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02/28/2011 - Packet , II Completeness TIGARD Review for Boards, Commissions and Committee Records CITY OF TIGARD PLANNING COMMISSION Name of Board, Commission or Committee February 28,2011 Date of Meeting Signature Doreen Laughlin 11/6/14 Date IIII '' City of Tigard TIGARD Planning Commission Agenda — Special Meeting MEETING DATE: February 28, 2011; 7 — 9:00 p.m. MEETING LOCATION: City of Tigard—Town Hall 13125 SW Hall Blvd., Tigard, OR 97223 1. CALL TO ORDER 7:00 p.m. 2. ROLL CALL 7'02 p.m. 3. WELCOME 7:05 p.m. 4. SPECIAL PRESENTATION & PANEL DISCUSSION ON SUCCESSFUL ECONOMIC DEVELOPMENT 7:10 p.m. I. Introduction of Speakers II. Presentation III. Panel Discussion IV. Questions from the audience 5. ADJOURNMENT 9:00 p.m. PLANNING COMMISSION AGENDA— FEBRUARY 28, 2011 City of Tigard I 13125 SW Hall Blvd.,Tigard, OR 97223 I 503-639-4171 I www.tigard-or.gov I Page 1 of 1 °'' City of Tigard TIGARD Public Notice of Possible Quorum DATE: February 28, 2011; 7 - 9 p.m. LOCATION: Tigard Civic Center—Town Hall 13125 SW Hall Blvd., Tigard, Oregon Notice: At the Planning Commission's request, a special presentation and panel discussion on Successful Economic Development will take place. Portions of the following groups will be in attendance and, in some cases, a quorum may be present: Planning Commission City Council Budget Committee Tigard Transportation Advisory Committee (TTAC) High Capacity Land Use Plan Citizen Advisory Committee (HCTCAC) City Center Advisory Commission (CCAC) This is a presentation and panel discussion only. No official city business will be conducted, and no voting will take place. PUBLIC NOTICE OF POSSIBLE QUORUM — February 28, 2011 City of Tigard I 13125 SW Hall Blvd.,Tigard, OR 97223 I 503-639-4171 I www.tigard-or.gov I Page 1 of 1 IIII '' City of Tigard TIGARD Planning Commission Agenda — Special Meeting MEETING DATE: February 28, 2011; 7 — 9:00 p.m. MEETING LOCATION: City of Tigard—Town Hall 13125 SW Hall Blvd., Tigard, OR 97223 1. CALL TO ORDER 7:00 p.m. 2. ROLL CALL 7'02 p.m. 3. WELCOME 7'05 pin. 4. SPECIAL PRESENTATION & PANEL DISCUSSION ON SUCCESSFUL ECONOMIC DEVELOPMENT 7:10 p.m. I. Introduction of Speakers II. Presentation III. Panel Discussion IV. Questions from the audience 5. ADJOURNMENT 9:00 p.m. PLANNING COMMISSION AGENDA— FEBRUARY 28, 2011 City of Tigard I 13125 SW Hall Blvd.,Tigard, OR 97223 I 503-639-4171 I www.tigard-or.gov Page 1 of 1 City of Tigard TIGARD Memorandum To: President Dave Walsh and Members of the Planning Commission From: Ron Bunch, Community Development Director Re: February 28, 2011 Planning Commission Meeting- "Successful Economic Development" Date: February 22,2011 Attached are two items that will be available at the Commission's February 28,2011 meeting regarding economic development. In providing this information it is staff's desire to help inform this important discussion. Attachment 1 is an article that appeared in the Economic Development Quarterly professional journal in 2006 entitled, "Rethinking Community Economic Development."' From staff's perspective,its principles are appropriate to Tigard because it discusses the importance of integrating community and economic development practices and strategies to promote community wealth. Attachment 2 is an issue paper prepared by staff that takes the major themes of the article and applies them to Tigard's situation. The issue paper provides some context on Tigard's economy and its regional context. It discusses the importance of integrating community and economic development practices and strategies and provides a local example of the City's efforts to attain High Capacity Transit (HCT) within the Pacific Highway Corridor. The issue paper also discusses the importance of reality based community and economic development goals and strategies that have been developed through a citizen engagement process. In closing, both the journal article and staff's issue paper emphasize that community and economic development does not necessarily mean growth. The purpose of local development should be to create wealth,which also means community quality of life. Thank you and we look forward to the discussion. Copy: Sheila Martin, Portland State Institute of Metropolitan Studies 1 Rethinking Community Economic Development;Ron Shaffer,Steve Deller and Dave Marconillier, Economic Development Quarterly 2006;20;50 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director COMMUNITY DEVELOPMENT AND SUCCESSFUL ECONOMIC DEVELOPMENT IN TIGARD PART I —KEY ASPECTS OF CURRENT CONDITIONS Tigard Has a Strong Local Job Base The City of Tigard has a robust local job-base. It has a high jobs to household ratio of about 2.3 jobs per household,which is about that of the Portland Central City. This is greater than most suburban cities in the Portland Metropolitan Region. The region-wide average is about 1.5 jobs / household. A major contributor to Tigard's jobs base is significant employment in the retail,wholesale and business services sectors, such as located in Washington Square Regional Center,Tigard Triangle, Sequoia Parkway, and along Pacific Highway. Also,Tigard has many light industrial,warehousing, and distribution jobs. A central location in the region and access to Pacific Highway/99W, Interstate 5, and Highway 217 are factors in Tigard's jobs-rich circumstance. Tigard's job base is fairly diversified. It consists of many midsize and small firms. There is no one employer, such as a computer chip manufacturer that,if shut down,would cause devastating job losses. Mismatch between Tigard's Jobs Base and Its Citizen's Occupational Characteristics As with many communities, the occupational characteristics of Tigard's citizens do not necessarily match its local job offerings. A significant percentage of Tigard's professional and technical employees travel to jobs in Portland, Beaverton, and Hillsboro. On the other hand, a large number of employees who work in retail, service, and manufacturing sectors commute to Tigard. Slow Recovery from the Recession and Forecasted Job Growth The nation and the state are slowly recovering from the recession that began in late 2007. The 10- year job growth forecasts for the Portland Metro tri-county region indicate positive job growth trends for all industry sectors, except the federal government and the manufacturing sectors. The sectors that are expected to grow the fastest include: educational and health services;professional and business services;leisure and hospitality;local government; retail; and wholesale trade. Other Metro data from Metro and the City's draft Employment Opportunities Analysis (EOA)1 forecasts that Tigard can expect growth in all employment sectors over the next two decades. It is forecasted that between a low of 10,000 and a high of 16,000 jobs will be added to Tigard's total employment during this period. 1 The EOA is a Comprehensive Plan Review requirement that compares a jurisdiction's employment land Page 1 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director PART II —MAKING A PLAN FOR THE FUTURE Intersection of Community Development and Economic Development in Tigard To accommodate forecasted employment growth Tigard needs to integrate both economic and community development strategies. For example,Tigard's future is dependent on its economic vitality and its attractiveness as a place to live. Economic vitality and community livability is supported by the economy and the City's ability to provide dependable governance and public services, such as public safety, transportation mobility, fiscal management,wastewater management, parks and open space, and land use and transportation planning, etc. The City of Tigard is part of a much larger"community" consisting of three counties in a Metropolitan region of over 2 million people, comprising 27 other governments and many other agencies and service districts. Tigard can positively affect its ability to provide services and promote economic development by continuing to play a constructive role in the region and also representing its interests at the state and federal levels. Mobility as an Example of Both a Community and Economic Development Strategy One of Tigard's current economic advantages is its central location and proximity to the regional transportation system. The City has access to Interstate 5, Pacific Highway/99W, and State Highway 217. However, all three of these major routes have major congestion problems,with traffic volume often exceeding capacity. Traffic congestion associated with future population and job growth has the potential to significantly undercut the City's livability and economic prospects. In response, the City of Tigard has engaged in a multi-year effort with other regional governments and agencies to expand the transportation capacity of the Interstate 5/Highway 99W Corridor through development and implementation of a multimodal Corridor Refinement Plan. The centerpiece of this effort is the future extension of High-Capacity Transit (HCT) within the Pacific Hwy/ 99W Corridor. As a result of political engagement and leadership, significant federal and state funds have been committed to this long-term project and a number of local governments are actively engaged in planning. A case in point is that Tigard and other governments are planning for the location of several HCT Station Area Communities within the Pacific Highway/99W corridor. This is an example of where Tigard has focused on a political and multi-jurisdictional effort to achieve a regional objective that will be transformative for its local economy. Tigard does not have the vacant industrial and commercial land to accommodate its projected employment growth, especially if the businesses and households remain wholly dependent on the automobile. Also,Tigard has no ability to expand its City limits to include suitable employment land. It is "land-locked" by other cities and unincorporated urbanized County land. Page 2 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director In order to promote more jobs, retail opportunities and services,it will need to be feasible to redevelop existing underdeveloped or obsolete urban uses to newer more economically viable / intensive uses. Alternative transportation modes, such as High Capacity Transit, are essential for this to happen. Tigard's most important resources are its citizens and the workforce that chooses to be employed in the City. Also important are the customers and clients that patronize the City's many businesses. Transportation represents major costs to customers, employees, and businesses. Moving people is much more expensive than moving goods and materials. The transportation of people as customers and as employees,with their attendant skills and knowledge,are major economic factors. These factors figure significantly in locational decisions,both for workers who want easy access to jobs and for businesses who need dependable access to workers. The Importance of Clear and Attainable Community and Economic Development Objectives A fact based effort, coordinated with the rest of the region,is important to establish an understanding of the local economy and its relationship to the region before deciding on where and how to focus economic development efforts. For example,it may be inadvisable to recruit tenants for vacant industrial warehouses without first understanding the basics of why these buildings are under-utilized. For instance, they may no longer be economically viable within the market place. Without this understanding,valuable resources could be spent dealing with economic symptoms rather than root causes. Also,local government should assess its political philosophy regarding involvement in the private market place and also its means to effectively to do so. For example, some communities,where there are few economic incentives to affect economic decision-making, focus on the community development side of the ledger, emphasizing livability, safety,good schools,parks, etc. Successful community and economic development efforts must also consider both short term and long term goals. High Capacity Transit within the Pacific Highway/99W corridor is obviously a long term goal,but there are many short-term objectives to accomplish before construction begins. For instance, the Tigard Triangle needs significant transportation improvements,but until now there has not been a means to equitably assess development for these costs. A short term goal could be to develop an equitable transportation funding mechanism specific to the Tigard Triangle where the costs are broadly shared. Another long term goal is to redevelop the Tigard Downtown. There are many short-term objectives to achieve this, such as fostering a Downtown Development Association,purchasing property for a Downtown public open space,building improvement incentives, etc. Page 3 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director Within Tigard, community and economic development objectives have been achieved through the public process. As an example, the City's Comprehensive Plan's Economic Development Policies were developed using a consensus-based citizen process and were legislatively adopted by the City Council. Also, the effort to designate Downtown Tigard as an urban renewal district fully engaged Tigard's citizens before adoption by City Council. Another citizen-based process was the recently approved parks and open space bond. It is an important community development achievement that will significantly impact community livability. It is advisable that any effort to create a local economic development strategy follow suit and meaningfully engage the citizens, businesses, and interest groups. Growth versus Community and Economic Development The purpose of community and economic development is to produce wealth, enhance economic resilience by increasing the community's economic adaptability, and improving livability and public well-being. This includes increasing the movement of money into and through the community. Community and economic development is not necessarily equated with growth. Some types of growth can negatively impact a community's long term economic, social, and environmental well-being. For example, over reliance on a few major employers can mean disastrous consequences if they closed. Other problems can arise, such as environmental degradation, traffic congestion,imbalance of housing demand versus availability, etc. In many communities, significant social disruption has occurred when the local economy has become over reliant on short-term extractive industries or on select retailers. Any discussion of economic development goals and objectives must also include how such efforts will enhance the community livability and quality of life. Close attention needs to be paid as to what citizens and businesses describe as what's important to maintain and enhance in their community. A local example is the City's vision for its Downtown as exemplified by legislatively adopted codes and standards intended to guide the quality of future redevelopment. File: Community Development and Successful Economic Development in Tigard Ron Page 4 Economic Development Quarter)y http://edq.sagb.com Rethinking Community Economic Development Ron Shaffer, Steve Deller and Dave Marcouiller Economic Development Quarterly 2006; 20; 59 DO I: 10.1177/0891242405283106 The online version of this article can be found at: http://edq.sagepub.com/cgi/content/abstract/20/1/59 Published by: (;)SAGE Publications http://www.sagepublications.com Additional services and information for Economic Development Quarterly can be found at: Email Alerts: http://edq.sagepub.com/cgi/alerts Subscriptions: http://edq.