The Community and Economic Development Hierarchy

Construction underway for a new 130,000 square foot shopping center located in Hollister, CA, May 17, 2019. Sadly, more communities want to see this than are actually able to have it. Source:

I've spent many, many years of my career working to improve the economic development prospects of communities. Wanting to make a meaningful, positive contribution to the revitalization of cities is what pushed me into this career path. More to the point, I've spent a good deal of that time working in places that were facing stiff economic headwinds working against them. I hear of the issues facing some of the booming coastal metros dealing with expansion of the New Economy, and while I can't say I'm envious, I can definitely say it's an entirely different world than where I come from.

One refrain I've consistently heard, mostly from frustrated local residents, is that their local government simply isn't doing enough to stimulate economic development. They ask tough and pointed questions: what are we doing to bring middle-class jobs to our community? We're good people; why don't we at least have a supermarket or sit-down restaurant? Why are commercial vacancies increasing, instead of decreasing? Why did this retailer/homebuilder/commercial developer choose that community over ours? Why are we forced to go to Community X to have the shopping experience, the living experience, we desperately want and rightfully deserve?

Every time I hear this I respond with the truth: our community is using every tool at its disposal to improve the economic development profile. We're doing everything we can to increase job opportunities for existing and future residents, to widen our range of retail options, to grow our tax base so we can minimize any burden to homeowners. This is indeed what I do, every day.

But scratch the surface and the truth is far more complex. In my view there are multiple layers, far removed from the municipal government level, that few laypeople realize have substantial impact on local community and economic development. The fact is there are actors and factors that control development patterns, starting at the metropolitan level but funneling all the way down to the half-vacant shopping center near your home. There is an economic development hierarchy at work that's often created winners and losers before municipalities have had a chance to weigh in.

At worst, municipalities can take the passive approach and wait until decisions made far above them filter down and become actionable on the ground.  As odd as it sounds, this is actually the approach that the vast majority of today's urban America took in the post-World War II era: they relied on policy changes at the federal level that filtered down to the development of the suburban subdivision you live in today (or facilitated the rebound of the hot urban neighborhood your child lives in now). There are many municipal officials who believe that their community's early success was because of efforts they led. It's more accurate to say that their community took advantage of headwinds that blew in their direction, rather than against it. I call this the "standing-on-third-base-and-think-they-hit-a-triple" syndrome.

People don't necessarily talk about decisions being made in smoke-filled rooms anymore, or how nebulous "powers that be" are implementing a nefarious "plan" that will enhance their wealth. But there is a deep disconnect between decision makers and local community users/consumers. Here's how I see the community and economic development hierarchy, ordered by social/interpersonal distance (furthest to closest) from municipal officials:

Banks/investors. At the absolute top of the hierarchy. Financial actors are the ones who put their money behind the developments we want in our communities. Simply put, they go where they believe money can be made, and that argument is made to them by those at lower levels. That said, the reverse is also true: if no one is making the argument to them that a place can make money for them, it's not heard at all.

The market. By "market" I'm specifically zeroing in on the potential users of commercial and residential space in a given community: national, regional and local retailers, job producing businesses and other commercial users, the constantly evolving and morphing pool of potential homebuyers and renters looking for places to live. In this context the size of the market has everything to do with the local economic development profile; a big and expanding market can create widespread economic development, while a small or stagnant market can limit economic development prospects.

Community profile/perceptions. Rightly or wrongly, investors and market actors are developing perceptions about your community, and they factor mightily into their decisions. For the bulk of the twentieth century, redlining conducted by the federal government created the feedback loop that financed the development of some communities, and starved others. Federal redlining was officially banned in 1968 with the passage of the Fair Housing Act. However, it's probably fair to say that many aspects of it live on at the investor and market levels today.

Development and demographic trends. Things happening at the ground level can influence development patterns as well, and what goes around often comes around. Young and affluent residents move into communities, contributing to a changing profile and community perceptions. Highway-oriented suburban development that relied on greenfield sites may have fallen out of favor, moving toward transit-oriented development near formerly neglected transit stations. Some communities are able to take advantage of the changes in trends, while others may lose out in the process.

Property owners. Landowners play a critical role in economic development. Whether they're a farmer who owns hundreds of acres on the periphery of the metropolitan area, or an investor who bought a vacant lot for back taxes in a highly contentious site in the inner city, property owners can have a big say in what happens. Centuries of American property ownership law give them outsized power. What's more, if a property owner is in tune with development and demographic trends, redevelopment may be accelerated; if not, it can be delayed.

Developers. Developers rightly or wrongly attract the ire of people regarding local development, but they're best described as the people who take in all the actors and factors listed above and turn them into development deals. They reach out to investors, assess the market, take into account the community profile and perceptions, examine trends, and work with property owners (or become one). They take a proposed deal and work with a municipality, and the tools it has at its disposal. This is where, for a municipality, the rubber usually meets the road.

So much of what impacts economic development happens far beyond municipal boundaries. Perhaps acknowledging this is an abdication of economic development responsibility. Perhaps it's an acknowledgement of the broader forces that control what happens at the local level.