Dean Barber

Economic Development Under Assault

In Corporate Site Selection and Economic Development on October 18, 2015 at 10:44 pm

We live in a democracy in which we are fully capable of electing talented people dedicated to improving the public good, as well as low-brow scoundrels bent on achieving power for their own self-serving purposes.

Speaking to the House of Commons in 1947, two years after winning a war but being unseated as prime minister, Winston Churchill said, “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.”

And so it is. We are constrained and elevated by those to whom we elect, whether they be brilliant or ignorant.

Gridlock and Vilification

We also live in a curious time when politics have become so radicalized, so divisive, that finding solutions by compromise, traditionally the needed lubrication to making government work, is now viewed as weakness and betrayal.

Hence the gridlock and vilification, a political backdrop that too often holds that if someone does not share your views or is of a different political party, then they are not worthy of trust and should not be worked with.

With a middle class that has essentially been shrinking for the past 40 years, much of the electorate is scared and angry, certain of a system rigged against them that favors the ultra-rich and the big corporations.

And they see government, not as so much as the solution, but central to the problem and in collusion with special interests.

Stooges for the Rich and Powerful

This grassroots movement, more destructive than constructive, more revolutionary than reform, has filtered down from the national level to state and local politics.

And I am convinced this is central to why economic developers and the profession of economic development are under assault in so many places.

This suspicion of government and corporate America has given new impetus to the belief, which has always been there, that economic developers are mere stooges for the rich and powerful.

The detractors, the skeptics, and now a wave of newly-elected firebrands that are taking office, subscribe to a doctrine that holds that financial incentives given to a company in return for capital investment equates to nothing more than corporate welfare.

You hear this on the far right, particularly with the emerging Tea Party, and ironically, you hear the same on the far left with a self-described democratic socialist running for president.

And for years you have heard this same mantra — that virtually all incentives are bad and unnecessary — from both the press and academia.

The naysayers hold that economic developers are largely unnecessary because the free market will determine if, how, where and when a company will set up operations, expand or contract.

It’s Happening in Texas

Last week, I attended the annual meeting of the Texas Economic Development Council, which was being held in Dallas.

There I spoke to a number of economic developers with excellent track records of success who found themselves under the gun politically because of newly elected officials in their communities.

“Economic developers are tied to government and everybody is suspicious of government right now,” said one attendee to the conference.

“It’s a difficult time and there are a considerable number of players in TEDC who find themselves under attack.”

As a consultant to economic development organizations and to industry, I can tell you that this wave of anti-economic development sentiment is happening nationwide. I hear it on a regular basis, and ironically in places where economic developers have had a history of success.

It’s Happening Nationwide

A few weeks ago, I wrote about how North Carolina’s primary economic development incentive program was being left unfunded because of state legislators who were convinced the program was corporate welfare.

Eventually, North Carolina did pass a budget that restored funding to the Job Development Investment Grant program, but not without prominent economic developers having to go public to argue their case.

It was an ugly scene for a state where economic development has had a long winning tradition.

But with success comes envy, especially from those who purposely seek to cut, eliminate and in some cases raid a tax revenue funding stream.

Tempting Pots of Money

That is the story here in Texas. Economic developers in the Lone Star State are finding themselves in the crosshairs largely due to their success.

Keep in mind that with success comes jealousy and often in response anti-growth advocates. To add to the temptation, many local Texas ED groups are sitting on rather sizeable pots of money.

In 1989 and in 1991, the Texas Legislature created 4A and 4B sales tax dedicated to local economic development, allowing certain cities the ability to promote a wide range of civic and commercial projects.

The effect was to largely decentralize economic development in Texas. Suddenly, communities could and did build substantial war chests for economic development. It also gave communities, even small rural towns, added horsepower on the awarding of incentives.

(I know a one-person ED shop in Texas with $3 million in the bank.)

Willing and now able to put skin in the game on corporate investment projects, local Texas economic developers started seeing great success.

But in today’s political environment, that success has only placed a bulls-eye upon them.

“It’s part of the everyday narrative now among the economic developers of this state,” said one TEDC attendee. “It usually starts with a council member or a board member questioning what they are doing.”

