Intro to Eco Devo Flashcards
Economic Development can be defined as
A program, group of policies or activities that seeks to improve the economic well-being and quality of life for a community by creating and retaining jobs that facilitate growth and provide a stable tax base.
Economic Development strategies are based on
- Needs
- Assets
- Goals of the community
What must be done prior to establishing an economic development initiative?
- Study the community’s historical growth/decay
- Assess community’s SWOT
- Understand existing business & development assistance programs
- Determine if existing programs / resources can meet community’s needs
- Understand obstacles to business growth / development
- Build relationships with community stakeholders to create community vision
Economic Development efforts typically strive for the following
Job Creation
Job Retention
Quality of Life
What factors affect the success of economic development projects?
Accepted vision with measurable goals
Understanding of community’s SWOT
Programs built on local comparative advantages
Cooperative/Collaborative leadership
Sustained financing
Excellence in management & customer service
Who are some of the stakeholders in economic development?
Government (local, state, federal) Special Authorities (port, airport, redevelopment) Public-Private Partnerships Chambers of Commerce/Business Associations Universities/Research Institutions Community Colleges Workforce Development Organizations Neighborhood Groups/CDCs Utilities/Telecommunications Philanthropic Organizations Financial Institutions Faith-Based Institutions Transportation Companies
What are some of the roles an economic development practitioner plays?
Analyst Catalyst Gap Filler Advocate Educator Visionary Ethics Champion Coordinator Administrator Leader
Neoclassical Eco Devo Theory
Assumes pure competition
Unregulated capital will flow to areas where it will receive the highest return
Better suited for urban areas
Economic Base Theory
Assumes export firms have higher job multipliers
Economies divided into Export (basic) and Non-Export (non-basic) goods and services
Growth dependent on expansion of export industries
Location Theory
Assumes location advantage
Business location decisions drive economic development
Spiral/Causation Theory
Assumes a causal process
Success/Failure can be attributed to specific local events and conditions
Product Life Cycle Theory
Assumes industrial location
Industries locate in different area as they move through the product life-cycle
New Growth Theory
Assumes knowledge is different from other goods
Knowledge drives economic development
Incorporates 3 inter-related strategies:
Investing in knowledge production
Investing in human capital
Promoting entrepreneurship
This theory is driving the trend for increased R&D, entrepreneurial support, access to venture capital, etc.
The Creative Class Theory
Assumes creative professionals drive economic development
Innovation and Entrepreneurship = future success
What does assessing a local economy identify?
Challenges Competitive advantages Obstacles to reaching goals Economic Environment & impact on local economy Local resources available Socio-economic make-up Skill-level of workforce Opinions / Perceptions of community
The information obtained from assessing a local economy can be used to”
Identify assets and liabilities
Forecast trends
Monitor performance
Economic condition describes what?
What data is analyzed to determine the condition?
The current level of economic activity of a community. Employment / Unemployment # of firms by industry & size Wages Area income Industry output New business starts Retail sales New housing starts Ave. price of houses sold
Population characteristics provide insights into what?
The potential workforce pool, nature of the local market, need for goods/services (i.e. schools)
Labor Force characteristics provides insights into what?
Population yet to enter the workforce Potential commuters Labor Force participation rates Underemployment Skill base Educational attainment
What data is reviewed to determine physical condition, space & infrastructure needed for development?
Land use & zoning Land values & cost Building condition, size, availability & access Vacancy rates & absorption Building / Construction activity Parking Infrastructure capacity / condition (rail, air, roads, water) Environmental conditions
What information reveals the business climate in a community?
Community attitudes Labor relations Business Taxes & Regulations Municipal Services Business Services available Workforce training programs Access to capital Access to transportation
Strategic planning is a process in which a community compares what?
A community compares its current situation to where it would like to be in the future
A community envisions its future and outlines the appropriate steps to achieve that future
How is strategic planning beneficial?
Shapes a community’s future
Provides structure for shared vision and goals
Defines purpose of community groups
Balances community goals with local resources
Incorporates measures of success
Strategic planning is based on
Economic realities Community resources Trends Developments Assets
What questions does a strategic plan answer?
What are the needs & opportunities?
What are the development goals required to meet those needs?
What resources are available to meet the needs?
What strategies / projects will best utilize the resources to meet goals?
What steps are involved in Strategic Planning?
Pre-Planning / Organizing the process Assess SWOT Form goals / objectives Identify / Evaluate / Prioritize projects Develop plans of action Implement tasks Monitor and evaluate outcomes Retool, Readjust plan
Planning is a ___________ ___________ and not an end product.
Continuous Process or Cycle
Strategic planning requires community involvement including whom?
Public
Private
Civic leaders
What is consensus?
A shared vision
Agreement
Unity
Why is consensus building important in strategic planning?
It provides Support, Justification & Validation for the strategic plan
It ensures community buy-in & ownership
Provides mutual benefit from multiple stakeholders to develop goals, strategies and programs
Strategic planning costs include both _______ & ________.
Time & Money
What is the difference b/w monitoring and evaluation?
Monitoring tracks performance or outcomes
Evaluation compares outcomes to benchmarks
What is the objective of monitoring / evaluation in strategic planning?
Promote effective implementation of plan Ensure goals are met Minimize delays through early detection of problems Provide feedback for problem solving Make adjustments to projects
When should planning evaluations be conducted and why?
Before, During and After
- Pre-implementation evaluations assess the allocation of resources and determine baseline info
- On-going evaluations measures progress against the goals and provides insights to adjustments
- Post-implementation evaluations determine project performance (time, cost, benefits)
What performance factors should be assessed to determine program success?
Organizational efficiency
Economic impact
Customer satisfaction
Return on Investment
Define Benchmarking
Process of comparing project performance and outcomes to pre-established standards
Marketing is about _____________ a product.
Positioning
Positioning involves distinguishing a product from the competition. How?
Product differentiation (developing attributes that are distinct from other communities) Price competitiveness (lower cost of doing business or value proposition) Market focus (targeting a particular industry, region or audience)
Define SWOT
Strengths (internal factor subject to change; encourage or enhance eco devo)
Weaknesses (internal factor subject to change; obstruct or constrain eco devo)
Opportunities (external factor; make competitive advantages possible)
Threats (external factor; harm the economy)
Which industries should a community target?
Industries that:
- match the assets or competitive advantages
- align with development goals
- have investment / growth potential
Target industry identification results from extensive market research. Define 2 research approaches that can be used?
Sectoral Analysis - considers industry sectors & identifies industries that best fit the community’s capacity & goals
Cluster Analysis - considers industries related by business activities either vertically (buyers/suppliers) or horizontally (competing businesses/sharing resources)
Name some of the factors involved in site selection:
Access to customers / supplier markets Access to transportation systems Access to business / professional services Shovel ready land available Environmental conditions of land Business climate Financial capital costs Community image Incentives Labor force Level of unionization Quality of Life Regulations (environmental, zoning, employment) Gov't attitude toward business Taxes Telecommunications systems Utility capabilities/rates
What’s the overall objective of a Foreign Direct Investment (FDI) campaign?
Attract or retain multinational firms to create jobs and stabilize the tax base in the local community.
What is the communication function of a marketing strategy and what is it’s goal?
Function - Promotion
Goal - To elicit a response from the target audience
What are the 2 components to marketing promotion?
