SANITY AND INSANITYSANITY AND INSANITYININ

GOVERNMENTAL COOPERATIONGOVERNMENTAL COOPERATION

Chuck EckenstahlerChuck Eckenstahler

Michigan Economic Developers Association Economic Development; Pushing the Boundaries

December 4, 2009

IntroductionIntroduction

Economic Development Economic Development models - models -

““Old Norm” Old Norm”

- Race for tax - Race for tax rateablesrateables

““New Norm” New Norm”

- Regional cooperation- Regional cooperation

The role of economic The role of economic developers?developers? If you don’t have a dream…..

…..you never get anything done!

CIA Chair John Brielmaier 9/30/09

ERAS IN REGIONAL ECONOMIC DEVELOPMENT AND PRACTICE

Industrial Recruiting1950’s to early 1980’s

Cost CompetitionEarly 1080’s to Early

1990’s

Regional Competitiveness

Early 1990’s to Present

Occupational SkillsPresent to Future *

Drivers Export Base Scale Economies Innovation and Entrepreneurship

Workforce Education and TrainingSkill Set Cross UtilizationWorkforce Occupational

MobilitySocial Capital

Strategies Financial Incentives to Firms

Industrial Parks

Industry Consolidation and Cost CuttingDeregulation

EntrepreneurshipClustersCommercializing Research

Education – TrainingWorkforce Talent ClustersCommunity Place MakingSocial Networking

Keys toSuccess

Government Funds – Subsidies and Tax BreaksIndustrial Infrastructure

Health of Existing Businesses

Distinct Regional assets, such as: Human Capital Higher Education Amenities

Qualified WorkforceExpanding Labor PoolComplementary Human

Capital Connectiveness

Sourced from:

Rethinking Federal Policy for Regional Economic Development. By: Drabenstott, Mark. Economic Review (01612387), 2006 1st Quarter, Vol. 91 Issue 1, p115-142, 28p; (AN 20356049)

* With additions by:Professor Anthony B. Sindone, Purdue University North Central, College of Business and Organizational Leadership - asindone@pnc.eduChuck Eckenstahler – pctecken@comcast.com

10/29/2009

PEORIA RANKED NUMBER 16 FOR MIGHTY MICRO CITIES

Next Generation Consulting (NGC):

Post Recession Economic Post Recession Economic Development SurveyDevelopment Survey

1.1. Small businesses will increase job counts Small businesses will increase job counts more more quickly than larger businessesquickly than larger businesses

2.2. It is easier to expand the job base of an It is easier to expand the job base of an existing existing company than locate a new onecompany than locate a new one

3.3. Entrepreneurial “start-up” businesses sponsor Entrepreneurial “start-up” businesses sponsor a a “locally connected” job base“locally connected” job base

4.4. Lack of traditional financing sources will limit Lack of traditional financing sources will limit “start-up” and “second stage” business “start-up” and “second stage” business growthgrowth

5.5. Regional collaboration is needed for national Regional collaboration is needed for national and global business recruitment effortsand global business recruitment efforts

Post Recession Economic Post Recession Economic Development SurveyDevelopment Survey

6.6. Partnering with others increases funds for Partnering with others increases funds for advertising and promotionadvertising and promotion

7.7. Supply chain business recruitment is superior Supply chain business recruitment is superior to to “shot gun” recruitment attempts“shot gun” recruitment attempts

8.8. Targeted business recruitment will change as Targeted business recruitment will change as new new post recession business linkages formpost recession business linkages form

9.9. Community preparedness; existing sites, Community preparedness; existing sites, buildings buildings & workforce will no longer optional& workforce will no longer optional

10. Pre-approved incentives increase chances for 10. Pre-approved incentives increase chances for successsuccess

The New NormThe New Norm

1. BER* – stop out migration and job loss1. BER* – stop out migration and job loss

2. Combined recruitment to increase 2. Combined recruitment to increase funding and reachfunding and reach

3. Area wide branding to increase global 3. Area wide branding to increase global identityidentity

4. Focused approach using web based 4. Focused approach using web based marketing & communications marketing & communications

