Local governments need revenue to provide basic services to their constituents, and to deal with issues like infrastructure crises, extreme weather, the increased need for housing and social services, and the like.
Economic development is an area of almost limitless possibility for reform and improvement for cities. The vast majority of city economic-development dollars are currently spent inefficiently, subsidizing development that would have happened anyway and receiving little return in local economic benefit for those investments.
Cities too often pursue low-road economic-development policies. They compete against each other to see which locality can provide the greatest subsidy and the most favorable development terms for large national corporations, which stay as long as the subsidies keep flowing before pulling up stakes for the next locality.
There is a better way. The truth is that the kind of companies that cities really want to attract—those that create quality jobs and will not offshore their operations at the first hint of trouble—rarely make location decisions based on the availability of subsidies. These decisions are instead based on access to infrastructure, the quality of local human capital, supply chains, markets, and quality of life for their employees.
So rather than spend increasingly stretched local resources by throwing subsidies and tax incentives at multinationals, local governments should pursue high-road economic-development strategies that attract and build stable, sustainable local economies.
They should map their regional economy to locate areas of potential competitive advantage and develop those areas with the aid of more efficiently organized places. They should modernize and make their local infrastructure and transportation networks more efficient. They should cultivate and strengthen their human capital, enhancing the skills of the local workforce in ways immediately relevant to the region’s best employers. They should concentrate on growing local, place-based businesses rather than pursuing national chains. And they should focus on capturing the value of all of the above locally and sharing it broadly, deeply anchoring these firms in neighborhoods, local supply chains, and the broader community.
Used wisely, value-capture strategies can allow cities to generate revenues from assets that would otherwise benefit private entities for free.
Mayors can influence anchor institution behavior to bring more opportunity to their cities, and drive that opportunity toward the most underserved areas and residents.
As part of their economic development strategy, municipal governments are increasingly thinking about how to cultivate smaller, locally owned businesses.
Many cities are taking a comprehensive approach to fighting poverty by aligning policies, investments, and increasing access to federal and state support.
Local government procurement practices can be a powerful tool for advancing equity and setting high-road standards city-wide.
Food production can be an important part of a city’s economic development strategy, strengthening the regional economy while expanding access to healthy, locally-grown food for residents.