Small towns use creativity to grow
- Published: May 15, 2014
EYE ON OUR ECONOMY This is the eighth in a series of articles examining the economic landscape of Yellow Springs.
Between 1993 and 2009, Ponca City, Okla., population 24,000, lost a total of 6,300 jobs due to the downsizing and merging of Conoco Oil, the modern iteration of the industry that built the place. According to a 2010 study by the International Economic Development Council, “Ponca City was not only a one-company town but a one-industry town, with the local economy 80 percent oil-dependent and totally invested in the success of Conoco.”
Some towns might have laid down and took it. But Ponca City fought its way back, first forming an economic development advisory board and later the Ponca City Development Authority to start an aggressive business retention program, a workforce training program, a business incubator and a business accelerator. And through sustained and personal work with existing businesses, the city has been able to help create 2,999 new jobs and about $80 million in new wages in Ponca City.
The story of Ponca City, recently named one of the top 10 best small towns for business in the U.S. by Jack Shultz, author of “Boomtown, USA,” is a case study for how to rebuild a flagging small town economy. As part of the YS News’ economy series, this article aims to look at a few examples of the efforts other towns across the country have made to address economic development and the results that have emerged from those efforts. Some towns, such as Ponca City, have focused on local growth, while other regions, such as Warren County, Ohio, have managed to attract more of their business from outside the area. There is no one answer, but a lot of creative ideas and options, many of which could be emulated by Yellow Springs for development in the local region.
Growing from within
Some communities are convinced that as a rule, growing from within is the most effective path to community self improvement. Ponca City, Okla., is one such town.
One need not spend long talking to Ponca City Development Authority Director David Myers to understand the energy behind the local growth. Myers, who speaks publicly about sustainable growth strategies, believes that towns don’t need to recruit from the outside to grow if they focus on internal needs and do the work to meet them.
“Communities need to know that what they need to succeed is already there,” Myers said.
Ponca City regrouped after Conoco left in 2002, and its leaders decided they needed a common economic metric to work toward. Ponca City, the chamber of commerce and its small online adult college decided that every agency in the city should measure local economic growth by the increase in local property taxes.
“Cities measure their success by city revenues, and economic development measures success by the number of jobs, but we said if property taxes go up then everyone’s benefitting — housing values go up, industrial values go up — we wanted a metric that benefitted everybody,” Myers said in an interview last week.
The development authority didn’t worry about recruiting industry from the outside, but instead started going on what Myers calls “donut runs” to all the businesses in town, getting to know them, understanding their needs and building trust toward a partnership. It took three years, Myers said, but the four-person agency was dogged in its belief that the effort would pay off.
Through their very regular and personal conversations, the agency learned that a skilled workforce pool was a need shared by several companies. So in addition to partnering with local schools and universities to shape workforce training programs, the Ponca City development agency devoted one of its employees to act as a headhunter for local businesses searching for people with a wide range of skills, from welders to human resource managers.
One company in particular needed 40 welders with a particular kind of skill in order to secure one of its contracts. Through deeper conversations with the company and the local vocational school, the agency figured out how to simplify and fulfill the training needs, set up a biweekly night training and successfully trained and recruited 40 new welders and an additional 200 employees needed to fill the four-year contract. In 2013 alone project Blue Wave added 151 new jobs and $4 million in wages for the city’s residents.
The development agency also learned that many businesses wanted to invest in energy saving measures but did not have the capital to do so. So they recruited local banks to finance the costs of energy efficient lighting and HVAC systems, and the companies repaid the loans with the money they were able to save on energy bills.
“The goal was to make the facilities here by far the most productive, so if a company was looking for where to expand, they would choose to do it here,” Myers said.
Ponca City has also recently breathed new life into its formerly passive business incubator housed at the local community college. The agency’s current focus is to increase what Myers called “economy-based jobs,” or jobs that export products and services and import cash (versus businesses such as restaurants, which are important, but generally recirculate the existing cash in the region). Myers believed that by marketing to and actively recruiting research-oriented academics and giving them space to experiment and share, the development of new products and ideas would ensue naturally.
As an additional economic boost, the city started a business accelerator, which offers more intensive, short-term counsel to young but established businesses, as well as investment based on venture-style returns. Counsel for accelerators is largely focused on how to expand existing markets, versus an incubator, which tends to offer more long-term help to new businesses who are just getting started.
