Regional Approaches to Economic Development

2. Regional Approaches to Economic Development A Presentation by Citizens Research Council of Michigan

3. Who We Are • Founded in 1916 • Statewide • Nonpartisan • Private not-for-profit • Promote sound policy for state and local governments through factual, objective research • Rely on charitable contributions of Michigan businesses, foundations, and individuals

4. All CRC reports are available online at www.crcmich.org • Survey of Economic Development Programs in Michigan, Report No. 347 • Regional Approaches to Economic Development, Report No. 345

5. Goals of this Project To test the assertion that regions are a logical basis for economic development. To understand how regional players coalesce around economic development structures and strategies. To develop recommendations for improved approaches to economic development in Michigan.

6. The New Reality: Creative Destruction • Globalization and the diffusion of knowledge, capital, and technology • Technology based productivity • Product specialization • International uncertainty and volatile gasoline prices • Delegation of responsibility for economic development to states and sub-state units • Rise of site consultants who broker between firms and governments • Preeminence of labor markets, not political boundaries

7. The Other Reality • Fragmented government (83 counties, 1,241 townships,274 cities, 261 villages) and strong local control • Few incentives for regional cooperation, very limited tax base sharing • Competing definitions of economic development • Expectations built on a 20th Century manufacturing model • Michigan’s economy

8. Michigan’s Economy in 2006 • GDP grew in every state except Michigan (-0.5% compared to 3.4% for the U.S. as a whole). • Michigan ranked 50th of 50 states in state personal income growth (3.1% compared to 6.3% for the U.S. as a whole). • Michigan ranked 49th of 50 states in per capita personal income growth (3.2% compared to 5.2% nationwide). • Michigan ranked 48th out of 50 states in population growth (-0.1% compared to 1%). • Unemployment is 7.2%...lowest number of people working in Mi since 1995

9. The Threat of the Old Reality Institutional sclerosis (Mancur Olson) A term used to describe a process of regional decline in which places that prospered greatly in one era find it difficult or impossible to adopt new organizational and cultural patterns, no matter how beneficial they may be. Innovation and growth shift to new locations.

10. The Importance of Regions • Economic activity is defined by labor markets: the cost and availability of different kinds of labor determines the attractiveness of the region for different kinds of businesses and different kinds of households. • Regions that can attract talented residents and support innovative firms will prosper.

11. Strategic Foundations of Economic Development Are Not Defined by Political Boundaries • Human capital • Research and development institutions • Financial capital • Industrial base • Physical infrastructure • Entrepreneurial environment • Legal and regulatory environment • Quality of life

12. A Paradox • The major forces that constrain or stimulate development are regional (real estate and labor markets, transportation systems, business and union environment, natural resources, industry clusters). • Most of the instruments of managing development are local (local tax structures, land use regulations, capital improvement programs).

13. Problematic Outcomes • In a review of nationwide results, Timothy Bartik found that 80 percent of net new jobs created by incentives go to non-residents rather than to residents. • Redistribution of public expenditures and tax burden to favor business over residents. • Incentive competition skews the mix of public services. • Waste of public resources.

14. Multiple Approaches: Invest in People, or Place, or Firms • Retain and protect jobs through business retention • Create better jobs by raising educational levels • Create higher paying jobs through union contracts, living wage ordinances • Increase tax base though business attraction • Increase diversification through entrepreneurism, university tech transfer, venture capital • Increase productivity through innovation and capital investment • Increase profits by reducing tax rates • Revitalize a geographic area through public investment in infrastructure • Increase population by creating jobs • Change the local context

15. Organizational Structure of Economic Development in MI • MEDC and various state departments • Counties, cities, villages, and townships • DDAs and other special authorities • Chambers of commerce • Specialized membership organizations • Councils of government and metropolitan planning organizations • Workforce Development Boards • Utility companies and banks • Consultants and developers • Education community • Foundations • Others

16. The Importance of Foundations in Economic Development • Not constrained by political boundaries • Not constrained by election cycles • Can assemble all of the appropriate participants • Can incentivize local officials to do what does not come naturally • Can mediate competing goals and approaches • Can change local context

17. Nationwide Survey of Regional Organizations • 50 useable responses • Each type of organization has a perspective that reflects its constituents and influences its goals and programs. • Most of the organizations have other responsibilities.

18. Regional Economic Development Organization Responses

19. The Region Served Parts of 2 or more states 9 Multiple counties in a single state 27 Multiple sub-county level governments 14 Urban 11 Mid-sized city 9 Large city 8 Small city 6 Suburban 4 Rural 12

20. The Service Area • Voluntary agreement of member communities • Adoption of federal or state designation (MSA) • Actions of the founders • Determination of the board of directors • Interlocal contracts • State designations

21. Role of the Regional Organization • Only 3 of 50 did not share the service area with other local or regional entities. • Coordination with other entities included serving on each others’ committees and boards, forums and meetings, formal memorandums of understanding and contracts. • Some regional organizations focus on international or national attraction, industrial and manufacturing, headquarters, or specific projects, while locals focus on retention and retail. Some provide data and issues analysis. Some perform all economic development for the region.