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav Citations(this article cites 29 articles hosted on the SAGE Journals Online and HighWire Press platforms): http://edq.sagepub.com/cgi/content/abstract/20/1/59#BIBL Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Rethinking Community Economic Development Ron Shaffer Ron Shaffer was a community Steve Deller development economist and a professor of agricultural and Dave Marcouiller applied economics at the University of Wisconsin—Madison/Extension University of Wisconsin– Madison/Extension. He was director of the Center for In this article,the authors present arguments for a more interdisciplinary approach to Community Economic community economic development.Building an alternative paradigm that includes six Development and the elements—resources,markets,institutions,society,decision making,and space—they National Rural Development rethink the framework that links economic theory to the practice of community eco- Institute.His recent work nomic development. Major attention is paid to the integration of economic and included the coedited volume noneconomic factors in the practice of community economic development.In the end, Participatory Governance: the goal of this new paradigm is to more directly link the practice of community eco- Planning,Conflict Mediation nomic development to its solid interdisciplinary theoretical foundation. and Public Decision Making in a Civil Society.Ron passed Keywords: community development; economic development;community theory away in the spring of 2005 after a long battle with amyotrophic lateral sclerosis Economics is the study of nation states (macro) and the study of the individual consumers and (ALS), commonly known as firms(micro).This distinction,however,leaves out an important middle ground frequently labeled Lou Gehrig's disease. the community.In this article,we explore economic development and the community in a compre- hensive fashion. When economic development policy options are discussed at the community Steve Deller is a professor of level,artificial disciplinary boundaries begin to break down.Economists,through the assumption agricultural and applied of all else being equal, often ignore issues that concern sociologists and political scientists. economics at the University Although economic development practitioners have been aware of this issue for years, the of Wisconsin–Madison/ academy has been slower to acknowledge it. Extension.His work focuses While we approach the problem from an economic perspective in this article,we suggest that on regional economic the interdisciplinary nature of the problem can be thought of as removing the all-else-being-equal structure and change and elements that break down as regions become smaller(community level).We offer a new paradigm policies that can be that we suggest will provide the student of community economic development with a more corn- implemented at the local level prehensive view of the problem(Shaffer,Deller,&Marcouiller,2004).Although rooted in eco— nomics, our approach moves toward a more interdisciplinary perspective;but before we discuss this new paradigm,we must lay the groundwork for what we mean by the term community. Dave Marcouiller is a Community,an amorphous concept,is usually defined as a group or unit having some common professor of urban and interest,such as the community of Green Bay Packer fans.Space,however,also plays a vital role in regional planning at the the definition. There are at least three different ways to define the spatial community. The first University of Wisconsin– approach is to view community as a place where space is a dominant part of the definition,such as Madison/Extension.A the political boundaries of a municipality or county.The second is a community of interests where certified professional planner, space has very little role in the definition, such as a community of scholars or Packer fans. The his work focuses on the third, which we will use, is community as a logical decision-making unit that may or may not interplay between natural incorporate space.This latter approach incorporates the first two definitions but emphasizes the resources and community point that a community can make and implement decisions.Generally,this approach refers to some economic development. ECONOMIC DEVELOPMENT QUARTERLY,Vol.20 No.1,February 2006 59-74 DOI:10.1177/0891242405283106 OO 2006 Sage Publications 59 Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 60 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 political entity such as a village or municipality,but it can also include a trade area in which collec- tive action can take place through a chamber of commerce or an urban neighborhood through neighborhood associations,school-based parent-teacher organizations,or church-based efforts.' To a large extent, there are two fundamental issues in community economic development: understanding the full range of choices available to alter economic circumstances and engaging willing(and even unwilling)collaborators in building a long-term strategy(Halebsky,Gruidl, & Green, 1999).Understanding choices means that the community is exploring all options,not just falling back on old-school approaches of equating economic development with growth. When striving to build strategies,people are often more interested in short-term projects than in long- term strategies, although both are important.Long-term strategies provide people with an over- arching direction for the community;short-term projects provide tangible feedback that local peo- ple need in order to remain committed to long-term strategies. Without a long-term strategy in which short-term projects fit,specific achievements may conflict with one another or not add up to effective community development progress.Tactically,the long-term strategy should be the enve- lope containing coordinated short-term projects.It is important that the strategy being built reflects an understanding of the current theories of community economic development. Before we present and discuss our new community economic development paradigm,we will provide a working definition of community economic development within a historical context and offer a more contemporary definition.Our paradigm is then presented and discussed,and we offer a set of economic development strategies that directly flow from the new paradigm.Finally,we provide our definition of community economic development and summarize how the new para- digm we offer captures the interdisciplinary nature of the problems communities face. COMMUNITY ECONOMIC DEVELOPMENT DEFINED Historical Perspectives Historically,economic development and community development have been two distinct and separate concepts. Economic development historically focused on jobs, income, and business growth,whereas community development tended to focus on equal rights,institutional organiza- tion,and political processes,among others.Academics and practitioners tended to fall into either of the two"camps"and seldom worried about the other.We maintain that for sustainable develop- ment,these two camps must be merged(Audirac, 1997). Over the past 100 years,economic growth theory has moved through four periods of thought.' Progression from one period to the next reflects not only our ability to think about the growth pro- cess more completely and in more realistic ways but also the changing economy itself.The histori- cal context begins with the notion of export base,in which policies focused on the production of goods to be exported out of the region. Widely attributed to Douglas North (1955, 1956) and Charles Tiebout(1956),the idea was first suggested by Homer Hoyt(1933),who laid the founda- tion for much of economic growth policy.The Rostow-Kuznets stages of growth,in which capital accumulation plays an important role,attempted to elevate the descriptive nature of export base to more general theories of economic growth and dominated much of the academic discussions of the 1950s and early 1960s(Shaffer et al.,2004). Concerns about unique differences and the linkage between rural and urban areas led to the structural change models of the 1960s.Extensions of these theories led to the Harrod-Domar model and the more fully developed neoclassical theories that dominated much of the thinking on economic growth during the 1960s and 1970s.3 Today, the focus of attention is on removing the assumptions of perfect competition and scale economies,thus leading to the theories of endogenous growth. Notwithstanding the fundamental differences between inductive and deductive approaches,one could argue that each of these theories is a natu- ral progression from the previous one and laid the foundation for economic development policy. Economic policies that have emerged from these theoretical discussions could be presented in terms of"waves"(Bradshaw&Blakely, 1999;Schweke, 1990).The first wave is embodied in the Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 61 Balance Agriculture with Industry(BAWI)policies from the Great Depression era and the current competition among the states. Here, policies are based on export-base theory and are aimed at attracting capital resources from other locations via tax subsidies, low-rent land, and training funds,among others.Today,this approach is widely referred to as"smokestack chasing"and has tended to focus on manufacturing. The second wave of economic development focuses on the expansion and retention of existing businesses and entrepreneurship(Eisinger, 1988, 1995).Spe- cific strategies might include increasing the pool of investment funds for local firms,development of incubators, technical assistance for local firms, and revolving loan funds. The third wave focuses on collaboration and partnership building within and across communities.The focus on cluster development today has its roots in agglomeration economies and the ideas flowing from endogenous growth theory(Marquez,Ramajo,&Hewings,2003;Thisse&Fujita,2002).Indeed, the idea of cluster development has brought the idea of collaboration across communities to the forefront(Bradshaw&Blakely, 1999;Cumbers&MacKinnon,2004;Eisinger, 1988, 1995;Por- ter,1995).We maintain that this latter wave,at least,starts bridging economic growth and develop- ment with community development into community economic development(Beauregard, 1993; Boothroyd&Davis, 1993;Christenson&Robinson, 1993;Reese&Fasenfest, 1996). Contemporary Definition We maintain that community economic development occurs when people in a community ana- lyze the economic conditions of that community, determine its economic needs and unfulfilled opportunities, decide what can and should be done to improve the economic conditions in that community, and then move to achieve agreed-upon economic goals and objectives. Community economic development is not a rationale for maintaining the status quo but is a comprehensive con- cept for changing the economic situation within the community. The community's initiative and leadership are resources for change.The community can use both internal and external resources to achieve change,drawing on its own strengths and capabili- ties and looking beyond its boundaries for supplemental resources. The participation of citizens within the community should be as inclusive as possible(Lovan,Murry,&Shaffer,2004).Inclu- sive participation need not mean that all participate but rather that all segments in a community are given an opportunity and encouraged to participate.Community economic development implicitly assumes a democratic political system in which people have an opportunity to express their prefer- ences. Community economic development is holistic, or truly interdisciplinary, in that it comprehensively examines the different dimensions of the community. Discussions of economic development are sometimes vague because the term is used as a syn- onym for economic growth.The concepts are closely related but at the same time fundamentally different. Growth can occur without development, and development can occur without growth. Goodwin (1997) argues that economic growth, once considered by economists as subsumed by enhanced well-being,can now be a source of diminished well-being.Growth is more jobs,more buildings,more equipment,and more sales.With growth comes negative side effects,such as pol- lution,that may actually detract from the more general improvement in human welfare.Basically, growth involves doing more of what we are currently doing in a manner that is fundamentally the same as what is currently being done.Growth has been at the center of first and second waves of development policy. Development is change in the capacity to act and innovate.Development is longer term,pur- poseful, and permanent. Development tends to imply more understanding, more insight, more learning, more nuances, and some semblance of structural change. Structural change reflects changes in technology, ownership patterns, occupational mixes,product mixes,industry mixes, and institutions.Development reduces vulnerability to outside-the-community changes.Develop- ment is a larger concept and encompasses growth,but in practice the distinction is seldom clear. The movement from economic growth to economic development is the focus of the third wave of development policies. