In economic development we know what doesn’t work:  one way communication and top down government-lead initiatives.  This “old school” economic development process is characterized by committees lead by government staff that are “public official heavy”.  Business and citizens become involved only as an input to be checked off the project to do list.  Involvement in this old school approach typically takes the form of scheduling hearings and asking business representatives and citizens to step to the podium and give opinions and express wants and needs.  The information is then turned into a government focused strategy by the committee that creates programs to be delivered by government and consumed by businesses and the public.  The end results of this old school approach is includes passiveness on the part of the private sector, reports that sit on shelves, lack of implementation due to lack of resources by the public sector, or programs supported and run by government that fail to have an impact.

So the question is what does work?  While there is no one answer and foolproof process that can guarantee success, there are many conditions, approaches and practices that can lead to the creation of economic development strategies that get implemented and meet desired economic, business, and community outcomes.  The following is an overview of what we have observed and participated in at PolicyOne.

Letting the business and citizens lead and government support and leverage – Government does not have to be the one that come up with the ideas and then leads the effort.  Just like excessive government borrowing crowds out private borrowing, government lead initiatives crowd out grassroot initiatives.  Businesses and citizens come to believe that government will take care of it and become passive and non-responses at worst and consumers only at best.

Identifying actions that can be taken outside of government implementation and programs that do not require government control and expenditures - no matter what strategies are development roles, responsibilities and financial support that does not involve government should be consider first, not last.

Using business and industry associations and citizens groups not just to provide feedback and representation by their staff but to get local businesses and citizens involved and active - Business and industry associations are typically included in old school economic development initiatives, but their involvement is frequently through paid staff and the involvement can suffer from the same ownership and control issues experience with government entities.  A more productive use of business and industry associations is to utilize them to help stir up and engage businesses to directly participate.  The same could be said of citizen interest groups.

Focusing on partnering and coalitions among organizations as opposed to ownership and control – Economic development touches many aspects of our daily lives and businesses and as such involves many different organizations.  Often times one organization tries to own and control the process in an effort to justify or gain resources.  The end result is often lack of long-term support and implementation and continuance f the status quo.   Through partnerships and coalitions organizations can create economic development strategies that can be implemented through broad based ownership and shared responsibility.   The key is not focusing on ownership and control but rather community outcomes.  If the community becomes economically successful its businesses and organization will be able to succeed as well.

Using new media – New media was once the playground of the young and tech savvy.  Now it is being used more and more by the entire population.  It is an effective and low cost way to both disperse information about economic development efforts and to engage interested persons and allow input, feedback, and new ideas.  Blogs, websites, newsletters, and social media tools such as Linked-in and Facebook provide free tools for these purposes.

Through our work at PolicyOne we have come across several recent examples of how these approaches can work.

Scarborough Farmers’ Market – Seeded by the Scarborough Economic Development Corporation (which is lead by a private sector – business board) partnering with the Scarborough Land Trust (grassroots organization interested in protection of land and open space to benefit the community and environment) and regional farmers and vendors.  With this engagement a grassroots, bottom-up famers market was piloted in the summer of 2008 and with a once-week summer schedule launched in summer of 2009.  Vendors and interested community members are now in the process of refining the market for further success.  Except for a bit of administrative support from SEDCO, all of this was done with no grants or no public funding – simply the hard work and dedication of volunteers and vendors.

Buy Local Scarborough – Modeled after Buy Local efforts, small independent business owners in Scarborough Maine recently united and created the Buy Local Scarborough Initiative.  Like many communities across the nation, Maine street businesses and small independent businesses in Scarborough have been impacted by an influx of national chains, big box stores, and the national recession.  Rather than sit back and watch sales and revenues decline, a group of independent businesses joined together formed the Buy Local Scarborough initiative.  In three month the group recruited 80 members, produced its first guide/directory, launched a website, and developed plans for a consumer discount campaign. How was so much achieved in so little time?  The answer these businesses and volunteers didn’t wait for government approval or support.  They identified a threat – lost sales and revenues, developed a solution:  branding local and independent to boost business recognition, and implemented it.  A local councilor helped spearhead the effort but she was acting as a local business owner and using grass roots organizing as opposed to government command and control techniques.    