The city’s efforts have paid off in a major way. Since 2003, the year after Conoco left, Ponca City has increased employment by 2,999 jobs and due to the increase in science-related jobs, the average wage also increased to about $15 an hour. Though the city didn’t actively recruit new businesses to attain the job increase, they did attract a few who liked the way existing businesses were being supported.
“By paying attention to existing businesses we were recruiting new businesses,” Myers said.
What made the difference was the personal nature of the development efforts — the development authority wasn’t just talking about getting more jobs, it was actively educating the community’s leaders about how to respond to businesses’ needs. Myers and his team talked to banks about financing needs, to the chamber of commerce about promotional needs, to the schools about training needs, and even the local hospitals about employer insurance needs.
“Medical providers need to understand that they need to be taking the insurance their local businesses have, because if there’s a mismatch, you’ve got a problem,” Myers said.
The connections take time, Myers admits, but he likens the outcome to the old commercial about the difference between the car rental companies Avis and Hertz — “There was no difference except that Avis tried harder,” he said. Likewise, all communities, if they do the work to interconnect the players and services available, can and will grow.
Fairfield, Iowa, population 10,000, is known in its region as a “rural boomtown” because of its longtime attention to sustainable, community-oriented growth. It is another town that felt that the competition between an enormous pool of cities for a small set of manufacturers appeared more difficult than growing the businesses that were already there. Its attitude toward growth was honed by a consortium of public and private industry leaders who created the Fairfield Economic Development Association, or FEDA, in 1971 on the belief that economic development and community development do best when they happen together, according to FEDA’s president Lori Schaefer-Weaton, who is also director of business development for Agri-Industrial Plastics Company.
“We understand that 90 percent of the economic development in a town like Fairfield is going to come from existing businesses — none of it will be because we attracted the next Google,” she said in an interview this week. “We want to make sure we’re taking care of our own, and the only way to do that is to sit down with all the businesses on a regular basis and ask them what it is they need to succeed.”
The formula has worked. Over the past 10 years, FEDA has led efforts that have resulted in a total of $275 million in venture capital invested in local businesses that have, in turn, created over 2,000 jobs. For the community, that growth has also translated into a $10 million arts and convention center, and a new library, hospital and health center. The pattern of growth and local investment isn’t new, Shaefer-Weaton said, but reflects the continuous work on behalf of both community leaders and local businesses to communicate regularly about the needs of each and finding ways to meet them.
Fairfield invests in its schools and supports the career tech paths that tie to local businesses. Toward that end, FEDA helped create the Fairfield Regional Career Academy, a post-secondary education option offering technology and industrial training that met Fairfield’s business needs and that Fairfield’s youth expressed interest in. The two-year program, housed in an unused elementary school, is a consortium of Indian Hills Community College and three local high schools and was created in response to a business survey that indicated the number one concern was workforce recruitment problems.
Fairfield also launched the Come Home Initiative working with Manpower, the regional office of the global workforce solutions company ManpowerGroup, to attract former Fairfield students and residents back to town by connecting them to local employment opportunities.
The FEDA has other programs to encourage businesses to invest and grow locally. According to FEDA Administrator Adam Plagge, REDI Loans provide gap financing to companies that need to invest in equipment but are unable to obtain all the necessary funding through the private financing system. The development office also manages a $1 million grant from the county’s Energy Rewards Program to provide loans for businesses that want to increase their energy efficiency, including solar paneling, insulation and LED lighting.
The accumulated effort is about creating a symbiotic atmosphere between business and culture that weaves a healthy, vibrant community.
“If we’re raising the right pool of kids today, that means workforce for me tomorrow; if I recruit someone but I don’t have a vibrant community where they can live or their spouse can work, I won’t be able to keep them,” she said. “At the end of the day this is all of our community — it’s not about individual interests, it’s about the whole town and the families that live here.”
Staying in town
For over a decade the Environmental Protection Agency has given national smart growth awards to communities whose innovative policies strengthen their economies and benefit both residents and the environment. The town of Brattleboro, Vt., population 12,000, received an award in 2012 for green renovation of a centrally located multipurpose facility housing both the Brattleboro Food Cooperative and a 24-unit affordable housing complex.