1) Developing the message
2) Conveying the message
Differentiate the 6 techniques in reaching a target audience:
1) Advertising - print/electronic media
2) Publicity - news releases, press kits, public speeches
3) Promotional Materials - newsletters, trade exhibits, websites
4) Direct Mail - letters, e-mail, brochures
5) Social Media - interaction via computer/mobile device
6) Personal Selling - trade shows, events, fairs
What is the goal in marketing & what criteria are evaluated to determine which marketing technique to use?
Goal - to create the greatest # of positive impressions in the target audience.
1) Cost - least to most expensive; budget based
2) Presentation - visualization, credibility, explanation
3) Exposure - reaching the right audience
A marketing plan provides a guide for all marketing activities. How?
Outlines a strategy to achieve marketing goals
Identifies the specific activities & timeline to achieve the goals
Identifies financial resources/staff to support the goals
Determines evaluation methods for effectiveness
Provides justification for funding
The purpose of site selection is to
Find the most appropriate site for a business from an economic & operational perspective.
Although site selection factors may vary, what are the 4 primary considerations taken into account?
1) Business strategy
2) Operating costs
3) Operating requirements
4) Risk factors
What can EDC staff do to prepare for working with site selectors?
Know existing businesses and SWOT
Develop/Maintain website with current/relevant info
Prioritize sectors for success
Build relationships with site selectors
What are the best practices in negotiating incentives?
1) Know the opportunity costs/trade-offs in granting incentives vs. investments in infrastructure, education or other needs
2) Determine performance-based criteria/eligibility standards for granting incentives
3) Develop accountability measures, financial recovery procedures and/or clawbacks in case of failure
What is the intent of business retention & expansion programs?
Help businesses survive economic difficulties
Add new jobs associated with expansion
Increase competitiveness in wider marketplace
Existing businesses account for up to ______% of all net new local employment.
80%
What is the potential impact of a business expansion project on a local community?
Increase local jobs Increase local property values Increase local tax base Enhance community image Maintain economic health
Why are utility companies involved in business retention & expansion programs?
The survival and profitability of utility companies depends on the preservation and growth of industries in their service area.
In BRE, what will a SWOT Analysis help discover about local businesses?
Better understanding of why businesses located in the community
Identify community assets available for businesses
Determining which businesses have a competitive advantage and which don’t
What is the purpose in visiting / surveying businesses?
1 - Serves as an early warning system of concerns and problems of individual companies
2 - Keep aware of company dynamics & economic well-being
What are the 2 most important factors in BRE surveying?
- Brevity (45 min - 1 hour)
2. Confidentiality
What areas of focus should a BRE survey include?
Company background Business climate Labor / Training needs Marketing & trade Financing needs Regulatory issues Barriers to growth Satisfaction with public services / facilities Prior utilization / satisfaction with local biz assistance programs
Why is following up the BRE survey important?
Provides a progress update on responses to business climate issues and provides assurance to the company that their concerns are being addressed
What are some of the early warning signs that a business may be at risk of closing or relocating?
Declining sales / employment Large non-corporate ownership Recent ownership change Lease of property; expiring lease Other facilities produce the same product / service Negative attitude about the community Unbearable regulatory burdens Union contract expirations Expanding sales / employment Facility / Site expansion plans Obsolete or land-locked facility Location in a problem neighborhood Older product lines / technology Contentious labor-management relationships Lack of export / international focus No succession plans Gradual corporate downsizing over time Relocation of corp office Loss of supplier contracts / relationships
How could marketing a BRE program utilize existing company marketing programs?
Local utility companies and educational institutions have existing marketing programs targeting the same businesses a BRE program focuses on.
EDCs can partner with utilities and educational entities to market BRE services available.
Why should an industrial cluster strategy be developed at the regional level?
Industry clusters develop as a result of specialized amenities & support services available in a regional area and not a single municipality.
Coordination should be pursued among the regional EDCs to target industry cluster BRE.
What services does the typical BRE technical assistance program offer businesses?
Operations Mgmt Marketing/Sales/Export Strategies Financial control systems Workforce training/development Strategic planning/Business plan development
What are the key elements of a successful technical assistance program?
Targeted companies
Participation standards
Defined scope of services
Defined service provision
Why is meeting a company’s workforce needs so critically important to a BRE strategy?
1 - Public $$ invested in upgrading skills in a community will largely remain in the community.
2 - Smaller companies don’t have in-house training programs and benefit from a better qualified pool of employees.
3 - A well-trained workforce combined with an effective training program can be a competitive advantage that isn’t easily duplicated.
Name some of the tools used in a BRE program?
Marketing Supporting Industry Clusters Creating Site Opportunities Providing Technical Assistance Developing workforce/training programs Finding new markets Assisting with permitting/licensing
The majority of real estate development projects happen through __________ transactions with developers acting on supply and demand market forces.
Private
Why is the public sector required in real estate development?
For regulatory processes/approvals such as zoning, building code compliance, permitting, parking space requirements, etc.
What is Smart Growth?
Development that serves the economy, community and environment.
It changes the development debate from growth/no growth to “how and where should new development be accommodated”
Mixed Use Development refers to
Combining multiple land uses (commercial, residential, transit) in a single district & even multiple uses in a single building.
Mixed Use Development is a tenet of the ‘triple bottom line’. What does that mean?
Triple bottom line seeks development benefits from:
profits
qualify of life
environment
What are the characteristics of a Lifestyle Center?
Open-air shopping Entertainment is complimentary to shopping Smaller than typical malls No anchor department store Located in affluent neighborhoods Offer specialty shopping Main-Street ambiance
How have advances in technology impacted the way business is conducted?
Allows companies to locate where land/office space are cheapest
Contributed to increased suburban and greenfield development
Contributed to operations moving overseas to access lower wages / highly skilled labor
Increased new jobs in computing, IT, IOT, AI, etc.
What is driving the growth of green development?
Increased environmental awareness
Increased attention toward building costs (energy savings
Increased costs of non-renewable resources
Increased local incentives for green building industry
Increased awareness that greener workplaces attract talent
Lower operating costs
Do green building techniques require a different construction skill set?
No
What are the 4 main types of development?
Build to Suit
Greenfield
Spec Building
Redevelopment/Reuse
Build-to-Suit development characteristics
Customized structure is built
The needs of the end user determine the facility design
Long-term financing
Difficult to find subsequent users for former customized buildings - especially if they have a special design purpose
Speculative development characteristics
Facility built prior to securing a tenant
Provides marketing tool for tenants needing space
Higher financial risks for community
Financing is typically not available for spec buildings unless pre-leased
No guarantee in finding an end user
Greenfield development characteristics
Occurs on larger tracts of previously undeveloped land in rural or suburban areas
Provides competitively priced land
Fosters job creation
Examples: industrial parks, tech parks, commercial development at Interstate interchanges
Redevelopment / Reuse characteristics
Takes previously developed property to a higher, more productive use
Redevelopment = construction (often with demolition)
Reuse = renovation / rehab of existing building
Encourages infill rather than sprawl
Removes slum/blight
Makes use of existing infrastructure
What’s the difference between New development and Redevelopment?
New Development = no or new infrastructure; larger land parcels with need for subdivision; topographical or ecological issues (i.e. wetlands)
Redevelopment = existing or older infrastructure; small, fragmented land parcels with need for land assembly; contamination (i.e. brownfields)
What are the 8 steps in the basic real estate development process?
- Predevelopment
- Market / Financial / Political Feasibility
- Site / Engineering Analysis
- Financing
- Contractor negotiations / Public approvals
- Construction
- Marketing
- Building occupancy / management
What happens in the pre-development stage of real estate development?
