Puyallup pairs with an academic research team to enhance its adaptive resilience for managing the current downturn—and the next.

A little over a year ago, the future couldn’t have looked brighter for Puyallup, a bedroom community of 42,000 that might aptly be described as “sleepy,” at least when it’s not hosting the million-plus people annually who visit the Washington State Fair. In summer 2019, the city had approved an ambitious downtown economic development plan to remake its aging but historic city center—home to the region’s busiest Sounder transit station—into a livable, walkable, modern rendition of Main Street USA.

“We are very fortunate in Puyallup to have a city built around a downtown that’s exactly what most people think of when they imagine small-town America,” says Puyallup City Manager Steve Kirkelie, who had just been promoted from assistant city manager to Puyallup’s interim city manager in July 2019. “We had just finalized the downtown economic development plan, a seven-month process, and I realized that I was in charge of the project, and now we had to implement this thing. I thought, it can’t just be something that sits on the shelf of my office, and to do that, you need somebody to focus on it. You need to have a dedicated professional.”

Kirkelie submitted a special request to city council to hire an economic development manager, a position that had been eliminated more than a decade earlier after the Great Recession eviscerated the city’s finances. But Puyallup’s general fund revenues, buoyed by sales tax receipts from a commercial district anchored by South Hill Mall, had posted double-digit increases, so his request was approved. Beginning on January 2, 2020, Meredith Neal took on the reinstated role with gusto, becoming a familiar presence on South Meridian (downtown Puyallup’s Main Street) as she rallied business owners and other stakeholder groups around the city’s top economic development priority.

“When I arrived, I felt really lucky that there was this fantastic downtown economic development plan, and that was really going to be my initial focus,” says Neal, who had spearheaded the economic expansion of the Port of Tacoma’s industrial sector as the inaugural director of the Tacoma-Pierce County Chamber’s Manufacturing Industrial Council. “There are a huge number of people who are coming into downtown every day to ride a train up to Seattle or other points on the rail line to go to work—and coming back at the end of the day—and we were going to start trying to figure out how to capture some of that through more transit-oriented development, getting people to stop and eat dinner and do some things downtown before leaving.

“I was just starting to get to know the community and get to know the businesses here, some of the partners we work with like the Chamber and our Main Street Association. And then COVID happened.”

Barely two months into her tenure, Puyallup’s downtown had become a ghost town, with windows of storefronts and restaurants gone dark and the normally filled-to-capacity, 366-space commuter lot outside the Sounder station deserted. What had been a detailed blueprint for downtown’s economic revival became a roadmap to a world that no longer existed.

“The downtown is the heart of the city. It’s really important to us that it is a fun, vibrant, livable space,” says Puyallup Mayor Julie Door. “The economic development plan had a parking study, transit-oriented development with ground-level retail and multifamily living units above—all these different features that would help us bring more people into the core, both to live and to visit. The business owners and the community were all excited, so it was heartbreaking when COVID came and just derailed the plan.”

As public health measures all but ground the local and regional economy to a halt, the city began to triage its public services, even while knowing that most of Puyallup’s 11,105 licensed businesses were clamoring for help.

“Like other cities across the globe, we really had to pivot,” recalls Kirkelie. “We had to figure out: OK, how are we going to deliver our essential services—police, public works, things of that nature—and make sure those can continue to operate in light of COVID? We have to react, we have to be resilient, but what can we do? Because there’s only so much bandwidth, especially with a medium-size city like Puyallup.”

One of the first things the city did was to convene an Economic Recovery Team, led by Kirkelie and Neal, who began meeting weekly to strategize short- and long-term plans for reviving the local economy. Responses included offering one-time Small Business Relief Grants of $2,000, deferring business taxes, and relaxing permitting regulations—such as through a pilot program allowing restaurants and retailers, which account for 63 percent of Puyallup’s sales tax revenue, to extend their operations onto city sidewalks and streets.

“It was also really about looking toward the future—that this is going to be our operating environment for at least another year—and beyond that, there’s going to be a long recovery,” Neal says. “So how can we come out of this and be successful?”

At the height of the crisis, Neal attended a webinar hosted by a veteran of the Brookings Institution, who had recounted the process the City of New Orleans used to recover from and rebuild its economy in the aftermath of Hurricane Katrina.

