RDA Happenings April 2014
Posted on April 1, 2014 – By Emporia RDA
Economic Development 101
This past month I spoke at a club meeting on the topic of “The Art and Science of Economic Develop-ment”. The fundamental reason for Economic Development in a community or region is the creation of wealth and to diversify and growth of the economy.
This objective can be achieved with retention, expansion and recruitment of our Basic Industries as opposed to our Non-Basic industries.
The definition of Basic Industries are those businesses where the vast majority of their goods or ser-vices are provided for sale outside the local market area. Non-basic industries/businesses have the major-ity of their sales inside the local market area. An example of a basic industry is a pet food plant, which the majority is sold outside of the local market area. Non-Basic industry is a grocery store where the vast majority of the goods and services are purchased locally.
If the community or local economic development corporation assists the local Basic Industries busi-nesses in their growth plan by increasing the sales it will in turn create more jobs which brings new reve-nue into the local economy, such as payrolls, goods and services purchased locally. This generates eco-nomic activity with new dollars into the community.
Manufacturing businesses in most cases require a higher skill level than certain lower skilled and thus lower paid jobs.
A local community may adopt performance-based incentives to encourage the location of those new jobs into their local community or region.
Emporia and Lyon County have adopted minimum salary and investment thresholds for performance-based incentives. The reasons for thresholds are first, encourage beyond normal business growth and not be an entitlement program. Secondly, business growth is encouraged with job creation but it is counter-productive to reward those companies for jobs with salaries below the average salary for the community.
Next the community needs to evaluate the return of investment for the community vs. the total perfor-mance-based incentives.
The key to any incentive is a performance time of mutually agreed upon investments, job creation num-bers and average annual salary are met or exceeded If those are not met then “claw back” provisions should be enacted.
So in essence Economic Development is keeping what you have, grow what you have and find new ones to grow and diversify the local economy.