Setting Regional ED Priorities is Challenging

It looks easy until you actually try it. That's what many regional economic development groups are discovering as they work to set future regional economic development investment priorities, especially those requiring public sector support and approval.

The latest region to learn this lesson is Dayton, Ohio, whose Dayton Development Coalition (DDC) had to revise its structure to include five public sector members because of the inability to gain consensus on which development projects should get top billing for federal funding. When the DDC agenda failed to gain sufficient buy-in, the regional chamber and the area's regional planning commission locked arms and formed their own regional priorities agenda. This situation points to a much larger problem afflicting economic development efforts everywhere. Go here to read about the Dayton situation.

During the current environment of scarcity, regional cooperation is more important than ever as a strategy to help communities get what they need to develop and grow. At the same time, regional cooperation is doubly difficult because there are scant public and private sector resources available to fund the growing list of regional development projects.

I have been saying this for some time: economic development is political economy, which means that both political and economic concerns must be addressed to reach a consensus on regional priorities and then to get these priorities funded. This suggests that both the public and private sectors must participate in these priority-setting processes. Several argue that there is no political constituency for regions because politicians get elected within city and county boundaries. That may be true, but local elected officials should support regional initiatives if they want their economic and tax bases to grow. Cities and counties are actors in regional economies. The economy does not start and stop within their boundaries. At the same time, the private sector must recognize that it must be selective in what it asks the public sector to invest in, especially during these current lean economic times.

The economic development landscape is littered with projects originally designed to increase local and regional capacity for economic development. The list includes: convention centers; airport expansions; ballparks and other sports facilities; downtown development projects; waterfront developments; science and tech parks; incubators; interstate highway exit ramps; new regional retail malls; museums and aquariums; entertainment resort developments; new research campuses to support industry cluster development; and many other things. Everybody has a "pet project' that they want to get funded. All promise to restore economic vibrancy to areas. Every economic impact study done on these projects says the project will generate far more benefit than cost.

What do I see as I look at these projects? Most seek and receive large government investments, which often compete for scarce revenues needed to fund basic public services like education and infrastructure improvement. Most project feasibility studies over-promise economic results that never materialize. The market is almost always smaller than what is estimated. Utilization of a large number of these resources, beyond the initial honeymoon period, drops off as fickle shoppers and visitors move on to the next latest and greatest. Most take the attitude that "if you build it, they will come." Most of these projects require public subsidies well-beyond startup and maybe forever.

These problems beset cities and regions of all sizes, but they are especially common in third and fourth tier regions, where the market base is insufficient to support these activities for long. Every city and region wants to be "big league." This desire underlies most strategies guiding urban and regional economic development efforts.

Here is my advice on how to cope more effectively with these issues:

1. Be careful about which projects you add to your regional development priority list. Temper your desire to be a big league city or region at the expense of basic public service.

2. Be careful what you envision about your city or region's future. Sometimes we imagine our cities and regions being more than they really are or can become. It's better to be an over-achiever than an under-achiever. Don't get suckered into believing that you are not a great place unless you have all of these fancy ornaments.

3. Accept at the beginning that you must work incredibly hard at developing and keeping a market for your new developments. In most regions of the country, we have more economic development capacity than we can use. We are overcapacity for tourism and travel destinations. We have too much downtown capacity. Right now we even have under-utilized airport capacity. The economy is always filled with risk and uncertainty, but especially now.

4. Examine the long-term performance of comparable projects across the country to see what is really working and what is not. Invest in a few trips to other cities and ask project planners and managers if their developments are bearing sufficient fruit ten years after they were built. Don't waste your time visiting projects that were just completed in the past couple years.

5. Look at where and how the private sector is investing its funds in these projects. Sort through the financial statements to determine how much private investor money is actually at risk in these projects. Is the private sector taking equal or less risk than the public sector on these deals?

6. Finally, agree that you are going to use two important types of collaboration to increase your success: a) local collaboration in creating market synergy among various developments in your region; and b) external collaboration nationally and internationally to build market ties between your local development projects and those in other cities and regions. The latter idea is new, but has significant potential.

Do these things and ten years from now you will have less worry about whether you made the right decision.