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 62 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 DECISION MAKING MARKETS RESOURCES SPACE SOCIETY/CULTURE RULES/INSTITUTIONS Figure 1: The Star of Community Economic Development THE PARADIGM . . .we maintain that One of the difficulties of the third wave of development is that it does not replace the first and community economic second wave but rather broadens the perspectives. In a sense, we maintain that community eco- development,which is nomic development, which is the blending of economic development and community develop- ment,is a holistic approach to community problem solving.The problem with holistic approaches the blending of economic is that they are very difficult to get one's hands around and are almost too big to operationalize from development and a theoretical and practice sense. community development, Economic theories and models of the growth and development process are notorious for invok- is a holistic approach to ing the notion of all else held constant.This is sometimes referred to in the economics literature as community problem partial equilibrium analysis,as opposed to general equilibrium analysis.We carve off small parts solving. of the community's economy and focus our attention on those elements while ignoring other parts of the community,holding all else constant. Indeed,much of the progress of economic thinking involves the systematic removal of seemingly unreasonable assumptions. To tackle this difficult view of community economic development, we offer a new paradigm embodied in a star diagram(see Figure 1).Around the nodes of the star,we have three elements that are typically associated with economics:resources,markets,and space.Three additional elements are associated with our broader definition of community economic development:society/culture, rules/institutions,and decision making. Space As outlined in our introductory comments,communities are generally defined within some spa- tial connotation as well as some form of communication network.Every community must move products and resources and interact over some physical distance. Community means that some form of communication is occurring.In our modem society,the notion of space and community is becoming more complex.Today,people are increasingly active members in several unique com- munities from a spatial sense.They live in one community,commute to work in another,go shop- ping in yet a third,and receive the daily newspaper from a fourth.4 It is important to remember that our definition of community includes both the spatial and nonspatial dimensions and is based on the ability to make and implement decisions. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 63 The narrow perception of location theory within the growth paradigm of export base is that it explains decisions to locate a business and leads to the economic development policy of"beggar thy neighbor."But businesses face numerous other location decisions. Because every economic transaction has a spatial dimension, each represents a location decision. Examples of decisions include where to start a business,where to expand as growth occurs,where to subcontract surges in production,where to merge to acquire capital or achieve market penetration or acquire sources of supply,where to buy inputs,and where to market production. Households also face spatial decisions. Examples of these decisions include where to live, where to shop,and where to work.Each of these questions has a spatial connotation,and different location factors will influence the decision.In some cases,familiarity and personal contacts domi- nate.In others,markets,resources,labor,or transportation predominate.Thus,the phrase"loca- tion decision"refers to any economic transaction with a spatial dimension,not just the traditional relocation decision. The traditional approaches to economic development have tended to pit spatially defined com- munities against each other.This is perhaps best described as the"new war between the states."The third wave of development,what we are calling community economic development,forces com- munities to think beyond their traditional spatial boundaries.Porter's(1995)notion of clusters has drawn communities into partnerships and collaborative efforts across a much larger geographic area and is an example of our notion of community economic development. But in a modem economy where rapid innovation has become an engine of economic growth, the role of space becomes less clear.Johansson and Quigley(2004)suggest that modern communi- cation technologies are allowing economic agents to more readily substitute agglomeration(spa- tial) proximity for network contacts. The importance of networking within and across communities has become readily evident in the community and economic development literatures. Over the 20th century, the decline in real transportation cost by 90% has made the transport of goods essentially free,but it is still expensive to move people(Glaeser&Kohlhase,2004).Clearly, however,the argument that space no longer matters is premature(Rietveld&Vickerman,2004). Resources Resources,the primary factors of production,include land,labor,capital,and the technology that the community uses to produce output.These factors of production have been the focus of tra- ditional economic development policies,but we maintain that there are latent factors of production including innovation,amenities,and publicly provided goods and services.Innovation is the abil- ity to capitalize on new ideas,products, and ways of doing things. Public capital refers, among other things,to roads,schools,parks,and landfill sites.Increasingly important in the functioning of local economies is the amenity base.Amenities can involve cultural,historic,natural,or built environmental resources that increasingly contribute to our notion of quality of life.By broadening our thinking about the resources at the disposal of the community, we can expand economic development policy options significantly. Land, labor, and capital. Much of the thinking on economic growth and development, from both a theoretical and policy perspective,has taken blended views of export base and the neoclassi- cal view with a focus on the traditional factors of production,land,labor,and capital,and how they are allocated in production decisions.First-wave economic development policies hinge on attract- ing labor and capital into a specific geographic location.Policy focuses on the movement of land, labor,and capital within a geographic region to a more productive use.The end result of either per- spective is the creation of more goods to export from the community. Consider the case of the north woods of the upper Great Lakes states of Michigan,Minnesota, and Wisconsin. While the Midwest was being settled, the virgin timber represented a critical resource that stimulated local economic growth.Labor and capital flowed to the resource that was represented by trees growing on the land.Whole forests were clear-cut for lumber and exported for the construction of Chicago and Detroit and converted to pulp for paper production. Once that resource was exhausted,policy makers attempted to promote more traditional economic activities by moving labor and capital away from forestry into agriculture. The land and climate, Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 64 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 unfortunately,were not conducive to crop agriculture,and the region witnessed significant failure. The region was more conducive to livestock agriculture,particularly dairy,which is still practiced. Over the years,the forests have regrown and,with abundant water resources such as lakes,tourism is now a dominant industry.Clearly,what we have seen is a movement of resources either into the area or to more productive uses within the area. Economic development theory and policy have tended to focus narrowly on the traditional fac- tors of production and how they are best allocated in a spatial world.We argue that community eco- nomic development must be broader than simply worrying about land, labor, and capital. This broader dimension includes amenities,public capital,technology and innovation,society and cul- ture,institutions,and the decision-making capacity of the community. Amenities and public goods.Nonmarket goods and services such as amenities and public ser- vices can be viewed as part of a community's set of economic assets, extending the traditional notion of primary factors of production.In addition to the traditional market-based aspects of land, labor,and capital,we have now begun to mix market-based assets with those that are fundamen- tally nonmarket in nature.Amenities and publicly provided goods and services serve as important latent inputs to production in amenity-rich communities.They exist as latent inputs and present a complex mixture of market-based and nonmarket goods and services into the analysis of commu- nity economic development(Marcoullier&Clendenning,in press;Power, 1996,in press).Rapid change experienced within amenity-rich communities continues to point to the importance of the less tangible resources as key drivers of community change (Green, 2001; Green, Deller, & Marcouiller,in press). Consider the case of natural amenities such as lakes and forests.Historically,economic devel- opment policy cast in the theory of export base or even the stages of development would view these resources as a part of a product to be harvested and exported.Today,changes in income and tastes and preferences have altered the markets for such resources.The north woods of the upper Great Lakes states are no longer just a source of timber and pulp but also a market for recreation and retirement migration. Effective community economic development will embrace such changes and look for new opportunities. A fundamental problem with amenities and public goods as part of the economic landscape of the community is the lack of clear market forces on which to base decisions.In the case of land, labor,and capital,market forces provide price signals about value.Because of market failure with amenities and public goods,the allocation decisions become a problem of public choice.As we will see, the ability of the community to make effective public choices is fundamental to community economic development. Innovation and technology.Since the 1980s,the name of the game has been competition,partic- ularly sectoral competition.But because sectors chose particular locations,we mean spatial com- petition as well(Ceh,2001).This is how communities become involved—sectorally and spatially. Historically,competition occurs among communities that are trying to present themselves as loca- tions with a comparative advantage.This harkens back to the first wave of economic development policy.Comparative advantage is the result of having some advantage in access to or costs of inputs and markets and is generally thought of as static.Dynamically,the key is innovation.'Whereas economists firmly believe that prices are a market signal that will eventually lead to equilibrium, changes in technology and innovation are constant disruptive forces. The innovation process is not linear.The relationship of science to technology and technology to economic growth and development is complex,interactive,and iterative.The entire process is characterized by uncertainty,risk,trial,and error.Adopting an innovation does not guarantee that the firm can capitalize on it because the ability to profit from the innovation hinges on the firm's technical capacity,organizational ability,and knowledge of the markets. In the simplest sense,technology is the means or methods by which land,labor,and capital are brought together to produce an output.Technological advances are changes in how the inputs of capital and labor are brought together.When a community or industry experiences technological change, the inputs required in the production process are likely to change. When these inputs change, other areas may become competitive or gain comparative advantage in the delivery of those inputs.Another way to look at technology is to view the products being produced;as change Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 65 occurs,communities and industries can probably gain some type of competitive advantage(i.e., profits and wealth). Technology is not a single item but is knowledge and the incorporation of this knowledge into products,processes,and management improvements.New technology is the flash of insight that provides new understanding of basic questions,specifically,an invention,and tends to be a physi- cal, biological, and/or chemical phenomenon related to production processes. Invention can be either autonomous,largely a random event,or induced,the result of focused research and develop- ment expenditures.Invention may be conceiving