The project was spearheaded by the Brattleboro Food Co-op, which needed to expand and was looking at an affordable abandoned big box grocery in a strip several miles outside of town, according to co-op president Alex Gyori in an interview this week. The co-op spoke with members, who stated a clear desire to remain the anchor of Brattleboro’s downtown, and then the larger community members, who expressed a desire to incorporate affordable housing on the upper part of the new building. So the co-op contacted the local Windham and Windsor Housing Trust, who did a feasibility study and agreed to finance their part of the building.
The four-story building with the co-op on the ground floor, co-op offices on the second floors and housing on the third and fourth floors cost $11 million, including energy efficiency specifications that would decrease the energy use by 50 percent, compared to a traditional building of the same size. The two organizations formed a development agreement, splitting the development cost. Windham used state housing grants and tax credits to finance $4 million for its part. The co-op used a combination of savings, 4 percent interest loans from about 160 participating co-op members, a loan from the Cooperative Fund of New England, and a loan from a local bank to finance its $7 million share.
The project, which was completed in 2012 and has been “very well received by the community,” Gyori said. About 16 percent of the co-op’s food is sourced from local Vermont farms, including produce, dairy, meat, processed confections and beers, and the business continues to provide a selection of clean, organic food for about 6,700 active members (mostly from outside Brattleboro). And of the 24 housing units, five are federally subsidized, the bulk are moderately affordable and five are market rate, and all filled immediately, Gyori said. Though the co-op has had some challenges unrelated to the business, such as Hurricane Irene which flooded one of its sister outlets, the project is still on track to repay its member loans by the end of the year.
Attracting new business
Some communities have figured out ways to stand out from the crowd and make the case for businesses looking to relocate or expand to choose them. The Port Authority in Warren County, population 215,000, between Dayton and Cincinnati has had success drawing in commercial ventures through a tax credit that allows companies building on Port Authority property to purchase construction materials free of tax.
The tax exemption saved FedEx about $350,000 on the $15 million ground terminal it built in Lebanon in 2012, according to port director Martin Russell. Through a somewhat complicated arrangement, Setzer Development Corporation purchased the property in Lebanon’s commerce park and leased it and the new facility to the port, while FedEx reimburses the port over a period of 10 years until the building investment is paid off.
“It’s an inducement to a company that could have picked locations in multiple other states or anywhere else in southwest Ohio,” Russell said in an interview last week. “[The port] is one of the tools the city can use to attract capital investment and create employment growth.”
The port aided in a different way with its first project in 2007 to build a $100 million Premium Outlet Mall in Monroe along I75. The port calculated the estimated increase in property taxes and borrowed against that amount to pay for the $6 million infrastructure installation (at a reduced cost due to the tax abatement for the cost of materials) and then accepted repayment from the local property taxes conferred directly to the port.
“We try to be as creative as we can with the opportunities the port affords,” Russell said.
The Port Authority was established in 2007, and since then has managed half a dozen major sales tax transactions totalling upward of half a billion dollars in new capital investment in buildings alone, including a $100 million distribution center in Monroe’s business park, and the recent $100 million expansion of ADVICS automotive manufacturer, Lebanon’s largest private employer.
The Warren County Port Authority offers its services for a small fee, which it invests in other community projects, Russell said. With the FedEx project, for instance, the port collected $50,000 in exchange for the $400,000 savings to the developer. The fees are invested in the Warren County Chamber Alliance, composed of the county’s six chambers of commerce, and in efforts such as the Warren County Small Business Development Center to promote businesses with under 50 employees. That center was launched in 2013 with the support of several hundred thousand dollars and 30 public and private community partners and has resulted in the creation of about 150 small business jobs in Warren County, Russell said.
Though a tax exemption may not be the only factor in a business decision to expand or relocate, Russell wants as many businesses as possible to know that it’s an option in Warren County.
“We don’t know what the tipping point is for any given project, but we want to put our best foot forward, saying, if you risk your capital here in Warren County, we have some things we can offer that are outside the box to hopefully benefit you,” he said.
The Warren Port has also contracted its services to neighboring counties, such as an agreement signed last summer with Preble County Port Authority to promote commerce and economic development within the region west of Dayton. Greene County also has a port authority, which has focused almost exclusively on managing the Lewis Jackson Regional Airport in Xenia. Airport Manager Don Smith could not speak to the matter of whether that port’s board does or plans to deal with economic growth in the county.