Having Dodged a Bullet

Mind you, economic developers are not infallible, and elected officials have every right to ask questions and seek answers. But in the process of asking, I would hope they would try to learn from the professionals.

I spoke to one economic developer who found himself facing a newly appointed board “whose goal in life was to get rid of me.”

Fortunately for him, he had allies.

“The good folks in town got responsible people elected and the mayor dismissed my entire board and brought in a new board, and they are all very good people.”

Having dodged the bullet, he looks back on his efforts.

“I spent a whole year trying to educate them and it was like talking to a brick wall. It’s like my city manager says, you can’t fix stupid.”

Educating the Cave People

By the second day of the TEDC conference, I knew I was going to write this blog, and I mentioned it to one economic developer, a long-time friend.

“What happens when the cavemen get elected. That should be your title,” he said. “Because that’s kinda the way it is playing out. It seems like the citizens who are against virtually everything are now getting elected.”

But then he said it is incumbent on economic developers to educate those who are hostile and skeptical or have pre-conceived notions on what economic development is or should be.

“We’ve not done as good a job telling our story and we’ve not done as good a job with accountability. Are we building clawbacks into our agreements? We should be.

“Are we asking for performance data from the companies receiving incentives? We’re working with public dollars, so we should be. And are we modeling this to show a positive return for our community. We should be there, too. … It’s a tough business.”

Economic development is a tough business, particularly at the local  level. And with the prevailing political winds, it’s probably going to get tougher.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas.  If you liked what you read here, invite Dean to speak at your next meeting. He can be reached at dbarber@barberadvisors.com or at 972-767-9518.

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  1. Thank you so much for addressing this. Every sentence is absolute truth, and it happens in metro ED organizations as well as small rural ED’s. And the better we perform, the more the board and communities expect. Boards and investors want to confidentiality, yet they want transparency as well. Rightfully so… But when personal or business proprietary information is exposing compromise, it is like watching a slow motion train wreck. And every economic developer, no matter how well they perform, are subject to personal and political bias from county officials, city officials, and board members. And unfortunately, all too often, those entities are willing to bite off their nose to spite their face. But the bull’s-eye always lands on the economic developer… We are responsible for success, past mistakes before we ever came onboard, and ultimately we become responsible for dysfunctional board itself. When one boardmember becomes frustrated, jealous, or whatever the case, it is amazing how quickly flying monkeys fall in formation and launch their attack. They are headed directly or the ED office itself. And make no mistake… For too many very professional and successful economic developers have fallen from arrows that come from those we thought were allies. This article was refreshing, and somewhat comforting, as odd as it sounds… Thank you so much for addressing it, and I hope that you are able to speak into the situation and shake some sense into those who really control the economic development realms. Very well written.. And good luck to the Industry peers and colleagues. I hope they become skillful scouts who recognize the scenarios before the monkeys take flight.

  2. Good article Dean! I have spent the afternoon working on my Linked In connections. Trying to grow my connections.

    Charles L. Smith, CEcD
    Executive Director
    Main Line: 903-572-6602
    http://www.mpedc.org

  3. In my current role, as an economic developer for Houston’s Greenspoint District, I have not suffered the “assault” you discuss in the article. With 60+ wins under our belt, the Greenspoint District does not have cash or tax incentives, but instead uses available resources to offer non-cash incentives to help with workforce, permitting, access to utilities, information, etc.

  4. Very well written & so very true. Thanks for sharing.

  5. Thank you for the insight Dean. I have found it necessary to spend a significant amount of time working at telling our story. As a small/medium size msa, it is difficult to use metrics in a truly meaningful way. So it just takes a lot of conversation and explanation of what we are involved in, and still stay true to non-disclosure expectations. Representing two communities, with a State line between them makes the task a bit more of a challenge.

  6. Nisa Nolder’s comments are valuable. And the basic article needed to be written, not only because the issue is very real, but also because economic development professionals need to address this. Raising its profile is well timed and necessary. We might want to consider what can be done to tackle some the antecedents to these criticisms.