and presenting new combinations of preexisting ideas,the result of an inventive act,or the discovery of something previously only imagined. The neoclassical approach essentially assumes that information about technology,a prerequi- site for transfer,is easy to obtain,does not cost much,and is comprehended by the receiver.Within the neoclassical framework,technology transfer,or innovation,may be broadly defined as a tech- nique or knowledge that has been developed in one organization and transferred to another,where it is adopted and used.Historically,space has played an important role in how innovations are dis- persed throughout the economy.For example, a farmer within a community is the first to adopt global positioning system(GPS)cropping technologies,and as neighboring farmers are exposed to the new technology,they may or may not adopt that innovation.Agglomerations,of which inno- vation is an integral part,have traditionally been thought of as clusters or nodes on an economic plane.Firms would cluster,in a spatial sense,to take advantage of the positive spillovers associated with agglomeration(Thisse&Fujita,2002).But the advent of network theory within agglomera- tion economics,coupled with rapid advances in communication technologies,has reemphasized the fact that communities no longer function in isolation(Johansson&Quigley,2004). The emphasis on innovation to spur economic development is not new.A widely accepted view is that new technology is an early link in a chain of activities that lead to a reworked industrial struc- ture.6 This view holds that technology is catalytic and can be expected to stimulate the rise of new industries.The adoption of a technology by a firm or number of firms,however,does not necessar- ily lead to the creation of new economic opportunities and growth in a community,which causes much concern in communities. Technology and innovation are very critical in a dynamic economy in which,invariably,win- ners and losers are created when new technology is applied.Technology tends to be sector specific, although there are many examples throughout history when that has not been the case(e.g.,small electric motors, computers, and the Internet). Technology also tends to be fairly spatial in its impact because the industries and the inputs are located within space.The losers in the technology game are those who see the decline of their welfare,their wealth,their job prospects,and occupa- tional desires.On the other hand,those places and workers who naturally can capture the benefits from the application of new technology will see their welfare increase. It is important to understand this discussion in the context of community technology.First,the . . .the technology in the technology in the community is the sum of the technology of individual firms, the sectors they community is the sum of belong to,and the technology employed by the local public sector.Second,much of the commu the technology of nity's technology is process technology, such as interaction between constituents and governing individual firms,the bodies;the manner in which teachers approach teaching;and,more broadly,how we deal with one another. sectors they belong to, We maintain that a vital element of the third wave of community economic development is the and the technology ability of the community to foster and embrace technological change and innovation. Successful employed by the local communities are those that seek new ways of doing things.We can think of innovation as a charac- public sector. teristic of the community's culture.Again,because technology tends to be sectorally and spatially specific, innovation-effective community economic development requires communities to become engaged. Markets Typically,we think of markets in the form of supply and demand for goods and services,and factor inputs for supply and demand capture the forces that are at play in a capitalist economy.In the context of a community,the markets node represents local and nonlocal markets in the spirit of Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 66 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 export-base theory.The local market is composed of businesses buying and selling locally to other businesses and households.It is important to remember that the local market is composed of two distinct parts—households and businesses.The nonlocal market refers to those goods and services that the community produces locally and sells to nonlocal households and businesses.It is impor- tant to remember that the critical element of the nonlocal market is that it is essentially an external source of sales and income. The provision of goods and services by community merchants(local markets)affects the well- being of community residents.Two dimensions of supplying these goods and services are of par- ticular interest for community economic development:(a)the interdependence among businesses in various communities (urban hierarchies) and (b) businesses' interpretation of the market's socioeconomic characteristics and how they influence decisions to provide particular goods and services.Community businesses marketing to households compete for customers in a multitude of ways including prices,access to stores,variety of goods or services,store hours,clerks'attitudes, credit policies,delivery policies,and personal knowledge of the customer. Today,the popular idea surrounding the notion of clusters focuses on tightening interindustry linkages within and across sectors as well as social networks(Feser&Bergman,2000;Johansson &Quigley,2004).In practice at the community or regional level,the development of clusters often flows from concerted efforts to better network existing businesses.Here,the idea of"gaps and dis- connects"within the local economy comes to the forefront. Gaps are said to exist if certain busi- nesses are not located within the area and consumers are required to import the goods or services.If these gaps are sufficiently large,they represent new business opportunities for entrepreneurs.Dis- connects are present when a local firm is able to supply locally demanded goods or services but the lack of information prevents the firms from connecting. Rules and Institutions The rules of the game are an often overlooked and assumed given element(i.e.,all else being equal) but are critically important to community economic development (Beauregard, 1993; Behrman&Rondinelli, 1992;Wolman, 1996).Rules are important because they govern what can be done with markets,resources,and space.Rules of the game often focus on rights and responsi- bilities of ownership and their respective enforcement. These rules are human-made limits or openings that guide the use of community resources and exploitation of markets. As discussed below,rules to a large extent are subsumed in culture. Institutions are basic to any form of social interaction,although their importance is not usually recognized except when changes are proposed or when they are not performing satisfactorily.The interest here is limited to institutions facilitating or impeding community economic development. Institutions are the rights and obligations or social,political,and legal rules that govern what has to be taken into account in the use of a community's factors of production,exchange,and the distribu- tion of rewards(Davis&North, 1971). Generally,one thinks of institutions as being formally defined and easily identifiable,such as the network of local governments and their abilities to tax and regulate.But this view is too narrow; for example,institutions can include local churches,civic and business organizations,and social organizations. All these institutions, both formal and informal, help to establish the rules and norms by which the community functions.In addition to establishing the rules,institutions are also responsible for enforcement. But here, differences in formal and informal institutions become apparent. Formal institutions such as local governments have police power that sets them apart from informal institutions that may be able to enforce rules only through peer pressure. Rules need to be in place to help resolve conflict about which set of values governs the goals the community is going to pursue. Consequently,conflict resolution is essential in effective rule set- ting.Rules are needed to determine the fairness and equity the community chooses to adopt,which frame the efficiency arguments and exchange between parties. Finally, rules are necessary to aggregate individual preferences and efforts into a community set of ideas and preference.How do you handle the contradiction of the individual versus the collective? How do you balance Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 67 individual initiative and greed against the needs of a larger group?Whose interests are considered in benefit-cost? Institutions also affect economic markets as they set the framework for the bargaining process and the resolution of inevitable conflicts.Institutions that focus on the enforcement of agreements, such as contracts,affect the functioning of markets especially over great distances with unfamiliar actors.Likewise,institutions with different methods of settling transactions,such as barter,cash, or credit cards,influence markets.Institutions affect markets in their ability to define what is an acceptable market.For example,the United States currently has restrictions on trading with Cuba and North Korea.These markets are simply unavailable to U.S.companies,as were formerly the People's Republic of China and Iraq. Institutions affect income distribution directly by defining rates of reimbursement including minimum wages,by whom and how resources are owned, and how the returns from the use of resources are distributed. The distribution of income directly affects development through its impact on incentives, willingness to save, willingness to invest, and the aggregate demand of society. Institutions related to the ownership of resources and capital accumulation affect community economic development by defining the mechanisms to acquire and control capital.Other institu- tions influencing capital accumulation are income and inheritance taxes.Income tax rules affect consumption and investment decisions as well as work incentives.The tax system encourages vari- ous forms of capital accumulation.Tax-free interest on municipal bonds encourages public capital formation,whereas depreciation rules and tax credits encourage investment in new buildings or the rehabilitation of existing buildings. Society and Culture Economic development practitioners often speak of a community's underlying social structure and culture as the community's business climate. In its narrowest sense, business climate is equated with the formal rules relating to taxes and regulatory burdens as discussed above.Gener- ally,lower taxes and a weaker regulatory climate imply a better business climate.Although taxa- tion levels and the regulatory climate are important, they represent only a small part of the components that help define a community's business climate. In the broadest sense,a community's business climate speaks to the attitudes of the community toward change,experimentation,entrepreneurship,institutional capacity,and communication lev- els.Business climate is a specific way to discuss what the Floras(C.B.Flora&Flora, 1990, 1993) call entrepreneurial social infrastructure or Putnam(1995)calls social capital.This specific way relates to the rules that govern how a community functions(DeFilippis,2001;Taylor-Ide&Taylor, 2002). As described above, these can be formal rules that are established by governments and informal rules that are established by the culture of the community.Formal rules range from land use, signage, and environmental regulations to workplace safety and child labor laws. Informal rules are dictated by society and culture and speak to what is socially acceptable and not acceptable. Business climate and culture speak to both formal and informal rules.Unfortunately,because the formal rules are determined and enforced by government,it is easy to focus attention on those rules.In essence,formal rules are written down and can be easily pointed to in economic develop- ment discussions.Informal rules,or the culture of the community,are more difficult to pin down, debate,and alter in the short term,when business decisions are often made.For example,in some communities failure is frowned upon,and to fail breaks an informal rule.This type of informal rule can place a serious barrier on entrepreneurial activity.Most successful entrepreneurs fail three to five times before their businesses are successful.If failure is unacceptable in the community,what does this say about the business climate within the community? Alternatively,for some communities the culture of success is ill defined.To rise above the aver- age of the community is discouraged,and success is not rewarded.There is perverse peer pressure not to succeed.A community where people are expected to be average has a poor business climate Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 68 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 regardless of what the public sector does in terms of taxation and regulatory policy.These types of expectations within the community are powerful forces that can overpower any public policy. . . .business climate A narrower way of thinking about the business climate of community hinges on the quality of the relationship between the private and public sector in pursuing community economic develop- speaks to the social ment.What is the nature of the partnership?Is it harmonious or turbulent?Although there is rarely capital of the community, complete agreement between business and government,high-quality business climates foster the the ability of the public situation in which businesses accept their social responsibilities and government supports legiti- and private sectors to mate business