Economic Gardening

The International City/County Management Association (ICMA)’s latest edition of PM Magazine focuses on “Economic Gardening.”  In short, this is a concept that focuses on building a community’s interior tools, models, incentives to develop economic growth from within the community.  The contrast this approach with “Big Game Hunting,” which is essentially recruiting large, outside businesses to the community.  In theory, big game hunting reaps large rewards when sucessful.  But, it takes (sometimes a long) time to catch the big one. 

A supplement to the article, from ICMA’s Municipal Year Book 2010, indicates that 45 percent of communities now do not use tax incentives for business recruitment.  The reason is simple.  They don’t work.  Or, at least, they do not work to the extent that they can pay for themselves in the long term.  To return to the metaphor, businesses often spend much money on “hunting supplies” – staff, tax incentives, trips, marketing literature, etc – only to find that they are not in the correct hunting grounds.  Most large companies are not looking to relocate without very specific circumstances; and taxes are but a small part of the equation.  The result is that communities have much hunting gear with nothing to shoot.

Even on that rare occasion when the hunting trip is successful, the results are mixed.  Large corporations are especially susceptible to large layoffs during economic downturns.  And, cities that use large levels incentives tend to have lower rates of growth and lower property tax revenues. The Municipal Year Book calls this a “race to the bottom.” 

This blog has given much attention to the “Growth Ponzi Scheme” advocated by Strong Towns simply due to the timing of Mr. Marohn’s visit.  There is much to be learned from the idea that unrestrained growth is not inherently beneficial financially in the long term.  There is much to be said for cities with diverse economic streams, community facilities, and amenities that result from economic development. Financially, I like to ask a relatively simple question: How many big cities do you know that have low property taxes?   

Locally, I believe we have taken steps down the Economic Gardening path. The City’s housing and economic efforts are focused primarily on infill development.  With a large inventory of land and infrastructure, there is little reason to be anxious about expansion (annexation).  The City’s business incentive loans have been provided almost exclusively in the last several years to the expansion of established, local businesses.  And, the Grand Forks-East Grand Forks Chamber of Commerce, along with the Economic Development and Housing Authority (EDHA), the City of Grand Forks, and the Convention and Visitors Bureau, commissioned a retail leakage study (the “Buxton Study”) to ascertain the retail opportunities that already exist in the region.  One may consider the latter a hybrid because it ultimately leads to business recruitment.  However, the study focuses on the opportunities and markets that already exist and are underdeveloped in the region.  It does not not faciliate retail development through furthering tax incentives to non-local interests.

The focus of community development models has already shifted to sustainable, local models that encourage local expansion over external recrutiment. The concept has several names names including economic gardening; and I once worked with a group that coined the phrase “enterprise facilitation.” Most of us our now familiar with phrases such as “Think Global, Buy Local.” Governments are now applying the same principles to community development.