I’ve recently been introduced to a new term (for me at least): Zoomtowns. This refers to smaller communities, often also known as gateway communities, that are attracting highly skilled and mobile workers who seek scenic amenities and a small town feel while also remaining connected to urban work centers and practices. Think Bozeman MT, Moab UT, Bar Harbor ME, or Bend OR. These places were attracting many newcomers prior to the COVID-19 pandemic and the pace of in-migration seems to be accelerating even faster now. As such, these towns are facing both good (how to spend increased tax revenues) and bad (how to manage rapid growth) economic development challenges.
A new study in the Journal of American Planning Association shares results from surveys and interviews with more than 300 officials in smaller Western gateway communities. Some interesting results emerge. When asked to identify the most important characteristics of their community, respondents cited (in rank order): well-maintained city infrastructure, small town feel, community character, livable wages and housing affordability. When asked for their top challenges in the face of growth, they cited housing affordability, lagging wages/job quality, lack of local resources, housing affordability, and climate change-related risks. While respondents in growing towns cited common growth challenges (e.g. too many tourists), most of those surveyed noted that the quality of life for residents has improved in recent years thank to an influx of new residents and tourists.
The local officials in these “Zoomtowns” also noted that they are now facing many issues more commonly associated with larger cities. These include zoning reform, affordable housing development, e-bike programs, traffic management and the like. They expressed interest in learning more about how other communities—urban and rural—have addressed such issues, and also recognized the need for more regional collaboration in areas like housing and transportation. They noted that strong regional partnerships often existed to promote tourism, but that more work to advance regionalism in other issue areas is still needed.
This is a solid review of the state of play in gateway communities and well worth a read. Other great resources include the Conservation Fund and the National Park Service, who both operate programs focused on gateway communities or what we may now be calling Zoomtowns.
The International Economic Development Council’s (IEDC) annual conference is going virtual next week. While I won’t see you in Dallas, hopefully we can connect on line. I’ll be leading a panel on Economic Diversification strategies on Wednesday October 14 from 2-3 PM Eastern Time. I’ll be joined by the National Association of Counties’ Jack Morgan and Lena Fowler, County Commissioner for Coconino County, Arizona. We proposed this panel pre-COVID, and planned to focus on how to deal with economic shocks like a factory closure or a natural disaster. (For example, Lena’s community is dealing with the shutdown of the nearby Navajo Generating Station, which employed hundreds of local people). We’ll cover these topics but also discuss what communities can and should be doing as they begin the process of recovering from the pandemic’s economic hits. This will be a timely and interesting discussion. You can learn more about the conference here. Hope to see you next week.
Tax incentives for investors serve as one of our primary tools to incentivize investment in startups and in other types of desirable economic development activities. Examples include tax credits for angel investors, enterprise zones, and the Trump Administration’s signature Opportunity Zones program. A number of recent studies suggest that we might want to take a deeper look at how these incentives work and whether they really do the job. Here’s a rundown:
- In August, the White House released a glowing report on the Opportunity Zone program, arguing that it has sparked $52 billion in new investment in distressed communities across the US. A number of reserachers have questioned these numbers, arguing that the White House claims are wildly overstated. In addition, many analysts question whether the investments are truly triggering investments that would not have happened “but for” the Opportunity Zone incentive. At this point, a fair assessment would be as follows: many investors are benefitting from the program, but the jury is still out on whether Opportunity Zones are an effective tool for revitalizing distressed areas.
- An August 2020 National Bureau of Economic Research (NBER) working paper examined the impact of angel investor tax credits, which are now available in 31 US states. The researchers find that the credits generate an increase an angel investing, but have little impact on local startup activity. The authors suggest that direct subsidies to firms may be a more effective strategy.
- A July 2020 NBER working paper, by Harvard Josh Lerner and Ramana Nanda, takes a deep dive into the role of venture capital in driving US innovation. The article is more about raising questions than offering final conclusions. Yet, the authors worry that VC investing has become so technically focused and specialized that its broader impacts on promoting innovation and technological change may be limited.
