EntreWorks Insights, Vol. 19, No. 1 (May 2022)

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Welcome to the latest edition of EntreWorks Insights, a quarterly newsletter that reports on business trends, policy developments, and other issues affecting the business of economic and workforce development.   You’re receiving this note because you’ve asked to subscribe or because you have some previous interest in the work of EntreWorks Consulting. If you wish to subscribe or be removed from this list, please send an email to info (at) entreworks.net. If you’re interested in the newsletter, please read on.  Please feel free to share with friends, family, colleagues, and other loved ones.  Comments and constructive criticism (and praise) are also welcome.  You are also encouraged to visit the EntreWorks blog at http://entreworks.net/blog.  Thanks for your interest.

Erik R. Pages
EntreWorks Consulting
EntreWorks Insights
Volume 19, Number 1
May 2022
HIGHLIGHTS:     Small Communities and Local Capacity Building
                              What’s New at EntreWorks Consulting?
Small Communities and Local Capacity Building  
Since January, we’ve been involved in supporting an interesting and important project funded by the Appalachian Regional Commission (ARC) and the US Environmental Protection Agency (EPA):  the Community Capacity Training Pilot Program.  This effort works with communities across Appalachia to provide technical assistance and program development support, with a special focus on helping smaller under-resourced communities compete successfully for new Federal grant programs, especially those tied to the American Rescue Plan Act (ARPA).
Capacity building has always been a big challenge for rural regions, but its critical importance has been further highlighted by the massive increase in new federal investments for local economic development, workforce and infrastructure projects.  While these funds represent an historic opportunity to address long-standing community challenges, recent experience also highlights another vexing reality:  many smaller communities simply lack the capacity—in terms of staff, expertise and management capabilities—to apply for, win, and effectively manage major Federal grant programs. 
Our project is trying to help, as are other capacity building efforts funded by ARC, EPA, the US Economic Development Administration (EDA) and others.  But, what we’re doing is not enough and we need to find new approaches that give every community, not matter how small, a real opportunity to compete for major new public investments.  This issue of EntreWorks Insights examines the challenges of rural capacity building, and offers some preliminary ideas on how we might improve our current practices and processes.
The Rural Capacity Challenge
Community capacity can be a fuzzy concept, but, for our purposes, I would use the Aspen Institute’s definition:  “Community capacity is the combined influence of a community’s commitment, resources and skills that can be deployed to build on community strengths and address community problems and opportunities.” Communities with high capacity tend to be healthier on many fronts; they are able to identify problems, come together to craft solutions, gather resources as needed, and implement related action strategies.  Communities with weaker capacity may lack the energy or resources to address pressing issues, or may simply not know how to proceed in event of crisis or emergency.
Not surprisingly, lower capacity communities are often centered in rural areas with lower populations and fewer resources than those found in larger urban centers. These lower capacity locations are sadly common, and are found across the US.  A recent Rural Capacity Mapping effort from Headwater Economics estimates that anywhere from 22% (in the Northeast) to 76% (Midwest region) of American communities could be classified as low capacity via a set of metrics tracking, among other things, staffing levels at local organizations, local poverty rates and income levels, educational attainment, and local broadband access. This ranking system identifies the following ten states as those with the most limited capacity:   North Dakota, South Dakota, Oklahoma, Nebraska, Montana, Arkansas, Kansas, West Virginia, Louisiana, and Mississippi.
So What?
In isolation, one could make the case that concerns about community capacity are overblown.  Leaders in lower-capacity states might conceivably argue that the benefits of lower taxes and reduced government spending may outweigh the benefits of strong community capacity.  Yet there are real downsides to ignoring these issues.  First, many low-capacity communities are facing significant new challenges, especially those related to climate change.  In fact, the Headwaters Economics assessment estimates that anywhere from 24-28% of all low-capacity communities in the US face heightened risks from either wildfires or flooding.
Equity presents a second concern.  These communities have pressing needs that they are not able to solve with existing local resources. In many cases, these legacy problems directly threaten the health, safety, and livelihoods of local residents.  Take the example of Martin County, Kentucky and its decades-long efforts to address local water quality.   A 2019 analysis found that, in 2018, water was unaffordable for 41.5% of local residents.  Nearly 70% of all local water is lost as it traverses local water systems, and water contamination rates are dangerously high. Overall, Kentucky’s backlog of water and sewer projects has been estimated as high as $14.5 billion. State and local leaders have sought to address these problems for years, but only now—thanks to new ARPA investments—have they been able to finance the needed system upgrades.
While these water quality issues in Kentucky are finally being addressed, many lower-capacity communities lack the ability to attract outside support. In many cases, rural community leaders fail to apply for new funding, especially for competitive grants like the EDA’s Build Back Better Challenge or for grants, like ARPA funds, that require extensive audit and reporting. Data from local government trade associations, such as the National Association of Counties and the National League of Cities show that many communities have opted to use their local ARPA allocations to replace lost revenues from the pandemic. Many smaller localities chose this option because it generates the fewest reporting and administrative burdens.  This is a legitimate use of funds, but it would be preferable for regions to use this historic investment opportunity to make historic investments that support long-term economic prosperity.  A tremendous opportunity to think big and be ambitious may be lost—largely due to limited local capacity to design and execute ambitious projects. 
So Now What?
These capacity issues affect all federal grant programs, and the feds are trying to help.  For example, the EDA and USDA have recently published a helpful project guide for rural communities.  In addition, many federal programs, like the Community Development Financial Institutions (CDFI) program, do try to target investments toward rural places. Yet effective solutions cannot come from Washington DC alone. 
If we hope to truly address these capacity issues, we’ll need to think about additional solutions as well.  Here’s a few things that can help.
Provide Some Direct Funding 