Possible sites are considered
Building sizes / uses are considered
Quick project analysis to determine fatal flaws
Site control secured if project appears favorable
What concerns are addressed in the feasibility stage of real estate development?
Market Feasibility - is there sufficient market demand?
Financial Feasibility - is there sufficient ROI?
Political Feasibility - will it be publicly approved?
What does a market study provide?
Basis for:
Identifying business development opportunities
Evaluating ideas / limitations
Determining if project will satisfy lenders to provide a loan
Forming realistic development plan
A market analysis answers the questions…
What products are appropriate for this market?
What will tomorrow’s customers demand?
What is the appropriate timing / phasing for this project?
What is the appropriate quantity / mix of uses for this project given the market?
Are there financial considerations the market alone won’t bear?
How can the project be best-positioned in the competitive marketplace?
Identify the 5 key components to a market analysis:
- Subject Site Analysis - location and impact to project
- Economic / Demographic Analysis - regional forecast & impact on project
- Competitive Supply Analysis - how will this project compare to other competing projects
- Demand Analysis - pool of customers & needs of market
- Development Recommendations - for a specific project
What questions does financial feasibility address?
If EDC should provide incentives to a project, and if so, how much
Level of investment a project is likely to receive
Metrics used to evaluate multiple real estate deals against each other
Name 3 models of financial feasibility testing:
Residual Land Value - what would a developer pay for the land under my project if it was developed as proposed?
Discounted Cash Flow - If the project receives income over time & I build it today, what is the present value of this project, taking into account the cost of borrowing money today & the recognition of income for years to come? (the value of a property based on expected future cash flows)
Rates of Return - Difference between $$ spent (cash, equity, debt) and $$ received (sales, leases, profits)
When is a real estate project considered financially viable?
When the net income generated from the sale/rent provides the investor with a return = to the associated risks
When there is a favorable relationship b/w $$ spent (cash outflows - capital, operating costs) and the revenue generated from the sale/lease income of the property (cash inflows)
What is the purpose of political feasibility?
Determines if the public will support a project in a reasonable amount of time.
Benchmark for support/opposition
What is the intent of the site/engineering analysis?
Result in a development plan that can be presented to and discussed with local planning agencies.
What topics are considered in the site/engineering analysis?
General property characteristics Natural ground conditions/contamination On-site road issues Off-site infrastructure access Utilities Planning, Transportation, Circulation & Development
Why is a ‘shovel ready’ site beneficial?
Provides speed to market
Ensures site is immediately ready for development
Completes preparatory work in advance of development saving time
Why is real estate financing critical?
It determines what gets built, where, when and by whom
What are the challenges of real estate financing?
- Magnitude of required capital is usually greater than the assets of the developer/investor
- Risky nature of real estate investments; they are long-term and relatively illiquid
- Unique nature of land and buildings - Land is considered a durable asset; buildings are a depreciable asset
What 2 ways are funds raised for a project?
Equity or Debt
What is ‘capital stacking’ in relation to financing projects?
When multiple sources of financing are ‘stacked’ in order to put together enough capital or financing to make a deal viable.
Define debt capital.
Money loaned to be paid back in fixed installments on a fixed schedule.
It reduces the amount of equity and increases the variability of return on equity investment (leverage).
Define equity capital.
Ownership investment in a project with no schedule for paybacks.
It bridges the gap b/w debt financing and the total cost of the project.
Subordinate to debt financing.
The Contractor Negotiations phase involve what?
Setting up joint venture or PPP agreement
Final permit approval
Financial commitments secured including permanent financing and construction loans
Setting up construction contracts
Negotiating prelease agreements
Public approvals are involved in which processes?
Zoning
Subdivision
Site plan review
Building permits
The Construction phase can include what activities?
Environmental remediation Demolition Infrastructure development Building construction / renovation Tenant improvements Preleasing
In Real Estate Development, EDO’s & Developers determine marketing strategies for what?
Pre-construction pricing (discount pricing for those who reserve land/space prior to construction)
Advertising
Promotion
Earned Media (project publicity from the media)
Broker relations (RE broker policies, procedures and compensation)
What is involved in property management?
Property Management - marketing, leasing, maintenance of the property; tenant relations & services
Asset Management - capital improvements, refinancing, sale of property
What is a major reason why many properties are not being used to their highest and best use?
Contamination - whether perceived or real
Define Brownfield
Real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant or contaminant
Steps involved in Brownfield Site Cleanup include
- Site assessment and reuse options
- Know about State VCP’s
- Identify other interested parties
- Remediation or Exclusion?
- Preliminary Project Feasibility Analysis
- Negotiate and Structure the deal
- Purchase/Sell Contaminated Property
- Cleanup
- Monitoring
Who usually pays for contaminated site assessment?
The developer
What are the primary goals of brownfield remediation?
Minimize costs subject to state approval
Win market acceptance
Provide for financial support
Define the ‘but-for’ test in providing public incentives?
The development would not happen but-for the use of the development incentive.
Describe the 3 types of RE projects requiring public participation and which could qualify for the ‘but-for’ test?
- Type I - projects for which there exists neither current market support nor the likelihood of future market support to justify the costs. No expectation of cost recovers (i.e. low income housing; qualifies ‘but-for’)
- Type II - projects for which current market support is inadequate to justify the development, but for which there exists reasonable probability that if developed, the property will generate revenue to repay costs (i.e. rural industrial parks; qualifies ‘but-for’)
- Type III - projects for which the pubic sector controls a property that is uniquely valuable to the developer to generate money or meet an eco-devo objective ( i.e. land downtown for convention center; does not qualify ‘but-for’)
Regardless of who is responsible for the economic development project at the local level, the _____________ will always be involved because of regulatory & statutory obligations.
Public Sector
The public’s power to regulate development is based on what?
A balance b/w the rights of individual property owners and the overall public interest.
The right of police power and the duty of the public to protect the health, safety and general welfare of its citizens
The main tools for local government regulation include
Comprehensive plans Zoning ordinances Subdivision regulations Site Plan reviews Building permits Policy initatives
When would an EDC be an initiator of a project?
When the following conditions are present:
- strong need to redevelop a specific property
- political will to withstand developmental risks
- agency with expertise and resources to develop the property
(It’s done through an EDC acquiring property and/or conducting pre-development studies on property it owns)
When would an EDC be a facilitator of a project?
When:
- responding to a specific developer initiative
- encouraging the private sector to identify and initiate projects
- encouraging development by reducing associated risks
- focusing redevelopment on an area rather than a specific site
The 4 general classes of structuring redevelopment deals are
- Front-End assistance w/o Offsetting Guarantee - land write-down; typically from federal / state grants or tax increments; affordable housing projects
- Front-End assistance with Guarantee - includes commitment to pay all or part of the financial assistance provided; low interest loans
- Performance-Oriented assistance with initial explicit denomination - funds are received only to the extent the development generates them; TIF revenue generated by the project
- Performance-Oriented assistance w/o formal denomination - does not include formal denominations b/w developer and public sector
Why do existing businesses typically need financing?
To fund working capital or purchase fixed assets.
What are the cycles of a business life-cycle?
Start-up
Growth
Maturity
Reorganization or Liquidation
What is working capital?
The most liquid assets of a company
Current assets - Current liabilities on the balance sheet
Used to meet current debt obligations
What are fixed assets?
