Economic Incentives? Yes, But Directly to the Community

Renaissance Community Co-op
Renaissance Community Co-op
Renaissance Community Co-op

Despite what many people believe, there are not many ways for city governments to directly impact economic development in communities. Cities don’t directly start businesses that provide goods and services and create jobs. Cities will tell you that their job is to create and sustain the infrastructure needed by business, and then let the market take over. That means to let businesses be created where owners will profit, let sellers sell for as much as the buyers are willing to pay, and let jobs be created paying wages that allow investors an adequate return on their capital.

But there are clearly times when market forces are not adequate to provide the development that a community desires. If market forces alone were sufficient, someone would have put vibrant stores back into the Renaissance Center (formerly the Bessemer Center, located on Phillips Avenue in Northeast Greensboro) years ago. What developer after developer has found is that the projected return would not make their investment worthwhile. That does not mean that they could make no profit, only that they couldn’t make enough for their investors to be satisfied.

What the city is able to do in such situations is to offer incentives that ‘sweeten’ the deal for a developer. This benefit to the private developer is justified in the hope that it will lead to a pubic good. The idea is that incentivizing a developer will enable enough profit to justify the investment, and the community will indirectly benefit as a byproduct of the profits made by the developer.

That’s the idea, but things don’t always work out that way in practice. What often happens is that the city buys a distressed property at its market value. It is then made available to a developer at below-market rates, so that the developer can “improve” the property, and thus justify renting it at market rates to entrepreneurs who try to make their businesses succeed. In good economic times this might happen. But in rough economic times, like now, we often see a series of businesses moving in and then failing in newly developed areas. We end up with a lot of empty commercial space, run down business districts and underserved communities. In times like these, high rents can be the death of businesses.

On Phillips Avenue there is an opportunity to directly benefit the community by bypassing the below-market-rate deal to a private developer and instead making an incentive deal directly with the group putting together the community-owned cooperative grocery store. Incentivizing this group would facilitate a vibrant community business operation that would be the hub of future growth in the area. Unburdened by high rent, a coop grocery store could meet the need for convenient, quality food at reasonable prices and allow for surplus to remain in the community to enable additional economic development and further enhance the community.

The city should engage in a public/community partnership with the Renaissance Co-op Committee. This is the community group that is working to build a community-owned cooperative grocery store in the center. In this relationship, the city would agree to make funds available as grants and loans with negotiated rates and payment schedules to help make this project a success as they have done with private developers on other projects. With the reduced cost of business space, a well-designed and efficiently operated cooperative grocery store has a great shot at thriving and becoming an engine for economic development in the area.

We often measure economic development by the amount of capital we can attract. I think we should begin to measure it by the capital we can retain in the community. This is what can be used to enable job creation, satisfy community needs, and increase community wealth. We need to find better ways to measure local economic development activity so that we do not celebrate putting money into a community in such a way as to mainly facilitate sucking wealth out of it rather than keeping it in and building on it.

We have lots of money in our community like a river. But the money flows out as people spend to take care of their wants and needs. Currently money that flows through is gathered by investors seeking the highest returns on their investment. This causes them to seek to invest in areas where they find low taxes, lax environmental protection, and low wages—the very factors that damage communities.

We need to slow this flow. We need to construct dams to create the pools of money that can remain in our communities to be used for ongoing development. Cooperative economic ventures that are by their nature democratically owned and controlled provide a means to do this. When communities control the wealth that they produce they can use it to create jobs, meet community needs and elevate the quality of life even subsidizing the arts and recreation, environmental sustainability and community healthcare. With the proper incentives to the right people, the city’s economic development policy and practices can be important parts of helping this happen in the interest of the city as a whole. Public resources should only be used for public purposes, not to further enrich private investors.

One thought on “Economic Incentives? Yes, But Directly to the Community

  1. Thank you for this article, Ed. I’m thoroughly enjoying the posts coming from F4DC.

    Even though I live in Raleigh, I discovered your site in my quest to find others who are passionate about the various forms of co-operative enterprises to be explored to develop our New Economy.

    I wanted to share an article from Yes! Magazine which discussed how to address housing issues in a similar manner, via structures such as community land trusts.

    Is this something that is on your radar, or do you know of any groups focused on both residential and retail cooperative community solutions?

    http://www.yesmagazine.org/issues/making-it-home/cheaper-together-how-neighbors-invest-in-community

    Thank you.

    Dena Patrick
    Founder, Wishadoo.org

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