Scott Ford: What do we want our economy to look like in 10 years?
March 2, 2011
Steamboat Springs — Two days after taking office, Gov. John Hickenlooper left on a statewide tour to describe his vision for a "Bottom-up Economic Development Plan Initiative." As a result, economic development discussions are occurring throughout the Yampa Valley.
There is a risk that these discussions will lead to a host of activities, action plans, responsibility assignments, due dates, etc., in the hope that the commotion alone will lead somewhere. The reality is it may lead nowhere. To put it simply, if we aim at nothing we will successfully hit it every time.
Any discussion that deals with the possibility of remotely improving the local economy is being considered economic development. For example, approving the building of a new Walgreens was called economic development. Bike Town USA and its multiple initiatives are being celebrated as an example of economic development. The city of Steamboat Springs spending money on office supplies has been judged by some to be economic development. Without question, all these activities have economic impacts. Some of these activities may result in economic benefit. Nevertheless, absolutely none of these activities is economic development.
Why is everything that even has a glimmer of hope of improving the local economy called economic development? It's because we lack the proper definition of terms. As a result, it is easy for folks to begin talking past each other assuming there is a shared understanding of meanings.
When it comes to discussing the local economy, definitions really do matter. Almost everything we do has an economic impact. Some of the things we do have economic benefit and a relatively small number of things are truly economic development. A few terms that will help us have discussions that are more thoughtful and productive:
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When new jobs are created (or lost), the households associated with these jobs will spend more or less money. We know three things about this money as it is spent locally:
■ Generally what consumer categories this spending will take place in.
■ Generally where these households will spend — local versus out of town.
■ There is also spending occurring by the local businesses themselves. This activity eventually impacts wages/salaries of the local vendors that support those businesses.
There is also secondary economic impact associated with this increase (or decrease) in household spending. Simply put, direct impact will result in a wee-bit of an increase (or decrease) in wages/salaries associated with the folks that are providing goods and services to these households.
Both direct and secondary impact can be readily quantified. It is a dollar amount based on a series of assumptions.
The types and degree of economic benefit is often case specific depending on the initiative. Using Bike Town USA for illustrative purposes, the economic benefit can be classified into four areas in rank order of importance:
■ Improved leveraging of existing lodging infrastructure. The best hope would be to increase occupancy during the summer months to match occupancy rates that exist during some of the winter months.
■ Increased sales tax receipts as a direct result of this increased visitor activity
■ Increased wage/salaries generated within the businesses that support this increased activity
■ Increased career opportunities depending on the jobs that are offered
The overwhelming benefits of the Bike Town USA initiatives are in the first three items.
Economic development efforts are associated with two primary areas that are narrowly focused:
■ Diversity of sources of employment and source of income
■ Increase in the per capita income
In Routt County, we have done the hard work to actually define what economic diversification means locally. Simply put, economic diversity is achieved or is being maintained when the top three private industry sectors are sources for no more than 45 percent of the jobs and income, and per capita income in the county is growing at a rate that is greater than the rate of inflation.
These percentages may change over time; however, it has provided a place to begin measuring in order to assess the success of any effort.
If everything associated with improving the local economy is called economic development, it is highly likely we will create the illusion of making progress simply by doing all sorts of activities. We can consolidate all these planned activities in an attractive binder and call it a strategic plan. All the activities described in this plan will have economic impact, some may result in economic benefit and likely very few if any will result and/or influence true economic development.
The activities themselves are not the end goal; it is an understanding of where we want to go. At a minimum, let us start by having a shared understanding of what economic development really means and what is the desired outcome.
Scott Ford is the director of the Routt County Economic Development Cooperative.