    Let’s start with the TEDC conference referred to in Dean’s article. Having been the Executive Director of TEDC for many years (quite some time ago), I happen to know that the members there are probably the least likely in the nation to wear a victim hat and to grouse about the complaints. As a bunch, they are pretty stoic. Texas produces a top fleet of economic development professionals, and I emphasize “professional.” If we are hearing it from economic developers in Texas, then the issue has got to be real and likely a nationwide phenomenon. Let’s accept that Texas is a good test, and so now, let’s address the problem.

    I’ve seen practitioners make statements which elicit complaints and criticisms in many states and regions, and I’ve seen them make reaction-provoking public comments repeatedly. Here are some of the examples:

    First, the heralding of inducements and incentives, and putting an “ownership” spin on them (e.g., “WE were able to offer…” or “OUR incentive package…”). I always have recommended changing the narrative to something like: “the County Commissioners have assembled an attractive terms and conditions package for the company to consider” or “City Councilmembers worked constructively in the past to devise job- and tax-generating conditions for new investment in our community. Company X affirmed the Council’s wisdom by committing to 100 new jobs for the community.” The key here is attribution, and of course this is VERY general. But you get the idea. The source of most incentives of substantial economic value–the ones detractors most often complain about–are local and state government. So let’s change the narrative: let’s credit ownership of the packages offered businesses to those elected by the people to make the decisions as to whether or not to create inducement packages, and if so, what they should be. One person says it this way: “if you own the credit, you own the blowback as well.” Be part of the team, for sure. But don’t hog the ball and then expect you won’t be the focus of attention.

    Second, discretion is needed here. In some of the web sites and offer material easily available from economic development interests, you’ll often see incentives touted. And then the economic developers that post them wonder why they hear plaintive remarks from detractors. With public funds, quasi-public funds and what some see as corporate welfare, we should always default to being discreet. There will be a time and place for conveying inducement and incentive information appropriately. I am NOT saying that we hide or violate any open records regulations or the public’s right to know. I am saying that we need to redouble efforts to be reasonable. It’s like waving the proverbial red cape in front of the angry bull. Why provoke? And if we choose to provoke, let’s not complain when we get the reactions like those posted in the article.

    Third, the words we choose. Never should the words “gift” or “freebies” or “subsidies” or (my favorite) “pot sweetener” (yes, I really heard that in public once) be uttered. We’ve all seen this or heard this type of communication. Rather, let’s stick to descriptors such as “job-generating” and “tax-generating” and similar. We’re not talking about euphemisms here. Actually, they are more accurately descriptive of the intent. If they weren’t descriptive of the intent, why would the governmental bodies or quasi-governmental bodies make them available? For charity? I don’t think so. Let’s call them what they are, but do so in ways that reduce the likelihood we’ll incite an adverse reaction.

    Finally, a very real example. I’ve recently seen a prominent economic development professional (not in Texas), active in the profession at present, boast quite publicly that he single-handedly “wrote” state laws that helped induce and incent corporate locations. My guess is what he meant was that legislators consulted with him and sought his guidance. Maybe I am wrong. But either way, is it any wonder that when we say these things, certain segments of the public will find them offensive and attribute them to us?

    Thanks do Dean for starting the conversation. The profession deserves it.

  7. Great article Dean! We face this problem on the local level every time there is an election. Everyone runs on the platform that they will make the EDA staff do their jobs. As if we are not already. About 6 to 8 months into their term the education will usually start to sink it and they realize it’s not as easy as it looks. Seems like that is half of our job these days…educating elected officials.

  8. One main unaddressed critique though is that attracting firms with incentives is a zero sum game from the national perspective, given that another location will lose those firms and jobs. The only ones that always win are the firms. If economic development efforts focused more on non fiscal and financial incentives, and on improving local drivers of competitiveness, this would lead to more win win interventions that help economic growth in all locations. And it would lead to less criticisms of the economic development profession.

    • Emma, without going into a long discourse, your premise that one location loses a firm and/or jobs and another gains is not necessarily true. It is simply not that simple. Many companies expand into regions/new markets because they want or need a presence there without loss of jobs or capital investment at other locations. I see it all the time.

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