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Cities, towns, counties, and all other local entities in a global economy have the challenge of opportunity of crafting their own economic destinies. This is true for the poorest as well as the wealthiest localities. The most preeminent technique would be urban revitalization. Revitalization is the process of rebuilding thriving economically, environmentally and socially sustainable urban areas and populations, in areas that have been in decline and in those urban areas that are stressed from the continuing influx of people to urban areas.
In reality, the forces of nature, demography, technology, and industry are such that no local economy can ever count on an achieved level of stability and security. One of the most significant economic development issues faced was how to fund cleanup and promote redevelopment of “brownfields. “. Brownfield sites also frequently suffer from: crumbling infrastructure traffic congestion; ramped lots; and high crime rates in the surrounding low-income, residential neighborhoods.
When a business is looking for a location to build a new facility, it has a choice between purchasing a brownfield site or a bare parcel of land in a rural or suburban area, known as a “greenfield” site. Unlike a brownfield site, a Greenfield site need not be cleared of existing structures, does not pose a risk of expensive-to-clean-up contamination, and does not suffer from crumbling infrastructure, traffic congestion, small lot sizes or high crime rates. If brownfields cannot be made competitive with greenfields, most businesses will chose to locate new facilities on greenfield sites.
For those cities to be able to compete for new economic development opportunities, and the new jobs that come with those opportunities, they will need to clean up and clear their brownfields so that businesses may acquire them at a cost that is competitive with greenfields. Those cities also will need to do something to rectify the infrastructure, traffic congestion, parcel assembly, and crime problems; whether real or perceived, that are associated with brownfields. During the 1997 session, the Legislature refunded, enhanced, and created number of tools for promoting brownfields cleanup and redevelopment.
Brownfield areas are all around us. Applying economic development tools to urban revitalization can help alleviate some of the issues revolving around American brownfields. Sales, Promotions, and Incentives- The community can engage in a variety of public relations, advertising, selling, and marketing efforts. In effect, it can view itself as a product and then make a concerted effort to sell that, “product”. For a firm seeking a location, there is no feasible way to gather objective information about all the possibilities.
The community that makes itself highly visible thus gives itself advantage. Business attraction and recruitment strategies gained great popularity during the 1970s when growing regions in the South and West were able to attract geographical mobile firms from the older industrial states in the North and Midwest via subsidies, tax abatements and infrastructure development. While the political salience of these recruitment strategies is well known, the actual effectiveness of these strategies has been challenged.
Recruited firms may not stay long before moving to another, cheaper location. Research results, while contradictory, generally support the notion that businesses benefit more from governmental investment in infrastructure, workforce development and quality of life, than they do from tax breaks. Experienced industrial recruiters emphasize the need to target these incentives strategically and carefully evaluate their effectiveness. Today, business attraction and business incentives remain the most common form of local economic development.
Business incentives are supported by 68% of all governments and range from regulatory flexibility to tax abatements and subsidies. Planning and evaluation of such programs has increased. However, concern that incentives may encourage destructive competition between localities has led to increased interest in alternative economic development approaches. New strategies for local economic development involve planning to identify key characteristics of the local economy and to design strategic interventions which will enhance local competitiveness and support a cluster of local firms.
These initiatives are characterized by public-private partnerships focused on strategic planning to identify and develop industrial policy for the local economy. Job training and marketing are addressed in addition to issues of finance and infrastructure. The focus is on the role of government and private institutions in providing information, technical supports and economic development infrastructure needed to support a range of local firms. These approaches may emphasize new technology related sectors, existing firms in he local economy, or economic development for low-income communities. Subsidization The community can subsidize development in a variety of ways. One form is tax abatement. Since the main tax used by local government is property tax, abatement most commonly takes the form of reduced property taxes for a new commercial or industrial development. Some communities will set up revolving loan funds or other credit-granting arrangements to facilitate business growth. If the municipality levies sales, inventory, commercial occupancy, or business taxes, it may offer reductions in these.
Making Sites and Buildings Available Availability of sites or buildings is a key factor in determining whether a community can attract new commercial activity and retain existing activity. To ensure that the adequate sites will be available in the foreseeable future, there are various steps a municipality can take. The most direct step is the public provision of sites. Beyond the direct provision of land, the community can use its land use control powers to ensure that adequate privately owned land will be available for commercial development.
One obvious step is simply zoning and adequate amount of land in the appropriate categories. Business Assistance Programs Business assistance programs are a core function of a successful economic development program. The programs are designed to assist new companies that are considering a location in a community and to improve the competitiveness of existing businesses. Specialized business assistance programs include entrepreneurial assistance programs, existing business programs, and small business assistance programs.
Typical services to businesses include assistance with finding a site or building, accessing capital and financial incentive programs, securing workforce training and educational services, maintaining data on community assets, facilitating the permitting process, hosting networking events, and serving as an advocate for business with local government and the broader community. An existing business program is focused on retaining existing businesses in a community and helping them to expand. Such programs recognize that some 80 percent of a community’s new jobs are created by existing businesses.
