COVID-19 Pandemic Makes Economic Development More Important Than Ever

Private business is a major source of jobs and tax revenues for many communities, so helping local businesses to remain viable and grow is something on which most local governments place a high priority. However, the COVID-19 pandemic has had many devastating effects, including business closures and job losses. As a result, numerous organizations, including many local governments, have taken steps to help improve the economic environment for their local businesses and residents.

Addressing these types of issues usually falls within the purview of organizations and staff people involved with economic development. But what is meant by the term “economic development” and what can local governments really do to assist local businesses? It is the aim of this blog post to answer those questions.

How is Economic Development Defined?

The term economic development is not defined in state law, but the Washington Growth Management Act (GMA) lists 13 planning goals in RCW 36.70A.020(5), one of which addresses economic development:

Encourage economic development throughout the state that is consistent with adopted comprehensive plans; promote economic opportunity for all citizens of the state, especially for unemployed and disadvantaged persons; and encourage growth in areas experiencing insufficient economic growth, all within the capacities of the state's natural resources and local public facilities.

Generally speaking, the primary goal of economic development is to improve the economic well-being of a community through efforts that address job creation, job retention, tax base enhancements, and quality of life. Most economic development activities fit into one of the following two categories: (1) business retention and expansion, and (2) business recruitment.

1. Business retention and expansion

Most experts and practitioners would agree that business retention and expansion (BRE) is the single most important economic development area of emphasis. This is based on the long-proven tenet that existing businesses are already located in your community and, in most cases, would prefer to remain and grow in their current location (rather than go through the hassle and expense of pulling up stakes and relocating elsewhere).

As the long-term nature of the pandemic became clear, many jurisdictions asked their local businesses what they needed to stay open and survive. Feedback from local eating/drink and retail establishments resulted in several communities creating programs to allow use of public rights-of-way for outdoor seating, food trucks, and the display of retail goods. Local governments also tapped many economic development entities to assist with distributing and monitoring Coronavirus Aid, Relief, and Economic Security (CARES) Act funding.

In both pandemic and non-pandemic times, local governments often administer grant funds to local businesses. Other BRE activities include providing information about tax credits, assisting with zoning and permitting, organizing workforce training and assistance, developing industry cluster strategies, conducting periodic surveys, and building relationships with key economic development participants. The City of Burien and City of Renton have strong BRE programs.

2. New business recruitment

Even though top priority is usually given to business retention and expansion, the recruiting of new businesses is another important economic development focus. Business recruitment activities can include:

•  Marketing your community and/or region (online and otherwise),
• Creating a welcoming environment for new businesses,
• Responding thoroughly and rapidly to inquiries from prospective businesses wanting to locate within your community,
• Attending industry trades shows, and
• Leveraging utility infrastructure.

The City of Richland and Choose Whatcom are good examples of government-led business attraction programs, city and county, respectively.

Local Government’s Role in Economic Development

The State of Washington is one of the most restrictive in the nation with regard to how public funds may be utilized to attract private investment. The Washington State Constitution states that a city, town, or county may not directly give or loan money to private businesses for economic development. Specifically, Article 8, Section 7 of the state constitution provides:

No county, city, town or other municipal corporation shall hereafter give any money, property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm.

While Washington’s constitution provides very few avenues for cities, towns, and counties to directly participate in private economic development projects, there are other methods that can be used to achieve your economic development objectives. Here are some options for local governments to consider.

A. Build and maintain good working relationships with local, regional and state economic development organizations

It is important to establish relationships with the many organizations that could assist you with your local economic development goals. Once those relationships are in place be sure to communicate and collaborate with those partners on a regular basis. The Thurston County Economic Development Council is a good example of a partnership involving a large number of economic development entities.

B. Undertake infrastructure development

Local governments and other partner entities, such as utility districts and port authorities, are in the business of providing and maintaining infrastructure. Examples include roads, sewer service, water lines, electrical service, and even development of “industrial parks.” Some communities will provide such facilities and services in advance of an economic development project (e.g., Build it and they will come) while others will wait for a specific project before doing so.

C. Review local plans and codes

It is important to periodically review your comprehensive plan and development codes to ensure these policies and standards are consistent with your economic development objectives. If they don’t align with each other, consider updating those documents. For example, if you want to promote local entrepreneurship by encouraging small-scale manufacturing in more locations, make sure your zoning code allows for it (see my blog post titled Encouraging Small-Scale Manufacturing During the COVID-19 Pandemic).

D. Make your permitting process efficient and customer-friendly

While it is important to have strong land use regulations that reflect local priorities, it is equally important that your development review processes doesn’t unnecessarily slow down the review and approval of desired development projects. The old adage — time is money — definitely rings true for most businesses, including when applying for a permit. Both applicants and staff will appreciate a streamlined and user-friendly process that clarifies procedures and removes unnecessary steps. This type of permit streamlining will still require applicants to meet all of your community’s rules and regulations.

E. Focus on workforce development and support

Since most businesses rely on their employees to make them successful, the importance of providing workforce development and support is increasingly recognized as being good for both “business retention/expansion” and “business attraction" reasons. This focus is wide in scope with many subjects falling under it, including:

• Training/education,
• Childcare for working parents,
• Healthcare, and
• Affordable housing.

The COVID-19 pandemic has only served to exacerbate the need for programs to address these quality of life issues. Workforce development/support issues are challenging ones and successful solutions are usually best addressed by a coalition of local, regional, and state participants. The Whatcom Business Alliance’s Yes Whatcom program is one example of a regional approach.

F. Other economic development activities 

‘Downtown revitalization’ and ‘tourism promotion’ are two other examples of actions that can be taken by local governments.

Potential Partners and Collaborators

There are many organizations that deal with economic development issues. For cities, towns, and counties, here is a partial list of some key economic development partners:

• State and federal agencies (such as the Washington State Department of Commerce and the U.S. Small Business Administration)
• Economic development councils
• Port authorities
• Utility districts
• Banks and other financial institutions
• Local chambers of commerce

Other potential partners include workforce development organizations; economic development districts; universities and community colleges; trade associations; convention & visitors bureaus; tribes; and private businesses.

Conclusion

It is important for a local government to determine what is its primary economic development goal. For example, a community that is looking to increase family-wage jobs will be focusing on a different set of businesses (e.g., technology and manufacturing) than one that wants to maximize businesses that generate a high rate of local tax revenues (e.g., retail/sales tax).

Economic development action is needed, now more than ever. Local governments should be examining the need and available options and then taking positive steps to successfully help local businesses, employees, and other needy community members during the COVID-19 pandemic and beyond.

Other Resources

• U.S. Small Business Administration
  • Washington Small Business Development Centers
• Washington State Department of Commerce
  • County-Based Associate Development Organizations
  • Washington Business Hub
  • StartUp Washington
• Washington Economic Development Alliance (WEDA)
• International Economic Development Council: Economic Development Reference Guide

The author would like to thank Gary Ballew, Vice President of Economic Development, Greater Spokane, Inc.; Suzanne Dale Estey, Executive Director, Washington Economic Development Association; and Chris Green, Assistant Director for Economic Development and Competitiveness, Washington Department of Commerce, for their assistance with this blog post.