By DARIN RUTLEDGE
There’s very little disagreement that small-town economic development is getting tougher these days. In fact, few would argue the fact that economic development — even in urban areas — is facing obstacles that they have never had to negotiate.
The major hurdles for small towns are still there: lack of high-volume transportation routes, limited amenities, lack of utility infrastructure, etc. With what many are calling the “new normal,” prospects are finding new reasons to be jittery about deciding where to set up shop.
Rural economic development is largely a sales game. And as officials work even harder to overcome objections on the way to closing the sale, it would seem that they are more frequently settling for opportunities that have fewer tangible economic impacts, and sometimes less favorable social impacts. For example, the new Facebook data center in Prineville provides only about 35 jobs to a community with a June 2011 unemployment rate of 15.3%. The facility does not provide any services or products to the local area; in fact, due to the nature of its business, the entire facility is locked down. How then does a project like this represent responsible economic development?
Job creation is the most obvious indicator that we rely on for determining whether an economic development project is a good or bad investment, and for good reason. Rural Oregon almost across the board suffers unemployment rates that are 3 percent to 6 percent higher than in urban areas, and it doesn’t take much analysis to know how to fix that: Simply create more jobs. But a closer look uncovers economic impacts that, if not quick fixes, are certainly the building blocks for improving economic conditions. Aside from the direct injection of payroll dollars into the economy ($1.75 million annually, in the case of Facebook), communities benefit in the following ways from economic development projects:
• Companies often provide community development contributions to offset the tax incentives they receive or other impacts they have on the community
• Companies often invest in Chamber memberships, event sponsorships, etc. to establish themselves as good corporate citizens
• Franchise fees that municipalities collect through utility companies often increase as a result of increased utility usage
• For projects that are heavy consumers of utilities, the result is often an upgrade of the local infrastructure, which eliminates an obstacle to further development
• After incentives expire, taxes are collected on real property that had relatively little or no value prior to development
• While intangible, economic development officials agree that the buzz of a small community that continues to secure development opportunities causes other prospects to take notice. When those projects have an everyday household name attached to them, the marketing value increases.
Aside from the financial aspects of economic development, it seems that every prospect faces local opposition for one reason or another due to its social or cultural impact. While a new restaurant or retail store is rarely controversial, other types of projects face varying levels of criticism. The most glaring example is industrial projects and their accompanying environmental impacts.
Without exception, these projects are met with controversy by environmental groups, NIMBYs and community activists. This opposition often extends the approval cycle, and increases the resources that are required to guide the project to completion.
The rewards however, can be worth the sometimes extended and grueling process if opponents fail to make their case. Industrial projects typically have a larger footprint in terms of physical needs and real property, which usually translates to additional tax revenue. Additionally, their employees are generally compensated at higher wages. And finally, in addition to the jobs created when the facility is operational, the extended building timeframe and complex construction requirements often inflate the overall economic impact and job creation figures.
Sustainable energy, particularly biomass, is a timely and illustrative example in Oregon. While biomass has been endorsed by government officials at all levels, the practicality of actually developing these projects can seem increasingly difficult to quantify.
In Klamath Falls, Northwest Energy Systems Company has been working for over a year to gain approval to build its 35-megawatt facility west of town. Among the benefits the company says it can provide to the Klamath Basin are a peak construction labor force of 175, and 30 regular jobs once the facility is operational. Aside from the facility itself, a 20-year agreement with a timber company will create approximately 70 additional jobs related to provision of fuel for the facility.
While the economic impacts of this project seem like a no-brainer, many local residents are less than flattered with its location near a residential area and the increased pollution they say it will create.
Projects such as this put economic development officials in a very difficult position, particularly in tough economic cycles. The increasing pressure to create living wage jobs is in direct conflict with the resistance of some to welcome industrial or even large commercial and/or distribution facilities. And wise developers know that an economy built purely on retail and service jobs is not going to reach its optimum level. While restaurants and shops are attractive, they typically have less of an economic benefit, job-for-job, as other types of development projects (the exception of course being economies that are exclusively driven by tourism). While these amenities are critical to the sustenance of a small economy, most economic development officials would prefer that they support higher valued cluster development than function as the main economic engine.
What it really boils down to for rural Oregon is the need to adapt from an economy largely based in timber and agriculture to an economy with a robust balance of commercial, industrial and retail development. These economies must do more than just “diversify” — they must recognize that good corporate citizens and neighbors now come in a variety of different packages.
Does this mean that rural areas should “settle” for opportunities that don’t perfectly match up with economic development strategies? Does it mean that desperate times call for desperate measures? Maybe, maybe not. What it does mean is that in today’s pool of limited opportunities, there is always someone out there who will meet or beat your deal. And it might be a while until you find another prospect to negotiate with.
Darin Rutledge has lived in Klamath County for more than 20 years. He is a past president of the Chamber of Commerce, a board member of the Klamath County Economic Development Association and chair of 2020 Klamath Vision.