Longer lived assets such as plant, property or equipment
Why is it difficult for new start-up businesses to obtain financing?
Their cash out-flows are generally more than in-flows (i.e. they spend more than they make initially)
Fixed assets are costly and take time to repay
They do not have established banking relationships
Rely on personal savings, credit or equity
Trade credit from suppliers is generally not available
Venture capitalists require a higher ROI
Commercial lenders impose stricter financing terms
The more __________ a business has the easier it is to secure loan financing.
Equity
Why do small businesses face a gap in private financing for long-term loans of fixed assets?
- Many commercial banks don’t provide loans for less than $100K
- Many commercial banks don’t want to lend for more than 10 years
- Insurance companies that are longer-term lenders limit commercial/industrial investments to $1M
Is short-term financing of fixed assets a viable option for small businesses? Why or why not?
Not an ideal solution. Short term financing of long-lived fixed assets is costly because debt payment is not amortized over the life of the asset. If the company can’t meet it’s obligation, bankruptcy is a risk.
Why are bank lines of credit used?
Firms with cyclical or seasonal demand need extra cash to finance buildup of inventory when actual cash sales are low.
Why is obtaining export financing difficult?
Small banks are unfamiliar with international banking transactions
Large banks provide financing on larger deals with more experienced companies
Perception of risk - greater in export trade due to potential exchange rate losses incurred during currency conversion, political instability or shipping accidents
Information gaps on credit worthiness of foreign customers
What is debt financing?
Investment typically made by banks that must be repaid within a specific time period based on a pre-established schedule.
Loan is the most common type
Lenders for debt financing make what types of loans?
Revolving lines of credit
Term loans
What do lenders rely on for debt repayment?
Primary - Business’ ability to repay
Secondary - Value of collateral assets
Lenders tend to finance more established busineses that demonstrate a profitable future
What is equity financing?
Capital investment that does not obligate the repayment of the investment.
What do investors receive in return for their invested capital?
Partial ownership of the venture
Expected appreciation of the value of their share
Payment of a portion of the earnings / dividends
What is the role of public financing?
- To bridge the capital gaps in private sector financing
- Leverage private lenders and investors to ensure access to capital is extended to credit-worthy entities not considered good risks in the traditional terms
- Invest in ventures where the economic / social benefits outweigh the risk of financing
- It should NOT provide financing to clients who qualify for conventional financing to meet their project needs
How can the public sector facilitate financing?
- Lower cost of borrowing - subsidize difference b/w market and discount rate thus lowering interest rates
- Lower risk - guarantee a % of loans against default
- Provide investment programs - establish lending programs to address special needs
- Package Loans - helps entities obtain financing
- Direct lending or investing - use own funds to structure loans
- Technical assistance - help improve financial management skills, marketing strategies and business planning
Name some of the local business financing tools available to EDOs?
Direct Lending - EDC acts as lender for gap financing or to leverage private funding (funding sources can be state/fed gov’t, bonds, taxes, investments, pension funds)
Revolving Loan Funds - repayment of loans made is recycled into future lending; as loans are repaid, the P & I return to a loan pool to be lent to other businesses
Microloan Programs - provide short-term, unsecured loans to businesses w/o credit history or collateral to obtain conventional loans.
State Financing Programs - development authorities; venture capital funds; R&D via universities
Federal Financing Programs - SBA; EDA. HUD; USDA
What are the goals and purpose of a RLF?
Job Creation
Counter economic decline in urban areas
Fill the gap b/w conventional financing and project financing needs
Promote leveraging of funds from private sector
In the pre-development phase what 2 components comprise an initial assessment of development potential?
Site
Location
What gives a site great market potential?
Accessibility
Site & Location are important in real estate because why?
They are unique assets in a fixed location & therefore their value is subject to their surroundings.
What questions are considered when looking at a site in the pre-development phase?
What is the topography & shape?
How does the site ‘read’ from the road? (Visibility)
It it easily accessible? For vehicles, pedestrians, truck, rail, mass transit?
What is the lot size?
Are utilities & public services adequate?
What questions are considered when looking at the location in the pre-development phase?
What businesses are doing well in local neighborhoods?
What income brackets characterize local neighborhoods?
What’s the regional transportation infrastructure system like?
What are the commercial traffic patterns like? Private vehicle patterns? Truck or rail patterns?
Is there access to mass transit?
Where is the nearest commercial airport?
Where are suppliers located? How long does it take to travel to them?
Why should the local neighborhoods characteristics near a location be considered in the pre-development phase?
The safety & level of blight contribute to the potential success of a property
Distressed neighborhoods might be eligible for funding to eliminate blight
In the pre-development phase, what does a property option contract allow for?
It allows the developer time to conduct a feasibility analysis to determine if the project is viable.
T or F
Small businesses drive the local economy.
True
Why is assisting entrepreneurs start an enterprise more difficult than assisting small business development?
Each entrepreneur has specific assets / oppys as well as have huge gaps in capital or management experience.
Entrepreneurs think their ideas are the best and generally don’t want to be told what to do.
Entrepreneurs have different objectives.
What must an Entrepreneurial Program do to be successful?
Define objectives
Define the target audience
Structure program to be consistent with community’s economic development mission
What’s the most common form of support offered to entrepreneurs?
Technical Assistance - in the form of business counseling, business plan development, accessing capital, workforce development, understanding taxes / implications, financial management, etc.
What benefits does networking provide?
Provides information, counsel, encouragement, leads, access to resources.
Share experiences, ask questions, discuss issues, seek advice, problem solve
What are the 3 stages of entrepreneurial growth?
- Start-up companies: new business ventures where innovation drives the start of the business.
- Second Stage companies: are past start-up but not mature; have more than 1 or 2 employees but not a full-mgmt team.
- Gazelles / High-Impact companies: small - med - sized companies that experience rapid stage of expansion (20% growth per year for 4 yrs); often in niche markets
What 2 sources of financing are available to entrepreneurs?
- Debt financing (loans based on ability to repay and collateral; owner doesn’t lose any ownership in business)
- Equity financing (capital infused in the business typically from venture capitalists or angel investors; doesn’t require repayment but owner loses a portion of ownership and control of the business)
How are small businesses defined?
Number of people employed
OR
Annual revenues
What characteristics of small businesses set them apart from larger busineses?
- Innovation (both in product and process)
- Community Ties (hire local residents; less likely to relocate; participate in community events)
- Flexibility (adapt quickly to changes)
- Limited capital (Half start with less than $20K)
What are the downfalls of small businesses?
- Majority of start-ups fail within the first 18 months of operation
- Only 40% of start-ups survive the first 5 years; only 10% survive 10 years
- Majority of small firms offer employees lower wages & fewer benefits
What technical assistance may be needed in the 4 stages of business development?
- Create business idea - ensure business idea & process have been thoroughly vetted
- Formalize business plan - written business plan, financial plan; fully developed product or service; considered working space & equipment requirements
- Open business - implements the business plan; assistance with managing cash flow, accounting, monitoring progress & managing inventory
- Expand operations - expansion plans, hire/fire employees, financial support for growth, space requirements
What is a business incubator?
A mechanism to encourage and support new business through affordable space, shared support services, reduced operating costs, access to services & equipment
T or F
Access to capital is a common complaint from small businesses?
True
What is cash flow?
How money is generated, how it’s spent, how much cash is available
Cash flow statement evaluates the 1st year on a monthly basis & the next 2 years annually
Balance Sheet shows what?
A business’s financial status for an entire fiscal year on 1 page.
