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How small cities and towns can find their economic-development secret sauce

By Mark Funkhouser


Ask any pro sports manager about how to win championships and they’ll tell you that developing a quality farm system is key. Yes, the wealthier teams can spend a lot of money signing superstars, but that type of success is usually short-lived. Focusing on homegrown talent can not only instill better loyalty, it’s a more authentic path to success.


The same is true for economic development. I’ve long argued against tax breaks to attract companies because they’re a temporary and fragile response to the need to grow a tax base. The evidence is clear that tax breaks don’t produce a win for taxpayers or the long-term vitality of local economies. What’s more, they’re not a viable option for the thousands of smaller cities and towns without the budget to afford a large-enough tax break to get a company’s attention.


More recently, I’ve observed a shift in economic-development policy back toward more viable fundamentals. As localities get creative, focusing on homegrown talent and investing in themselves, there’s empirical evidence that this focus on quality is a far better way to attract good jobs and qualified employees than tax breaks.


On the one hand, this is good news for folks like me who have viewed tax breaks as government waste, and it’s a beacon of hope for the small cities and towns that couldn’t afford them anyway. On the other hand, it means there’s no silver-bullet solution to growing a tax base. Authentic, homegrown economic development takes a long time and necessitates broad collaboration and commitment across multiple administrations. It’s difficult to know where to begin and how to plan long-term for your goals.


But there are some basic ingredients for success. I spoke with a half-dozen public officials and experts about this and, based on those conversations and my own experience, I see four key elements to economic development and strategic planning for towns and smaller cities.


Take an inventory of your community’s assets and liabilities. It’s hard to change and grow without truly understanding where you’re starting from and what’s in your toolkit. Cast as wide a net as possible when doing this analysis, because the answers to these questions may surprise you. For example, when Funkhouser & Associates helped South Bend, Indiana, develop its Comprehensive Plan Roadmap, we conducted more than 100 engagements with a range of stakeholders, including city employees, residents, businesses, nonprofits and academia.


“The roadmap F&A designed for South Bend 2045 [made] cross-cutting connections to show how the city’s assets — its people, location and resources — can be leveraged for a more prosperous, thriving community,” City Council Vice President Sheila Niezgodski says.


Similarly, don’t be afraid to dig deep to understand the root causes of your weaknesses and then address them. It’s likely that at least some of them are detracting energies and resources from your goals.


Find your secret sauce. What is unique about your town or city? Who are the local partners and entrepreneurs who are adding to this spark? How can this be leveraged to complement the larger regional economy?


“When you’re looking at creating a sense of place, there are some things you can do something about — and some you can’t,” says Mick Cornett, the four-term former mayor of Oklahoma City. “You’ve got to find your niche; what makes you special.”


For example, a largely agricultural community can lean into agritourism while also working with regional colleges and universities to support practical learning opportunities at local farms. A place with a lot of artisans who sell their wares online might want to work with a nonprofit to open a local art gallery or hire local artists for town beautification projects. If your town is popular with older residents, consider what funding opportunities there may be via AARP’s Network of Age-Friendly Communities to enable your residents to age in place with dignity and respect.


For Upton, Wyoming, it’s history and community. “When people think about Upton they think of the city park,” notes Clerk/Treasurer Kelley Millar. She adds that a section of Upton’s Old Town is being rebuilt and will include an ice cream shop and potentially a wedding venue. “It’s about celebrating our heritage and keeping it local. We want to build something that our kids can come back to.”


Hone in on quality services and amenities. Research by the Brookings Institution indicates that’s it’s not tax rates that primarily drive relocation decision-making by businesses and families — it’s the amenities those taxes pay for. Michael Hicks, an expert on regional economics and co-author of the Brookings research project, notes that there are a few gold-standard amenities that are common to all places: good schools, low crime, low blight and abundant recreational opportunities. But beyond that, different types of amenities work for different places.


For example, having a local transit network is essential in larger cities but fairly unnecessary in small, rural towns where nearly all households have a car. Opening a new public swimming pool might drive all kinds of summer activity and business in one place and be a money pit in another.


Moundsville, West Virginia, Mayor Sara Shaw-Wood says her town revamped nearly all of its parks to improve quality-of-life appeal. “This is what people look at when they’re deciding where to live,” she says, noting that parks are also a public health issue. “We understand that West Virginia has one of the highest rates of obesity and diabetes. Parks are imperative.”


If you’re unsure about where to invest, don’t guess, advises Hicks. “Instead of trying to figure out what the community needs in terms of amenities, let the market decide and make it easy to start a business. How hard is it for someone to open a gym or start a food truck? How long does it take?”


Turn your lemons into lemonade. It’s hard enough when a town loses a major industry, but the physical reminders left behind can feel like salt on an open wound. Things like abandoned mines, neighborhood blight or a desolate waterfront are mocking reminders of better days.


In Cuyuna County, Minnesota, open-pit iron mines abandoned in the 1960s left behind a landscape dotted with mining pits 100 to 525 feet deep and rock piles 200 feet high. Thanks to a major collaboration that included the state, various area local governments, two joint power boards and volunteers, the mining sites have been transformed into a state recreation area complete with biking trails and boating, and the Cuyuna Lakes State Trail is a paved eight-mile path running from Crosby to Riverton. Communities all along the trail are benefitting from the brewpubs, house rentals and cycling shops that have popped up since it opened.


In the hub-and-spoke model that encompasses most of our regional economies, smaller cities and towns lie at the ends of spokes and dot the landscape that encompasses that invisible outer wheel. They are part of a much larger whole but, as writer Emma Durand-Wood noted recently on the website for the advocacy group Strong Towns, there is strength in smallness. Smaller cities and towns are more nimble and accessible, and those qualities allow leaders the freedom to be creative and agile in determining their path to prosperity.


“The mistake is waiting for someone outside to come save you,” says Cornett, the former Oklahoma City mayor. “The answer is almost certainly going to have to be internal.”

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