Testimonials of satisfied existing businesses can also provide the basis of a marketing program to attract new businesses. An existing business program can also include a direct contact program, which involves personal visits with targeted industries, and surveys to determine what a business needs to stay in business or expand. Every five years the International City County Management Association conducts a nationwide survey of local government support for economic development. In the 1999 survey ICMA added a question specifically focused on economic development strategies targeted to low income neighborhoods and people.
The survey was mailed to the manager/administrator of all cities and counties with populations over 10,000. Over 1000 municipalities responded (response rate 31%). The survey measured local government support for three broad types of economic development policy: incentives and recruitment, business retention and expansion, and community economic development. Interviews and surveys are used to identify businesses that need assistance in overcoming hurdles that interfere with day-to-day operations or that may prevent expansion or cause a move to a new location.
A survey can also be used to understand the factors that make an area conducive to business expansion and new investment. Additional services to existing businesses can include assistance with accessing incentives and financing programs, finding a new site or building for an expansion, recruiting and training employees, and securing technical services. Entrepreneurial assistance programs are a specialized area of a business assistance program. The programs help an individual take an idea for a business or an invention into successful production.
A number of organizations in Florida provide entrepreneurial assistance. Small Business Development Centers (SBDC) are a principal provider of assistance to small businesses. The US Small Business Administration (SBA) established the SBDC program in 1976. Local economic development and job growth are largely determined by the success of local firms. Recognition of this fact has encouraged states and localities to develop business retention and expansion programs focused on enhancing the viability of firms already in the local economy.
Technical assistance, workforce development, support for technology transfer and revolving loans funds all figure into business retention and expansion programs. These programs have increased in popularity and the majority of responding governments support at least one retention on small business activity. Preventing a business from leaving and helping it expand does not garner the political headlines the way attracting a new firm does, however, the benefits of business retention and attraction programs may have more staying power since the firms assisted have already shown a willingness to invest and remain locally
Economic Marketing Economic impact studies are used to predict how a policy or investment decision directly or indirectly affects the economy. Typical measures of economic impact include income, employment, and expenditures. Direct impacts include the number of jobs created, the wages paid by the jobs, and the impacts of the jobs on personal consumption spending. Indirect impacts look at the long-term effects created by a plan or investment decision ??? how the impacts multiply over time (the multiplier affect).
Three of the most commonly used methods to calculate indirect impacts are the Regional Economic Models, Inc. (REMI), the US Department of Commerce Regional Input-Output Modeling System (RIMS II), and the Minnesota IMPLAN model. Those models can be used to predict economic impacts, such as the number of jobs created or lost; increases or decreases in personal income, which influences household-to-business spending; and increases in business productivity and business-to-business spending. Economic impact studies are used for a variety of projects.
In addition to the expansion or location of a new business, examples include construction of a new facility, such as a convention center or sports stadium; a large development or regional impact; or a military base expansion or closing. Economic incentives are offered by most economic development programs to make it easier for companies to expand or to locate in a community or region. The incentives can be both financial and non-financial. Examples of economic incentives used in communities include a small business revolving loan program; reduction in impact fees, d valorem and other tax exemptions or reductions; cash incentives for creating certain types of jobs in target industries; and use of industrial revenue bonds. Economic incentives can also be used to carry out other public objectives. For example, they can be used for locating a business in an economically distressed area or near public transit or affordable housing to help address a jobs-housing imbalance (where jobs are far removed from locations that offer employees affordable housing, which causes long commutes, exacerbating traffic problems).
Economic development organizations use a variety of marketing techniques to attract businesses to their community and to retain and expand businesses. Marketing programs can also help enhance a community’s image and spread the word about its assets to a broader audience. An important part of a marketing program is honing what the message should be, which requires understanding what appeals to the needs of the target business audience.
Techniques in marketing programs generally include a combination of sending direct mails and emails, participating in trade fairs, conducting marketing trips to other regions, hosting a website, producing a marketing brochure that highlights community assets, and conducting special studies on specific regional assets (for example, a labor force analysis). Because regions, not individual communities, now compete for new economic investments, many economic development marketing programs are conducted by a regional organization or collaboration of organizations. Cluster Industry Development Strategy
An Industry Cluster Development Strategy is a principal focal point of many economic development programs because it builds on the strengths of a region’s economy and creates a framework for targeting economic development activities for the most impact. The basis for a cluster approach to economic development is understanding the concentrations of related companies in a geographic area (an industry cluster) that do business with each other and have common needs (for example, for the same type of workforce, research, education, technology, or transportation services).
The companies in a cluster can be competitors or they may be interdependent through purchases of services or supplies. A cluster can include educational institutions, nonprofits, and governments that support an industry cluster through its services. Concentrating companies within an industry cluster can increase their productivity and competitiveness by providing access to a larger pool of suppliers; a skilled workforce; networking opportunities to share information and address common problems; and specialized support services, such as workforce recruitment, support infrastructure, and research and training programs.