“One of the things that really stuck with me was that this is an opportunity to look at how you can become more resilient,” she adds. “To look at where some of our deficiencies might be and restructure so that the next time there’s some economic disaster, we become stronger.”

So she emailed some friends, professors at the University of Washington-Tacoma’s Milgard School of Business, with an idea.

Three years ago, Dr. Haluk Demirkan, assistant dean of analytics innovations and founding director of the Milgard School’s Center for Business Analytics (CBA) and Master of Science Business Analytics (MSBA) programs, unveiled a yearlong work-based learning program that would realize the school’s mission “to help individuals, businesses and our community grow and succeed in our global digital economy” by pairing MSBA candidates—typically midcareer professionals with a decade or more of real-world work experience—with organizations that had some intractable business problem to solve.

“We are basically trying to simulate a student-run pro bono consulting company,” explains Demirkan. “I teach them how to become T-shaped analytical thinkers and adaptive innovators by learning project management, data analytics consulting, and many other skills, and we run all these projects to generate data analytics–enabled digital solutions.”

Since its inception, the Milgard School’s Students As Adaptive Innovators consulting program has helped more than 35 for-profit and nonprofit organizations solve real-world problems, from Delta Airlines (optimization of flight scheduling) to Costco Wholesale (waste reduction of perishable foods). When Neal reached out to Demirkan, CBA Program Manager Michael Helser, and Associate Teaching Professor Margo Bergman last spring to ask whether students might be interested in helping the City of Puyallup develop a post-pandemic economic development plan, she was invited to submit a proposal for the school’s 2020–21 consulting program. Her proposal was one of 15 projects accepted into the program in June; while other Washington cities also were accepted into the program (Tacoma’s Fire Department wants to understand how improved resource allocation might reduce its response times; Lynwood’s Parks & Recreation Department is asking for an analysis of parks usage during the pandemic to better target services), Puyallup was the first city to seek the school’s help in executing a reinvention of its economy.

“Now is the perfect time for a project like this,” says Demirkan. “Almost every city around the world is having similar challenges, so cities need to think out of the box about how they provide services. Traditional ways of doing things are not going to work anymore.”

Bergman, the academic adviser to the team of five Milgard MSBA students assigned to the Puyallup project, puts it this way:

“This is really the first time there was an opportunity to reimagine an entire economy,” she says. “Usually the client comes in with much more specific questions, but the students were given a blank slate to ask whatever questions they wanted. The scope and the opportunity of this is huge; this could really have a long-lasting and incredibly important impact on the community and its businesses. That was really appealing to the students.”

“This is really the first time there was an opportunity to reimagine an entire economy.”
– Margo Bergman

The students spent the summer quarter meeting remotely via Zoom with Neal, Kirkelie, and other Puyallup department heads to get the information they needed to produce a Scope Management report. That document, released in August, defined the project’s ultimate goal: to enable Puyallup “to quantify, analyze, and track the relationship between sales tax revenue and economic conditions in order to better predict revenues, increase economic resilience to recessions, and identify opportunities for revenue growth.” In other words, to help the city execute an offensive plan for its post-pandemic recovery.

After using advanced business management and problem definition tools to generate an analysis of the city’s current predicament, the students used the Porter’s Five Forces model (a tool for determining a business’s niche in a competitive environment) to gauge factors like the expectations of the city’s “buyers” (citizens and businesses), the purchasing power the city holds over suppliers, and the risk of competitors entering the market. A standard Company Analysis examined the city’s “market segmentation” (at base, its comparative tax revenue sources), while a SWOT Analysis articulated the city’s Strengths (proximity to SeaTac Airport, host to the Washington State Fair), Weaknesses (lack of multifamily housing, inability to track business health in real time), Opportunities (a walkable downtown, potential of remote working), and threats (unprecedented economic impact from the pandemic, reduced tax revenue).

Ultimately, the Scope Management report identified a lack of business analytics as perhaps Puyallup’s most fundamental weakness, concluding, “They are not using analytics in their tracking or decision-making processes at this time. Instead, they are closely tracking sales tax data as a real-time indicator of economic health.” Adopting business analytics in its economic development planning promises the greatest potential for transformation, the report added, noting that “information on existing, exiting, and entering businesses could play a considerable role in predicting revenue for the city.”

