Volume XVI | Issue 2 | Fall 2016

Vital rural economies take a long-term view

Increase the odds of success by investing in local businesses

When Facebook announced last year that it was building its third data center in Prineville, adding hundreds of more jobs to the 147 it already created, the region’s vigorous efforts to attract outside business were rewarded. The incentive package offered by Crook County and Prine-ville exempted Facebook from taxes on its buildings, equipment and improvements for 15 years, a multimillion-dollar benefit to the company.

Incentive-based business attraction strategies like the ones employed by the Central Oregon region are a favorite economic development tool for many communities. Data centers may well be a win for some rural areas, but there are not enough to bring prosperity to all. Plus, incentives don’t always work out. 

In 2002, for example, Dell opened a much-anticipated call center in Roseburg, drawn by a generous package of tax breaks and other financial incentives. Five years later, when many of the incentives ran out, the call center abruptly closed its doors, leaving 220 Douglas County residents without jobs. 

 “Too often winning the chase for jobs from outside corporations is nothing more than fool’s gold,” says Portland consultant Rich Bruer. “It may look like real economic development, but it is soon followed by the realization that the same thing that draws large companies to a community — lower costs and higher profits — is what sends them on their way when their business declines or better opportunities present themselves elsewhere.”

Improving the vitality of rural economies with the tools of economic development is a long-term commitment. And it is hard work. 

The strategy of business attraction is just one tool and, despite its upside, it has several potential downsides. Incentives may attract businesses whose only loyalty to the community is financial — when the incentives run out, the companies leave town.

In addition, offering incentives to outside firms to locate in a community sends a message to those who are already there that new firms are more important than they are.

Up to 80% of job growth comes from startups and existing businesses, according to the Center for Budget and Policy Priorities.  But, according to Michael H. Shuman’s book The Local Economy Solution (available through Select Books), in one study, 80% of the funds given by state economic development programs were given to nonlocal businesses. Since a majority of job creation happens in local businesses, this is not playing the odds.

There are many entrepreneurial development and business retention and growth strategies that rural communities can employ:

Engage the broader community in supporting new and existing local businesses through “Buy Local” campaigns or “Cash Mobs”: In a Cash Mob, residents gather and “mob” one business each month to make small purchases. The business enjoys a boost in its daily sales, and townspeople learn what is available in their own community. Myrtle Creek holds a Cash Mob every month.

Provide incentives to existing businesses: Many communities have provided financial incentives for property owners to upgrade store appearances through façade improvement grants through a model offered by Oregon Main Street program.

Increase your knowledge about the local business climate: There may be some fairly easy ways to change regulations that may be presenting a barrier, and educating local, regional and statewide policymakers about them is a good first step toward starting or expanding businesses in the area.

Increase the odds of strengthening businesses in your community: Talk with existing businesses and identify the barriers to their business growth and stability. There may be skill sets needed by several employers, such as truck driving; find ways to provide the training for those skills. Perhaps they are unable to find financing for their next phase of growth; help find financial resources and organizations that work across the spectrum, from startup to global enterprise. Whatever it is, you will find that other businesses share the same or similar challenges and the community can come together to help resolve them. 

Identify opportunity gaps in the business sector of your community: Perhaps your area needs a specialty retail outlet or service. By identifying gaps, there may be entrepreneurs ready to step up and supply the missing pieces.

Encourage the creativity of local people to establish new businesses: Make it known that you want your community to be a place friendly to new endeavors by local folks.

Your community’s greatest assets may already be in place. Before committing time and resources to attract outside businesses, it’s worth the time to employ strategies that make the most of what communities already have to offer.  

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