survey of why Pioneer Square businesses <br />chose that neighborhood. The most common answer? That it was a historic district. The <br />second most common answer? The cost of occupancy. Neither of those responses is <br />accidental. <br />While I'm often introduced as a preservationist, what I really am is an economic <br />development consultant. At the top of the list for economic development measurements are <br />jobs created and increased local household income. The rehabilitation of older and historic <br />buildings is particularly potent in this regard. As a rule of thumb, new construction will be <br />half materials and half labor. Rehabilitation, on the other hand, will be sixty to seventy <br />percent labor with the balance being materials. This labor intensity affects a local economy <br />on two levels. First, we buy an HVAC system from Ohio and lumber from Oregon, but we <br />buy the services of the plumber, the electrician, and the carpenter from across the street. <br />Further, once we buy and hang the sheet rock, the sheet rock doesn't spend any more <br />money. But the plumber gets a hair cut on the way home, buys groceries, and joins the <br />YMCA -each recirculating that paycheck within the community. <br />Many people think about economic development in terms of manufacturing, so let's look at <br />that. Recently I was in Tennessee so I offer that state's numbers to you as a typical example. <br />For the average manufacturing concern in Tennessee for every million dollars of production <br />28.8 jobs are created. A million dollars spent in new construction generates 36.1 jobs. But <br />that same million dollars in the rehabilitation of an historic building? 40 jobs. <br />A million dollars of manufacturing output in Tennessee will add, on average about $604,000 <br />to local household incomes. A million dollars in new construction -- $764,000. But a million <br />dollars of rehabilitation? Over $826,000. Now of course the argument can be made, "Yeah, <br />