Economic development strategies for local government have gone through a number of cycles and trends in the United States since Congress in the 1930s first authorized tax-exempt bonds, legislation enacted primarily to assist southern states to attract industry. In the late 1940s, federal legislation authorized urban renewal financing as the post–World War II suburban boom created rising concerns of disinvestment and decline in the inner cities.
Early projects were focused on the elimination of blighted areas and the creation of neighborhood reinvestment through such programs as Model Cities. The decades of the 1970s and 1980s brought forward even more ambitious (and expensive!) projects centered around sports stadiums, upscale retail and festival centers, and large tax-incentive packages for corporate relocations.
Inevitably, some of these projects failed, creating resentment by local taxpayers. Nevertheless, the deal-making mentality in economic development still has tremendous appeal. It’s a rare public official who does not relish the headlines and ribbon-cutting photos when a deal is consummated.
In the shadow of the deal making, however, one quiet strategy emerged in the 1990s. It is known as “economic gardening,” which many have credited Littleton, Colorado, for creating.
ICMA’s 2010 The Municipal Year Book article “Local Economic Development, 1994–2004: Broadening Strategies, Increasing Accountability” discusses the three waves of economic development practice and how local governments are expanding their strategies to include both industrial recruitment and small-business development.
An interesting data point from the article: the proportion of governments not using business incentives rose from 12 percent in 1994 to 45 percent in 2004, suggesting that local governments are becoming more cautious regarding industrial recruitment and are instead turning to increasing business retention and expansion and small-business support.
A 2010 Economic Development Quarterly article that I coauthored with Lingwen Zheng explores those governments that still use business incentives and finds that they have lower economic growth and lower property tax revenue, face more competition, and may be “trapped in a race to the bottom,” which places like Littleton, Colorado, are avoiding.
—Mildred Warner, professor, Department of City and Regional Planning, Cornell University, Ithaca, New York, and coauthor (with Lingwen Zheng), “Local Economic Development, 1994–2004: Broadening Strategies, Increasing Accountability,” in The Municipal Year Book 2010.
Littleton is a city of 41,000 in the Denver metropolitan area. Incorporated in 1890 as a farming and ranching community, it developed in the 20th century similarly to other cities along the Colorado Front Range that stretches from Fort Collins to Colorado Springs. As with Sun Belt areas, much of the growth along the Front Range since World War II was driven by in-migration of both businesses and population from other parts of the country.
In the 1950s, Littleton was the beneficiary of two such relocations. In 1955, the Glen L. Martin Company (later to become Martin Marietta, and now Lockheed Martin) purchased several thousand acres in the Rocky Mountain foothills west of Littleton to locate a guided missile design and manufacturing facility. In 1956, Marathon Oil Corporation, based in Ohio, purchased a 77-acre chicken farm in the Littleton area to build a research and development facility. Over several decades, these two companies brought to the Littleton area thousands of employees and their families who contributed significantly to the economic base and civic culture of the community.
With the onset of the 1987 recession, Littleton staff and city council began to rethink the city’s approach to economic development. Two primary employers, Martin Marietta and Marathon were cutting jobs—Martin Marietta because of reductions in defense spending and Marathon because of a major downsizing trend in the oil industry.
Being one of the smaller cities in the Denver area, Littleton’s economic development strategy had been mostly one of participating in coordinated state and regional efforts at recruiting business (especially from California, a strategy that continues today). The success of the recruiting programs was erratic. A major urban renewal project—an upscale retail center—in the city was struggling and ultimately failed completely, and a national home improvement company that received tax-exempt-bond financing went into bankruptcy and closed its Littleton facility.
Although the city was not directly financially responsible for these projects, their failure started to create doubt about deal making and tax incentives as viable long-term economic development strategies.
The two of us—I was then deputy city manager—were given the task of researching and developing new approaches to economic development. What we found initially was a varied assortment of business assistance programs, after-hours networking, and some incubator facilities, where overhead costs could be shared. The track record of these programs in actually creating new jobs seemed mixed.
