Cities that are active in regional economic development often find that the ability of a group of cities, counties and other local actors can far surpass their own individual capacity. While there will always be apprehension over losing local control, a strong agreement will allow a city to maintain its identity and still enjoy the benefits of working on a regional basis.
Benefits of Regional Economic Development
One of the main advantages of participating in a regional economic development effort is that it strengthens a city’s ability to retain and attract businesses. Combining resources with other cities, a county, a council of government or economic development organization can widen the scope of potential development. By simply pooling each entity’s strengths, whether it is funding capacity, staffing or other resources, the region as a whole can increase its ability to reatain or land a desired industry. Regionalizing efforts can also bolster marketing activities as the group can highlight the different attributes of the various members, such as demographic characteristics, existing infrastructure, incentive packages, amenities or other unique features.
A common concern heard in municipal economic development is that two or more cities competing for a business to locate in their community can result in a zero-sum game where participants undercut their competitors with different incentives. Consequently, there may only be a shifting of jobs from one city to another, rather than the creation of new ones. Also, it stands to reason that such situations can negatively affect the relationship between those communities. Regional economic development can help eliminate some of these issues as it creates an avenue for cities to discuss their goals and aspirations for future growth. These discussions will allow each member of the group to gain a better understanding of what their neighbors hope to achieve and where potential competition could arise. Talking about these issues prior to taking action on business retention or attraction can greatly reduce the amount of negative competition.
Perhaps the most beneficial element of regional economic development is that it provides members the ability to share information with one another. Explicitly or implicitly, participants are expected to share important information on economic development activities (with an understanding that there are times when business prospects demand confidentiality). Keeping others informed can only help all involved – a city may learn of a company looking to locate in the area but they do not have the characteristics or infrastructure the company needs. Rather than politely telling the company they cannot help them, they could notify their regional partners of the situation to see if one of them can work with the company.
Another instance where information can be beneficial is when a city becomes aware that a business in its community is looking to move. While it may be painful to lose the business, the city can share the information with the group and hopefully keep the business in the region. Doing so will likely keep the business’s employees in the community. Strong communication can also help partners identify strengths and weaknesses and how each can improve to make the region stronger in economic development.
Components of a Regional Economic Development Agreement
The National League of Cities (NLC) has reviewed numerous regional agreements and found several key elements to successful partnerships:
- Information Sharing and Transparency
Participants must be forthcoming on economic development activities and prospects.
- Anti-Poaching Combined with Retention
Reduce negative competition, or “poaching”, through explicit agreements. One way to do this is to base such agreements on business attraction and retention with specific policies that discourage bad faith competition.
- Enduring Agreements
Regional agreements need to endure so they are binding despite turnover on city councils. This is particularly true for groups that share revenue, as there needs to be ongoing commitment from each city to finance development activities.
- Start Slow
Regional cooperation can be difficult in the early stages, so research showed that it is wise to start slow. Each partner may have unique views on what is important or needed for the region and organizing different priorities can take time.
In most cases these agreements fall under Chapter 28E of the Code of Iowa and cities should ensure they’re using best practices when forming contracts. The following provides helpful tips to forming a successful regional economic development group.
Goals and Objectives
A fundamental aspect to each regional economic development group is its goals and objectives. Simply asked, what is the group designed to do? Some groups have a narrow focus, perhaps putting all of their efforts into industrial development or tech startups. Other groups may have a broad scope with goals to encourage residential, commercial and industrial development as well as retain existing companies and residents.
Whatever the case may be, the goals and objectives of the group should be well understood by all members. This is not to say the goals and objectives may never be changed. In fact, it is recommended for groups to continually review their goals to determine if a change in course is needed. It’s also possible to have broad goals while identifying specific priorities, such as landing a particular type of industry or business.
A key aspect of any regional economic develop group is the membership. Again, there can be wide variety here as in some cases the group consists of one city with a handful of local partners, other groups are county based and may include the county government and several cities while some groups may include several counties and the cities in a wider region.
In addition, it’s common to see nonprofit and private sector entities belong to a regional economic development group. This may include chambers of commerce, business associations and individual businesses, developers, investors and more.
The governance of a regional economic group must also be established to detail who will be responsible for setting priorities, giving direction and providing oversight for the group’s activities. This is especially true for any group that will manage its own budget and resources.
Many groups are governed by a board of directors that provide direction and oversight, which raises questions over who will serve on the board and how members will be represented. In some cases each member will have a representative on the board. In larger groups that may not be feasible and representation may need to be shared. From a city perspective, it is also important to understand who will serve on the city’s behalf – it may be the mayor, a council member or other city official.
Legal Considerations and Policies
As with any partnership a city may enter into, all parties must understand the legal aspects of the relationship. In forming a regional economic development group it is likely there are bylaws that establish the entity along with how it is governed. It may also be necessary for each city and other members to enter into an agreement that specifies what is required from the group and its members, any funding obligations and how members may join or opt out.
Various policies may also set directives for the group, such as completing market research each year, what types of projects have priority, how to handle competition for development amongst members and more.
Funding and Resources
In order to achieve goals and objectives, regional economic development groups will need adequate funding and resources. One of the significant strengths of regional economic development groups is pooling the resources of its members. For example, an individual city may not be able to afford a market research study but through a group it is able to have its community analyzed. Many groups have members make annual funding contributions that make up the operating budget. Careful consideration should be given each year to the amount needed for a successful group.
A major consideration is what staffing, if any, will be needed to carry out the group’s objectives. Many groups have at least one position working on behalf of the members and staff responsibilities should be clearly detailed. Funding for office, equipment and travel needs should be considered as well as marketing and research projects.
Please visit the 28E Agreements page to see more details.