needs.In essence,the business climate is but one small part of the overall culture of work together,and the the community.Unfortunately,the fullness of this relationship is often collapsed into the simplistic flexibility of rules,both tax-burden issue.' formal and informal,to In the end,business climate speaks to the social capital of the community,the ability of the pub- be adjusted when lic and private sectors to work together,and the flexibility of rules,both formal and informal,to be economic opportunities adjusted when economic opportunities present themselves.Is the public sector willing to listen to present themselves. the concerns of the private sector?Is the private sector willing to compromise on their plans if they impede the well-being of the residents of the community?If there are barriers to change imposed from outside the community,such as federal regulations,can the public and private sectors form partnerships to address these barriers?The business climate of the community is a reflection of these rules,both formal and informal. Culture and rules intersect in the area of attitudes about resource use. For example, attitudes about resource conservation or exploitation in Western society are quite different from those in a Buddhist society,providing a partial explanation of past differences in development and accept- able alternatives for future development.An example of a cultural change affecting labor supply is that of women participating in the labor force.After World War II and through the early 1950s,few women pursued permanent careers outside the home.Since the mid-1960s,this has become a com- mon phenomenon. Now, more than half of the women age 16 to 60 participate in the formal workforce. As a result of this change, the labor supply and the economy's productive capacity increased dramatically. Societal standards on retirement age also affect labor supply and the availability of valuable human capital and experience. Again,the intersection between economic development and community development is what we refer to as community economic development.Much of community development hinges on the building of social capital and infrastructure. We maintain,however,that economic development occurs within the contextual definition of the culture of the community.Effective community eco- nomic development must take into account the culture of the community(i.e.,interdisciplinary), something that economists seldom feel comfortable with. Decision Making The decision-making capacity of the community centers on the ability to distinguish between problems and symptoms and then to identify and implement solutions.A symptom is a visible sign that there is an underlying problem,but treating the symptom does not correct the problem. Implicit in decision making is the need to establish community values and priorities (Johannison, 1990;McDowell, 1995;Stohr, 1989;Swanson, 1996;Turner, 1999).Each commu- nity,at any given time,is faced with a range of issues,and effective decision making requires the community to not only identify issues but also rank them in terms of priority.How these issues are identified and ranked hinges on the values that the community possesses.Values,to a large extent, indicate what we identify or define as problems.These values are driven by the larger society.Each community faces a plethora of problems,and community priorities go a long way in determining which ones will be addressed first,second,or not at all. Decision making translates into how the community goes about making decisions and sets up and implements policies and strategies.In a sense,we are speaking to the public choice process in the broadest sense. Does the community integrate sound analysis with community perspectives and desires?Does it involve a broad spectrum of interests or just a select few?Can the community separate problems that it can have some influence over and problems that are beyond its control? Does the community really get at the problem or problems or just treat symptoms? Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 69 No amount of decision making is of value unless it is accompanied by action.Lack of action is the bane of professional planners and many community development practitioners when detailed plans and reports are approved and then collect dust on a shelf.The willingness of a broad spectrum of local citizens to take risks and commit resources is essential to effective community economic development. Community economic development is not a one-time event. It is achievable only through continuing analyses,decisions,and actions over an extended time period.Limitations of time and money permit only a few concerns to be addressed at once. Furthermore, conditions change and prior decisions must be modified. Social capital, as described above, is an important element in community decision making. Social capital is often referred to as the glue that holds communities together.In the perfect neo- classical marketplace,anonymous transactions,in which trust and reciprocity are not considered or needed, occur among self-interested, rational buyers and sellers in a world of complete information. The difference among communities in terms of civic engagement is due largely to the level of social capital as outlined by Coleman(1988),Putnam(1995),and more recently by Turner(1999). Networks of civic engagement foster norms of general reciprocity and encourage the emergence of social trust.Social capital consists of the social networks in a community,the level of trust between community members,relationships,and local norms.These networks,norms,and trust help local people work together for their mutual benefit(J.L.Flora, 1998;Swanson, 1996).Networks facili- tate coordination and communication and thus allow dilemmas of collective action to be resolved (Putnam, 1995).At the same time,networks of civic engagement embody past success and collab- oration that can serve as a cultural template for future collaboration(Lovan et al.,2004). Success of community-based development is the result of political entrepreneurs who are skilled at creating the political environment in which communities can succeed.It is political atti- tude,will, and activism that find ways to create change in a community. Successful community economic development,then,involves a partnership between nonprofit community groups,local government, and the private sectors (Gaunt, 1998; Lovan et al., 2004; Sharp & Bath, 1993). Community-based organizations must build technical capacity to undertake development projects and attract investors as well as the community capacity to organize people and develop leadership to plan and implement successful strategies. Community development is the ability to mobilize economic capital (investment) and social capital (capacity building) over a long period in an entrepreneurial approach. Pulling It All Together We have argued that the third wave of development is built on the premise that economic and We have argued that the noneconomic development forces are equally important in community economic development. third wave of We maintain that community economic development is the blending of economic development development is built on and community development and is a holistic approach to community problem solving.To truly understand why one community prospers and another struggles,one must take an interdisciplinary the premise that view of the community.Economics provides strong insights,but sociology,political science,and economic and planning also provide powerful insights. One can think of the science of community economic noneconomic development as a three-legged stool,with the three legs being economics,sociology,and political development forces are science.If any one of the three legs is ignored(i.e.,all else being equal),the stool will collapse.The equally important in paradigm we offer in Figure 1 is but one modest way to pull all of the elements of effective commu- community economic nity economic development together.If we were forced to narrowly focus on one key element of development. effective community economic development,it would be the ability of the community to make and implement informed decisions. STRATEGIES Community decision making implies group action.For successful group action,even more so than for individual action,it is important to have a strategy of where,how, and what the group Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 70 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 desires to do. The overall purpose of community economic development policy is to reduce or abolish the barriers(economic,cultural,and/or political)in product and factor markets that prevent the positive culmination of economic development processes.Community economic development policy must be viewed in the long-run dynamic context of those markets and the surrounding socio-politico-physical environment(Schaeffer&Loveridge,2000).In a capitalist economy,the fundamental justification for community economic development policy is to ameliorate failures in product and factor markets(Halebsky et al., 1999). There are a variety of goals for community economic development to pursue.One goal that we prefer is that community economic development is meant to produce wealth and facilitate change or adjustment. It is important that we recognize both monetized (income) and nonmonetized wealth.Nonmonetized wealth includes increasing choices or opportunities for individuals.It also includes the community's appreciation of amenities such as the view of a beautiful sunset.In the broadest sense,nonmonetized wealth includes many qualitative aspects of quality of life.Facilitat- ing change or adjustment means that it is a dynamic process in which new resources,new markets, and new rules are appearing both inside and outside the community. The change or adjustment means that the community is able to absorb those new factors through increased economic resil- ience.In the broadest sense,we could think in terms of growth as monetized and development as nonmonetized. There are several tenets that underlie any attempt by the community to set economic develop- ment policy and generate community economic development action programs.A community is a logical economic unit that can exert some control over its economic future.Intervention in the form of conscious group decisions and actions will affect local economic welfare more than the sum of individual actions.The action or policy must be comprehensive and cannot focus just on economic activity but must also include noneconomic dimensions. Finally, the resources needed will be available or can be found to implement the policy.Here,resources are more than monetary and include all factors of production, especially social capital and what Kretzmann and McKnight (1993) call community assets. Our view of the economic system in a community hinges on the actions of people.In most communities,the success or failure of any specific economic develop- ment activity centers on the level and commitment of volunteer citizens. Beginning with the BAWI policies of the 1930s,virtually every state and community has sought to attract export or basic employers.Clearly,BAWL-type policies moved away from the neoclassi- cal view of policy formation,because government is now assumed to have a proactive role in eco- nomic development and growth. Today, the BAWI policy is widely referred to as smokestack chasing or the new war between the states. We offer an alternative way of thinking about community economic development policies or strategies.Rather than a laundry list of ideas,we turned to the theoretical foundations underpin- ning our new paradigm.For example,state-of-the-art thinking on economic growth theory empha- sizes the role of technology and innovation in not only growth but as part of profit-maximizing behavior on the part of the firm.From the community's perspective,the natural strategy that fol- lows is to work with new and existing business in using existing resources differently. This generally means that you have applied new technology and have found new ways to com- bine existing capital and labor to produce greater output per worker.It could also mean that existing capital and labor have been used differently to produce a new good or service that previously had not been produced locally.It could also mean that you now have local jobs for workers who previ- ously commuted elsewhere for work.Or it could mean that workers have received training and are now able to do different tasks from before. Our theoretical discussion of external and internal markets also points the way to a range of eco- nomic development policies.Indeed,the BAWI-type policies that dominated economic develop- ment thinking for so long were based on export-base theory.In our terminology,we are suggesting that the community increase the flow of dollars into the community.This means that the commu- nity is essentially bringing income into the community by attracting new basic employers.Other ways of bringing dollars into the community include existing basic employers increasing their sales outside the community,the community increasing its visitors,or the community increasing its intergovernmental aids.In areas endowed with rich natural amenities,communities must think Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 71 beyond traditional extractive industries and focus attention on newer opportunities such as recreation and retirement migration. These policies focused solely on the inflow of dollars into the community with no attention to internal markets.People and businesses must have someplace to spend the money.Too often,com- munities think all they have to do is attract a basic employer(i.e.,the buffalo hunt or smokestack chase)and their problems are solved.Firm location theory,specifically demand maximization,and central place theory open the door to numerous policy options including but not limited to