5. Focus on supplier/vendor 5. Focus on supplier/vendor relationshipsrelationships * “BER” business expansion and retention* “BER” business expansion and retention

The New NormThe New Norm

6. “Cluster Analysis” identifying 6. “Cluster Analysis” identifying Regional Competitive Advantage Regional Competitive Advantage

7. Pre-Packaging of incentives7. Pre-Packaging of incentives

8. “Shovel ready” site availability 8. “Shovel ready” site availability

9. Incentive “tied” to job creation 9. Incentive “tied” to job creation

10. Focus on small business, 10. Focus on small business, entrepreneurialism and research entrepreneurialism and research commercialization.commercialization.

Importance of New Business Importance of New Business FormationFormation

New jobs created by businesseswith less than 20 employees

1980-90 - 56%1990-95 – 49%

SBA Data

* 1979 David L. Birch “The Jobs Generation Process” 2/3 new jobs created by small businesses

Where will the Jobs Where will the Jobs Come From?Come From?

2/3 jobs created by young businesses Where will the Jobs Come From?

Kaufmann Foundation November 5, 2009

2006 - 2007

Where will the Jobs Where will the Jobs Come From?Come From?

SBA approves 3

6%

fewer loans i

n FY 2009

$3.9b less

than 2008

WSJ 1

1/19/2009

Michigan's Cooperation Michigan's Cooperation Tool KitTool Kit

Do we have all the tools we need?Do we have all the tools we need?• Act 7 Intergovernmental Cooperation ActAct 7 Intergovernmental Cooperation Act• Act 425 – tax base sharing Act 425 – tax base sharing • Authorities – 8 + TIF’SAuthorities – 8 + TIF’S• Joint participation laws –Joint participation laws –

• Joint Municipal Planning ActJoint Municipal Planning Act• Nonprofit corporationsNonprofit corporations• L3C – Socially Responsible LLCL3C – Socially Responsible LLC• New Michigan Development Act - HB 5346New Michigan Development Act - HB 5346

My opinion we do!My opinion we do!

We can conclude………..We can conclude………..

New legislationNew legislation

cannot mandate cannot mandate

the the “New Norm”“New Norm”

What Prompts What Prompts CooperationCooperation

• Mandates – MPEA, MPO, EDA-EDDMandates – MPEA, MPO, EDA-EDD

Fed. Project Notification (A-95 Review) Fed. Project Notification (A-95 Review) • Increased financial advantages – MNRTFIncreased financial advantages – MNRTF• Shared financial responsibilities – municipal Shared financial responsibilities – municipal

authorities authorities • Financial needFinancial need• Political pressurePolitical pressure

– Perceived cost savingsPerceived cost savings– Perceived increasePerceived increase

(or no loss) of services(or no loss) of services

K-12 Population 2010 – 2030

Nationally 15.7% growthMichigan 7.9% growth

142 district to loose 10-15% enrollment21 districts to loose 26-50% enrollment

Detroit Schools

Enrolment loss 70,000 last 7 years 2008 student capacity 153,000After “downsizing” capacity 90,000 <41%>20 of 192 schools closed28 more school closings suggested 19 new or remolded school

What Prompts What Prompts CooperationCooperation

- Better government managementBetter government management ““right sizing governmentright sizing government

Live Within Your MeansLive Within Your Means

School Bond Issue Ballot School Bond Issue Ballot HistoryHistory

• 1,273 issues 1995 - 2008 1,273 issues 1995 - 2008 – 49.7% approved49.7% approved– 85 average annual issues85 average annual issues– range 17 – 166 per yearrange 17 – 166 per year

• 2009 2009 – 17 issues17 issues– 12 replacement - 5 increase12 replacement - 5 increase– 10 replacement approved10 replacement approved– 2 increase approved2 increase approved

