Future Here Now: in Future Ready communities, economic development is an everyone task
This article is an earlier draft of a chapter I wrote for the new Guide to Planning in Ohio that just came out a couple of months ago. It was a nice opportunity to explain how economic development works most effectively to citizen planners (the book is used by professionals, and also by planning commission members and board of zoning appeals members and the like), and I think it does a good job of bridging that common gap. You can get the Guide at ohioplanning.org.
Look for more Future Readiness for communities this week, as well as a free resource for paid subscribers. If you’re not a paid subscriber, you can try it out for 7 days — at a 25% discount! Just use this link -
Economic development
Many professional planners and citizen planners find themselves sticking a toe (or a leg) in economic development at some point in their lives. And for some, economic development can become a primary component of their work, as when economic development responsibilities are folded into a community development or planning and zoning department, or vice-versa. Planners often struggle with economic development, however, because the purpose of economic development can unintentionally run at cross-purposes to conventional planning responsibilities. To navigate these two sets of important and sometimes conflicting responsibilities, every planner should understand the basics of economic development, if only to understand where the economic developers are coming from.
This section has to do a lot in a short space. We will do a high level review of what economic developers typically deal with (and how that differs from planners’ responsibilities). Then we will overview some of the major things that economic developers do, and we will point toward how local economic development is changing and how your planning work might help.
Who are economic developers?
An economic developer is typically responsible for attracting and keeping businesses in your community. Economic developers can work for the local government, or for a local or regional nonprofit or “public-private”organization, or for a multi-county regional agency (that may or may not be specifically tied to local governments), or the State of Ohio.
In Ohio at this time, state-level economic developers (JobsOhio) typically work more or less closely with regional economic development agencies, such as REDI Cincinnati in southwestern Ohio, TeamNEO in the Greater Cleveland area, and One Columbus in Central Ohio. The state and regional partners mostly collaborate on big business attraction projects (more on this in the next section). There are also regional agencies in many rural areas, plus county economic developers, chamber of commerce economic developers and economic developers who work for local governments. Depending on your role, you might deal with many of these levels, or none of them.
In the first paragraph I said that economic developers are typically responsible for attracting new businesses and for keeping existing businesses in a community. At the state and regional level, that typically means a lot of data analysis, technical incentive packaging and networking/sales. At the local level, it usually involves administering local incentives, giving businesses advice on navigating permitting and grant application processes, and general networking with the business community.
It’s important for planners to notice something here. Economic developers are responsible for getting and keeping businesses, and many will interpret that as being responsible for getting as many businesses to come and stay as they can. Economic developers often get evaluated in terms of the number of new jobs attracted or retained, the number of new businesses attracted or retained, the number of contacts they have with businesses, the amount of grants or incentives they help make happen, etc. This is the case for both public sector economic developers and others.
As a result, the economic developer’s success is measured based on whether or not they land or keep the business, not necessarily on whether the business itself meets the city’s planning and zoning objectives. As a result, your planning and zoning police power responsibilities, and their responsibility to facilitate economic growth, can lead to conflict. It’s important to keep this in mind when dealing with economic development staff — they’re not necessarily trying to be problematic, but their most fundamental purpose is in many ways the opposite of what conventional planning and zoning professionals are expected to do. That’s a blanket statement, of course, and doesn’t fit every situation. But being aware of that can make it easier understand what’s going on when economic developers do not see eye to eye with planners.
What do Economic Developers (and economic development organizations) do?
As noted above, economic developers do a variety of work. This summary is based on how the International Economic Development Council (IEDC) categorizes the range of things that economic developers do. Most economic developers work most heavily on one or two of these issues, and few economic developers touch every category.
Business Attraction and Marketing
Historically, and in many communities today, business attraction was the biggest part of the economic developer’s job. Bringing new businesses into the community, whether they were truly new or relocating from somewhere else, was considered the main part of an economic developer’s job.
This work involves an analytical side and a marketing side. Economic developers who work on the analytical side are managing extensive data sets, including
Education and labor analytics, such as the distribution of specific employment types and educational qualifications,
Detailed GIS mapping of site characteristics, such as location of infrastructure, flood plains, economic development incentive zones, traffic, etc. (this system might look a lot like yours in the planning department),
Details on economic incentive programs, grants and other benefits available at any level of government, from local to national.
Information on business “leads,” including lists of businesses nationally in a targeted economic cluster or industry that the economic development agency is interested in recruiting.