Assets are positive: working capital, cash from sales, accts rec, inventory, fixed assets
Liabilities are negative: Loans, mortgages, accts pay
How does an EDC determine what services to provide small businesses?
Territory - Know the business progress / decline; market oppys, business sector representation
Problems - issues faced by small businesses; success rates
History - of business success, industries & locations
Business Climate - census of business’s perspective of the climate helps determine what services to provide
Why should an entrepreneur develop a business plan?
It serves as an overall game plan;
It’s a financial, development & sales tool;
It forces one to think critically how the product/service creates value & how to get customers to buy it & why
What should an entrepreneur know prior to writing a business plan?
- Why the customer will buy / use your product
- Why larger companies won’t copy the product / service
- Show financial returns & needs
- Entrepreneur’s knowledge, skills, managerial abilities
- Define entrepreneur’s goals, needs, interests required to commit to the success of the business
What’s included in a business plan?
Cover EXEC Summary Table of Contents Description of business Marketing strategy Placement Profiles of mgmt team Description of staff positions Overall schedule Role of business in the local community
List the 3 types of financial statements used to evaluate the strength of a business.
- Balance sheet
- Income statement
- Cash flow statement
What financial information is needed in preparing the financial section of a business plan?
Estimated sales - 1st year projections
Cost & Expense Forecast - estimates
Cost of Sales / Manufacturing - contact suppliers to determine a product cost range
Selling, General & Administrative Costs
Break-Even Analysis does what?
Determines the exact sales level at which sales cover costs; the venture will neither lose nor make money
Calculated by: Fixed Costs/Gross Margin x Variable Costs|
Balance Sheet shows:
The business’s financial position at a specific point in time
It includes assets, liabilities, equity
Income Statement shows:
Detailed account of business activity for the 1st year
It includes income, expenses, profitability
Profit & Loss Statement
Cash Flow Statement shows:
Information about the business’s cash receipts (inflows) & cash payments (outflows)
It includes sources & uses of cash
Reconciles the net cash flow with the cash category on the balance sheet
Cash flows highlight the amount & timing when money will be coming into & going out of the business
Why is high-technology development important to an economy?
It contributes to business creation, expansion through new products/services, increased efficiencies & competitiveness.
High-tech industries provide high growth potential and ‘spill-over’ effects into other economic sectors ( R&D, training, high paying jobs, etc)
What 9 factors is technology based economic development dependent on?
- Presence of research institutions
- Access to capital
- Support for entrepreneurial development
- Foreign Direct Investment (FDI)
- Educated / Talented workforce
- State / Local commitment
- Established technology structure
- Broadband infrastructure
- Quality of place
How do research institutions impact technology development?
- Developing innovative and valuable ideas will create and sustain a strong tech sector
- Convert research into commercial activity
- Transfer university-developed technology to start-up companies
T or F
FDI is a one time investment
False
FDI is a chance to broaden the capabilities of a localized industry cluster.
Identify State & Local commitments that assist in technology development.
R&D institutions to educate workforce
Strong workforce development program
Provide opportunities for business development
Offer capital resources
Provide specialized services
Have strong leadership to support tech development
Effective regulatory processes
What characteristics do all high-technology areas have in common?
- They have highly developed technology infrastructure which includes both physical infrastructure (fiber optic networks, incubators, transportation) and knowledge-based infrastructure (innovative people)
- Quality of Place to attract / retain high quality workforce
What is Quality of Place?
Places that provide diversity in education, culture, recreation that support different types of people in various stages of life.
High technology companies share many characteristics. What are they?
R&D investment
Up-front, higher-risk capital needs
Tendency to cluster with related companies
Collaborate more than other industries
Higher level of international investment in production, outsourcing and subject to global prices & pressures
Less formal business structure & shorter product life cycles & planning cycles
Employees / Contractors work remote or telecommute
Shorter company lifecycles
What’s the difference between dilutive and non-dilutive funding sources?
Dilutive sources assume some equity in the firm thus diluting the owner’s share of ownership
Non-dilutive sources do not require an equity stake in the firm
Why is it important to know about potentially relocating industries?
To appeal to their particular needs and highlight strengths in your area that will address those needs.
What are industry clusters?
Concentrations of interdependent firms related through their industry activities.
Clusters represent critical masses of skill, information, relationships, and infrastructure in a given field.
T or F
Industry clusters never include competing industries.
False
Clusters include both collaborators and competitors.
(Inter-cluster environment fosters innovation and new business ventures - they tend to be self-generating)
The presence of a group of competing companies contributes to the formation of new suppliers, the growth of companies in related fields, the formation of specialized training programs, and the emergence of technological centers of excellence in colleges and universities.
Define Cluster Analysis
Highlights local industrial relationships, commonalities and identifies ways to encourage synergies of clusters
How can industries typically be clustered?
Vertically - buyers / suppliers
Horizontally - similar businesses that compete or that share common resources
Define Input-Output Analysis.
Considers clusters by regional transactions & analyzes inputs rec’d in relation to outputs sold.
It reveals the extent to which a change in demand affects local output, income and employment.
It identifies industries that best fit the community’s resources & environment.
Define competitive advantage
The ability of a community or company to provide a good / service more efficiently that distinguishes them from their competitors.
i.e. workforce, value, price, etc.
How can industrial clustering enhance a community’s competitive advantage?
Enhancing those technology sectors showing growth potential & diversification, will help them become a strong base of the economy.
T or F
Clusters tend to grow in localized communities.
False
Due to regional amenities and support services, clusters typically develop on a regional basis.
What benefits do business networks bring to technology clusters?
It offers a way to aggregate and project the voice of the cluster industries.
Helps express mutual interests, create jobs, expand product development, form new joint ventures, enter new markets and expand economic development efforts
What are the key elements of a Regional Innovation System (RIS)?
RIS supports the innovation ecosystem by providing:
- business networking to promote idea/resource sharing
- technology transfer to protect intellectual property while accommodating commercialization
- workforce development to match job seekers’ skills with the needs of the employer
Development on a ___________ level is viewed as the best scale to promote innovation.
Regional
Define technology transfer
The exchange or sharing of knowledge, skills, processes, or technologies across different organizations
How is technology transfered?
Data & information
Know how / Expertise
Right to make, use or sell
Embedded technology (in machinery or software)
What is technology commercialization?
It encompasses a variety of activities from concept development to product manufacture.
When a technological innovation is brought to the marketplace.
What 2 forces drive technology innovation?
- Technology - push (when an inventor develops an idea, product, service NOT in direct response to a market demand. Inventor must also develop the market)
- Technology - pull (when an inventor attempts to fulfill an unmet need in an existing market. Inventor has an idea now to meet a particular need)
Technology - _____ is the driver of innovation.
Pull
T or F
Most innovations are incremental developments that build on existing products or processes.
True
T or F
A good product makes a good company.
False
Along with a good product, it takes marketing, sales and business management experience.
What can economic developers do to promote technology commercialization?
Establish and foster Networks!
i.e. incubators, research parks, accelorators, virtual tech networks, informal clubs, philanthropic partnerships)
Where do technology incubators tend to locate and why?
Where:
- in close proximity to universities and medical centers
Why:
- to gain access to resources needed to commercialize their products
- to help transfer technology coming from the univ.
- access low cost, highly qualified graduate student workforce
Name the 3 components of a technology incubator.
- innovation friendly space
- access to technical assistance
- access to financing
What is a research or science park and what’s its purpose?
