9 Economic Development Concepts Every Official Should Know

Economic development is a deep, constantly shifting topic affected by technological, political, sociological, economic and generational trends.

For busy decision makers, staying in-the-know can be difficult. Here, planning and development professionals share notable concepts, new and old, affecting the world of economic development.

Return of the city, growth of metro areas

After decades in the suburbs, populations are returning to cities and large metro regions. This migration has made city and metro areas more attractive to businesses wanting a millennial workforce.

It's also changing regional dynamics.

“The new economic development model is no longer about the individual community or municipality, it's based on raising the quality of life and the welfare of everyone,” says Dan Botich, SEH senior economic development professional.

Smaller outstate communities wanting to compete with urban areas must invest in technology to be more competitive.

“Outstate communities, or suburbia and exurbia, are now in a position to invest in technology,” says Botich. "Quality of life/social amenities (trails, parks, access to the outdoors, social centers) are now available in the population centers.”

Valparaiso Park
Central Park Plaza in Valparaiso, Indiana, is a shining example of how an informal venue can strengthen a downtown. It includes a park with amphitheater, ice rink and catering facility. In 2014, it had 130,000 visitors.

The expanding definition of “downtown”

The downtown area has long been considered an engine of commerce, the heart and pulse of a community and a place where businesses locate to drive prosperity. But the competitive advantage of downtown is changing. 

“It’s becoming more and more important to think about our downtowns as central social districts and not simply central business districts. A downtown thrives when we create a place where people not only do business, but also decide to live, gather and celebrate with loved ones,” says SEH community development specialist Mike Larson.

According to Botich, the resurgence of downtown as the new central social district is more about the placemaking movement than actual development. It is about integrating attractive public spaces where people want to be. This is the basis for businesses to benefit from this concentration of individuals.

Much of that movement is grounded in participatory, community-driven processes aimed at taking back public space and making disused urban spaces into lively, inclusive and safe places where people want to be.

“Downtown is no longer primarily for shopping or work. It’s more about entertainment, dining, farmer’s markets, living, exploring and actively participating in the artistic and cultural activities of the community,” says Larson.

Parks and trails measured for prosperity

According to the American Planning Association, well-designed parks and trails boost property values and increase municipal revenues. They also attract knowledge workers, affluent retirees and homebuyers. That’s why it’s rare to find a project today that doesn’t have an economic development metric – even public realm investments like parks and trails.

"In today's economic development approach, proximity and access to parks, open spaces and recreational opportunities play as much a role in a community's success as schools, employment centers and housing stock," says Botich. "Capitalization of these spaces positively impact property values across the board in a community, raising not only the market values of individual property but the intrinsic value of an entire community, a tertiary amenity to home owners and business alike".

It is not always true that development lowers taxes though, in fact it may be the primary reason taxes increase as more and more services are required. This is why a cost of community service (COCS) analysis is beneficial to identifying tax cost-generators and determining an equitable economic diversification strategy to reduce the potential long-term negative impacts of development (new schools, fire and police facilities and operations, etc.). Open space does not demand the same level of services that a residential neighborhood or commercial development may require, meaning less municipal expenses.

It is a realization that a strategy of developing or conserving parks and open space is not contrary to a community's health but rather an integral part of it. This is the basis of what's called the proximate principle." For more on this topic, refer to the research paper by John L. Compton, The Proximate Principle: the Impact of Parks, Open Space and Water Features on Residential Property Values and the Property Tax Base (2004).

Adds Larson, “In fact, economic development is one of the primary evaluation criteria for one of our largest funding entities in the region, the Northwest Indiana Regional Development Authority.”

Dunes Kankakee Trail
Dunes Kankakee Trail, Porter County, Indiana

On the Dunes Kankakee Trail in Porter County, Indiana, (above) economic sustainability was viewed on par with social and environmental considerations. The SEH planning and landscape architecture team incorporated economic development considerations into the design during trail routing evaluation. The trail alignments that connect business districts, potential new development areas and tourism destinations received a higher priority for completion.

How sustainable streets serve the economy

Planning pundits have long believed well-designed streets were good for business. Now, a recent report by the New York City Department of Transportation helps solidify this stance, providing more proof that well-designed, sustainable streets do more than increase safety and reduce environmental impact.

“Better streets attract more people and more activity, thus strengthening both communities, the businesses that serve them and the city’s economy as a whole,” writes New York City DOT Commissioner Janette Sadik-Khan in the report.

In one case study, retail sales for businesses along a sustainable new street — with traffic calming, tree plantings and improved bike and pedestrian facilities — outperformed two comparable streets by nearly 25 percent.

Central City
Main Street, Central City, Colorado

In Central City, Colorado, (above) downtown infrastructure had deteriorated to the point of impacting businesses. SEH collaborated with residents and businesses to rebuild main street with a more pedestrian-friendly, and business-friendly, sustainable street design.

