Citizens Oak Ridge

A Fair and Effective Strategy for Economic Development

Comments by Tim Holt

    During September 2006, Democracy for East Tennessee (DFET) provided local government officials strong evidence that the use of subsidies for economic development is ineffective.   The evidence included statements from CEOs and financial experts, and more significantly, identified a report by economist Robert Lynch, who evaluated hundreds of economic studies.  Lynch’s report concludes that there is little evidence to support tax cuts and incentives as useful tools in economic development. 

    A number of recent national studies on economic competition among geographic regions have indicated that business executives contemplating relocation look closely at the quality of a state or community, its schools, culture, and recreational opportunities. A study by David Burch of MIT declared that the effect of business incentives in attracting firms to communities paled beside the perceptions and preferences of the chief executives. According to David E. Baker, Executive Director, Illinois 2000 Foundation, this is particularly true for small firms, which create more than two-thirds of all new jobs today.

    Oak Ridge City and Anderson and Roane County officials are currently considering improvements to the “tax abatement” approach to economic development.  By using subsidies, we are marketing community opportunities to prospective businesses as the low cost supplier. We suggest, in this report, an alternative strategy which will permit marketing local opportunities to prospective businesses as the high quality supplier. 

    Grow Existing and New Businesses 

    Searching for an alternative to tax abatements, we found a very specific strategy, called “economic gardening”, that could work for Oak Ridge and the surrounding region.  Littleton, Colorado, a town with a population about the size of Oak Ridge, was in a similar situation, having lost about 7000 jobs in the years before 1989.  Littleton has prospered thereafter, a period that included two recessions, by growing existing local businesses.  They chose this strategy over the more common alternative, which they describe as “hunting” and seeking the “kindness of strangers”.

    Some significant facts about economic gardening in Littleton for Oak Ridge developers are that, from 1989 to 2004, population grew by 30%, in-town sales tripled from $7 million to $20 million, and the number of jobs grew from 15000 to 30000.  This growth was achieved without any subsidies. 

    Littleton’s approach to economic growth was developed gradually and was based on applying knowledge gained from recent practical research.  It ultimately focused on creating an environment that increased the success of local businesses and entrepreneurs.  This environment included:

    ·      free access for local businesses to several sophisticated information databases;

    ·      a culture and quality of life that was attractive to entrepreneurs, creative people, and other citizens;  

    ·      an information network connecting local businesses and colleges.

    More Information is available from Littleton’s website: http://www.littletongov.org/bia/economicgardening/default.asp

                Economic Gardening has been recognized and won awards for innovation from the National League of Cities, the U.S. Economic Development Administration, and the University of Minnesota.  Economic Gardening has been featured in stories by:

    ·        Governing Magazine

    ·        Business Week

    ·        Nations Weekly

    ·        Business Expansion Journal

    ·        National Public Radio

    Numerous governments have started to integrate the Littleton model.  In particular, San Bernardino, Lake Elsinore, Chico, Berkeley, and Oakland, CA; Santa Fe, NM; Lancaster County, PA; Steamboat Springs, CO; the state of Wyoming, and even Bangor, Northern Ireland and communities in Norway. 

    DFET Recommendations

    We recommend that our local governments add an “economic gardening” component to our development efforts and stop using subsidies.   In place of subsidies to attract new businesses, choose the business strategy of creating and promoting quality instead of marketing low price.  We recommend investing in higher quality community and business resources of value to both newcomers and the citizens and businesses that are already here.  This would provide a fair and effective economic development program.  The Littleton model and the experiences of other governments that have adapted it to their own situation can provide a ready roadmap for moving our community forward.