Business codes help decipher economic development challenges

June 8th, 2018

By Guy Stephens | WNIJ

Striking a balance between competing local interests to achieve a benefit of all long has been a mantra of regional economic development. No one involved seems to disagree. Still, it has been deemed necessary to “get it in writing.”

The Region 1 Planning Council is an economic development alliance that comprises the Rockford Metropolitan Agency for Planning (RMAP) and the Economic Development District of Northern Illinois (EDDNI). It includes the City of Rochelle along with governments in Stephenson, Winnebago, Boone and McHenry Counties.

The Council has been working on its so-called “code of ethics” with the aim of having something in place this year. It would, among other things, prohibit local governments from poaching businesses or business opportunities from their peers in the region. Local governments and organizations would sign on to the agreement as a condition of membership in the council. 

It’s not a new concept. The council is looking for models in similar codes implemented in the Denver metro area and in northeast Indiana, among others.

John Sampson is President and CEO of the Northeast Indiana Regional Partnership, which formed a little over decade ago. Like the Region 1 council in Illinois, it includes a mix of rural communities and towns, agriculture and manufacturing, proximity to large cities outside it, and a city – Fort Wayne – comparable to Rockford in size, that is the area’s urban center. Fort Wayne – again, like Rockford – also has an airport that serves as an economic draw for the region.

Sampson says the partnership got started because many people realized that a regional approach was the way to go.

“There was a clear recognition in the early days that economic development in the region was not working,” he said, “and the nature of that ‘not working’ was a very competitive nature between communities: city to their county, county to neighboring county, and so forth, across the region.”   

Sampson says officials from nine counties got together to form an alliance in 2006. It’s now grown to eleven counties. Still, the process of coming together and agreeing on the terms of the partnership took time.

“Over the years we determined that the principal effort is building trust to support a collaborative relationship between these counties,” he said. “So, from the very early days -- I would say even in the first year when we started doing work together -- we were documenting agreements that we would make, and writing them down into a procedure, and committing to one another that we would follow those basic tenets that we agreed to along the way.”

Norm Walzer, a Senior Research Scholar at the Northern Illinois University Center for Governmental Studies, says the trend for some time has been for communities to band together to boost economic development. That’s led to more and larger regional partnerships. But, he says, local politics still plays a part when decisions are made. That’s because of the way we’ve traditionally looked at development.

“It’s always the number of jobs,” he said. “So a new company comes into town and they’re going to create – take a number, 435 jobs – and that’s it. It’s not how much income, where are those people going to live, who’s going to benefit, where the tax increase are going to be. It’s just, ‘How many jobs did we create?’ So, the next time the mayor comes up for election, well, he knows adjoining city A created x number of jobs, and we didn’t create any, so, you know, we’ve got to get a new mayor.”

Walzer says the irony is that studies have shown that getting a prized employer doesn’t always help the host community as much as people think -- especially these days, with the common use of incentives offered by local governments.

“So it may very well be that you land a business in city A and they give tax incentives for ten years or something like that, but the workers mostly live in adjoining city B,” Walzer explained. “So City B really comes out ahead. It get the tax benefits of the people and maybe some sales taxes – these kinds of things. Whereas city A that got the business, doesn’t get any property taxes – any serious property taxes – for, say, ten years.”  

In fact, Walzer says, surveys show that many workers commute not just from an adjoining town, but across regions – for example between Rockford and Rochelle -- for a job they want. So a regional approach to attracting development makes even more sense.

Sampson says a watershed moment for his group came in 2009, when a nationally known and well-respected site selector was invited to tour and review the region’s assets, and the partnership – then mainly a marketing organization.

“And he told us that he would not show our region to his clients,” Sampson said. “For as stunning as that remark was, it was one of the better things that happened to us, because it changed the course and the mission of the partnership also to build a region that was competitive in a global market.”  

That meant local governments and the business community had to develop even closer cooperation on everything -- from building on, rather than duplicating, a particular community’s assets, to pooling support for regional infrastructure improvements.  

Sampson emphasizes that his partnership doesn’t discourage competition by and between communities; he says they should tout what they have to offer but wants to make sure everyone is on the same page as to how do that in a way that will offer the maximum benefit for all. That’s where the so-called economic development “code of ethics” comes in. It’s supposed to help prevent that urge to poach for a strictly local, perhaps political, interest.

The Indiana partnership has made signing its “Code of Ethics” a very public event. Sampson says that is deliberate. Sampson says he’s following the advice of a mentor, Tom Clark the founder and former CEO of the Metro Denver Economic Development Corporation. Its "code of ethics" formed the basis for the code in Indiana.   

“Tom says never underestimate the power of public ceremony,” Sampson said, “so what we’ve done on occasion is, our economic developers get together, and now we include all the mayors and the commissioner of these eleven counties, and we invite them to publicly sign -- with media present -- the code of ethics.”

He says it’s not just for show.

“Part of this is certainly ceremony,” Sampson noted, “but another part of it is kind of weaving together a fabric of collaboration and mutual trust around standards of behavior.”

Sampson -- and Walzer -- say taking that action, along with other partnering mechanisms, makes it easier for a region to act and speak with one voice. Walzer says potential developers like that. Similar to Sampson’s story of the site selector, he recounts meeting someone advising a firm looking at a particular region – he wouldn’t say where – who told him the company got multiple offers while there and refused to discuss any of them. Walzer says that illustrates what companies really want.

“Their preference basically is to be able to have a response from that metro area that says ‘We have one industrial park, or ‘We have one something else, or one something else’ – not six,” Walzer said, “and we’ve run into this in work with some communities, where the consultant would basically say, ‘We want to talk to one group. We don’t want to talk to three others.’”

Sampson says stories like those offer a healthy dose of reality in a world where your competitor isn’t just the next town or county over but a region across the country or on the other side of the globe. And they underline the necessity of having and following a “code of ethics” – a way of working together -- for the good of everyone.