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Local economies need a boost. The federal government can help.

By Nathan Ohle

Jan 9, 2019

If we want to start rebuilding our nation’s distressed cities and towns, we need new strategies. Traditionally, state and local governments have relied on financial incentives to promote economic development, with states spending more than $45 billion yearly on business incentives. In most cases, these incentives do little to impact companies’ location decisions, and research shows little correlation between these incentives and local economic growth.

The traditional approach is only widening the disparity between communities. A case in point is the competition for Amazon’s second headquarters, in which our country’s wealthiest cities poured massive resources into incentive packages. Those cities most in need of an economic boost were unable to match the generous packages proffered by large cities with deep pockets, and ended up losing out to New York and Washington, D.C.

If we really want to help distressed cities and towns revitalize their economies, we need a new strategy that reimagines the federal role in local economic development. One such approach is to strengthen and expand the role of the Economic Development Administration (EDA), a small agency within the U.S. Department of Commerce that helps communities develop long-term economic growth plans. As the only federal agency solely focused on economic development, EDA is well poised to lead a renewed effort in rebuilding local economies.

The EDA already successfully connects distressed and under-resourced communities with federal funding. Specifically, the agency developed a unique funding approach where communities fill out a proposal with an outline of their project and submit it to the agency for approval. This allows communities that do not have excess capacity to get immediate feedback on opportunities. For eligible communities, EDA also provides a point of contact to help fill out the full application. This added expertise gives the most distressed communities the guidance necessary to secure funding.

EDA can build on this success. In particular, EDA can be the integrator of federal government economic development programs through its Office of Economic Development Integration. Billions of dollars in federal economic development funding is available for communities, but it is scattered across multiple agencies, including some with no economic development planning expertise. Applying for funding can be challenging for under-resourced communities, and some are not even aware how to access funding opportunities. These communities need technical assistance to identify and access funding sources. The agency’s oversight would increase accessibility of federal funds for in-need communities and help ensure funds are more efficiently allocated.

We need a new strategy that reimagines the federal role in local economic development.

Congress could easily help align this work. EDA was established five decades ago to facilitate critical public works projects and has since evolved through congressional reauthorizations. Unfortunately, EDA has not been reauthorized by Congress since 2008, and a new authorization bill could expand the agency’s scope. For example, the reauthorization process could allow Congress to update the agency’s policies and priorities to match current economic development trends and challenges, as well as assist Congress in the oversight of the federal agency and its critical programs. In particular, a reimagined role for EDA’s integration leaderships could include:

  • Networking: Building upon its existing network and creating new relationships and partnerships across federal agencies, as well as state and local economic development organizations.
  • Content and data: Developing comprehensive, clear content and data on federal, state, regional and local, and philanthropic resources, along with building effective diagnostic tools to help reach economically distressed parts of the United States.
  • Technical assistance: Improving community access to federal program information, data, and funding opportunities through coordinated technical assistance with an understanding that all communities face differing sets of economic development challenges.
  • Planning: Utilizing economic development planning to ensure that the billions of dollars in investments are coordinated in a way that is driven by local needs.
  • Program alignment: Integration of strategic investments from multiple federal and non-federal resources in high-impact economic development projects.

This model has already proven to be successful. The EDA used similar programs in inter-agency, place-based collaborations like the Investing in Manufacturing Communities Partnership and the Assistance to Coal Communities programs. The future of federal economic development programs continues to push toward place-based work that leads with local needs and facilitates coordination of federal partners in economic development funding and technical assistance.

By utilizing EDA and updating its role, the federal government could ensure funding is directed toward communities that need it most. Simply handing out billions in business incentives isn’t working for distressed communities. It’s time for a change.


 

Nathan Ohle is a leading expert in economic mobility, and was recently selected as one of 40 Under 40 Rising Stars in economic development internationally. Nathan currently serves as the Executive Director of the Rural Community Assistance Partnership (RCAP), a national non-profit focused on access to water and economic development for rural communities across the country.