It’s a specialized real estate development that clusters technology companies together
The purpose is to reduce the timeframe of commercialization by providing an environment where technology is readily developed and brought to the marketplace.
Economic development at the neighborhood level deals with both _______ and _______.
Place and People
What is the fundamental base of neighborhood economic development?
Building assets both individually and collectively for the community.
How can you minimize economic leakage from a neighborhood?
The goods and services desired and purchased outside of the neighborhood should be established within the neighborhood.
Which produces more sustainable change in a neighborhood? Top-down or Bottom-up development?
Bottom-up development
Building coalitions and working relationships across many interests within the neighborhood is more productive and successful
What’s the intent of Neighborhood Economic Development?
Build capacity for continuous positive change at the local level, in the face of changing economic and political environments with dynamic population shifts
Emphasizing the needs of a neighborhood allows local governments to do what?
Customize improvement projects and maximize resource efficiency so only the areas in need are targeted.
At this level, the needs of residents can be determined appropriately and development projects can be more effective.
How do citizen associations impact a neighborhood?
They are informal organizations that assemble local citizens to solve problems or share common interests and activities.
They can mobilize around an issue to provide perspective, build awareness, identify problems, define common interests/goals and initiate change.
Successful community development requires the ability to…
Build on the experience of solving problems, employ proven techniques and harness the commitment and energy for ongoing work in community issues.
List the steps of organizing local community change.
- Create awareness & willingness to address the problem
- Rebuild trust and commitment to common goals
- Develop a strategy
- Choose a course of action
- Mobilize people and resources to implement
What is one of the reasons local residents begin meeting to organize a local neighborhood development program? What can prevent their progress from ever moving forward?
Residents assemble to complain and focus on the problem.
They never develop a purpose or move beyond complaining
What should happen during the initial meetings in organizing a community development program?
Make the process inclusive
Convey the mission (Why are we here? What are we seeking to accomplish?)
Focus on the people
Build trust and working relationships
Foster positive dialogue and seek common interests
Take incremental steps - small successes; gain the reputation of being action-oriented
Set benchmarks (What is to be accomplished?)
__________ ___________ is the major asset of every neighborhood.
Human Capital
Effective revitalization efforts have ___________!
Champions - an active participant who is passionate about the cause, has respect from the community, extends vitality to the group and can leverage human capital to make the consensus building process work.
Neighborhood economic development specifically strives to do what?
Improve the economic well-being and quality of life within NEIGHBORHOODS by applying strategies of economic development to a confined geographic area
Improve the business climate, attract private investment, provide jobs, strengthen the tax base and improve physical appearance and infrastructure
Porter’s Competitive Advantage of the Inner City calls out 4 advantages of inner cities. What are they?
- Strategic location - proximity to central business district
- Local market demand - concentrated # of potential customers
- Integration with regional clusters - access to specialized clusters allowing business formation and competition in downstream products/services
- Available human resources - access to entrepreneurship
Money changes hands during transactions between 4 primary consumer groups. Who are they?
Residents
Businesses
Workers
Visitors
How does leakage limit a neighborhood’s buying power?
When goods/services are purchased outside of the neighborhood, it decreases the total potential income (buying power) of businesses and potentially residents within the neighborhood.
How does gap analysis identify unmet meeds of a neighborhood?
Gap Analysis compares total buying power against total service and retail expenditures.
It identifies strengths and weaknesses in the market by estimating the number of shoppers coming to the community to purchase items.
T or F
One of the main impediments to increasing business diversity in a neighborhood is that such demographic and economic information often do not represent the true spending power of the neighborhood.
True
Neighborhoods need to market their areas by focusing on the ___________.
Strengths
What information does Social Compact Inc provide that would be of interest to local neighborhood economic development initiatives?
Micromarket, neighborhood block data with expertise in market analysis for low-income neighborhoods
Population count
Purchasing power
Stability
What are the 5 rules to generate new investment in neighborhoods (based on Social Compact, Inc. data)?
- Build strong partnerships - b/w community stakeholders
- Utilize technology - to organize data sets
- Organize the data - highlight the positive
- Focus on key stories - real life from actual stakeholders
- Democratize data - use many platforms to access data
What are the steps in the Neighborhood Planning Process?
- Pre-planning
- Create vision
- Assessment of neighborhood
- SWOT
- Asset mapping
- Physical condition inventory
- Neighborhood economic base analysis - Develop goals/strategies
- Plan dissemination
- Project identification
- Action plans
- Implementation
- Monitoring, Evaluating, Implementing
- Retooling, Adjusting, Implementing
- Publicizing progress and outcomes
What are strategies?
Proactive measures to encourage stakeholders to improve their community beyond minimum standards
Neighborhood economic development encompasses what 4 strategies?
Community building
Place-oriented
Business development
Workforce development
These strategies are most effective when used together
Community Building involves what?
Social event planning
i.e. farmers markets, outdoor concerts, festivals, fairs
Place-Oriented strategies focus on what?
Enhancing the quality of the natural as well as the built environment
Creating and maintaining a place where existing residents want to stay
Providing an environment that is well-cared for
Business-Oriented strategies focus on what?
Providing financial and technical support to neighborhood businesses
Assist businesses with challenges caused by lack of financial and technical support
Name the attributes of a healthy neighborhood commercial area?
Creates jobs Increases the tax base Keeps \$\$ in the neighborhood Improves the image of the neighborhood Encourages residents to socialize/shop local Improves quality of life Attracts shoppers from outside the community Encourages reuse of vacant buildings
What’s one way local businesses can contribute to local community projects?
Sponsoring apprenticeships, school-to-work and job-training programs targeted to local youth or unemployed persons.
What does a Workforce Development strategy do?
Give a community a distinct competitive advantage in providing a well-trained workforce and effective training programs.
Successful programs are not easily duplicated by other communities.
What are some current trends in organizing economic development agencies?
- Privatization - private sector organizations
- Regionalization - different towns working together
- Benchmarking - performance evaluation
List some public EDO ‘powers’ or capabilities.
Assemble land
Access state/federal grants
Provide public funding & tax incentives
Access to and influence on gov’t decision makers
Examples: Eminent domain Infrastructure improvements Zoning & regulatory powers SIDs TIF Business incentives - tax and non-tax
What are the disadvantages of public EDOs?
- Economic influence limited to political jurisdiction
- Municipal debt limitations
- Can’t earn a profit; can’t lend directly to the private sector
- Turn-over of elected officials
List the different types of private EDOs.
Non-profit - offer specialized eco-devo services
Chambers of Commerce
Community Development Corporations (CDCs)
Community Development Financial Institutions - focus on financing in low-income areas
Define a public-private partnership.
Long-term shared commitments b/w the public and private sectors designed to pursue common goals related to the social, political and business environment in a community.
Involves collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects.
List the advantages of a PPP type of EDO.
Greater flexibility to conduct eco-devo activities
Can use public resources w/o public limitations
Funding from both public & private
Can undertake greater risks
Formed around specific projects
Have more autonomy - not part of gov’t structure
Can become self-supporting through memberships
How can PPP EDO’s be structured?
- Unincorporated Committee - ad hoc committee to perform planning, policy development, technical advisory & information dispersal functions (they do NOT directly implement the programs they recommend)
- Incorporated as a non-profit, tax-exempt corp. and has financial and implementation responsibilities as well as policy, advisory and planning functions.
How are competency models used by EDOs?
Succession planning
Employee performance evaluations
Define ethical behavior.