TOTAL ANNUAL BOND ISSUES

0

20

40

60

80

100

120

140

160

180

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

YEAR

NU

MB

ER

OF

BO

ND

ISS

UE

S

BOND APPROVAL RATE

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

YEAR

PE

RC

EN

T

““SANITY” Says SANITY” Says

1. We have tools to cooperate1. We have tools to cooperate2. We must by certain laws and 2. We must by certain laws and

grant assistance leveragegrant assistance leverage3. We probably don’t have a choice 3. We probably don’t have a choice

in some instances in some instances (infrastructure)(infrastructure)

4. Might need to due to political 4. Might need to due to political pressurepressure

5. Might need to due to financial 5. Might need to due to financial necessitynecessity

““INSANITY” Barriers INSANITY” Barriers IncludeInclude

1. Historical “mind set” about 1. Historical “mind set” about governmental structuregovernmental structure

2. Tax revenue need2. Tax revenue need

3. Suspicion and lack of trust3. Suspicion and lack of trust

4. Lack of experience4. Lack of experience

Attitude Change AgentsAttitude Change Agents

1.1. Impending doom – “low tide” - Impending doom – “low tide” - lowers all boats syndromelowers all boats syndrome

2. The “Michigan Miracle”2. The “Michigan Miracle”

3. Defining moment 3. Defining moment – – changing state/Midwestchanging state/Midwesteconomic competitivenesseconomic competitiveness

By the late 1990s, many national By the late 1990s, many national observers were shaking their headsobservers were shaking their headsin wonder at the improbablein wonder at the improbableeconomic turnaround, which becameeconomic turnaround, which becameknown as “The Michigan Miracle.”known as “The Michigan Miracle.”

Drivers of the New ED Drivers of the New ED NormNorm

1. “Place” and “Social Capital” 1. “Place” and “Social Capital”

2. Community based leadership2. Community based leadership

3. Innovative governance3. Innovative governance

4. Making our own way 4. Making our own way

– – vision and action stepsvision and action steps

5. Realizing “doom” can happen5. Realizing “doom” can happen

6. Realization “total” community is 6. Realization “total” community is greater than the sum of its partsgreater than the sum of its parts

7. Realization success will be driven 7. Realization success will be driven from from within within

EXAMPLE EXAMPLE COOPERATIONCOOPERATION

UPTOWN UPTOWN CORRIDOR CORRIDOR

IMPROVEMENT IMPROVEMENT AUTHORITY AUTHORITY • Formed July 13, 2009Formed July 13, 2009

• District parcels - 138 – 5 in Township District parcels - 138 – 5 in Township • Township “front-end” loan to CIATownship “front-end” loan to CIA• Township supports CIA goals – create a compact Township supports CIA goals – create a compact

downtown with commercial entrywaysdowntown with commercial entryways• $8.4m infrastructure & streetscape$8.4m infrastructure & streetscape Development Tax Increment Financing PlanDevelopment Tax Increment Financing Plan• Hearing/adoption – December 14, 2009Hearing/adoption – December 14, 2009• Support by College and County Support by College and County

What made this What made this Cooperation WorkCooperation Work

• Strong Leadership by Civic and Strong Leadership by Civic and

Political LeadersPolitical Leaders • Recognition of a Vision based on Recognition of a Vision based on

Sound Planning PrinciplesSound Planning Principles• We’re All in it Together NowWe’re All in it Together Now • Place Matters Place Matters

– – We Have to Take Advantage of We Have to Take Advantage of ItIt

If you don’t have a dream…..…..you never get anything done!

QuestionsQuestions

Chuck EckenstahlerChuck Eckenstahler

PHONEPHONE219-861-2077219-861-2077

EMAILEMAIL pctecken@conmcast.netpctecken@conmcast.net

LINKEDIN LINKEDIN web:http://www.linkedin.com/in/chuckeckenstahlerweb:http://www.linkedin.com/in/chuckeckenstahler

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