Maine Entrepreneurs Group on LinkedIn –The business and entrepreneur community in Maine has long recognized that networks are key to economic success as the facilitate knowledge sharing and peer support.  To succeed however, networks in Maine must overcome geographic dispersion and lack of density that exists in larger urban areas.  One entrepreneur, Kirk Hill, Owner of Quai Inc a software development business, recognized this need and challenge and rather than wait for an organizational or government program went ahead and created and Maine entrepreneur network on LinkedIn.  At first the network was mostly virtual consisting of the sharing information, advice and opinions via the on-line community, but is has since grown to over 900 members and monthly in-person get together to network, socialize, and dive into specific issues.  The meetings typically draw 30-40 persons and although networking may result in business leads the focus is on information and knowledge sharing.   The network is low cost (beyond Kirk’s sweat and blood) and is not support by any government program or funding.

These are examples of what we at PolicyOne have seen working using new approaches.  I welcome the sharing of other successful methods for grassroots engagement in the economic development process right through taking ownership and responsibility for implementation.

Recently, I was part of a panel for the Maine Town and City Manager’s Association on conducting municipal service and department reviews and assessments.  I have conducted several such studies including ones that assess all services as well as ones focused on a specific department.  Such efforts can be very useful for municipal leaders to improve service delivery as well as generate cost savings.  Over the course of these efforts there are several tips I have picked up which if followed will increase the changes for successful implementation.  They are as follows:

• Be very clear about why you are conducting the review – reasons typically y include trying to lower costs, lower taxes, improve service, expand service, improve morale, or improve customer satisfaction.  Your reasons can include one, some, or all of these but they need to be made clear upfront.  Along the same lines, be clear about which services and departments are to be included. 
• When evaluating services, separate human resource items like personnel reviews from the service delivery analysis.  Most importantly, do not conduct such an effort simply to make the case to terminate someone.  Human resource issues such as this require different toolsets than service delivery analysis.  Additionally, service delivery analysis takes time, resources and energy that are not worth expending for tasks they are not designed for.
• Be aware of review and assessment processes that that utilize one “silver bullet” technique.  There are many good tools and techniques for assessment and each has strengths and constraints at meeting particular needs.  A customized analysis drawing from several tools and techniques is often the best approach.
• Be upfront and clear on the level and type of public, council, and staff involvement required.  Assessment efforts take time and energy to be done correctly and regular staff work needs to continue on a day to day to day basis while the assessment is being conducted so proper planning is important. 
• Be clear and communicate to staff what is being done, why and how information will be used.  Assessments can be unsettling for staff.  Clear communication can help defray fear and result in a more productive process.
• Don’t be afraid to compare yourself to private sector entities that at first glance don’t seem directly comparable.  Instead, think about the customer service experience and try to include benchmarks for similar services in the private sector.  For example, tax collection offices often function much like bank teller services and benchmarks in that industry would be comparable and useful.
• Understand that reviews require data and information and the better the information that is regularly collected, the better the review and analysis.
• Finally and most importantly, do not conduct the review if you are not prepared to implement solutions and follow-through.  It is too resource and time intensive to do the work then ignore the solutions.

In economic development, attention is often paid to which areas of the country have low tax burdens and which have high tax burdens.  While not the only or even primary factor in driving business and economic development performance, tax burdens play an important role.  No area wants to be perceived as a high cost area and being considered low cost or even middle of the pack can help support economic development strategies.   In stable economic times, comparative tax burdens of states and regions seldom change as governments tend to follow the “business as usual” approach.  Thus, the ranking of states with regard to low vs. high tax burdens remains relatively constant.  However, all of this can change in a volatile economy.

The severe downturn in the national economic climate impacts households, businesses, and governments.  For government, loss of revenues associated with the downtown forces change.  This change can take the form of program and service reductions and eliminations, across the board spending reductions, tax increases, or some combination of all. The path taken in response to the economic downtown is in the hands of policymakers and the public and over time has the potential to re-shuffle the deck in terms of comparative tax burdens.  

Some states and regions will make the tough choices by identifying costs savings and program and service reductions and avoiding large tax increases.  Others will delay these tough choices by relying on tax increases or bailouts from federal grant and funding programs.  The net effect can move some areas from being high tax states to the middle of the pack or even being low tax burden states and vice-versa .  No doubt, making the tough choices will result in some pain as people benefit directly from the programs and services provided.  But in such tough economic times, a bit of pain now can make a more prosperous future.