A few negative studies should not directly prompt a policy change, but they should push us to do more research and analysis to ensure that incentives actually produce the outcomes we seek in terms of more and better jobs and better places to live, work, and play. We need a more robust innovation policy in this country, but let’s do our best to do it right!
As small businesses continue the long slog of recovery from COVID-19 impacts, we’re going to need all hands on deck. We are going to need more resources for business technical assistance, more sources of business finance, and a greater focus on local business retention and expansion efforts. There has been an outpouring of new programs to finance small businesses affected by COVID-19 (you can access a useful resource list here). In terms of financing, crowdfunding has been an important tool for many businesses. Many of the major global crowdfunding platforms, like Kiva, Kickstarter, GoFundMe, and Honeycomb Credit, have seen significant growth in recent months. In fact, monthly investment totals doubled during the summer of 2020. Much of this growth is stimulated by the pandemic, but the crowdfunding market has been growing rapidly for years. A new study, from Crowdfund Capital Advisors and the SBE Council, examines how the market has fared since new federal crowdfunding regulations went into effect in 2016. The study notes that, since 2016, 2,600 companies have been funded via these new federally-regulated crowdfunding platforms. These firms have raised an average of $340,000 per firm, and overall capital invested in crowdfunding platforms exceeds $500 million. These funds support local businesses operating in a diverse mix of industries, and also address pressing early stage finance gaps where traditional funding sources may not be available.
These figures suggest that crowdfunding remains a small, but increasingly important part of the small business finance landscape. The report authors recommend creation of a new $20 billion Main Street Recovery Fund to support additional crowdfunding investments. While the future prospects for this fund are unclear, it is clear that crowdfunding will be an important part of ongoing small business recovery efforts. If you don’t have active crowdfunding resources in your community, now is a great time to close that gap.
As we continue to slog toward an economic recovery from the pandemic, communities around the US are coming to grips with the problem of housing. Simply put, too many places lack sufficient (or affordable) housing for current or new residents. This challenge is especially pronounced in many rural areas where plans to attract talented workers and their families may face the harsh reality that they lack places for these new families to live. We’re going to need to build more and better housing, and we should get started on this task now. Some places are already on the way. I recommend taking a look at the Indiana Uplands region which surrounds Bloomington in south central Indiana. I’ve been working this region over the past year (although not on housing), and have been very impressed with the work of county leaders and Regional Opportunities Initiative, Inc. (ROI), a regional economic development partnership covering 11 counties. ROI has done an excellent regional housing needs study, along with individual analyses for each county in its region. The deep analysis (the report is more than 350 pages long!) contains deep details on what’s happening in each community, and seeks to enhance both public and private efforts to build and maintain more and better housing. It includes recommendations for each county as well as for a region-wide strategy that upgrades existing housing stock, develops funds to finance new construction, and reviews current rules and regulations that may be impeding new construction. It’s an excellent guide for addressing a complex series of regional challenges. If you to learn more, ROI is sponsoring a webinar series that starts this week and you can sign up here. This effort is just one example of local innovation in the face of our current housing shortage. If you’re interested in following trends in this field, I also recommend a newish organization, Up for Growth, that advocates for better housing opportunities.
It’s back to school time again. If you’re pursuing professional development or just want to learn about new trends in economic development, join us on September 17-18, 2020 for another on-line version of the International Economic Development Council’s Entrepreneurship and Small Business Development Strategies course. This intro session will give you the basics on what makes entrepreneurs tick and how we economic developers can help them succeed—much needed info as America’s small business owners are getting pounded by the pandemic. I’ll be teaching with my friend and colleague Carol Lauffer, and we’ll also be joined by our colleagues at Maryland Economic Development Association (non-Marylanders are also welcome!). You can learn more and register here.
I recently returned from our annual Maine vacation to find my pre-ordered copy of The Startup Community Way by Brad Feld and Ian Hathaway. This new book follows up on Feld’s excellent 2012 work Startup Communities, which I still consider to be among the best guides to entrepreneurial ecosystem building. This new work digs deeper into the real life challenges facing ecosystem builders, with a focus on sustaining this work over the long term. Key topics include performance metrics, embracing diversity, and integrating lessons learned from complexity theory in supporting local ecosystems. I’m just getting started on this book, but my early reactions are very positive. Check it out!