We then came upon two sources that dramatically influenced our thinking. The first source was the book, The Job Generation Process, published in 1979 by David L. Birch, who at the time was a researcher at MIT and went on to establish his own consulting firm, Cognetics, Inc. Birch had examined a huge database that showed that the majority of new jobs were created by small businesses and that large companies generally had a record of consolidating and cutting employees.
Our second source was a paper, “Increasing Returns and Long-Run Growth,” published in 1986 by Paul Romer, an economist. Dr. Romer, now a senior fellow at the Stanford Institute for Economic Policy Research, is widely credited in the economics field with path-breaking work in what is termed “new growth theory.”
After carrying out technical modeling, Romer learned that ideas and innovation are crucial inputs to economic growth, and, in contrast with such scarce inputs as land, labor, and capital, ideas can be used by any number of people simultaneously with no depletion impact. In fact, the more they are shared, the greater the potential for economic growth.
As we explored these two basic concepts, we started to develop the framework of a new economic development strategy for Littleton. Because Littleton has roots as a farming community, we adopted an agricultural metaphor, economic gardening. We presented the city council with an image of a garden: when you plant a garden, you do not know which of the vegetables will produce the greatest yield, so you fertilize and water all of them equally.
To contrast this strategy with the corporate and deal-making strategy, we used a big-game-hunting metaphor. As every hunter in Colorado knows, you can go for many years without bagging a trophy elk. Similarly, economic hunting can be an exciting strategy, but the better odds are with economic gardening.
The city council got the picture.
In early 1990, we rolled out the first experimental gardening program. Following Romer’s insights that knowledge and ideas are crucial ingredients of economic growth, we negotiated the transfer of a skilled researcher from our public library to the city department of Business/Industry Affairs (BIA) and started offering customized data search services based on interviews with individual businesses.
With the advent of the Internet, access to real-time information through subscriptions to private database providers was exploding. Whether updates to census data, market trends, or technology trends, timely and accurate information was our first carrot. The response from the local business community was overwhelmingly positive. By 2010, the staff grew to four full-time positions. As the sophistication of the information technology increased, we increased the sophistication of the services that we offer:
In a typical year, BIA is in contact with approximately 300 to 400 businesses and conducts intensive customized consulting with more than 100 businesses. Consistent with the gardening philosophy, we do not try to pick winners or focus on just one industry cluster such as high tech. Our customers range from a locally owned spice and herb store to a national satellite television company that has an operations center in Littleton.
The results of the program have been promising. From 1990 to 2009, the job base in Littleton doubled from 15,000 to 30,000. We have not avoided the impacts of the current recession, but our estimated unemployment rate has remained in the range of 6 to 7 percent, well below the national average and significantly below some of the harder-hit areas in the country.
Since initiating its economic gardening program in 1990, Littleton has been contacted by more than 700 city, state, and international economic development organizations. They range in size from small, rural communities to the state of Florida, which just this year launched a pilot program called GrowFL. Several communities have sent entire delegations to Littleton to see the program in action.
Before attempting to start an economic gardening program in your community, consider these key factors:
ICMA’s InFocus report “Strengthen Your Local Economy through Economic Gardening” (volume 42, number 4) describes the key elements of an economic gardening program, including business coaching and technical assistance, a strong referral network, market research services, coordination and administrative oversight, ongoing training of staff and providers, tracking and performance systems, and an ongoing capitalization plan. It also provides overall implementation considerations.
For more information, recent InFocus (formerly IQ Reports) issues can be purchased and downloaded from the online ICMA Bookstore at bookstore.icma.org.
Economic gardening will be more challenging in rural areas than in metropolitan areas. Littleton has some advantages, including being part of the Denver metro area with access to a major airport and several universities. Our estimate is that communities more than a two-hour drive from a major airport will generally have a much smaller base of entrepreneurs to work with.
It has also been our experience, however, that almost every area of the country will have people with innovative ideas. Finding ways to nurture them is the challenge.
If you are interested in learning more about economic gardening, Chris Gibbons supports an e-mail discussion group at email@example.com. The eighth International Economic Gardening Conference was held June 16–18, 2010, in Bellingham, Washington, with more than 90 organizations in attendance. Some of the conference content can be found at http://economicgardeningconference2010.ning.com. Also check out discussions on the economic development topic page in ICMA’s Knowledge Network.