There is a great deal of buzz in the economic development community about the potential for alternative energy initiatives to have significant, positive impacts on states and local economies.  This buzz has been escalated by several recent factors.  First, concern over the environment has spread from being an issue primarily pursued by environmental interest groups and activists to being pursued widespread among business and citizens.  Second, the recent increase cost of traditional fuels, most notably oil and gas, has negatively impacted the fiscal bottom-line for consumers and business alike.  This has called in to question many investments and business models based on a continuation of low cost or even “cost stable” traditional energy.  Third, the passage of the American Recovery and Reinvestment Act at the federal level promises significant funding and support to governments and businesses for alternative energy programs, R&D, and commercialization.

All of this renewed and increased attention has both business and governments scrambling to find ways to convert the attention into economic opportunity.  However, to make the most of the economic development opportunities the state and local economic development community and policymakers need to avoid jumping into the latest trend or chasing the latest grant or subsidy, without a focused strategy based on both short and long term opportunities.  The following are important issues to consider for increasing chances for economic development success.

Strategies and initiatives should be tied to existing strengths and assets.  This includes existing strengths in R&D, infrastructure, and workforce.  Doing so will increase the chances that initiatives can be implemented in the near-term and sustained over time because the underlying foundation to be built upon is already in existence.  It also increases economic use of past and current investments in these underlying assets and avoids the cost of building without a foundation 

Strategies and initiatives should also be tied to opportunities and assets in a state or region’s non-energy economic sectors including in advances in technologies and commercialization in those other sectors.  This creates not only direct economic impacts but also indirect impacts and “spinoffs” to other sectors.  For examples, if done properly, biomass energy development can help create markets and efficiencies in the forestry and agricultural related sectors and wind energy can increase the market for composite manufacturing.

Economic developers and policymakers must also understand that there is likely no one perfect alternative energy solution and they should avoid putting all their eggs in one basket.  Some solutions which may seem ideal are still very far to market in need of technological solutions or improved economic models.  In the meantime there are solutions which may not be the long-term environmental ideal but lessen our dependence on out of state, out of country fuels, technologies, and products.  Adhering to this advice means policymakers should support but not become overly aggressive in trying to pick winners as entrepreneurs and market will ultimately decide what is feasible.

Finally, solutions should not be based on long-term subsidies.  Subsidies can help jump start and support a nascent technology or business model but are not the long-term answer as over the long-term they skew consumer and business behavior towards inefficiencies.

In summary, there are plenty of economic development opportunities that renewed interest and investment in alternative energies present.  To make the most of these opportunities, the economic development community along with state and local policy makers should avoid jumping into the latest trend or chasing the latest grant without a strategic focus based on existing economic assets.

Tax Increment Financing (TIF) is a powerful economic development tool and if used with appropriate planning can benefit communities as well as businesses.  While the exact application and provisions of TIF's vary by state, TIF's typically encompass some form of capturing property taxes resulting from increases in property value due to development of a project and dedicating those revenues to support the development  as well as other activities.  This may include using dedicated revenues for infrastructure and capital improvements costs, payment of bonds and other financing mechanisms, and in some states like Maine, direct tax relief to encourage development.  To help ensure that TIF's provide their intended purpose and value, a community should consider the following tips: 

• Fit use of TIFs into long-term economic development strategy - Know what your long-term objectives are
• To maximize fiscal benefit from TIFs tie into community capital planning and budgeting - consider going beyond the use of TIFs for business incentives and use to fund public infrastructure to support economic development
• Be aware that when using TIF revenues to benefit specific businesses/developers, what you provide to one will be serve as the benchmark for future requests
• Once TIFs are used, be sure to implement system for tracking values, revenues, and expenditures throughout the life of the TIF
• Plan for the tradeoff between TIF funds and General funds" - what you take in for TIFs can not be used for General Fund purposes
• Downtown TIFs often will not generate sufficient revenues from new investments to pay for items in the development program - you may want to consider integrating downtown TIF objectives with other TIFs in the community
• TIF policies can help direct decisions on when and how to use TIFs and can be tailored to meet community's long term objectives - they need not be overly restrictive

The fiscal benefit of TIF use varies by community and is driven largely by its tax rate and the state school funding formula - knowing the fiscal "breakeven point" can help a community determine how much of an incentive for a business makes fiscal sense - this breakeven point changes over time and should be periodically reexamined