RELATED CONTENT: HOW TO DEVELOP A STRATEGIC ECONOMIC DEVELOPMENT PLAN

Having a “skills snapshot” of your workforce

The concept of economic development is grounded in job creation and retention. But remember those jobs still need people, and those people need the right skills for the job. 

“What is the composition and availability of your existing workforce?” asks Larson. “Be sure to understand the skills and availability of workers in your region. With that knowledge, your efforts will be more fruitful.”

While workforce development strategies vary by location and sector, success will depend on having a good, realistic snapshot of the skills of your workforce and its capabilities. Larson says a good pre-assessment of your workforce will help determine whether a sector- or place-based approach to workforce development is best for your region.

The unlikely role of parking management

Parking facilities use land. When that land is tied up to hold cars rather than businesses, there is a potentially lost opportunity, especially in higher density urban areas.

Recent findings show context-appropriate parking management programs can yield surprising results in reducing congestion and improving downtown vibrancy. It’s a matter of managing the land so parking facilities don’t replace opportunities that might instead contribute to the economy.

aerial photo
28th Avenue Park and Ride, Bloomington, Minnesota

In the Minneapolis metro area, park and ride facilities connected to strong transit programs, like the 28th Avenue Station above, help reduce the downtown parking footprint.

Economic gardening concepts becoming more prevalent

Headlines in the business section of major newspapers are filled with relocation announcements of multi-million dollar companies relocating hundreds of jobs. Attracting this kind of company is difficult -- there aren’t many of them and the ones available are highly sought after by other regions or communities. 

What happens when you stop looking for a single company with 100 jobs and, instead, identify and assist five smaller companies already in your region able to grow 20 jobs each? That’s the underlying principle behind economic gardening, a concept initiated in Littleton, Colorado in 1987.

Since then, it’s grown throughout the country.

Is economic gardening right for your community? Learn more at the International City/County Management Association website.

The emergence of niche development firms

Certain economic development programs require a high degree of specialization to capitalize, including:

  • Historic tax credits
  • Tax credit housing projects
  • New Market tax credits

"As a result, economic development as a service industry is evolving from economic development planning to economic development financing. This specific niche assists private and public entities in understanding not only the financial impacts of economic development but also develops financial incentive strategies in order to negotiate, bargain and compromise (NBC) the best deal," says Botich. "It's the application of the Pareto Principle (80/20 Rule or Rule of Sparcity) which produces economic development success, efficiency and the marginal gains necessary to have short-term to long-term impacts on a community's quality of life. However, this method and approach requires a high degree of time and cost as well as expertise.

The solution, according to Larson, is less about finding the right program, and more about picking the right partner.

“Clients need to team with consultants who understand how to successfully leverage these resources, while ethically pursuing the public good,” advises Larson.

The need for rigorous risk assessment

All projects are not equal. Municipalities must be disciplined – and evaluate risk and only partner in projects with reasonable returns on investment.

“Some communities have become so desperate to have any projects at all they are willing to make deals inadequately supported with private dollars. These deals provide insufficient paybacks to justify the level of public participation,” says Larson, an advocate for scrupulous risk assessment.

Without adequate assessment, a project can end up doing more harm than good in the long run.

“It results in things like distressed TIDs, which end up having their already-long lives extended, and the need for donor districts to prop up non-performing districts,” explains Larson. “It erodes public confidence in devices like Tax Increment Financing when citizens feel they've been victimized by performance that doesn't measure up to the front-end promise.”

Whether your project will generate enough ROI for public involvement is a matter of asking yourself a simple question.

“Ask yourself, would the project occur in substantially the same way without any public funding? If the answer is yes, then public funds spent on it may be wasted, no matter how much policy makers and development staff members may want the photo op,” says Larson.

In a perfect world, there are hard numbers and data to support investment. Sometimes those aren’t appropriate.

Says Larson, “Do the math to assure payback periods are reasonable and public financing is pared back to the necessary amount. But remember, some goals can’t be reduced to accounting tests. In those cases, a community is wise to work from a vision encompassing overarching goals.”

Conclusion

When it comes to economic development, no single strategy works in every scenario. But there is much we can do to improve the systems and structures supporting jobs and the economy. We can create destinations people want to live in, work in and socialize in. Attract people with well-designed parks, trails and streets. Keep a close eye on our workforce. Manage the land wisely. Cultivate small businesses. Be disciplined about our investments. And, finally, we can team with consultants who understand how to leverage opportunities and resources while working for the public good.

About the Experts

Dan Botich is a senior economic development professional and leader of the SEH economic development team in Wisconsin, Indiana and Michigan. He is a project management and economic development financial advisory professional with more than 30 years of experience. Dan believes a strong relationship among community leaders, businesses and educational institutions is the foundation of economic growth and sustainable development. Contact Dan

Mike Larson is a community development manager with extensive experience working with communities, businesses and non-profit organizations on their community and economic development projects and strategies. Mike is responsible for project financing, development and providing sound and innovative strategies to ensure that client projects and programs are undertaken in the most cost-effective manner. Contact Mike

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