increas- ing the recirculation of dollars in the community.This approach means that the community is plug- ging leakages out of the local community's economy.In other words,the community is actively seeking ways to get people and businesses to spend more locally. The community could undertake customer surveys,alter store hours,encourage new or differ- ent store types,physically renovate downtowns, or even talk to businesses about buying inputs locally rather than from nonlocal sources.The end result is that dollars turn over at least one more time locally.Firm location theory in general,and central place theory specifically,point us in the correct direction to better understand this set of approaches(Shaffer et al.,2004).One could almost think of the current emphasis on business clustering in this same light.Here,firms within the clus- ter industry are encouraged to network and work more closely to build synergies (Gordon & McCann,2000;Johansson&Quigley,2004). Our discussion of the economy points to the importance of local factor resources.We have seen that technology as a factor is extremely important to the growth and development process, but equally important is the amount of land, labor, and capital.Increasing the amount of resources available simply means that the community has increased the amount of land,labor,and capital available for producing output. This increase could be local financial institutions making more loans available locally,an outside business making a local investment,or the forming of a credit union.It could be people moving or commuting into the community or working more hours.The important thing to remember is the spatial component.The resources are increased here rather than there. We have also discussed at length the importance of noneconomic factors in community eco- nomic development.From Figure 1,we see that the idea of decision making and rules comes to the forefront.Acting smarter translates into how the community goes about making decisions and sets up and implements strategies.Does it involve a broad spectrum of interests or just a select few? Does the community really get at the problem or problems or just treat symptoms?Does the com- munity integrate sound analysis with community perspectives and desires?Changing(reinterpret- ing)the rules means that the community seeks a change in rules that would benefit the community or seeks a change in interpretation of rules.For example,a land-use plan might encourage further development on some land by ensuring that incompatible uses do not occur next door.On the other hand,changes in some land-use regulation can impose major costs on some firms.Or maybe the community gets higher units of government to reinterpret eligibility rules on some type of man- power training fund, thus making some community residents eligible.Remember that rules are societal constraints that govern how we either use resources or exploit markets. We hope the reader will walk away from our discussion with an appreciation of the fact that the- ories within the social sciences are by necessity abstract and simplifying.Indeed,the main reason to develop theories in the first place is to help think through complex issues.As such,our theories always leave out some element of the real world.Even with this weakness,theory lends the practi- tioner one last policy option:getting lucky.This may seem like an unusual item,but think for a sec- ond:A small rural community could be by pure happenstance located within the commuting shed of a growing metropolitan area or 50 years ago could have been the birthplace of a budding entre- preneur.Although we like to think more than luck is involved—and it is—it also explains a lot of current economic activity. A comprehensive strategy that any community can pursue entails all of these seven elements. Clearly,most communities will pursue vigorously only one or two elements at a time,but over time the community should consider all seven.Based on our experiences working with communities, many communities that use these strategies as building blocks begin with a simple foundation and move upward over time with a more sophisticated approach. At each stage, the prior building Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 72 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 blocks are reinforced.It is important to remember that an economic development undertaking is part of a larger effort by the community to achieve some desired outcome or change. SUMMARY Community economic development is about how economic, social, and political theories explain community change.It is about how community structure influences the choices that we can make. It is about increasing community wealth, both monetary and nonmonetary. It is about growth and development.It is about how movement or flow of resources across community bound- aries influences choices.It is about how dynamics and the resultant disequilibrium or changing cir- cumstances create tensions within the community that require choices. It is about creating opportunities for the residents of the community.It is about enhancing human well-being,welfare, and quality of life.Implementing decisions and strategies means that people are intervening in the community with the idea that they can achieve some type of desired outcome. Community economic development represents a conscious attempt to improve the decision making associated with community economic development rather than simply waiting for fortu- itous circumstances.The emphasis in community economic development is on the technical and structural analysis of community versus individual decisions. This means consideration of the interaction of the economic,political,social,and institutional components of a community.Com- munity economic development is a dynamic concept concerned with movement and change,with overcoming obstacles and capturing opportunities. In this article,we have In this article,we have presented a paradigm that incorporates six elements we feel need to be presented a paradigm considered in trying to understand a community's economy or to initiate some change. The ele- that incorporates six ments are resources(land,labor,capital,amenities,public goods,and technology),markets(inter- elements we feel need to nal and external),space,institutions and rules,culture and society,and decision making.Although all elements need to be considered,the importance of each varies over time and with the situation. be considered in trying to As one thinks about community economic development,it is important to keep in mind all of these understand a elements,for any one of them or some combination becomes the focus of a community economic community's economy or development strategy. to initiate some change. From a practitioner's perspective, the idea that community economic development is a truly The elements are interdisciplinary area of study has been widely accepted; unfortunately, the academy has been resources(land,labor, slow in embracing this approach.Some say that communities have problems and universities have capital,amenities,public disciplinary departments. Whereas the primary academic disciplines of economics, sociology, goods,and technology), political science,and planning bring significant insights to the table,community economic devel- markets (internal and opment requires a unique blending of all relevant disciplines.By considering the underlying eco- external),space, nomic,social,and political forces at play,the community can better focus on the issues at hand. institutions and rules, culture and society,and decision making. NOTES 1.Many communities or political jurisdictions tend to view themselves in isolation,separate and independent from the larger region.We maintain that successful communities are those that can retain their own self-identity but are tied to the larger region economically,politically,and culturally.Indeed,the popular notion of cluster development has moved many "isolated"communities into multicommunity collaborative efforts. 2.Clearly,there are several theories of economic growth that have been offered by economists that we will not cover in this discussion. 3.It is recognized that the neoclassical theory of the 1960s and 1970s became popularized in the 1980s through the ascendancy of conservative political regimes such as the Reagan(United States),Thatcher(United Kingdom),Mulrony (Canada),and Kohl(Germany)governments. 4.One could argue that this"spreading out"of the spatial size of the community in which people reside results in a cer- tain degree of apathy in community issues.The sense of belonging or being a member of any particular community is diluted (Putnam,1995). 5.Innovation or technology transfer is the successful introduction of ideas perceived as new into a community or as the first commercial or genuine application of some new development outside of experimentation(Friedmann,1972). 6.Changing factor prices and changing demand structures also contribute to changes in industrial structure. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 73 7.Within the institutional economics literature,one could think of transactions costs associated with enforcement of these formal and informal rules(Chamberlin&Jackson,1987;Deller,1998;Hirsch,1995a,1995b;McCann,2004).What does it cost the community,or specifically,businesses and people within the community,to adhere to these rules?Time and effort to apply for a zoning variance on a commerce development,or the costs associated with altering construction plans to adhere to environmental concerns are examples of such transactions costs.As described above,discussions of business cli- mate are often limited to the transactions costs associated with following the formal rules(e.g.,zoning and worker safety regulations,among others).We would argue that there are also transactions costs imposed on residents that are often over- looked in the economic development literature.An example would be the peer pressure associated with the first business in the community to hire immigrant workers. 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City of Tigard TIGARD Memorandum To: President Dave Walsh and Members of the Planning Commission From: Ron Bunch, Community Development Director Re: February 28, 2011 Planning Commission Meeting- "Successful Economic Development" Date: February 22,2011 Attached are two items that will be available at the Commission's February 28,2011 meeting regarding economic development. In providing this information it is staff's desire to help inform this important discussion. Attachment 1 is an article that appeared in the Economic Development Quarterly professional journal in 2006 entitled, "Rethinking Community Economic Development."' From staff's perspective,its principles are appropriate to Tigard because it discusses the importance of integrating community and economic development practices and strategies to promote community wealth. Attachment 2 is an issue paper prepared by staff that takes the major themes of the article and applies them to Tigard's situation. The issue paper provides some context on Tigard's economy and its regional context. It discusses the importance of integrating community and economic development practices and strategies and provides a local example of the City's efforts to attain High Capacity Transit (HCT) within the Pacific Highway Corridor. The issue paper also discusses the importance of reality based community and economic development goals and strategies that have been developed through a citizen engagement process. In closing, both the journal article and staff's issue paper emphasize that community and economic development does not necessarily mean growth. The purpose of local development should be to create wealth,which also means community quality of life. Thank you and we look forward to the discussion. Copy: Sheila Martin, Portland State Institute of Metropolitan Studies 1 Rethinking Community Economic Development;Ron Shaffer,Steve Deller and Dave Marconillier, Economic Development Quarterly 2006;20;50 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director COMMUNITY DEVELOPMENT AND SUCCESSFUL ECONOMIC DEVELOPMENT IN TIGARD PART I —KEY ASPECTS OF CURRENT CONDITIONS Tigard Has a Strong Local Job Base The City of Tigard has a robust local job-base. It has a high jobs to household ratio of about 2.3 jobs per household,which is about that of the Portland Central City. This is greater than most suburban cities in the Portland Metropolitan Region. The region-wide average is about 1.5 jobs / household. A major contributor to Tigard's jobs base is significant employment in the retail,wholesale and business services sectors, such as located in Washington Square Regional Center,Tigard Triangle, Sequoia Parkway, and along Pacific Highway. Also,Tigard has many light industrial,warehousing, and distribution jobs. A central location in the region and access to Pacific Highway/99W, Interstate 5, and Highway 217 are factors in Tigard's jobs-rich circumstance. Tigard's job base is fairly diversified. It consists of many midsize and small firms. There is no one employer, such as a computer chip manufacturer that,if shut down,would cause devastating job losses. Mismatch between Tigard's Jobs Base and Its Citizen's Occupational Characteristics As with many communities, the occupational characteristics of Tigard's citizens do not necessarily match its local job offerings. A significant percentage of Tigard's professional and technical employees travel to jobs in Portland, Beaverton, and Hillsboro. On the other hand, a large number of employees who work in retail, service, and manufacturing sectors commute to Tigard. Slow Recovery from the Recession and Forecasted Job Growth The nation and the state are slowly recovering from the recession that began in late 2007. The 10- year job growth forecasts for the Portland Metro tri-county region indicate positive job growth trends for all industry sectors, except the federal government and the manufacturing sectors. The sectors that are expected to grow the fastest include: educational and health services;professional and business services;leisure and hospitality;local government; retail; and wholesale trade. Other Metro data from Metro and the City's draft Employment Opportunities Analysis (EOA)1 forecasts that Tigard can expect growth in all employment sectors over the next two decades. It is forecasted that between a low of 10,000 and a high of 16,000 jobs will be added to Tigard's total employment during this period. 