Chattanooga smart city research tops $110 million; MIT economist praises public investment in city

Staff Photo by Dan Henry / The Chattanooga Times Free Press- 5/7/14. EPB employees work in the all-new, state-of-the-art Distribution Center designed to compliment the citywide Smart Grid and fiber optic network.

More than two thirds of all research funds in America are spent in a handful of U.S. coastal and big cities, leaving the rest of the country outside of most of the technology boom and the high-paying jobs it generates.

But Chattanooga is trying to shift that direction and an MIT economist who helped author a new book on promoting innovation sees Chattanooga as a prime example of what the federal government can do to boost America's economy.

Capitalizing on Chattanooga's high-speed internet connections, a coalition of government, university, business and nonprofit agencies formed 16 months has succeeded in capturing $110 million of federal research projects. Backed by grants from the National Science Foundation and working with the Oak Ridge National Laboratory and others, the Chattanooga Smart Community Collaboration is exploring and applying new technologies in energy, health and traffic services, among other research initiatives.

Dr. Jonathan Gruber, a Ford professor of economics at MIT who co-authored a new book on Jump Starting America, thinks mid-sized cities like Chattanooga should get far more in federal research funding and, if they do, the economic gains would more than pay for the investment. Gruber suggests cities like Chattanooga should compete in a new federal research initiative to provide up to $100 billion a year, or $1 trillion over the next decade, to offer R&D programs and to create new hubs outside of Silicon Valley and research centers like Boston where the cost of living is far higher.

Despite the hefty taxpayer price tag for the proposed R&D effort, Gruber said as a share of the total economy, such publicly funded R&D would still be only about 1.1% of the Gross Domestic Product. That's up significantly from the current 0.6% of GDP spent on government research but still only about half the 2% share of GDP the federal government spent from World War II until the 1960s to fund military preparedness, the space race and the early stages of computer technology.

"The U.S., which once led the world in R&D spending and development, has fallen to No. 13th in such spending," Gruber said.

photo Photo by Dave Flessner / Dr. Jonathan Gruber, second from left, talks about the advantages of federally funded R&D during a forum in Chattanooga along with, from left, Deb Socia, left, president of The Enterprise Center, EPB President David Wade, Mayor Andy Berke and University of Tennessee at Chattanooga Deputy Vice Chancellor Reinhold Mann.

The MIT economist said the drop in government research is one of the reasons the U.S. is not maintaining its lead in some new technologies and why the GDP, which grew historically at 3% or more in the 1950s and 1960s, slowed to only a 2.1% growth rate last year.

Gruber said the major breakthrough technologies that are propelling the U.S. economy today, including the Internet, computers, transistors, satellite technology, nuclear power and the Human Genome Project, all began with federally funded R&D.

Privately funded research will pay for applying new technologies to commercial ventures, Gruber said. But such investors are usually wary about paying for basic, pioneering scientific discoveries.

Gruber also said most of the venture capital is concentrated in a few cities, "which furthers the destructive division and inequality" among different regions of the country and among different jobs and workers.

The MIT study identified 102 cities, including Chattanooga which ranked No. 96 in his study, where there is sufficient size, research capability and an educated workforce but affordable home prices and cost of living to support more R&D activity. Gruber suggests such cities compete to create new tech hubs around the country.

"Chattanooga is great example of the potential success of such an initiative," Gruber told community leaders during a forum Thursday night at The Enterprise Center, the city-backed nonprofit coordinating the research collaborative. "I wish I would have included Chattanooga in my book."

Gruber said the $226.8 million investment made in building a fiber network by the city-owned electric utility EPB in 2009 helped make Chattanooga the first "Gig City" in the Western Hemisphere and provided the impetus for the downtown Innovation District. About half of the initial cost for building that smart grid was paid for with a $111.6 federal grant to EPB under the stimulus package adopted following the Great Recession a decade ago.

A study by University of Tennessee at Chattanooga Economist Benton Lobo found that EPB's Gig service helped add at least 2,800 jobs and pumped an extra $865.3 million into the local economy in just its first four years by cutting power outages, improving data connections, lowering power bills and attracting businesses to the self-described "Gig City." Lobo is now updating the economic impact of the Gig service and smart grid after 10 years and the benefits are expected to be far higher.

Chattanooga Mayor Andy Berke, who frequently touts Chattanooga as "a city of creators," has tried to build upon the Gig City potential by making Chattanooga the first mid-sized U.S. city to establish an Innovation District in 2015 and by funding The Enterprise Center to find way to promote and recruit more research and startup companies.

"Chattanooga is rapidly becoming America's living laboratory for smart city research," Berke said. "By combining some of the our nation's most advanced smart city infrastructure with expertise ranging from autonomous vehicles development and healthcare delivery to freshwater conservation and entrepreneurship, Chattanooga is emerging as a singular location for integrated research and testing new technologies."

Berke endorsed Gruber's call for more federal research and education support, which he said "could turn the spark of innovation we've started here into an inferno" of economic activity.

Even without such a major initiative, EPB, Erlanger Health System, the Tennessee Aquarium, CO.LAB and the University of Tennessee at Chattanooga have secured a variety of federal grants for research into ways to improve traffic flow, reduce energy use and improve both human and aquatic life.

Hamilton County Mayor Jim Coppinger said EPB's high-speed internet allows different STEM schools to connect with 4K microscopes "to provide our students with access to cutting-edge technology and the kinds of educational experiences that give them a real advantage."

EPB President David Wade said the utility has played a role in more than 60 research projects by the Oak Ridge National Laboratory since 2015, including an ongoing study that is mapping the energy use and needs for every property in EPB's 600-square-mile service territory. Wade said such research has not only improved the reliability of its electricity grid, but the research is attracting engineers and other skilled workers to Chattanooga.

Dr. Mina Sartipi, director of the UTC Center for Urban Informatics and Progress, said Chattanooga is "growing a culture of collaboration" to support more research and applying those studies for real-life applications for cities, utilities and businesses. On M.L. King Boulevard, a series of cameras are identifying and documenting the number of cars, trucks, bikes and pedestrians that pass through eight intersections to identify ways to better synchronize traffic lights, improve pedestrian and bike safety and improve vehicular traffic.

"Chattanooga has a proven record of diverse entities coalescing together quickly to build support and resources for innovation, with the establishment of the smart technology urban test bed in only a matter of months as just one example.

But for all its success, Chattanooga and many other U.S. cities need to do more to improve the education of its workforce, Gruber said. Chattanooga ranked near the bottom on the cities identified for potential new R&D investment, in large part, because of lower rates of educational achievement in the metro area.

"If we want to add to high value jobs, we need to invest in science and spread it around the places like Chattanooga," Gruber said. "Educational investment is key and we need to do more to really train our students for skilled-based economy."