I am truly worried about Greater Cleveland’s economy, and for good reason because our economy continues to struggle despite our stepped up economic development efforts. Our regional economy is struggling under the weight of deep structural problems that are never solved by our short term economic development solutions. One of these deep-seated problems is urban sprawl and the great long term costs it creates for left-behind places and people. And for many of these left-behind places, billboards are the only developments that choose to locate in them. We have spread our population and job base over too large of a geographic base and real long term financial costs are created by this trend. Sprawl is one of the largest sources of fiscal distress being experienced by local governments and schools across the region. A second underlying problem is our fixation with financing economic development projects on taxpayers’ backs over future generations. This article talks some about a part of this second problem.
My personal interest in economic development is greater than most people because I have spent over 30 years developing and implementing economic development strategies across the country, which gives me an “insider” view of what works and what doesn’t work. My experience says that we need serious reform in economic development in the future, and this reform must be grounded in sound economic analysis that considers the short and long term impacts (benefits and costs) of development projects to different stakeholder groups (rich, poor, central cities, inner ring suburbs, outlying suburbs. etc.) in the region.
This article is about “expectations management” when it comes to the true economic and financial costs and benefits of economic development project investments. I believe in many cases the benefits are overblown to get community leaders and citizens to go along with them. And often the public is starving for good news, and tends to go along with the “good news” stories our economic development spinmasters generate. Our naivety leads us to sign off on too many community and economic development projects because we believe they will pay for themselves, and realistically they don’t. A better approach is to use critical thinking that brings out the true costs and benefits of these deals.
What happens in the surrounding regional economy matters to Bratenahl! For that reason, it is important to take a hard look at the regional economic development strategies that have been put into place and the public investments made in these strategies. Bratenahl residents pay a share of the taxes used to finance many of these projects. It is also important for Bratenahl residents to set realistic expectations about the regional economy, and it is and is not capable of doing for us.
Let’s start by looking at how much convention centers add to the regional economy, and what it costs to make these economic contributions. The question is: “Do the economic benefits created outweigh the economic costs generated, or is it the other way around?” A follow-on question is: “Who pays these costs and who receives the benefits produced?”
We need to be smart about these issues! It’s a mistake to blindly accept these economic development projects and their requests for public funding as good for us. Why should we challenge them? Because often private investors make out on these deals at great expense to the public.
Nationwide convention centers and related facilities have been highly controversial for many years. Too often the controversy is ignored because we are desperate for growth. What could possibly be wrong with building a new convention center? A lot could be wrong if the lion’s share of the expense is paid by public tax dollars and if the local economic impact is inflated as a strategy to “sell” community leaders on the deal. By the way, the same concerns can be raised with respect to sports arena and stadia, industry and trade marts, shopping centers, museums and a wide range of facilities built with an economic development purpose.
It’s easier to show than tell. Click on this link to read about one example of “overselling” in Memphis. The bottom line is that the assumptions are too generous in terms of economic benefits and not substantial enough in terms of economic costs. Click on this link: SD Conv Center Impact Cahllenge to download a critique of an economic study touting the benefits of the San Diego convention center. It shows how we are easily misled by the numbers.
We need a smarter approach to regional economic development; one that costs less and produces more benefits. We also need to be more realistic in the choice of our economic development opportunities. Greater Cleveland’s tourism and convention strategy will add some benefit to the area economy, but it will also create costs. These costs will grow larger if we are not successful in competing for business in the industry.
To be continued.