1 The EOA is a Comprehensive Plan Review requirement that compares a jurisdiction's employment land Page 1 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director PART II —MAKING A PLAN FOR THE FUTURE Intersection of Community Development and Economic Development in Tigard To accommodate forecasted employment growth Tigard needs to integrate both economic and community development strategies. For example,Tigard's future is dependent on its economic vitality and its attractiveness as a place to live. Economic vitality and community livability is supported by the economy and the City's ability to provide dependable governance and public services, such as public safety, transportation mobility, fiscal management,wastewater management, parks and open space, and land use and transportation planning, etc. The City of Tigard is part of a much larger"community" consisting of three counties in a Metropolitan region of over 2 million people, comprising 27 other governments and many other agencies and service districts. Tigard can positively affect its ability to provide services and promote economic development by continuing to play a constructive role in the region and also representing its interests at the state and federal levels. Mobility as an Example of Both a Community and Economic Development Strategy One of Tigard's current economic advantages is its central location and proximity to the regional transportation system. The City has access to Interstate 5, Pacific Highway/99W, and State Highway 217. However, all three of these major routes have major congestion problems,with traffic volume often exceeding capacity. Traffic congestion associated with future population and job growth has the potential to significantly undercut the City's livability and economic prospects. In response, the City of Tigard has engaged in a multi-year effort with other regional governments and agencies to expand the transportation capacity of the Interstate 5/Highway 99W Corridor through development and implementation of a multimodal Corridor Refinement Plan. The centerpiece of this effort is the future extension of High-Capacity Transit (HCT) within the Pacific Hwy/ 99W Corridor. As a result of political engagement and leadership, significant federal and state funds have been committed to this long-term project and a number of local governments are actively engaged in planning. A case in point is that Tigard and other governments are planning for the location of several HCT Station Area Communities within the Pacific Highway/99W corridor. This is an example of where Tigard has focused on a political and multi-jurisdictional effort to achieve a regional objective that will be transformative for its local economy. Tigard does not have the vacant industrial and commercial land to accommodate its projected employment growth, especially if the businesses and households remain wholly dependent on the automobile. Also,Tigard has no ability to expand its City limits to include suitable employment land. It is "land-locked" by other cities and unincorporated urbanized County land. Page 2 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director In order to promote more jobs, retail opportunities and services,it will need to be feasible to redevelop existing underdeveloped or obsolete urban uses to newer more economically viable / intensive uses. Alternative transportation modes, such as High Capacity Transit, are essential for this to happen. Tigard's most important resources are its citizens and the workforce that chooses to be employed in the City. Also important are the customers and clients that patronize the City's many businesses. Transportation represents major costs to customers, employees, and businesses. Moving people is much more expensive than moving goods and materials. The transportation of people as customers and as employees,with their attendant skills and knowledge,are major economic factors. These factors figure significantly in locational decisions,both for workers who want easy access to jobs and for businesses who need dependable access to workers. The Importance of Clear and Attainable Community and Economic Development Objectives A fact based effort, coordinated with the rest of the region,is important to establish an understanding of the local economy and its relationship to the region before deciding on where and how to focus economic development efforts. For example,it may be inadvisable to recruit tenants for vacant industrial warehouses without first understanding the basics of why these buildings are under-utilized. For instance, they may no longer be economically viable within the market place. Without this understanding,valuable resources could be spent dealing with economic symptoms rather than root causes. Also,local government should assess its political philosophy regarding involvement in the private market place and also its means to effectively to do so. For example, some communities,where there are few economic incentives to affect economic decision-making, focus on the community development side of the ledger, emphasizing livability, safety,good schools,parks, etc. Successful community and economic development efforts must also consider both short term and long term goals. High Capacity Transit within the Pacific Highway/99W corridor is obviously a long term goal,but there are many short-term objectives to accomplish before construction begins. For instance, the Tigard Triangle needs significant transportation improvements,but until now there has not been a means to equitably assess development for these costs. A short term goal could be to develop an equitable transportation funding mechanism specific to the Tigard Triangle where the costs are broadly shared. Another long term goal is to redevelop the Tigard Downtown. There are many short-term objectives to achieve this, such as fostering a Downtown Development Association,purchasing property for a Downtown public open space,building improvement incentives, etc. Page 3 Issue Paper Date: February 22,2011 Planning Commission Author: Ron Bunch, CD Director Within Tigard, community and economic development objectives have been achieved through the public process. As an example, the City's Comprehensive Plan's Economic Development Policies were developed using a consensus-based citizen process and were legislatively adopted by the City Council. Also, the effort to designate Downtown Tigard as an urban renewal district fully engaged Tigard's citizens before adoption by City Council. Another citizen-based process was the recently approved parks and open space bond. It is an important community development achievement that will significantly impact community livability. It is advisable that any effort to create a local economic development strategy follow suit and meaningfully engage the citizens, businesses, and interest groups. Growth versus Community and Economic Development The purpose of community and economic development is to produce wealth, enhance economic resilience by increasing the community's economic adaptability, and improving livability and public well-being. This includes increasing the movement of money into and through the community. Community and economic development is not necessarily equated with growth. Some types of growth can negatively impact a community's long term economic, social, and environmental well-being. For example, over reliance on a few major employers can mean disastrous consequences if they closed. Other problems can arise, such as environmental degradation, traffic congestion,imbalance of housing demand versus availability, etc. In many communities, significant social disruption has occurred when the local economy has become over reliant on short-term extractive industries or on select retailers. Any discussion of economic development goals and objectives must also include how such efforts will enhance the community livability and quality of life. Close attention needs to be paid as to what citizens and businesses describe as what's important to maintain and enhance in their community. A local example is the City's vision for its Downtown as exemplified by legislatively adopted codes and standards intended to guide the quality of future redevelopment. File: Community Development and Successful Economic Development in Tigard Ron Page 4 Economic Development Quarter)y http://edq.sagb.com Rethinking Community Economic Development Ron Shaffer, Steve Deller and Dave Marcouiller Economic Development Quarterly 2006; 20; 59 DO I: 10.1177/0891242405283106 The online version of this article can be found at: http://edq.sagepub.com/cgi/content/abstract/20/1/59 Published by: (;)SAGE Publications http://www.sagepublications.com Additional services and information for Economic Development Quarterly can be found at: Email Alerts: http://edq.sagepub.com/cgi/alerts Subscriptions: http://edq.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav Citations(this article cites 29 articles hosted on the SAGE Journals Online and HighWire Press platforms): http://edq.sagepub.com/cgi/content/abstract/20/1/59#BIBL Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Rethinking Community Economic Development Ron Shaffer Ron Shaffer was a community Steve Deller development economist and a professor of agricultural and Dave Marcouiller applied economics at the University of Wisconsin—Madison/Extension University of Wisconsin– Madison/Extension. He was director of the Center for In this article,the authors present arguments for a more interdisciplinary approach to Community Economic community economic development.Building an alternative paradigm that includes six Development and the elements—resources,markets,institutions,society,decision making,and space—they National Rural Development rethink the framework that links economic theory to the practice of community eco- Institute.His recent work nomic development. Major attention is paid to the integration of economic and included the coedited volume noneconomic factors in the practice of community economic development.In the end, Participatory Governance: the goal of this new paradigm is to more directly link the practice of community eco- Planning,Conflict Mediation nomic development to its solid interdisciplinary theoretical foundation. and Public Decision Making in a Civil Society.Ron passed Keywords: community development; economic development;community theory away in the spring of 2005 after a long battle with amyotrophic lateral sclerosis Economics is the study of nation states (macro) and the study of the individual consumers and (ALS), commonly known as firms(micro).This distinction,however,leaves out an important middle ground frequently labeled Lou Gehrig's disease. the community.In this article,we explore economic development and the community in a compre- hensive fashion. When economic development policy options are discussed at the community Steve Deller is a professor of level,artificial disciplinary boundaries begin to break down.Economists,through the assumption agricultural and applied of all else being equal, often ignore issues that concern sociologists and political scientists. economics at the University Although economic development practitioners have been aware of this issue for years, the of Wisconsin–Madison/ academy has been slower to acknowledge it. Extension.His work focuses While we approach the problem from an economic perspective in this article,we suggest that on regional economic the interdisciplinary nature of the problem can be thought of as removing the all-else-being-equal structure and change and elements that break down as regions become smaller(community level).We offer a new paradigm policies that can be that we suggest will provide the student of community economic development with a more corn- implemented at the local level prehensive view of the problem(Shaffer,Deller,&Marcouiller,2004).Although rooted in eco— nomics, our approach moves toward a more interdisciplinary perspective;but before we discuss this new paradigm,we must lay the groundwork for what we mean by the term community. Dave Marcouiller is a Community,an amorphous concept,is usually defined as a group or unit having some common professor of urban and interest,such as the community of Green Bay Packer fans.Space,however,also plays a vital role in regional planning at the the definition. There are at least three different ways to define the spatial community. The first University of Wisconsin– approach is to view community as a place where space is a dominant part of the definition,such as Madison/Extension.A the political boundaries of a municipality or county.The second is a community of interests where certified professional planner, space has very little role in the definition, such as a community of scholars or Packer fans. The his work focuses on the third, which we will use, is community as a logical decision-making unit that may or may not interplay between natural incorporate space.This latter approach incorporates the first two definitions but emphasizes the resources and community point that a community can make and implement decisions.Generally,this approach refers to some economic development. ECONOMIC DEVELOPMENT QUARTERLY,Vol.20 No.1,February 2006 59-74 DOI:10.1177/0891242405283106 OO 2006 Sage Publications 59 Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 60 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 