With Phase I ended in August, the students are spending the fall quarter gathering, modeling, and analyzing sales tax and other economic data using “descriptive” and “diagnostic” analytics to depict what has happened to Puyallup’s economy (Phase II), and they will devote the winter quarter to using “predictive” analytics and machine learning to produce data-driven scenarios of what could happen to Puyallup’s economy in the future (Phase III). The spring quarter, Phase IV, will see the students prepare their final report, using “prescriptive” analytics and artificial intelligence to give the city various strategies and outcomes for long-term economic recovery.

“Our goal is to, in a very broad way, help them create a post-pandemic recovery plan,” explains Trish Wells, a Tacoma-based full-time auditor at Columbia Bank who serves as the MSBA team’s project manager. “Analytics can’t create a recovery plan. Analytics is a tool, and tools need humans. This is a tool Puyallup can use to decide which path they want to take going forward, to come up with a bigger, better economy that’s more resilient to economic down-turn. I’m looking forward to digging into the data, and seeing insights that aren’t all that obvious.”

This will mean drilling down into the details, such as determining which sectors (e.g., restaurants, construction, retail) are most susceptible to the impact of recessions and finding the theoretically optimal mix of sectors that increases Puyallup’s resilience to recessions while still fitting within the city’s vision. By running multiple regression analyses, the students might try to assess the economic impact of pandemic pilot projects, like the parklets the city’s engineering staff built for restaurants and retailers to expand onto sidewalks and streets, so that decisionmakers can gauge whether to continue, expand, or discontinue those programs in the future.

“We want to look at what the city can do to help struggling sectors like restaurants, but we also will be asking if they should be attracting more of those sectors that did fine,” says Wells. “That’s where the human element comes in. If our analysis says you want more big-box retailers to make your economy more resilient during a downturn, the human element asks, ‘Does this fit with your mission? Do you just want a strip of big-box retailers? Or do you want a mix of sectors, where you expand one sector during a downturn and put a cap on another?’ We are going to dive into the data and define these relationships.”

And then some.

“As consultants, we offer extremely high-quality work, perhaps even more so because these are students who are hungry and have something to prove,” notes Margo Bergman, who received a $17,000 research grant from the University of Washington to study how Puyallup residents’ perceptions of public health measures might impact diners’ decisions to patronize restaurants. “They go above and beyond. These students work hundreds of hours trying to get the best product for their client.”

For Wells, it’s deeper than that.

“I grew up in Tacoma, and Puyallup was always a neighbor, so being able to help a city that’s nearby actually be able to recover from the pandemic, that’s a major draw,” she says. “We’re not creating a business plan; we’re giving them a tool they never had before, and that’s satisfying on our part for sure. And this will be universally applicable when we are done: the same methods we used here can be applied to any municipality.”

But perhaps none is more hopeful, or more grateful, than the City of Puyallup.

“Bringing these minds together, these great minds to work on this project, can only benefit the city,” says Mayor Door. “This is uncharted territory for all of us. We’re learning together. This is not a Puyallup-specific problem; this is a nationwide problem. We need to be reaching out and using whatever tools we can, because it is going to take some tools we currently don’t have in our toolbox to be successful at this It’s going to be challenging, but I think it can be done.”

Meanwhile, Puyallup perseveres. When the 2020 edition of the Washington State Fair, scheduled as always for late summer, was canceled due to the pandemic, it meant a loss of about $1 million in expected tax revenues to the city. While tentative plans are in the works to hold a replacement 2020 fair in spring 2021, Puyallup didn’t wait around.

Partnering with the state fair organization, the city hosted a pandemic-friendly drive-through food fair, with vendors hawking elephant ears, funnel cakes, corn dogs, and other classic fair food. “At one point, people were waiting in line for hours to drive through the fairgrounds,” says Kirkelie, noting that the first collaborative drive-through food fair was so successful that they reprised the event.

“This has never been done before, and the response was unbelievable,” Kirkelie adds. “What this shows is that to be resilient, especially for a midsize city, you can’t go it alone. Resiliency means you draw on other sources and look to others for help, and they look to you. Cities need to play the role of convener, bringing people together.”

And in the words of Puyallup’s mayor, they need to think it can be done.