Conduct that is beyond reproach and in accordance with the standards of a society, institution or organization.
Not always written
Upholding higher standards of conduct above simply adhering to the rules or laws
What tools will help an EDO support ethics in their organizations?
Written Code of Conduct
Written Policies and procedures for Investigation - define the consequences for violations
Involve Staff in reviewing the code
Be a role model - practice what your preach
Incentivize ethical behavior - reward good behavior
List several standards from the IEDC Code of Ethics
- Responsibilities conducted to bring respect to the profession
- Practice with integrity, honesty and adhere to the trust placed in them
- Stay free of influence, interest or relationship related to clients activities
- Represent the community
- Keep all stakeholders informed
- Maintain confidentiality
- Share information with the governing body according to protocol
- Cooperate with peers
- Conduct activities with equal opportunity
- Refrain from sexual harrassment
- Not exploit disaster impacted areas
- Abide by principles of IEDC Code
What’s a common goal of workforce development and economic development programs?
Strengthen the local talent pool of workers to match the needs of employers
T or F
A well-trained workforce can give a community a competitive advantage.
True
Not easy to duplicate by competing communities
Who are the key players in designing workforce development programs?
Local business & industry associations
Economic development organizations
Community colleges
Training centers
High schools and vocational schools
Community and faith-based organizations
Industry associations
What’s the difference b/w vertical and horizontal partnerships with regard to Workforce Investment Boards?
Vertical - link different levels of gov’t, from Federal to state to local Workforce Investment Boards
Horizontal - found at the local level, with WIBs partnering with social service agencies, non-profits, colleges and others
What impact will combining workforce and economic development depts have on a community?
Effective collaboration offers a better chance to compete in a global economy to grow, attract and retain talented workforce.
- Improved problem solving
- Consistency & alignment
- Greater resources
- Greater accountability
- Potential to institutionalize desired change
Why is the cluster based workforce development strategy effective?
Human capital is vitally important to a cluster.
Having a pool of talented and skilled labor, as well as specialized training and education are important for a successful cluster.
Promotes the competitiveness of industries.
Advances the employment of the workers.
Solutions for workforce issues can be customized by employers in a cluster.
What are the benefits of incumbent training to both employees and employers?
Employees - increase their job oppys, increase wages, increase job retention and enhance self-esteem
Employers - develop a skilled workforce, increase productivity, increase profits, reduce employee turnover and grow the company
What is the intent of the Workforce Innovation and Opportunity Act (WIOA) of 2014?
Reform WIA (Workforce Investment Act)
Provide a framework for a national workforce preparation and employment system to meet the needs of both employers and employees.
Give flexibility and encourage collaboration b/w workforce and eco-devo organizations.
How does the Workforce Innovation and Opportunity act (WIOA) support economic development?
- Package workforce strategies to meet employers’ and employees’ needs
- Coordinate or provide financial resources
- Provide current information
- Anticipate labor market and economic trends
- Promote employer participation
- Connect employers to resources to meet needs
- Gain public recognition for employers
- Deliver quick responses for transitioning laid-off workers to new occupations/industries
What are the primary differences b/w workforce and economic development programs?
Workforce programs target individuals; Economic development programs target businesses
Different operational contexts and cultures
Different funding streams, reporting requirements, performance measures
Limited understanding of each other’s work
Limited capacity to meet objectives
What is the ‘life cycle’ of comprehensive emergency management?
- Mitigation
- Preparedness
- Response
- Recovery
In the 4-phase disaster response model, Mitigation involves what?
Steps to reduce risk and vulnerability to disaster impacts.
It builds resiliency into the community.
i.e. changing building codes, revised zoning, strengthening public infrastructure
In the 4-phase disaster response model, Preparedness focuses on what?
Understanding the impacts of a disaster and how education, outreach and training can build the capacity to respond.
It includes pre-disaster strategic planning & business continuity training
In the 4-phase disaster response model, Response addresses what?
Responding to the immediate threats caused by the disaster.
i.e. saving lives, meeting humanitarian needs, cleanup, damage assessment, resource distribution
What is the progression of Response efforts to a disaster.
- Triage efforts deal with the most pressing issues.
- Business re-entry into the economy begins (Initial issues include access to sites, preliminary damage assessment, communication with staff; Ongoing issues include access to capital, repairs, diminished customer base). In this phase the long term health of a business community is saved or lost!
- Business Recovery Centers set up to provide resources (technical assistance, bank officers)
- Federal resources start to arrive (HUD, SBA, EDA, USDA); temporary housing goes up; planning begins for reconstruction of damaged infrastructure and buildings
In the 4-phase disaster response model, Recovery is what?
Restoration of a disaster’s impact on a community. Development and Implementation of a disaster economic recovery plan.
How is a presidential disaster declaration accomplished?
- Governor submits written request to President through FEMA
- Request certifies combined local & state resources are insufficient to respond and recover
- FEMA reviews for disaster severity and impact
- FEMA provides report to President
- President makes a decision
Why is a presidential disaster declaration so important?
Open up federal assistance programs, resources and funding.
What is the National Disaster Recovery Framework (NDRF) & how is it different from the National Response Framework (NRF)?
NDRF provides guidance on how LONG-TERM federal disaster recovery assistance will be delivered. How federal agencies will work together.
Different from NRF in that NRF is for short-term recovery efforts an NDRF is for long-term recovery efforts.
What is the purpose of the Economic Recovery Support Function (RSF)?
Mission: Integrate the expertise of the Fed. Gov’t to help public and private sectors sustain and/or rebuild businesses and employment; develop economic oppys that result in sustainable and resilient communities after large scale disasters.
Purpose: Support State & local programs that address economic consequences of a disaster so communities become self-sustaining quickly
T or F
The Economic Recovery Support Function facilitates activities both before and after a disaster.
True
List a few of the activities the Economic Recovery Support Function (RSF) can achieve in conjunction with communities.
- Establish workforce development initiatives that create jobs.
- Assist in economic development plans to build recovery and resilience
- Establish entrepreneurial and business development initiatives
- Identify strategies to adapt to changing market conditions (reopening existing business)
- Pursue initiatives to employ workers
- Develop mgmt plans to ensure the most effective use of federal funds
What are the disaster preparedness steps and activities an EDO should be engaged in?
Step 1 - Engage the business community & establish economic recovery team
Step 2 - Arrange business financing & identify sources of capital & technical assistance available after a disaster
Step 3 - Organize the business continuity plan (alternative office location; emerg. contact info; offsite database mgmt)
Step 4 - Identify redevelopment priorities w/ key stakeholders
Step 5 - Plan for resiliency in workforce (temp housing; retention training; live in close proximity to work during response/recovery)
T or F
Communications post-disaster should be provided by each individual agency involved in the recovery process.
False
A single spokesperson should take the lead - preferably from the lead EDO
Speaking with ONE voice helps avoid delays, confusion and disputes
What are the top issues to address in a communication strategy prior to a disaster?
Communication b/w local gov’t and businesses
Communication b/w EDO, chamber and businesses
Public relations and community image
Potential conflicts b/w stakeholders
T or F
FEMA will perform a damage assessment after a major disaster and therefore, the community doesn’t need to.
False.
The community should still seek an independent economic impact assessment.
The study considers both physical & economic damage.
The study provides intelligence and supports any request for Congress to appropriate funds.
It should be conducted asap after the event.
Define the cumulative factor.
Cumulative effects are the result of distress from successive natural disasters in a region along with the economic recession.
