Proof is in Action
As consumers cut back on spending in response to the crisis before us, state and local governments will likely face their steepest sales tax decline ever.
I think we're looking at an unprecedented time for state and local budgets, and I predict that some economic development organizations, much dependent of public funding, will not survive as a result.
Certain services will be cut and economic development is not, nor should it be, immune. The question that will undoubtedly be asked, "What did you do in response to the crisis?"
If an EDO can only point to a resource guide on its website, well, good luck, because that's not nearly enough. If it cannot demonstrate true value through an aggressive business retention and expansion program to determine the real needs, particularly of small business, it is not fulfilling its true purpose to impact lives, plain and simple.
If an EDO is not attempting to work with local policymakers to get a revolving (emergency) loan fund off the ground to save small business because there is "risk involved," then what the hell is it doing? You are there to make a difference.
For EDOs to be spared from the chopping block, now is the time to prove your worth. Proof is in action. It's nut-cutting time, folks.
A Tale of Three Cities (in Oklahoma)
Consider for a moment Medicine Park, Oklahoma, population 400. There the Medicine Park Economic Development Authority recently approved an emergency loan program, setting aside $40,000 for restaurants and stores.
“I was trying to make it a simple, one-page application. It’s just a promissory note, a good-faith note, just trying to get people over the hump,” Authority Chairman Tom Null told The Lawton Constitution.
On the other extreme, 85 miles to the northeast is Oklahoma City, population of about 650,000, where the city council approved a $5.5 million emergency relief program for local small businesses.
It was the first time the city government ever did such a thing. The Small Business Continuity Program is funded from general obligation bonds.
Then there is Tulsa, home of the Woody Guthrie Center (I got a T-shirt there), and soon, next year, the Bob Dylan Center. (Now how cool is that?)
In partnership with Tulsa Economic Development Corporation, the city government has dedicated $1.1 million in funds for zero interest loans to provide financial assistance to small business owners.
Here are just three examples of communities stepping up. Different communities will have different financial resources and risk tolerances and to be sure there are risks involved.
Now here is a question that only you can answer: If you saved 20 small businesses from going under, but two or three others defaulted on the loans, was it worth it?
A common question: "Where does the money come from?" Answer: Again, that's for you to determine. Typically an authority or local government entity will manage the program. Whichever agency does it, budgets will have to be re-prioritized for it to work.
For what it's worth, we at BBA can help in getting a locally-managed loan fund off the ground and working. Let's talk if you would like to learn more.
It's Time Regional Groups Do the Right Thing
When this is all over, people have long memories when it comes to what your economic development organization did in a crisis. What an EDO does now will affect its brand for years to come. As I stated earlier, posting a COVID-19 resource guide on your website is good, but not enough.
I'm particularly concerned with regional economic development groups that focus exclusively on business recruitment, and essentially wash their hands of any responsibility of business retention and expansion. Everyone knows who they are.
Now is the time for these regional groups to add a staff person to coordinate and track BR&E within their multi-county jurisdictions.
Says my friend, Laith Wardi with Executive Pulse: "The absence of regional management in BR&E almost always results in a hodgepodge of localized approaches that don’t follow uniform customer-focused policies and ultimately underperform."
Not long ago, pre-outbreak, I met with representatives from two large regional groups, one representing 11 counties and the other 15 counties. Neither had a BR&E person on staff.
Incredibly, the website for one talks about "creating connections" to promote the region's economy. Sounds good, but that's all it is -- talk.
A smart EDO will leverage connections gained from BR&E in its recruiting efforts. I usually don't work with big groups (these two are based in NFL cities), primarily because they think they don't need help.
Clearly these two groups should rethink their recruitment-only mission. Maybe, just maybe this health and economic crisis will force them to do so.
Local EDOs, if your regional group has absolved itself of BR&E, push them to do the right thing. If they refuse, well, it's your money. You probably have better uses for it right now. The truth is that recruiting will be toast for a good long while.
How the world does business will be forever changed by what we are experiencing now.
As I wrote in last week's Digest, this crisis will only accelerate ongoing changes already rooted in the Fourth Industrial Revolution -- with more automation and more AI.
Jobs most likely to be affected are those in the food service, manufacturing and transportation/warehousing sectors, with research showing roughly 36 million jobs have a “high” susceptibility to automation, according to Brookings research.
But also, COVID-19 has exposed what many may see as an excessive reliance on suppliers in China. (About 80% of pharmaceuticals sold in the U.S. are produced in China, according to Texas A&M University researchers.)
Businesses are rightfully rethinking their global supply chains, and a great uncoupling between the U.S. and China, the world's largest manufacturing economy, is almost inevitable. Two giant powers that once seemed to be moving closer together are now tearing themselves away from each other. That's probably a long-term trend.
More and more, companies will diversify their supplier base to hedge against future disruptions by building in redundancy and perhaps even moving away from the practice of holding near-zero inventories.
While just-in-time manufacturing may be the optimal way to assemble a car, the disadvantages of a system that requires all of its elements to work like clockwork have now been exposed.
Words I Remembered
When I used to manage and perform in a little old-time string band (think hillbilly or the parent music to bluegrass), invariably I would get requests for us to play for free for the "exposure."
Recently, two magazine publishers asked if I might write for them for free. One of them mentioned "exposure."
I should have shot back, but I didn't, something an old fiddle player told me years ago, "You know, a fella can die from exposure."
Then again, it may have been an old banjo player who said that. Whichever, it's advice I've taken to heart. There's just no money in working for free.
What We Do, Who We Are
BBA’s entire reason for being is to help economic development organizations solve problems and achieve their goals.
(We do some corporate location analysis, but not much. Hence, we do not think of ourselves as a "site selector.")
Many problems and goals have shifted lately but know this: the BBA team has all the brain power that it did prior to the coronavirus crisis. We can guide our clients from where they are to where they want to be. Here's the team:
Barry Albrecht has been in economic development for over 29 years, having been the CEO of EDOs in Texas, Arizona and Oklahoma. He lives in Oklahoma and is well-versed in the defense industry.
Dan Collins has a passion for creative and analytical problem solving and 25+ years of experience in oil and gas and real estate. Dan plays a mean guitar.
Tim Feemster has more than 40 years of experience in real estate, transportation, logistics, distribution, and marketing. Tim lives five minutes from me in Dallas.
Michael Lehmkuhler knows advanced manufacturing, particularly the automotive and aerospace sectors. Mike lives along the coast in North Carolina.
Ben Magill is our labor analytics guru. He founded the Labor Market Intelligence Center at the Dallas County Community College District. Con: He owns a banjo.
Rob O'Brian, CEcD, has led chambers of commerce in economic development for more than 30 years. He knows organization structure. Rob is in Missouri and drives a convertible.
Andrew Sloss knows all the tax implications involved in site selection. He's in Houston. Like me, Andrew is an aficionado of craft beer.
Me? Well, I clean up around the place and make sure we give great value to all of our customers. A banjo and guitar player, I try to stay out of my wife's way.
I should mention that BBA is always looking to expand our horizons and bring on consultants who would expand our expertise.
Non-Pandemic Stories We're Reading (We all need a break)
Letter of Recommendation: Mudlarking The New York Times Magazine
Linguists Hear an Accent Begin Scientific American
How a Real Dog Taught a Robot Dog to Walk Wired
Spirit Journey: one man's role in a 6,000-mile run through North America
How the South Won the Civil War The New Yorker
Suffering unseen: The dark truth behind wildlife tourism
The Frontier Couple Who Chose Death Over Life Apart Outside