1. A New Direction in
Economic Development
Jim Claybaugh, MBA, EDFP
October 24, 2012

2. Overview
What is Economic Development?
History
Theories
Common Strategies
Infrastructure – Capital – Resources
The “Knowledge Economy”

3. Why Do Economic Development?
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

4. 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

5. What is Economic Development?
“The enhancement of the factors of
productive capacity – Infrastructure –
for community well-being”
Economic “Development” v. “Growth”
Must Be A LONG-TERM Commitment

6. What is Economic Development?
Should Be Consensus-driven
Should 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”

7. What is “Infrastructure?”
Five Types
Physical
Organizational
Social/Political
Financial/Economic
Human/Intellectual

8. What is “Infrastructure?”
Human/Intellectual
Financial/Economic
Social/Political
Organizational
Physical

9. 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

10. 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

11. 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

12. 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

13. 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

14. Theories of Economic Development
Staple
Sector
Growth Pole
Product Cycle
Economic Base
Entrepreneurship
Inter-Regional Trade
Neo-Classical Growth
Flexible Specialization

15. Common Strategies
Business Creation
Business Retention
Business Expansion
Business Attraction
Other Strategies/Capacity Building
Neighborhood/Downtown Revitalization
Redevelopment

16. 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

17. Business Retention
Designed to Retain Existing Businesses
Information 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

18. Business Expansion
Similar to Business Retention
Assists Local Businesses Expand
Location Assistance
Financing Assistance
Permitting Assistance
Job Placement Assistance
Highest Job Creation ROI
~80% of New Jobs Created

19. Business Attraction
AKA Business Recruitment-Marketing
“First Thought”
Promotion of Region, Sites, Amenities
Most Common Approach
Lowest ROI of All Approaches
“Playing the Lottery”
Alabama Example
Involves Site Selection Process

20. 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

21. Site Selection Factors
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

22. Site Selection Factors
Labor Availability/Quality Site Availability
Education/Vocation Facilities Public Safety
Labor-Mgmt Relations Environmental Restrictions
Wage Levels Local Views to Development
Education Opportunities Financial Incentives
Utility Costs/Availability Housing Cost/Availability
Real Estate Costs Shopping Facilities
Taxes/CODB Hotel/Motel Availability
Highway Accessibility Medical and Health Services
Market Location/Freight Community Environment
Transportation Services Recreational/Cultural Climate
Source: Fantus Co. - Chicago

23. 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

24. 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

25. Knowledge Economy
Regional and Holistic
Sector/Cluster-Based
Human Capital-Based
Linking Workforce Development
Innovation-Based
The R&D – Jobs “Food Chain”
Information-Based
Littleton, CO Example
Use of Internet in Site Selection

26. Conclusions (… Mine)
Econ Dev Does NOT Tackle Poverty
Traditional Strategies Haven’t Helped
Southeast U.S. Example
Human/Intellectual Capital is MVP
P = Poverty-slayer
Business Attraction = Negative ROI
Economic Development Growth
… Is NOT…
… Can Lead To…
… Should Focus On…

27. What Would I Do?
Innovation And Tech Commercialization
Focus Attraction to Inquiry Responses
Review/Update Planning Documents
Tighten Relationships With Partners
Land And Infrastructure Inventory
Develop CRA-type Industrial REIT
Develop “Capital Index” Scorecard

28. What Would I Do?
Technology Commercialization
Expansion of Industrial Sectors
Quality Workforce
Use “Balanced Scorecard” Approach
Innovation Culture
Land Zoned and Pre-Permitted
Advance Infrastructure

29. 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

30. 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

31. 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 Development
EDO’s, Local Governments, Chambers, etc.