Thursday, March 5, 2015

Time Tested Economic Development That Works

Some will see this as a new way of economic development but if you take a deeper look this is really old school, tried and true economic development that has proven successful for centuries as I am currently presenting to Greensboro leaders.

1. Zero incentives. Believe it or not there are means by which the City of Greensboro can and does invest in businesses that does not require incentives while returning a return on investment to the taxpayers.

2. Put the jobs where the poor people live. At best, putting jobs in areas far from where jobs are most needed only encourages people and their money to leave already depressed areas.It was only after the advent of the automobile that commuting to jobs became common.

3. Forget megasites, we need the farms. North Carolina already has 13 empty megasites. Nationwide there exists 180 empty megasites. The idea that spending $20 to $100 Million Dollars of State and local tax dollars to build 1 megasite to attract an automaker to North Carolina is ludicrous. Megasites are just another form of corporate welfare. Megasites are simply another form of incentives to real estate developers, surveyors, construction companies, architects, engineering firms and the construction industry as a whole..

4. Keep it local. Outside the corporate city limits of Greensboro is too far. Piedmont Triad International Airport is outside the Greensboro City limits and pays no taxes to the City of Greensboro-- think about it. Development outside the City only spurs more development outside the city and drains people, tax dollars, revenue and resources away from the city. You cannot grow the exterior of a city by gutting the city's interior of it's resources.

5. Start a hard line process of culling the non profit development agencies from City funding beginning with the Greensboro Partnership, Action Greensboro and Downtown Greensboro Inc. Non profits simply drain money from the system. The argument that private corporations can do it more cheaply than government only really applies to for profit corporations and only in certain instances. By law the City of Greensboro cannot shut down any non profit company but there is no law that forces the City of Greensboro to give them money. All funding to non humanitarian non profits should be very closely scrutinized and most of these duties should be assumed by the City of Greensboro as reducing an entire level of upper management will no doubt lower costs. That is: if they're found to be needed at all.

6. Give preference to locally owned co-ops as co-ops are for profit businesses that pay taxes, generally pay higher wages, return more to the community and stay in the community.

7. Stop doing what everyone else is doing. No one ever became a leader by playing follow the leader.

8. Employ the long time unemployed first. Providing new jobs to people who already have jobs really doesn't do much to help unemployment and reduce poverty and tends to recruit workers who commute from out of town. Those workers contribute little to our local economy. Any plan designed to benefit Greensboro must give preference to Greensboro residents first.

Any economic plan needs to take into account what you have in terms of assets, what you have to work with that others might not have in abundance. This is where you must begin. What does Greensboro have plenty of?

*Unskilled labor. Training for jobs is great but unskilled labor need jobs now-- train them in their off time for the next generation of high tech jobs.
*Empty commercial and industrial buildings.
*Infill properties.
*Water and sewer infrastructure.
*Excess water, aka 53% of the water from the Randelman Dam which is more water than Greensboro uses.
*Railroads. Greensboro is not currently utilizing the North Carolina Railroad-- the closest to North Carolina Ports. Instead, Greensboro ships via rail to Virginia ports farther away.
*North Carolina A&T University
*Guilford Technical Community College
*Untouched Renewable Natural Resources
*$282 Million Dollars in capital City of Greensboro doesn't want you to know is available. Hell, until I made them aware of it the City didn't know it was available. Yes, I did say no incentives in and I'm sticking to that rule. I'll explain more later.

Can you think of more? What kinds of businesses can be built around those kinds of assets? I can think of plenty, can you?

The beauty is: with the exception of the funding, most all those things are in greatest supply in Greensboro's poorest neighborhoods. All the infrastructure is already in place, nothing new has to be built except businesses. Will the current infrastructure someday need to be expanded? That's the kind of problem City Councils should want to half to solve.

 NC GS 159-30. Investment of Idle Funds requires that cities invest their money in insured mutual funds until the time comes when the city needs to use said funds. Greensboro currently has $282 Million Dollars in such a fund upon which the City of Greensboro has no controls over where or how that money is invested.

But mutual funds don't have to be uncontrolled and North Carolina law does not say the City cannot exercise controls over how the mutual fund invests said funds. There are in-fact green investment mutual funds that only invest in green businesses and socially responsible mutual funds that only invest in businesses that do good things. There's gold mutual funds that invest primarily in gold. There's even vegan friendly mutual funds so if anyone thinks what I'm about to tell you can't be done just remember the words, vegan friendly mutual funds and shut up.

The City of Greensboro has $282 Million Dollars in a mutual fund operated by an out of town bank that drains the profits out of Greensboro and invests the money in any way the bank wishes. But if the Greensboro City Council were to make it their will to place that same $282 Million into a mutual fund managed by a local bank with restrictions as to where and how that money could be invested our entire city could begin to grow in ways it has never grown before.

What kinds of restrictions you ask?

Keep the investments as local as possible.
Require small business loans.
Require home loans to first time home buyers. It's our money, do locally what the Fed never did.
Encourage the bank to partner with local businesses-- become a stakeholder. 

Of course it might not be possible to invest 100% of the money locally and still keep the account safe. That would have to be worked out. But it would be understood that 100% local investment is the ultimate goal of the program and if Bank A can't do it then perhaps Bank B should get a try.

In discussing this plan with economist W. E. Heasley he wrote to me:

"Another item is the use of the current $282 slush fund errr rainy day fund as venture capital. One push back you will receive is that government would become a driving force in private sector capitalization. Maybe, maybe not."
He's right, some will see it as that but as I replied to Bill:

"I think that is pretty easily countered at least to reasonable people in that the money is already being used as venture capital just not in Greensboro. Part of the plan that I discussed previously was to use city resources to help local businesses go public. In Part 11 I mention how other local cities could do the same following Greensboro's lead and how this could spin off a Piedmont Triad Stock Exchange:

Our local stock exchange might never be the size of Wall street or the Dow Jones but it doesn't have to be to become a major economic force locally and regionally. There are, after all, dozens, if not hundreds of smaller stock exchanges world wide that manage to thrive despite Wall Street and each one of those exchanges acts as a barrier between the local community and Wall Street preventing Wall Street from taking all the profits out of the local area.

And it does fit right in with their long held plans to make Greensboro a banking and insurance center. See they always put the cart before the horse."

Bill answered:

"Yes, Cincinnati, Ohio has a regional exchange that does quite well and is utilized to carry out trades of many transactions that otherwise would have been thought to have occurred in NY, NY i.e. you make a stock transaction yet it actually occurs in Cincinnati rather than Manhattan."

To which I replied:

"And who is headquartered in Cincinnati? None other than Proctor and Gamble. Bumped P&G docks all over that city hundreds of times over the years.
And thus we now know the reason that the Greensboro Partnership discovered in their research that Greensboro is a net exporter of capital: "

And have any of you ever heard rumors of Proctor and Gamble threatening to leave Cincinnati if they don't get incentives?  While I can show you dozens of references to Proctor and Gamble getting incentives from cities all over the world, none I've found thus far came from Cincinnati.