The marketing side of Business Attraction involves most of the same kinds of marketing activities you would find a business doing — magazine ads, social media, sponsoring events, creating promotional videos, attending trade shows, etc. Marketing-oriented economic development staff will also go on trips to meet and pitch their community to businesses, or go to learn about the site needs of a type of business they want to attract, or take other trips. A lot of economic developers want to get into these jobs because of the opportunity to go places.
Business Retention and Expansion
Economic developers are actually taught that the majority of new jobs in a given place are created by existing businesses, which is what census and other data sources indicate. Despite this, most economic development Business Retention and Expansion (BR&E) work consists of a relatively small amount of staff time and resources given to:
Periodic surveys of business owners
“Business retention” meetings with business leadership
Communication with existing businesses, such as via newsletters, and
In-person ombudsman-type meetings with individual businesses, typically when a business reaches out to them, or when one of the other types of outreach indicates a problem to be addressed.
Economic development practitioners often struggle with BR&E for several reasons. First, of course, there are hundreds or thousands of different businesses in a community, and only a small handful (at best) of people in the economic development department. Keeping a handle on economic issues in the community, let alone establishing relationships with business owners, would take more people-hours than most economic development organzizations can muster. (Business attraction, on the other hand, usually focuses on cultivating a small number of prospects) . Organizations that place a high priority on BR&E often try to use sales databases to keep track of businesses and goings-on that might impact them, but that also takes a lot of effort. And it’s not as fun.
As a result, many BR&E initiatives are limited to occasional newsletters or surveys, and trying to keep businesses from closing or downsizing or leaving when word leaks out that they are planning to do so. But by the time the economic development agency becomes aware of a company in crisis, the tools at their disposal are often limited to a few incentives and persuasion.
Workforce Development
Over the past couple of decades, the education and skills of an area’s potential workforce has become one of the most important criteria in selecting a site for a new or relocating business, and this has pushed many economic developers to spend more time trying to improve the local workforce and/or more closely align the training options available to the industries that they have decided that the community should attract or retain.
Economic developers usually meet these demands using basically the same tools that they use for business attraction and retention: marketing and deal-making. Some economic development organizations focus on attracting workforce with desirable skills, as when communities trumpet their quality of life or offer incentives for people in specific industries to relocate to a community. Others focus on being the liaison between businesses and local education providers, especially those businesses that need high-value, technically-specific skills, such as certification on a type of machinery or a quality level designation. In these cases, economic developers may focus on communicating those needs to education providers and helping them find grants and other resources to support training investments.
Other specializations
Within these broad categories, many economic developers focus on a specific type of business. At the state or large city level, one may find experts in international economic development, sometimes called Foreign Direct Investment after a commonly-used incentive program. These economic developers are mostly focused on attracting businesses from other countries and may specialize in a region where they have language fluency or experience. Others focus on entrepreneurship, typically with a concentration on high technology development. These economic developers often work in accelerator or incubator programs, and often focus on connecting businesses to resources, such as grants. A very small number of economic developers focus on small businesses, particularly on helping small businesses find support, resources, etc. People in other kinds of nonprofit roles, such as Community Development Corporations (CDCs) or Main Street programs might play a very similar role to a small business-focused economic developer but may not identify themselves as such.
The increasing role (and challenge) of complex data
Planners are trained to work with complex data, from GIS mapping to census and labor statistics. Since economic developers do not come into the field from a single area of study, economic developers vary widely in their opening ability to understand and manage complex data. This is a particular challenge today and for the foreseeable future, because all aspects of economic development are becoming increasingly, and often stringently, data-driven.
Historically, economic developers’ effectiveness was often evaluated on simple measures, such as the number of jobs created by a deal. Similarly, late-2oth century site selection was often heavily influenced by relatively simple measures, perhaps whether a CEO liked a location or whether a site had a rail spur or adequate electrical service. Today, economic developers focused on site selection may assemble massive packages of data that may range from numbers of people in a multi-county region with training in a specific skill set, to locations of competitors, adjusted daily traffic volumes, sewer and water capacity, environmental factors, tax rates and other items. Much (although not all) of the data that modern economic developers use is highly familiar to urban planners, and planners often begin collaborations with economic developers by helping them access and manage the data they need.
However, data can also mislead. In Foxconned, Lawrence Tabak’s incredibly detailed post-mortem of one the largest failed economic development projects in recent history, Tabak methodically uncovers the limitations and over-simplistic assumptions that underlay the economic impact study that was used to justify massive public investments. On repeated occasions, economic development staff, as well as elected officials, took the study at face value, even when its assumptions about transportation patterns. Land use planners appear nowhere in this phase of the project’s failed development, a pattern that appears to be ubiquitous in economic development projects driven by economic impact studies.
