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
