In many communities, economic development is viewed as an investment in the community’s future. Economic development can be viewed in several different ways, from encouraging an entrepreneurial and startup-friendly business environment to actively recruiting larger companies to relocate to our region.
Communities across the country see economic development as a requirement to remain competitive in retaining young professionals, maintaining a qualified workforce and expanding the tax base, which leads to economic growth.
Public money is often used to help fund economic development activities in a municipality. While it is rarely the sole source of economic development funding, it supplements private funding and grant funding often available to these types of activities.
Public funding of economic development activities is an investment in the community’s future; it is not an expenditure.
There is a distinct difference.
The difference in cash spent
Expenditures are money spent now to receive a return now or to pay for a past return. Investment is money that is spent now and that will achieve a return sometime in the future.
Communities invest in many things; infrastructure, technology and public transportation are investments. Communities also have many legitimate expenditures; legal fees, salaries and debt payments are all expenditures.
In Colorado Springs, both taxpayers and ratepayers fund some level of economic development or, as the city calls it, economic vitality.
The ratepayers of Colorado Springs Utilities have traditionally funded a portion of the economic development activities in the region. This year, that funding was in question due to reservations by the Utilities Board (also the Colorado Springs City Council) but was ultimately extended recently at its regular meeting.
After much deliberation, the Council approved a reduction in funding from $310,000 to $250,000, to be disbursed in the following manner: $210,000 to the Colorado Springs Regional Business Alliance (CSRBA), $35,000 to the Colorado Springs Technology Incubator (CSTI), and $5,000 to the Colorado Procurement Technical Assistance Center (PTAC).
Colorado Springs also charges a Lodgers and Automobile Renters Tax (LART), which generates revenue to fund tourism and economic development activities. For the past three years, LART has provided economic development funding to several organizations in town that have a mission to develop small businesses and entrepreneurs and to actively encourage outside employers to relocate here.
In 2014, LART anticipated $4 million in revenues to be generated by the tax. The budget allocates $188,000 in line-item economic development investment after removing the two-thirds of the entire LART budget allocated to the Convention and Visitors Bureau (CVB) and reserves: $43,000 to the Cultural Office of the Pikes Peak Region, $70,000 to the CSRBA, $10,000 to the CSTI, $55,000 to the Colorado Springs Small Business Development Center (CSSBDC) and $10,000 to Innovations in Aging.
Funding could vanish
In 2015, this small amount of economic development investment is at risk and may be pulled from these organizations.
The LART committee has decided that the tax generated from LART should be spent on tourism-related activities only, and have asked the city administration to move the funding of other economic development activities to the city’s general fund.
This is will be a tough sell as revenue growth for the general fund has been stagnant, and the infrastructure needs of the city are well-known and expensive.
But let’s look at what the city’s general fund currently allocates toward economic development or economic vitality, as our city refers to it. In the 2014 budget for the city, the Economic Vitality office receives approximately $678,000 of a nearly $250 million general fund budget. Included in the $678,000 are the salaries, benefits and pension obligations for the employees of that department.
It is also important to note that the city’s economic vitality office spearheads the city’s work on homelessness and also the City for Champions project. Regardless, economic vitality is far less than 1 percent — actually 0.27 percent — of the city’s overall general fund budget.
It begs the question of whether we are investing enough in the future of our community in a way that will allow us to be competitive with other communities?
With the lackluster economic growth we have seen over the past several years, particularly coming out of the recession and during a time that other Colorado cities have rebounded much better than we have, it begs the question of whether we are investing enough in the future of our community in a way that will allow us to be competitive with other communities?
Example to the north
One can look up the road at Fort Collins to see successful economic development in action.
The Rocky Mountain Innosphere is an incubator that works closely with both Colorado State University and the local business community to help entrepreneurial startups with funding and mentoring.
A bank in Fort Collins has helped invest in a startup fund, in conjunction with the Colorado Enterprise Fund. The Innosphere receives $60,000 in public funding from the city of Fort Collins, a city one-third our size, as pointed out by Ric Denton, the President and CEO of the CSTI, in his presentation to City Council earlier this month.
If we were to invest equivalent public money in our incubator, we would invest at least $180,000 a year, much more than the current level of $35,000.
As I did my research before writing this piece, I looked at several economic development plans for cities across the nation.
While they all have their own goals and strategies unique to their strengths and assets, one thing is very clear: They have input and accountability from all of the community stakeholders. The city is involved, the economic development organization is involved, and the public is involved.
There is a plan, there is a road map, and there are specific goals that the community will reach in specified timeframes.
In reviewing the number of strategic plans available from our own community, it appears that everyone has one, but there is not one cohesive plan for our city going forward.
Perhaps this is something that should be considered by our own community and its leadership?
What we need here
I am no economic development expert. I am a banker. I do know, however, how to look at economic results and make an educated opinion about whether they are positive or negative. I would venture to say that our current economic results are lackluster and, therefore, a drastic change in decision-making needs to be made.
There is no need to reinvent the wheel as we have examples of successful communities all around us, specifically right here in our own state.
We need a cohesive plan of the investment we are going to make in our future, and then we might look at funding that plan to the extent possible, with expectations, accountability and measurement tools very clearly defined.
It is clear that the decisions we have been making are not yielding positive results. Our rates of major firm attraction, new local startups and overall job creation are not at a level to assist in expanding revenue for local government operations.
Is it not time, then, to make different decisions?
Robin Roberts is president of Pikes Peak National Bank.