Some localities are changing the game plan when it comes to spurring economic development. Rather than courting big companies through tax incentives for an economic boost, they are cultivating local businesses, or performing “economic gardening,” to bring their economies to the top. As reported in Governing Magazine:
Soon after, Gibbons and his team connected with a Denver think tank, the Center for the New West, that was anxious to test a theory developed by a Massachusetts Institute of Technology economist economist David Burch. That theory was that so-called Stage 2 companies, employing between 10 and 100 people and with annual revenue of at least $1 million, create the best kind of jobs that will improve an economy. As opposed to small shops that create mostly minimum wage jobs, these mid-sized companies were growing the middle class workforce. Nationally speaking, Stage 2 businesses make up 10 percent of the business population — but they create 35 percent of the jobs. The thinking was that if such companies had the proper push they could drive a local economy upward.
Gibbons called it economic gardening and began trying it out in Littleton in the late 1980s by identifying local Stage 2 companies and offering them more resources to help expand their business. Over the next 25 years, Littleton’s population increased by one-quarter but the number of jobs tripled and the city’s sales tax revenue went from $6 million to $21 million. “When Martin Marietta was there, we were a rocket town,” says Gibbons. “Now that economy is so diverse, there is no one industry that could fail and bring down Littleton like it could 25 years ago.”
As Governing Magazine also reports this approach is being used by Maryland under the Advance Maryland program. In its pilot year, the program accepted five companies. This year the program was expanded state-wide. The article notes:
Andrew Ratner, public relations manager for the Maryland Department of Business & Economic Development, says the idea is appealing in part because it takes the focus away from competing with other states. “That’s economic hunting — everybody’s trying to land that enormous auto plant to move halfway across the country,” Ratner says. “And the amount of incentives that often have to be given to lure those kind of things, there’s often a lot of debate if that’s even worth it.”
For more information read the full article in Governing Magazine and visit the Maryland Department of Business & Economic Development.