A New Direction in Economic Development
Jim Claybaugh, MBA, EDFP
April 13, 2023
Overview
What is Economic Development?HistoryTheoriesCommon StrategiesInfrastructure – Capital – ResourcesThe “Knowledge Economy”
Economic Reasons Revenue from High Incomes/Biz Activity Savings From Reduced Govt Services
Social Reasons Affluence Lowers Crime, Drug Use, etc. Collective Confidence
Political Reasons
Why Do Economic Development?
What is Economic Development?
Depends who you ask… As to the answer received…
Economists Quantifiable economic growth
Businesses Barriers (taxes, regulations)
Environment Keep ecology & environment
Labor Groups Wages, training, benefits
Community leaders Strengthen local communities
Government Officials Tax Base, Revenues
“The enhancement of the factors of productive capacity – InfrastructureInfrastructure – for community well-being” Economic “Development” v. “Growth”
Must Be A LONG-TERM Commitment
What is Economic Development?
Should Be Consensus-drivenShould Be Market-based
Work with market forces “Economic development is not a
salad bar.”Should Be Sustainable
As in “Sustainable Development”Should Be “Bottom Up”
What is Economic Development?
Five Types Physical Organizational Social/Political Financial/Economic Human/Intellectual
What is “Infrastructure?”
What is “Infrastructure?”
Financial/E
conomic
Human/In
telle
ctual
Social/P
olitic
al
Physical
Org
aniza
tional
History
Three Waves First Wave: Industrial Recruitment
Started in South, 1930’s Second Wave: Retention & Expansion
Low ROI From Business Attraction Third Wave: New Economy ED
First Wave 1930’s-1990’s
Focus on Attracting: Manufacturing Outside Financial Investment
To achieve this cities used: Tax Incentives Grants & Subsidized Loans Subsidized Infrastructure Investment Expensive Marketing Techniques
Second Wave 80’s-00’s
Focus Moved Towards: The Retention/Expansion Of Business An Emphasis On Inward Investment Targeted To Specific Sectors/Clusters
To Achieve This Cities Provided: Technical Assistance To Businesses Financial Assistance/Loan Programs Infrastructure Investment Permit Streamlining
Third Wave 90’s - Now
Focus Shifted… From: Direct Financial Incentives To: Making Regions Competitive
Focus is placed on: Public/Private Partnerships Soft Infrastructure Investments Increased Competitive Advantages Leverage Public/Private Investments
Third Wave 90’s - Now
To Achieve This Cities/Regions Are: Developing Holistic Strategy Creating Competitive Business Climate Networking And Collaboration Supporting Cluster Development
Horizontal And Vertical Integration
Education/Workforce Training Targeting Investment To Clusters Quality Of Life Improvement
Theories of Economic Development
StapleSectorGrowth PoleProduct CycleEconomic BaseEntrepreneurshipInter-Regional TradeNeo-Classical GrowthFlexible Specialization
Common Strategies
Business CreationBusiness RetentionBusiness ExpansionBusiness AttractionOther Strategies/Capacity Building
Neighborhood/Downtown Revitalization Redevelopment
Business Creation
AKA Entrepreneurship Development Micro-Enterprise Development Economic Gardening Business Incubation
Programs to encourage start-ups Technical Assistance Financial Assistance
2nd Highest Job Creation ROI
Business Retention
Designed to Retain Existing BusinessesInformation Gathering
Surveys, Interviews Track Trends and ID Barriers
“Red Team” Visits to Troubled or Recruited Businesses
Energy Crisis, 2001 CA Forced to Focus on Retention
Business Expansion
Similar to Business RetentionAssists Local Businesses Expand
Location Assistance Financing Assistance Permitting Assistance Job Placement Assistance
Highest Job Creation ROI ~80% of New Jobs Created
Business Attraction
AKA Business Recruitment-Marketing “First Thought”
Promotion of Region, Sites, AmenitiesMost Common ApproachLowest ROI of All Approaches
“Playing the Lottery” Alabama Example
Involves Site Selection Process
Site Selection Factors
Area Development, Annual Survey Availability/cost of skilled labor Corporate tax rate State and Local incentives Tax exemptions Occupancy or construction costs Highway Accessibility Environmental regulations Low union profile Energy availability and costs
Conway Data, Inc. Work force, wages, productivity Market and demographic data Specific sites & Buildings Transportation Energy and utilities Materials, supplies, services Government programs Water and WW infrastructure Environmental impact, ecological factors Climate/Quality of Life factors
Site Selection Factors
Site Selection Factors
Labor Availability/Quality Education/Vocation Facilities Labor-Mgmt Relations Wage Levels Education Opportunities Utility Costs/Availability Real Estate Costs Taxes/CODB Highway Accessibility Market Location/Freight Transportation Services
Site Availability Public Safety Environmental Restrictions Local Views to Development Financial Incentives Housing Cost/Availability Shopping Facilities Hotel/Motel Availability Medical and Health Services Community Environment Recreational/Cultural Climate
Source: Fantus Co. - Chicago
Capacity Building
Infrastructure-Capital-Resources “Hard” v. “Soft” Infrastructure
Why Focus on Infrastructure? Economic Climate Conducive to Growth We can’t predict the next “Big Thing” Assists in All Econ Dev Strategies Ecosystem Analogy
Knowledge Economy
New Strategies and Objectives Infrastructure Investment
New Definition of “Infrastructure”New Partnerships
Includes Colleges & Universities
New Challenges Widening Wealth/Income Gaps Widening Education/Skills Gaps
Regional and HolisticSector/Cluster-BasedHuman Capital-Based
Linking Workforce DevelopmentInnovation-Based
The R&D – Jobs “Food Chain”Information-Based
Littleton, CO Example Use of Internet in Site Selection
Knowledge Economy
Conclusions (… Mine)
Econ Dev Does NOT Tackle Poverty Traditional Strategies Haven’t Helped
Southeast U.S. ExampleHuman/Intellectual Capital is MVP
P = Poverty-slayerBusiness Attraction = Negative ROIEconomic Development
Growth … Is NOT… … Can Lead To… … Should Focus On…
What Would I Do?
Innovation And Tech Commercialization Focus Attraction to Inquiry Responses Review/Update Planning DocumentsTighten Relationships With PartnersLand And Infrastructure InventoryDevelop CRA-type Industrial REITDevelop “Capital Index” Scorecard
What Would I Do?
Technology CommercializationExpansion of Industrial SectorsQuality WorkforceUse “Balanced Scorecard” ApproachInnovation CultureLand Zoned and Pre-PermittedAdvance Infrastructure
Appendix:Capital Index
Physical Capital Index Industrial and Commercial Land Ratios Ratio of Region with High Bandwidth Commercial-Industrial Vacancy Regional Water/Sewer Capacity Regional Traffic Capacity
Appendix:Capital Index
Human/Intellectual Capital Index High School Graduation Rates/Test Scores Ratio of Pre-School Participation College Degrees Per Capita Patents Per Capita Unemployment
Appendix:Capital Index
Social/Political Capital Index Local Government Permit Fee Structure Participation in School Business Teams
Virtual Enterprise, Junior Achievement
Local Efforts in Economic DevelopmentEDO’s, Local Governments, Chambers, etc.
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