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29 Apr 2014

A Major Economic Impact: A New Study Predicts Coachella Valley's iHub Will Bring Billions to the Area Over Two Decades

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Palm Springs Mayor Steve Pougnet, on the Coachella Valley iHub: “We invested money when times were tough—and we’re now beginning to see the fruits of our labor.” Palm Springs Mayor Steve Pougnet, on the Coachella Valley iHub: “We invested money when times were tough—and we’re now beginning to see the fruits of our labor.” Jimmy Boegle

When the pain of the Great Recession was just beginning to be really felt in 2009, Brian McGowan—then-Gov. Arnold Schwarzenegger’s deputy secretary for economic development and commerce—approached Coachella Valley leaders about developing an innovation hub.

“We didn’t really have a clue what it meant,” said Palm Springs Mayor Steve Pougnet at a news conference on March 31.

Spurred by McGowan, Pougnet—along with Cathedral City Mayor Kathy DeRosa and then-Desert Hot Springs Mayor Yvonne Parks—formed the Coachella Valley iHub. After the three cities chipped in, the iHub became one of the first six in California—there are now 16 in the state—and it’s starting to pay dividends: 21 tech-related companies are currently part of the Coachella Valley iHub.

“We do have the top iHub in the state,” said Tom Flavin, the president and CEO of the nonprofit Coachella Valley Economic Partnership, which is now working with the three founding cities (as well as the cities of La Quinta, Palm Desert and Indio, plus Riverside County) on the iHub.

More dividends are coming, too: According to a study released at that March 31 news conference, the iHub is projected to have a $12.5 billion impact on the Coachella Valley between 2017 and 2036. Yes, that’s billion with a “b.”

By 2036, the study—by research economist John Husing—estimates that 81 companies involving clean/renewable energy, technology, health/medicine or advanced manufacturing will be operating in the valley as a direct result of the iHub. A projected 3,544 new jobs will be in place at those companies in 2036, with a total payroll of $174 million.

The iHub currently includes companies working at the CVEP business center, and at the iHub Accelerator Campus, located near the Palm Springs International Airport. Leaders are also hoping to build a second iHub campus, for advanced manufacturing, in the East Valley with the assistance of a federal grant.

“We have a lot of work ahead of us, but the economic payoff is significant,” Flavin said.

Joe Wallace, the managing director of the Coachella Valley iHub, explained that Husing’s study makes some fairly conservative assumptions. It assumes that seven companies will “graduate” (i.e. go out on their own from the iHub) each year, with an average of 15 employees each; half of those companies are projected to go out of business. The bulk of the surviving companies are assumed to have 10 percent job growth per year, with expansion stopping at nine years and 35 employees; every fifth company is presumed to keep expanding beyond 35 employees, and every 10th company’s job growth is projected to be 20 percent per year. Each job’s pay is modestly projected at $48,900—the median salary of an Inland Empire manufacturing worker in 2013.

The development of an iHub is especially important in the Coachella Valley, elected officials say, because the valley’s economy is currently over-dependent on tourism—a fact which reared its ugly head during the Great Recession.

It’s also important because the valley currently lacks a lot of good-paying jobs outside of the service and tourism sector. Today, many young people who grow up in the valley are forced to leave due to a lack of work.

“Most of the kids who grow up here would like to stay,” Wallace said.

Silicon Springs Enterprises—a company that partners with and helps develop tech companies that want to do business in the Coachella Valley—was the first company to graduate from the iHub. It’s a great example of a new local company that has big plans—and big potential.

“We want to create another Silicon Valley, one that’s smaller and more efficient, in the desert,” said Joel Fashingbauer, Silicon Springs Enterprises’ president and chief operating officer, at one of the company’s regular Desert Tech Meetups, as reported by the Independent in December.

At the March 31 press conference, Pougnet patted himself and his fellow mayors in Cathedral City and Desert Hot Springs on the back for taking the initial steps to form the Coachella Valley iHub in 2009 and 2010.

“We invested money when times were tough—and we’re now beginning to see the fruits of our labor,” he said.

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