For these reasons, an important part of fulfilling their public responsibilities in economic development may be for planners to use their data access and data facility to inform and, when necessary, challenge the underlying assumptions of economic impact and similar studies. Planners may often be among the best situated to understand the current environment that a proposed economic development project will impact, and planning departments (and planners themselves) are most likely to find themselves responsible for making land use, zoning, infrastructure and related decisions resulting from ill-informed findings of an economic impact study.
A word about incentives
You may have noticed that references to incentives popped up in many of the sections above. Incentives are economic benefits that economic development agencies offer to businesses to help them pay for something that might otherwise prevent the project from happening (or sometimes simply to “sweeten the pot” in a competition between communities.) Incentives range from infrastructure tools familiar to most planners, such as Tax Increment Financing, to tax rebates, support for workforce training, and a whole host of other strategies for offering a financial benefit in exchange for investment, job creation or retention, or any other economic objective. Incentives get the most publicity when they are employed as part of trying to attract a big business, such as the multi-state competition for the Amazon Headquarters 2 project, but some form of incentive gets employed in most levels and most aspects of economic development.
Economic developers’ incentives packages get an increasing amount of popular criticism, and often rightly so. Incentives can be helpful when they fill a financing gap that would otherwise prevent a project that would be beneficial to the community from happening — for example, when an abandoned industrial building is going to be rehabilitated to house new businesses, but the environmental cleanup costs are so expensive that the project cannot raise enough money to get the work done. In such cases, an incentive such as a low interest loan or a grant could make the difference between the project happening, and the building continuing to present an environmental hazard to the community. Most, although not all, modern incentive programs require a “but-for” statement: an assertion that the proposed investment could not happen without this additional help.
It’s not uncommon, however, for incentives of any size, issued by any of the multiple levels of economic development agencies, to raise as many questions as they answer. Economic impacts of proposed projects are often overstated, changes in the market or business over-optimism may mean that the promised job creation doesn’t happen, and sometimes elected officials (or even professionals) get stars in their eyes and buy into the excitement and incredible claims that proponents of a new opportunity may make. More problematically, some incentive deals include inadequate protections for the public’s money (these protections are often called “clawbacks,” because they allow the agency to take back the incentive if the company does not meet specified deliverables.). Incentive deals do not always receive the scrutiny that they deserve.
Planners and the future of economic development
As noted at the beginning of this section, economic developers and planners have different responsibilities and different motivations when it comes to their role in supporting their communities. Economic developers are typically responsible for enabling an economic activity to happen, while a planner’s responsibility is often to protect the community from undesirable side effects of an economic activity. This means that the economic developer and the planner can find themselves in conflict, even if they work for the same department. Being transparent about differing motivations and responsibilities is essential to maintaining functional working relationships.
The economic development profession is also changing rapidly, which provides some interesting opportunities for planners to bridge that gap. Economic developers in the 1950s and 1960s worked almost exclusively on business attraction, but today’s economic developers may be as likely, on the whole, to work with a small local business or a college as with a site selector (a company that represents a business shopping for a new location). While some economic developers may subscribe to a “shoot what flies and claim what falls” mentality, most today are relatively conscious about protecting the well-being of the community — many give preference to higher paying jobs, employing disadvantaged residents, addressing environmental needs and other factors that reflect priorities other than increasing the number of jobs and growing the tax base. This trend may be in part due to the fact that an increasing number of trained planners have moved into economic development positions, bringing a more holistic perspective to the role of economy in a community.
Suggested Resources
International Economic Development Council (IEDC)
. IEDC is the most prominent industry organization for economic developers, and a producer of books, webinars, white papers, conferences and other resources on topics ranging from economic development marketing to technology based entrepreneurship.
National Development Council (NDC)
http://nationaldevelopmentcouncil.org
. NDC trains and advises economic development practitioners regarding economic development finance and analysis methods, and produces a wide range of materials that help practitioners learn how to do technical analyses, such as real estate pro formas and credit evaluation.
Foxconned, by Lawrence Tabak, University of Chicago, 2021. Probably the most definitive, well-researched post-mortem of a failed economic development project ever written. Focused on the Foxconn mega-project proposed for southeastern Wisconsin in 2021, this book illustrates the paradigm and assumptions upon which most business attraction efforts are based, and shows with precision how these create unintended consequences.
Everyone Innovates Here, by Della Rucker, Wise Fool Press, 2019. Provides an analysis of contemporary assumptions about entrepreneurship-and innovation-based economic development, and outlines an alternative strategy that may be more compatible with economic development goals.