By Kevin Crowder, CEcD, Director of Economic Development
Regulations exist for a reason. They help protect the health and welfare of a community and guide the city toward realizing its vision. Regulation is where a local government can significantly influence economic growth, but they must be clear and applied fairly, especially to achieve positive economic development. A city’s regulatory role has a significant impact on the organization’s credibility, customer service reputation, and the cash flow situation of the local private sector.
The bottom line for successful business retention and attraction is cash flow. Cash flow is the key to a business’ success and it’s important to remember that there are only two things that improve cash flow: increasing revenues and/or reducing expenses. This is important because there are many things that a community could do to impact a business’ cash flow, including the creation and implementation of policies. That said, elected officials have a role broader than economic development, which includes the health, safety and welfare of the community. Therefore, policies that have a negative effect on cash flow could be implemented as well. In those cases, it is essential to understand and respect the impact of policy decisions and implementation of those policies on cash flow to maintain credibility with the private sector.
When implementing regulations and their related processes, the question is, is a city truly friendly to business or does just say that it is; do the procedures have predictability and certainty built into them; is there a perception of fairness in the process or a reputation for cronyism; are codes and regulations consistent with market conditions?
When approaching regulations and the processes for their implementation, it is essential for the local government to remember that there are two types of economic development. One is Market-Driven Economic Development where public resources, policies, goals and strategies create an environment that is business-friendly and that attracts and promotes investment. Tools include infrastructure, research, zoning and regulations that match the marketplace, professional management, and transparency.
Market-Change Economic Development is where the market is not delivering what the community wants or needs and is not supporting enhancements to the tax base because economic development projects and business investment are not feasible under current conditions. Public resources, regulations, and policies are used as incentives and the public sector takes a more active role to encourage targeted investments, including direct grants and loans, specific zoning and land use actions; and public-private partnerships aimed to facilitate investment that is not otherwise feasible.
Local government many times has a reputation of being bureaucratic. Sometimes this reputation is because the regulations are onerous as they relate to efficient business investment and make development and investment unfeasible. Other times the rules may be unclear creating uncertainty, and many times it is the processes to implement the regulations that are burdensome and time-consuming. Businesses really want to know three primary things when they are considering opening in a community: is there a market for what they want to do or can they create a market; is there a location that is appropriate, available and affordable for what they want to do; and how long it will take to get open and how challenging is that process going to be.
The key to breaking the bureaucracy and enhancing a community’s economic development is the adoption of the three critical economic development principles of responsiveness, information and credibility. These are values that should be adopted throughout all departments and personnel in the organization that touch any aspect of economic development or interact with the private sector.
- Responsiveness – The difference between the public and private sectors is that a business will suffer from bad customer service, while a local government can still thrive with lousy bad customer service. The key here is not that the government should be run like a business, but that a local government economic development strategy should focus on adopting private sector standards for responsiveness and customer service into the local government processes.
- Information – Should be meaningful, clear and relevant to the customer.
- Credibility – Predictability, fairness and timeliness are critical to the business or investor. A local government may give incentives to a business on one hand, and then have the project become infeasible due to inadequate management processes or time delays due to unclear regulation or subjective enforcement. Building economic development credibility with the private sector means understanding that the public and private sectors have different motivations and goals and developing a mutual respect between the two.
A perfect example of successful economic development that follows this approach is North Miami Beach (NMB), in Florida. NMB was facing a declining tax base and increasing costs, as well as a reputation as being anti-business and anti-development. Beginning in 2013, RMA worked with the city to reposition the NMB Community Redevelopment Agency (CRA) and to match the land development code to market conditions to foster economic development. Additionally, NMB made staffing enhancements and improvements to their processes that understood and respected the private sector, and leadership strengthened relationships with the real estate and development community.
As a result, in 2016 NMB led Miami-Dade County with a year over year growth in their tax base of 16.7% and a more than 40% increase in the increment to the CRA. This was driven by hundreds of millions of dollars of real estate transactions and multiple site plan approvals in the different target areas. In 2018, interest continues to grow as several projects have already topped off and will be completed soon.