_________ businesses will need additional assistance after a disaster, in terms of capital and technical assistance.
Small
What are some of the unique needs of small businesses after a disaster?
Working capital to meet payroll
Replace damaged inventory / equipment
Operational costs
Retrain workforce
Reorient products or services
How can EDOs assist with small business financial needs after a disaster?
Identify sources of gap financing
Help secure gap financing for working capital until other sources can be secured
Establish a revolving loan fund
What is the purpose of a post-disaster strategic plan?
Provides a guide to reevaluate economic objectives in light of vulnerabilities to disasters and establish action steps toward long-term recovery
T or F
1 in 4 businesses will not open after a catastrophic event.
True
Why do 25% of businesses never reopen after a catastrophic event?
Lack of working capital
Being under-insured
Damaged inventory / property
Limited workforce options
Diminished customer base
How can a business recovery center assist post-disaster?
Serves as a 1-stop shop for local, state, federal resources
What are the benefits of an international strategy in economic development?
New investment and trade broadens markets & increases stability and resiliency
New investment brings innovation which strengthens and grows existing industries
Increased competition drives growth and employment
Define Foreign Direct Investment (FDI).
The process of foreign capital flowing into a community, usually through a business in one country having a controlling ownership of an entity based in another country.
Define Exporting.
The sale of goods or services produced in one country to consumers in another country
What’s the primary differences b/w FDI and Exporting?
FDI is focused on attracting large firms.
Exports involve intimate knowledge of small to medium firms.
FDI programs are targeted outward to foreign firms.
Exports require knowledge of local firms prepared to launch into new markets.
Both FDI and Exporting suffer from a lack of what?
Knowledge of foreign business cultures, regulations and trade barriers.
What are the positive benefits for communities that incorporate FDI and exporting strategies into their economic development approach?
- Expands the economic base of the community
- Communities are less impacted by fluctuation of local economies
- Communities are more resilient
- See more innovation and business spinoffs
How does FDI & exporting play into the economic base theory?
Economic Base Theory assumes that export firms have higher job multipliers and the increase in demand from outside markets will create more jobs in the local non-export sector.
FDI and exporting grow the economic base by attracting new investment funds into the local economy and creating new products to sell outside of the local economy. FDI supports growing industries, while developing exports creates new wealth in the community. Both increase or maintain employment, since jobs are retained or expanded with the attraction, retention and growth of new firms or existing firms that export.
T or F
Foreign owned firms both import and export more products than their domestic peers.
True.
Engaging with the global economy can have a _________ effect on a community
Catalytic.
For example new investments bring new technology, management, processing making a business more efficient. New spin-off firms will adopt these to become more efficient. Backward technology transfer happens when the foreign firm seeks local suppliers.
T or F
Most FDI happens through mergers and acquisitions.
True
List the unique benefits of FDI projects that set them apart from domestic investment.
- Create foreign exposure, international ties and potential new markets.
- Increase innovation and technology transfer.
- Advances the marketing efforts and creates potential for additional investment.
When is an investment considered FDI?
When a company invests enough that it owns a controlling state in the foreign enterprise.
How can FDI be invested in a community?
Horizontally (expansion of business abroad)
Vertically (firm adds business functions on either side of the value chain outside of its home country)
Conglomerate (investment in unrelated business aboard)
Types of FDI ownership structures are
Branch operations (extension of foreign company)
Subsidiaries (separate legal entity) (most common)
Joint ventures (2 + firms temporarily join for specific purpose)
Individual entrepreneurs
How can a strong BRE program assist with FDI?
Accurate and realistic analysis of cluster developments allows for targeted marketing to foreign markets aligned with those industries. Analysis provides data that overseas investors look for. Foreign firms are more likely to establish firms in clusters with similar firms.
What roles does an economic developer play in dealing with FDI?
Marketer
Ambassador
Organizer
Technical Assistance
Why is ‘aftercare’ important in FDI?
Providing support and assistance after a foreign firm is operational, can strengthen foreign investor relationships by creating a favorable business & operating environment and preventing business failure or relocation.
How do Port Authorities act as funnels to economic development?
- Direct effect - port services & transportation
- Indirect effect - import/export activity and benefits
- Induced effect - benefits from increased activity around the port
When considering new investment endeavors, foreign investors tend toward places that…
- They’ve invested in before
- Their competitors have invested in
- Major customers or suppliers are located
- Appear in location attractiveness rankings
- Have positive reports in business / media
- Have visited on family trips
- Have family in
Successful FDI and exporting strategies are built on the foundation of good _______________ at the local and state level.
Relationships
At the Federal level, what primary services does SelectUSA provide?
- Promotion of FDI by targeting foreign investors
- Coordination at state / local level to improve and implement FDI strategies
- One stop shop for resources
- Source for finding FDI project funding
List the factors contributing to the increase in exporting.
Increase in trade agreements
Trade promotion / facilitation
Greater production and consumption of products in lesser developed countries
Cheaper transportation / communications costs
Innovation and deregulation in financial markets
Trade opening in previously closed markets (China, India and the Soviet Union)
What are the 2 different types of trade?
Merchandise (goods) - tangible, physical products; majority of global trade
Services - consulting; call centers; tourism
What are the reasons that companies export goods/services?
- Access new customers
- Enter new markets
- Mitigate risks
- Moderate seasonal fluctuations
- Keep up with competition
- Encourage innovation
T or F
The sales of US companies that export grow slightly faster per year than companies that only sell domestically.
True
Explain the possible correlation b/w exporting and innovation.
By exporting, companies gain access to technology and know-how only available overseas.
A firm that overcomes the challenges of exporting, may build its capacity to overcome other challenges and lead to innovation in other business endeavors.
Explain “export readiness”.
It means a company has the following:
- financial security
- market-ready product/service
- available time, capital, staff resources
- commitment from managers
- ability to fill orders quickly
- awareness of the culture abroad
- experience in domestic marketing (market analysis, developing distribution channels, customer service)
- are export competitive - meaning the product/service is attractive to the international market
What are the necessary steps involved in the exporting process?
- Create an international business plan (target market; strategies; action plans)
- Select Market/Country and Enter that Market (considering risk and control factors)
- Production (modifications to meet consumer/health/climate/packaging demands)
- Shipping (consider use of freight forwarding company)
- Payment (considering various forms and risks)
What is the govt’s role in assisting US firms export?
- develop international trade policy (eliminate trade barriers; unfair trading practices; make US products more competitive)
- undertakes export promotion activities (export assistance; market development; financing; insurance; advocacy)
What is the difference b/w a tariff and a trade agreement?
Tariffs intend to protect industries from international competition.
Trade Agreements establishes the terms of trade and facilitates trade b/w countries.
T or F
NAFTA was one of the first trade agreements to address trade in services and include side agreements for environmental protection and labor laws.
True.
The US Gov’t export assistance services includes what type of services?
Distribution of trade related info
Foreign country market research
Counseling
Business matchmaking services (trade missions & reverse trade missions)
Why does the US Gov’t offer financing to export firms?
The commercial and political risks of exporting deter private financial institutions from participating in export business ventures w/o gov’t guarantees.
Private institutions are limited by conventional banking practices; export financing often outpaces maturity limitations.
How can economic developers best assist firms in exporting?
1) Develop export awareness - programs, assistance, benefits
2) Develop export network - which agencies provide what services
3) Facilitate info exchange - broker b/w sources of assistance and firms requiring them
