Above photo: Main Street of Galena, Illinois.
Last month, I circulated a list of the top ten policies that state governments could enact to support local business and local economies. Some of you wanted me to repeat this exercise for local governments, where the ability to enact law is more limited, but there’s also the possibility of moving faster. Most of my suggestions below really suggest how your community ought to carry out economic development (ED), which sometimes is done by your municipality and sometimes by an independent agency.
Here are my thoughts:
(1) Revamp Your ED Department – Chances are very good that your economic developers are wasting tax dollars on the wrong things, like attracting manufacturers, AI data centers, or biotech giants. Corporate attraction of any type, for any reason, is a dead end, because those same dollars could generate significantly more jobs—often 10 to 100 times more per dollar—were they to focus on local businesses. Clearly communicate the following marching orders to your economic developers: If you want to chase and seduce outsiders, please quit. Your job, henceforth, is to support locally owned businesses—period. The savings from doing the wrong things will give you the resources to do the right things below.
(2) Perform a Leakage Analysis – This is a foundational piece of analysis that most communities lack. To what extent are residents and businesses unnecessarily purchasing goods and services from outside the community? Every dollar that leaves the community means lost jobs, income, and taxes. Those sectors with the highest leakage should be the top targets for local expansion. The next question, then, is how that expansion should proceed.
(3) Facilitate Leak Plugging – Starting with the sectors with the biggest leakages, work with existing local businesses to expand their capacity. If, for example, legal services are a big leak in your economy, target existing lawyers and law firms for expansion. Let them know about the local market opportunity and help them find the capital to expand. Every business in your community should try to create more of its own supply chain. Speaking of capital…
(4) Increase Local Investment – At least one full-time person on your economic development team should be promoting local investment. Through public education (not only of investors and businesses but of local investment advisors and community bankers). Through online listings of local securities offerings (just put a tab on your economic development website). Through local tax incentives (on property tax bills, for example).
(5) Create a Local Fund– Cities should create one central local investment opportunity for community members. Pick one priority—housing, renewable energy, food security, business incubation—and create a fund that allows grassroots investors in your community to participate. A growing number of fund designs are available (our back issues are filled with models), as are back-office services (legal, administrative, insurance) that allow your local fund to plug and play and get started quickly. Funds offer a way of raising capital for local problem-solving without increasing taxes or bond indebtedness.
(6) Local Procurement – With whatever tools are legally available, increase local purchasing by the city. Raise the threshold for no-bid contracts. Give bidding credits to local bidders (commensurate with their tax payments). Recruit larger anchor businesses to partner with smaller businesses to improve the quality of local bids. One easy target for local purchasing is banking services. Make sure your city banks with a local bank or credit union, and insist that they use your deposits to expand lending to local businesses.
(7) Green Everything, Everywhere– Many of your leaks will be imports of electricity, gasoline, and building materials. Localize all of them. Make your city more energy self-reliant, expand the use of EVs, and shift your building materials to locally available wood, stone, and fibers. Charge everyone per pound of garbage to encourage more recycling and household efficiency. Design your new neighborhoods (or redesign old neighborhoods) with walkability and proximity in mind.
(8) Support Entrepreneurs– How easily can a young person start a new, leak-plugging local business? Do you have courses, mentors, incubators, accelerators, co-working spaces, and finance in place to support them? The better your answers, the more likely talent will come and stay in your community. Also, knock on doors, discover, and support the expansion plans of every other business in your community. Successful economic development is not about attracting one company promising (but never delivering) a thousand jobs. It’s about a thousand existing companies expanding themselves by one-sies and two-sies.
(9) Make Every Square Inch Special – Economic development should include placemaking, the art of bringing dead spaces to life for residents and visitors. Engage neighborhoods throughout your community to discover the dreams they have, and THEN hire outside developers to realize those dreams.
(10) Set Appropriate Indicators – Finally, set measurable goals for each of the points above and publish an annual report showing progress. Is the level of economic leakage decreasing? Is local investment increasing? Is local procurement expanding? Are energy imports going down? Are business startups going up and business failures going down? Is the city increasing its attraction and retention, not of useless outside businesses, but essential talent? Indicators will hold your economic developers accountable.
As was the case for the state policy list I provided, these items are not necessarily cheap, quick, or easy. But they are cheaper, quicker, and easier than the counterproductive corporate attraction policies being done today.
The starting place for most of our readers is to compare this list with what purports to be economic development in your community right now. Note the gaps—I doubt you’ll find more than one or two of my items being taken seriously—and push for change. We at The Main Street Journal are here to support you.
