How should Lawrence conduct its economic development efforts?

It is time to change the role of the Chamber of Commerce.


Recent developments present an opportunity.

The City of Lawrence, Kansas does not conduct its economic development planning through city staff. Rather, the City hires the Chamber of Commerce to conduct these tasks.

In the wake of controversy and legal embarrassment, the Chamber of Commerce is about to replace its Executive Director.

This provides an opportunity for the City to rethink how it goes about conducting its economic development efforts.



Definition of economics development.

Economic development means helping a city achieve higher levels of employment as well as attracting higher levels of tax revenue from non-residential sources than would otherwise be the case. This usually involves:

Outreach: This means advertising the City to prospective businesses who might locate here.

Subsidy packages: This means generating analysis to determine whether or not the city should offer incentive packages to firms to locate here or to firms already here that may expand. These incentives may come in many forms. They may take the form of tax reduction through rebates or refunds. They may offer financial assistance through various forms of loans, which may come at below market interest rates. They may offer cost reduction through providing land, buildings, and infrastructure at reduced prices.

Planning: This means conducting research to identify weaknesses in the local economy and to identify the needs of the community in the future. This research should monitor which sectors of the economy suffer from the greatest levels of unemployment and underemployment. It should also project the needs of the community for future employment and use this research to guide future actions.


Current state of economic development in Lawrence.

For many years, the City has hired the Chamber of Commerce to conduct its economic development activities. The Chamber provides some outreach services. The Chamber has supported numerous applications for subsidy packages from the City to private firms without analyzing the need for the subsidy packages. The Chamber conducts little to no planning research.


The record.

The record of the Chamber of Commerce in the field of economic development is one of failure.


Tax Abatements:

The Chamber has actively led the City into a large list of tax abatements. Of the 17 firms granted abatements:

· Only 6 produced the promised jobs and wages.
· The remaining 11 are either out of compliance, out of business, or not reporting.

This record of success is unimpressive. The abatements are:

· Successful only: 35% of the time;
· Non-compliant: 40% of the time; and
· Complete failure: 25% of the time.

(See Annual Reports of the Public Incentives Review Committee.)


Secret meetings:

The Chamber actively sponsored secret meetings to arrange for packages of taxpayer-funded subsidies to private firms. The parties at these meetings included the City Commission, the buyers of the property, and the sellers of the property. The only people excluded were the taxpayers. The Attorney General found these meetings to be in violation of the Kansas Open Meetings Act. (See “AG: City leaders broke law: Morrison proposes open meetings training for settlement” Lawrence Journal World December 1, 2007.)


Failed projects:

The Chamber has led the City into failed projects. The Chamber recently held a celebration of its accomplishments in a building developed, at least partially, at taxpayers’ expense that has remained vacant for years. Many other failures such as Serologicals and Decyphera exist. (See Mark Fagan, “Business Park Marks 20 Years,” Lawrence Journal World April 1, 2008.)


Enforcement:

Chamber staff actively resisted any and all efforts by the Public Incentives Review Committee to investigate the level of compliance by firms with the terms of their tax abatements. (See Minutes of the Public Incentives Review Committee.)


Lack of Planning:

The Chamber conducts virtually no planning in its economic development exercises. It has supported proposals for such grandiose projects as the development of 1,000 acres of industrial park space, yet it has failed to produce any planning analysis that would justify such a large facility. (Lawrence Journal World, Group recommends 1,000 acres to assist in creation of jobs, December 5, 2001.)


Lack of Analytical Skills:

The City has recently fielded requests from the developer of the Oread hotel for subsidy through the Tax Increment Financing and Transportation Development District programs. The City had to hire outside consultants to review the subsidy request because neither the City staff nor the Chamber staff possess the capabilities to perform this type of analysis.


What Lawrence needs.

Lawrence needs to bring economic development skills inside City Hall.

The Chamber of Commerce is a business advocacy organization. Economic development strategies need to be good for business, but, more importantly, they need to be good for the City and its taxpayers. Everything that is good for business is not necessarily good for the City and its taxpayers. The Chamber has shown itself to advocate for the interests of business at the expense of the interests of the City.

Lawrence needs intelligent, knowledgeable, highly skilled economic development leadership that is an advocate for the City and its taxpayers.

Lawrence needs economic development planners that can guide the City through detailed negotiations with firms to ensure that a subsidy package, if any, is in the City’s best long-run interests, not simply a giveaway to any business that asks.

Lawrence needs economic development planners that can accurately project the City’s future needs without exaggeration or bias.

Lawrence needs economic development planners that will be open and transparent in the development and analysis of subsidy packages and will understand the confines of the law prohibiting secret meetings.

Lawrence needs economic development planners who will enforce the terms of agreements between the City and private firms receiving taxpayer dollars.



Recommendation.

It is time for Lawrence to learn the difference between economic development and business advocacy.


Redefine the role of the Chamber.

The Chamber has lost the respect of the taxpayers by leading the City Commission into failed projects, into illegal meetings, and into tax giveaways that do not produce as promised. The Chamber’s role in economic development should be redefined. The Chamber needs to be heard as economic development issues arise, but the Chamber should not be performing any of the analysis or planning duties.


Bring professional economic development planning expertise onto the City staff.

Bring the job of economic development inside City Hall. Increase the skill level of the planning staff to include:

· Analysis of the feasibility of real estate development projects so that the need for subsidy can be determined by someone who interests lie with the City and not with the businesses who will be subsidized,

· Analysis of market conditions so as to determine the true need for commercial and industrial space, protecting the City from engaging in unneeded industrial parks, retail centers, or office parks that will further expand the surpluses that already exist, and

· Analysis of existing programs to fairly assess their effectiveness so that they can be expanded when they succeed and redesigned or discontinued when they fail.