During my time up in Maine, I was also pleased to see the continued development of the ecosystem in Bangor, Maine’s third largest city and the business center for much of Northern Maine. Maine has many excellent business programs, including the Maine Technology Institute, the Maine Center for Entrepreneurs, Coastal Enterprises Inc., and many others. For many years, these efforts never really seemed to gain traction in Bangor. But, that appears to be changing with a new regional collaboration, UpStart Maine that engages local business networks, coworking spaces, and the University of Maine system in nearby Orono. UpStart Maine has great promise—they’re now in the process of hiring a new Ecosystem Coordinator who I’m sure will benefit from reading The Startup Community Way. I’ll be watching this work with great interest and excitement!
I just finished an interesting new book by Martin Sandbu, economics writer for The Financial Times. The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All was published pre-COVID 19 but is full of good ideas that would enhance our economic recovery from the pandemic and beyond. Sandbu seeks to understand the economic causes of the current backlash we’re seeing across developed economies. He argues that too many workers and too many communities now feel that they do not belong as part of a wider economy, and thus have chosen to opt out or protest in the streets, the ballot box, and beyond. He does not view cultural clashes as the key factors behind this backlash, and instead argues that economic disconnection is the driving force behind these sentiments. He is particularly focused on left-behind places and strategies for reintegrating them into the 21st century economy.
Finding ways to instill a sense of belonging are essential to moving people out of their current precarious economic circumstances and toward greater prosperity for all. His remedies are not necessarily new or radical, but perhaps unique coming from someone with a Financial Times affiliation. They include Universal Basic income (via a net wealth tax), an expansion of collective bargaining rights for unions and other worker organizations, big increases in spending on education and training, and a carbon taxation system. The Economics of Belonging is worth a read as it does an excellent job of both diagnosing our current crisis, and in providing a good compendium of potential solutions.
I will admit that I don’t spend a lot of time thinking about or studying fiduciary rules related to retirement plans, but a new proposal from the Department of Labor has me a bit concerned. Recently, DOL issued a proposed rule (with a request for comments by July 30, 2020) related to private sector retirement plans (such as 401Ks) that include funds with an environmental, social, and governance (ESG) focus. These ESG funds seek to promote both financial and social benefit goals, and have outperformed the market in recent years. The proposed rule would define ESG criteria as “non-financial” factors. This shift could have the effect of limiting the availability of these retirement fund options because fund managers are required to offer fund options based primarily on financial factors alone. Under the new rule, ESG advocates believe that fund managers would likely opt to avoid including ESG funds as an option in many retirement funds. (This is a very complex issue so if you want to learn more, visit here and here.) ESG advocates further warn that this move would greatly limit future funding for ESG-related investments that focus on supporting a triple bottom-line of profit along with environmental and social benefits. As a result, a promising, growing and successful set of tools for socially-responsible investing may be restricted. If you share these concerns, share them with DOL or reach out to your Senator or Member of Congress by July 30!
If you’re an entrepreneur working in rural America or in sectors with a focus on food and agriculture, consider competing in the American Farm Bureau Federation’s 2021 Ag Innovation Challenge. This annual competition recently kicked off, and the Farm Bureau and its partners are looking for startups with great ideas addressing challenges faced by America’s farmers, ranchers, and rural communities. Up to ten entrepreneurs will be selected to compete in the final rounds at the Farm Bureau’s annual convention in January 2021. Winners and top performers get lots of great publicity, coaching, mentoring, consulting services, and yes—money! EntreWorks Consulting assisted in the creation of this competition in 2015, and I’m really pleased that it is thriving. Some great companies have been past competitors and winners! If you have a great idea or a great business, consider applying. But, do so quickly, as the application deadline is July 31, 2020. Please also note that you must be a Farm Bureau member to compete, but you can sign up with your application. Details and application materials are here.