Activities within a cluster development strategy can include joint marketing to expand the cluster, collaborative buying, joint research, and e-newsletters and directories to increase communications. Community Economic Development Community economic development strategies attempt to increase private capital investment in low-income neighborhoods through economic development zones and promotion of job training. They also use community development corporations and community development loan funds to make financing and technical assistance available to local residents and businesses.
Not surprisingly, local government support is highest for economic development zones that use a familiar tool, tax incentives, targeted to promote investment in neighborhoods with high poverty or high unemployment. Two thirds of responding governments report using tax incentives in this manner. Job training is also quite common. Again, this is a common tool (often part of a business attraction package) so expanding the focus to meet the training needs of a wider set of local workers and businesses is a natural extension.
While less common, over half of all responding governments support community development loan funds and community development corporations. Programs specifically focused on welfare to work were also reported by almost half of all governments. Micro-enterprise programs were the least common, supported by only a quarter of all governments, but this compares favorably to those governments supporting small business programs more generally. Importance of Partnerships with Local Government
The community economic development programs reflect an important set of partnerships between government and the non-profit sector. Local governments use non-profits to support community development corporations and micro-enterprise programs more than 50% of the time, and over a quarter of governments use non-profits to provide job training, welfare to work programs and community development loan funds. Non-profits combine social support, training, community organizing and economic development expertise.
These collaborative public-private partnerships increase the scale and impact over what local government or non-profits could provide alone. A challenge for the community economic development movement is to increase involvement of the for-profit sector. While private sector participation in traditional economic development programs averages over 55 percent, private sector support for community development approaches averages only 4-6 percent.
Many for-profit institutions perceive limited profit potential from investment in low-income communities and are reluctant to make investments unless large subsidies or tax breaks are provided. However, community economic development programs have demonstrated that profitable economic development can be fostered in low-income neighborhoods. Community economic development programs, which promote neighborhood revitalization and workforce development, are beneficial to private sector competitiveness over the long term.
While local governments have built important partnerships with the non-profit sector, they need to encourage more direct investment by the for-profit sector in community economic development programs. The following is a brief account of how a municipality might approach economic development planning: 1. Needs assessment. In this phase the municipality decides the purpose of the program. The two most common goals are providing additional employment opportunities and strengthening the municipal tax base.
If the main goal is jobs, the municipality should consider whether the goal is seeking particular types of jobs, perhaps to address high rates of unemployment or underemployment among particular sectors of its labor force. Being clear about the goals of the program is particularly useful if choices have to be made about the expenditure of public funds on competing projects. 2. Market evaluation. In order to develop an effective marketing program, the municipality’s economic development agency tries to make an objective assessment of its competitive strengths and weaknesses.
This means examining wages and the availability of labor, taxes, land and construction costs, utility rates, the composition of its existing commercial and industrial establishment, strengths and weaknesses in its transportation infrastructure, its educational and cultural establishment, and a variety of “quality of life” items Such an assessment will help the municipality target its sales and marketing efforts toward those types of firms that are most likely to be interested in relocating to or expanding in that municipality. . Assessment of the consequences of an economic development program. Economic development will involve fiscal effects, both new revenues as well as new expenditures. It may also affect traffic flow, environmental quality, housing markets and many other aspects of community life. Anticipating and planning for those effects is a part of a systematic approach to urban development 4. Plan formulation. The plan might include some or all of the following elements a)An advertising and marketing program )A plan for the use of subsidies such as property and other tax abatements, low interest loans or loan guarantees, or public absorptions of some of the costs of site acquisition and development. c)A program of capital investments in water, sewer, road and other facilities necessary to support industrial and commercial development. If the municipality decides to take an entrepreneurial role, it might include planning for the development of a municipality’s land-use controls to provide adequate industrial and commercial sites and possibly also the purchase or optioning of land for future economic development.
Economic development is the primary objective of the majority of the world’s cities. This truth is accepted almost without controversy. To raise income, well being, and economic capabilities of people everywhere is easily the most crucial social task facing us today. Virtually all states strive to foster their own economic growth through a variety of programs involving marketing, subsidization, and the use of capital expenditures. Many thousands of municipalities also promote their own economic development using marketing and subsidization.
Very often, the community will use its capital budget and its land use policies to assure the availability of an adequate number of suitable sites. Every year, aid is being dispersed, investments are undertaken, policies are being formed, and elaborate plans are hatched to achieve this goal. Using these tools of economic development will bring your community on step closer to achieving economic sustainability. Bibliography Blakely, Edward James, and Nancey Green. Leigh (2010).
Planning Local Economic Development: Theory and Practice. Los Angeles: Sage. Godschalk, David R. , Daniel A. Rodri? guez, Philip Berke, and Edward John. Kaiser (2006). Urban Land Use Planning. Urbana: University of Illinois. Levy, John M (2206). Contemporary Urban Planning. Upper Saddle River, N. J. : Pearson/Prentice Hall. Ray, Debraj (1998). Development Economics. Princeton, N. J. : Princeton UP. Warner, Mildred (2009) Innovative Economic Development Strategies. Cornell University