22. Common Functions and Services • Coordinating strategic approaches • Creating E.D. plans • Researching, reporting of E.D. data • Business attraction • Advice to local governments to improve competitiveness • Inventory of available sites • Involvement in mass transit and infrastructure issues • Branding, image campaigns • Assisting businesses with local government requirements

23. Less Common Functions • Advocacy and lobbying • Business retention • Trade missions • Member services • Involvement in quality of life issues • Low interest loans, gap financing, equity investing, venture capital • Workforce training • Industrial park • Site acquisition and preparation • Export development • Business-to-business trade shows

24. Identified Strengths-All • Skilled/productive workforce 31 • Industrial/business base 19 • Location/proximity to markets 17 • Knowledge/education assets 11 • Business climate 9 • Business costs 8 • Quality of life 8 • Transportation infrastructure 8

25. Identified Strengths-Michigan • Industrial/business base 6 • Skilled/productive workforce 5 • Business climate 4 • Knowledge/education assets 2

26. Identified Problems-All • Industrial decline or restructuring 14 • Lack skilled workforce, need retraining 12 • Lack transportation infrastructure 12 • Image 9 • Educational attainment or outcomes 7 • Infrastructure investment 7 • Loss of population or talent 7 • Limited land or buildings 6

27. Identified Problems-Michigan • Industrial decline/restructuring 7 • Image 3 • Loss of population or talent 2 • Union attitude/perception, high wages 2

28. Targeted Industry Clusters • Advanced manufacturing • Advanced materials • Alternative energy • Automotive/transportation research and development • Aviation and aerospace • Business and financial services • Chemicals • Corporate headquarters • Creative • Distribution and logistics • Engineering and management services • Film and television

29. Targeted Industry Clusters • Finance and insurance • Health care • Information technology • Life sciences/bioscience • Machinery, metal, and instruments • Medical and pharmaceutical • Nanotechnology • Printing and publishing • Software • Technology • Warehouse operations • Wholesale trade

30. Shared Regional Vision and Plan

31. Operating Revenues

32. Average # of Board Members from Various Sectors

33. Growth in the Past Five Years

34. The North Carolina Model • 100 counties organized into 7 regional public-private partnerships to maximize collaboration • Regional entities work with local and state economic development agencies, corporate allies, funders • Purpose: Enable regions to compete effectively for new investment and to devise effective economic develop-ment strategies based on regional opportunities and advantages • Approach: Develop integrated economic and workforce development strategy; market the region; provide data and information; provide financial assistance, training and access to technology to counties; create special purpose commissions and councils; spearhead regional initiatives

35. Lessons • Economic development is being organized on regional bases in Michigan and in every part of the country. • The process of identifying regional boundaries is generally ad hoc, imprecise, and variable, but North Carolina has assigned all counties into one of seven regions. • Where there is a regional economic development entity, there is usually a regionally shared vision and plan.

36. Lessons • Organizations’ priorities and goals reflect their membership. • Layering and overlapping of economic development efforts is the norm. • Most regional organizations have increased in size over the past five years. • States, regions, counties, cities, chambers of commerce, and other organizations are competing for a limited number of target industries.

37. Lessons • Success reflected the number of full-time staff devoted to economic development.

38. Recommendations • Consider expanding the use of regional public-private partnerships for reinforcing and resourcing economic development. • Build on existing regional structures where possible, create new structures where necessary. • Adopt strategic economic development goals for the state and regions and publish semiannual reports on progress toward meeting goals and on best practices.

39. The Role of Regional Economic Development Partnerships • Bring together public and private actors; foster business, government, education and foundation collaboration. • Emphasize the diverse characteristics of Michigan’s regions and coordinate the development of a regional strategy based on regional goals and assets. • Market the region’s assets and sites and refer developers to county or local ED departments as appropriate. • Assist economic development professionals in obtaining specialized training and technology as needed. • Maintain a regional data base of available sites. • Advocate for the region and lobby for statutory or regulatory changes. • Raise public and private funds to support operations. • Assess the success of various regional strategies.

40. The State Role in a Regional Model • Define logical regional boundaries that build on existing initiatives. • Initiate and/or support a public-private partnership in each region. • Support the development of regionally relevant ED strategies. • Coordinate state ED efforts with regional plans. • Provide data, share best practices.

41. The County and Local Role in a Regional Model • Participate in regional partnerships. • Assist in defining a regional strategy based on regional assets and values. • Support regional efforts. • Align local strategies to support the regional plan. • Share information and best practices. • Follow up on referrals.

42. Because Truth is Nonpartisan • $14 million funding initiative • $1 million Kresge Challenge: We must raise $6,050,776 by June 30, 2008 • Increasing Regional Philanthropy – Endowment matching program at the Community Foundation for Southeast Michigan Your gift can help CRC meet its Kresge Challenge and campaign goals!!!

43. Thank You! For information on donating to the Research Council and for copies of CRC publications, please visit: www.crcmich.org Bettie Buss bbuss@crcmich.org