Federal and state agencies should consider supporting a mix of funding streams that combine competitive grant competitions with more limited direct funding for smaller communities and under-resourced community development organizations. These funds should have few strings attached, ensuring that the investments can be used to support regular program operations as opposed to specific project. By seeding the development of local economic development expertise, these investments not only build capacity but they also help lower-capacity places compete for future funding.
The benefits of existing community capacity are clearly present in Appalachia, where many smaller communities rely on assistance from their Local Development District (LDD) or Councils of Governments (COGs). These regional entities, which receive direct funding from several federal and state agencies, support planning, project development, and project management. In some states, like South Carolina and Pennsylvania, these organizations receive direct funding to help localities apply for various state-backed grant programs.

Invest in Technical Assistance Services 

Many public agencies provide technical assistance via webinars, office hours, program guides, and other tools.  This assistance is essential, but more hands-on technical assistance is also needed.  In some cases, agencies can bring in outside consultants to offer such assistance.  Our current ARC/EPA project works in this fashion.
These one-off technical assistance efforts are helpful, but many low-capacity places would benefit from more sustained support and partnerships.  This type of sustained capacity building is being provided in many locations by non-profit organizations, foundations, and universities.  Some great examples include:
 The West Virginia Community Development Hub, which provides a host of support services to communities across WV.The Just Transition Fund, a philanthropic initiative assisting coal-impacted communities as they apply for federal assistance.Many University programs support capacity building in stand-alone programs or via initiatives like Rural Extension Services.  Good examples include the University of North Carolina’s School of Government, Albright College’s (PA) Center for Excellence in Local Government, and Purdue University’s Center for Regional Development  EDA’s University Center programs support this type of work.

Build Rural Development Hubs 
The Aspen Institute and others have pioneered new thinking about rural development hubs, i.e., rural economic development organizations with strong staff and management capacity to address a wide range of community development challenges.  These intermediaries play a growing role in providing technical assistance and supporting project investments in rural places. 
Rural development hubs can take many forms.  They may operate as a non-profit, such as the WV Community Development Hub or the Northern Forest Center, as a quasi-governmental agency such as an LDD, or as an anchor institution, such as a major hospital system or local college/university.
Regardless of their structure, these hubs share key characteristics.  Most importantly, they view community capacity building as a core mission. They do this via technical assistance, local leadership programs, coaching, and public advocacy. They are essential partners for smaller communities.
Closing Thoughts
Capacity building must begin at home; lower-capacity regions need to recognize the problem and commit to building strong community development expertise and capacity.  But, they can’t do it alone.  The ideas noted above, as well as the many excellent recommendations from the Aspen Institute and other rural advocates, can help close this capacity gap.  This support can help rural places design their own solutions that tap into outside investment streams, but which are designed and executed by local people with the skills, knowledge, and capacity needed to succeed.
What’s New at EntreWorks Consulting?
We’re back on the road and keeping busy with some exciting new engagements, including work in the Virgin Islands, Northwest Indiana, and in Appalachia.  Erik Pages has a few upcoming speaking engagements including presentations at the National Association of Counties annual conference outside of Denver CO (July 22-23) and teaching the International Economic Development Council’s Entrepreneurship and Small Business course (June 21-22). 
In addition, we’ve published several new articles and book chapters, including the following:
“Connecting Entrepreneur Ecosystems across Urban and Rural Regions:  Lessons from Central and Western Virginia,” in Vibrant Virginia: Engaging the Commonwealth to Expand Economic Vitality. Virginia Tech Publishing, 2022.
“Shale Energy and Regional Economic Development,” in When Fracking Comes to Town:  Governance, Planning and Economic Impacts of the US Shale Boom, edited by Sabina E. Dietrick and Ilia Murtazashvili.  Cornell University Press, 2021.
Delta Regional Authority, Labor Market and Workforce Report, 2022.  Available at:  https://dra.gov/images/uploads/content_files/DRA_laborMarketReport22_review-5.pdf
You can find reports and other great resources at our website; we encourage you to check it out. The new website also includes access to all past issues of the EntreWorks Insights newsletter and the EntreWorks blog at http://entreworks.net/blog.  In addition, you can still access blog updates at our Facebook and LinkedIn pages.  Recent posts have examined Britain’s “Levelling Up” programs, trends in workforce development, the emerging fintech sector, and some suggested new readings.  We look forward to connecting in person at some point in 2022!
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