political entity such as a village or municipality,but it can also include a trade area in which collec- tive action can take place through a chamber of commerce or an urban neighborhood through neighborhood associations,school-based parent-teacher organizations,or church-based efforts.' To a large extent, there are two fundamental issues in community economic development: understanding the full range of choices available to alter economic circumstances and engaging willing(and even unwilling)collaborators in building a long-term strategy(Halebsky,Gruidl, & Green, 1999).Understanding choices means that the community is exploring all options,not just falling back on old-school approaches of equating economic development with growth. When striving to build strategies,people are often more interested in short-term projects than in long- term strategies, although both are important.Long-term strategies provide people with an over- arching direction for the community;short-term projects provide tangible feedback that local peo- ple need in order to remain committed to long-term strategies. Without a long-term strategy in which short-term projects fit,specific achievements may conflict with one another or not add up to effective community development progress.Tactically,the long-term strategy should be the enve- lope containing coordinated short-term projects.It is important that the strategy being built reflects an understanding of the current theories of community economic development. Before we present and discuss our new community economic development paradigm,we will provide a working definition of community economic development within a historical context and offer a more contemporary definition.Our paradigm is then presented and discussed,and we offer a set of economic development strategies that directly flow from the new paradigm.Finally,we provide our definition of community economic development and summarize how the new para- digm we offer captures the interdisciplinary nature of the problems communities face. COMMUNITY ECONOMIC DEVELOPMENT DEFINED Historical Perspectives Historically,economic development and community development have been two distinct and separate concepts. Economic development historically focused on jobs, income, and business growth,whereas community development tended to focus on equal rights,institutional organiza- tion,and political processes,among others.Academics and practitioners tended to fall into either of the two"camps"and seldom worried about the other.We maintain that for sustainable develop- ment,these two camps must be merged(Audirac, 1997). Over the past 100 years,economic growth theory has moved through four periods of thought.' Progression from one period to the next reflects not only our ability to think about the growth pro- cess more completely and in more realistic ways but also the changing economy itself.The histori- cal context begins with the notion of export base,in which policies focused on the production of goods to be exported out of the region. Widely attributed to Douglas North (1955, 1956) and Charles Tiebout(1956),the idea was first suggested by Homer Hoyt(1933),who laid the founda- tion for much of economic growth policy.The Rostow-Kuznets stages of growth,in which capital accumulation plays an important role,attempted to elevate the descriptive nature of export base to more general theories of economic growth and dominated much of the academic discussions of the 1950s and early 1960s(Shaffer et al.,2004). Concerns about unique differences and the linkage between rural and urban areas led to the structural change models of the 1960s.Extensions of these theories led to the Harrod-Domar model and the more fully developed neoclassical theories that dominated much of the thinking on economic growth during the 1960s and 1970s.3 Today, the focus of attention is on removing the assumptions of perfect competition and scale economies,thus leading to the theories of endogenous growth. Notwithstanding the fundamental differences between inductive and deductive approaches,one could argue that each of these theories is a natu- ral progression from the previous one and laid the foundation for economic development policy. Economic policies that have emerged from these theoretical discussions could be presented in terms of"waves"(Bradshaw&Blakely, 1999;Schweke, 1990).The first wave is embodied in the Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 61 Balance Agriculture with Industry(BAWI)policies from the Great Depression era and the current competition among the states. Here, policies are based on export-base theory and are aimed at attracting capital resources from other locations via tax subsidies, low-rent land, and training funds,among others.Today,this approach is widely referred to as"smokestack chasing"and has tended to focus on manufacturing. The second wave of economic development focuses on the expansion and retention of existing businesses and entrepreneurship(Eisinger, 1988, 1995).Spe- cific strategies might include increasing the pool of investment funds for local firms,development of incubators, technical assistance for local firms, and revolving loan funds. The third wave focuses on collaboration and partnership building within and across communities.The focus on cluster development today has its roots in agglomeration economies and the ideas flowing from endogenous growth theory(Marquez,Ramajo,&Hewings,2003;Thisse&Fujita,2002).Indeed, the idea of cluster development has brought the idea of collaboration across communities to the forefront(Bradshaw&Blakely, 1999;Cumbers&MacKinnon,2004;Eisinger, 1988, 1995;Por- ter,1995).We maintain that this latter wave,at least,starts bridging economic growth and develop- ment with community development into community economic development(Beauregard, 1993; Boothroyd&Davis, 1993;Christenson&Robinson, 1993;Reese&Fasenfest, 1996). Contemporary Definition We maintain that community economic development occurs when people in a community ana- lyze the economic conditions of that community, determine its economic needs and unfulfilled opportunities, decide what can and should be done to improve the economic conditions in that community, and then move to achieve agreed-upon economic goals and objectives. Community economic development is not a rationale for maintaining the status quo but is a comprehensive con- cept for changing the economic situation within the community. The community's initiative and leadership are resources for change.The community can use both internal and external resources to achieve change,drawing on its own strengths and capabili- ties and looking beyond its boundaries for supplemental resources. The participation of citizens within the community should be as inclusive as possible(Lovan,Murry,&Shaffer,2004).Inclu- sive participation need not mean that all participate but rather that all segments in a community are given an opportunity and encouraged to participate.Community economic development implicitly assumes a democratic political system in which people have an opportunity to express their prefer- ences. Community economic development is holistic, or truly interdisciplinary, in that it comprehensively examines the different dimensions of the community. Discussions of economic development are sometimes vague because the term is used as a syn- onym for economic growth.The concepts are closely related but at the same time fundamentally different. Growth can occur without development, and development can occur without growth. Goodwin (1997) argues that economic growth, once considered by economists as subsumed by enhanced well-being,can now be a source of diminished well-being.Growth is more jobs,more buildings,more equipment,and more sales.With growth comes negative side effects,such as pol- lution,that may actually detract from the more general improvement in human welfare.Basically, growth involves doing more of what we are currently doing in a manner that is fundamentally the same as what is currently being done.Growth has been at the center of first and second waves of development policy. Development is change in the capacity to act and innovate.Development is longer term,pur- poseful, and permanent. Development tends to imply more understanding, more insight, more learning, more nuances, and some semblance of structural change. Structural change reflects changes in technology, ownership patterns, occupational mixes,product mixes,industry mixes, and institutions.Development reduces vulnerability to outside-the-community changes.Develop- ment is a larger concept and encompasses growth,but in practice the distinction is seldom clear. The movement from economic growth to economic development is the focus of the third wave of development policies. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 62 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 DECISION MAKING MARKETS RESOURCES SPACE SOCIETY/CULTURE RULES/INSTITUTIONS Figure 1: The Star of Community Economic Development THE PARADIGM . . .we maintain that One of the difficulties of the third wave of development is that it does not replace the first and community economic second wave but rather broadens the perspectives. In a sense, we maintain that community eco- development,which is nomic development, which is the blending of economic development and community develop- ment,is a holistic approach to community problem solving.The problem with holistic approaches the blending of economic is that they are very difficult to get one's hands around and are almost too big to operationalize from development and a theoretical and practice sense. community development, Economic theories and models of the growth and development process are notorious for invok- is a holistic approach to ing the notion of all else held constant.This is sometimes referred to in the economics literature as community problem partial equilibrium analysis,as opposed to general equilibrium analysis.We carve off small parts solving. of the community's economy and focus our attention on those elements while ignoring other parts of the community,holding all else constant. Indeed,much of the progress of economic thinking involves the systematic removal of seemingly unreasonable assumptions. To tackle this difficult view of community economic development, we offer a new paradigm embodied in a star diagram(see Figure 1).Around the nodes of the star,we have three elements that are typically associated with economics:resources,markets,and space.Three additional elements are associated with our broader definition of community economic development:society/culture, rules/institutions,and decision making. Space As outlined in our introductory comments,communities are generally defined within some spa- tial connotation as well as some form of communication network.Every community must move products and resources and interact over some physical distance. Community means that some form of communication is occurring.In our modem society,the notion of space and community is becoming more complex.Today,people are increasingly active members in several unique com- munities from a spatial sense.They live in one community,commute to work in another,go shop- ping in yet a third,and receive the daily newspaper from a fourth.4 It is important to remember that our definition of community includes both the spatial and nonspatial dimensions and is based on the ability to make and implement decisions. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 63 The narrow perception of location theory within the growth paradigm of export base is that it explains decisions to locate a business and leads to the economic development policy of"beggar thy neighbor."But businesses face numerous other location decisions. Because every economic transaction has a spatial dimension, each represents a location decision. Examples of decisions include where to start a business,where to expand as growth occurs,where to subcontract surges in production,where to merge to acquire capital or achieve market penetration or acquire sources of supply,where to buy inputs,and where to market production. Households also face spatial decisions. Examples of these decisions include where to live, where to shop,and where to work.Each of these questions has a spatial connotation,and different location factors will influence the decision.In some cases,familiarity and personal contacts domi- nate.In others,markets,resources,labor,or transportation predominate.Thus,the phrase"loca- tion decision"refers to any economic transaction with a spatial dimension,not just the traditional relocation decision. The traditional approaches to economic development have tended to pit spatially defined com- munities against each other.This is perhaps best described as the"new war between the states."The third wave of development,what we are calling community economic development,forces com- munities to think beyond their traditional spatial boundaries.Porter's(1995)notion of clusters has drawn communities into partnerships and collaborative efforts across a much larger geographic area and is an example of our notion of community economic development. But in a modem economy where rapid innovation has become an engine of economic growth, the role of space becomes less clear.Johansson and Quigley(2004)suggest that modern communi- cation technologies are allowing economic agents to more readily substitute agglomeration(spa- tial) proximity for network contacts. The importance of networking within and across communities has become readily evident in the community and economic development literatures. Over the 20th century, the decline in real transportation cost by 90% has made the transport of goods essentially free,but it is still expensive to move people(Glaeser&Kohlhase,2004).Clearly, however,the argument that space no longer matters is premature(Rietveld&Vickerman,2004). Resources Resources,the primary factors of production,include land,labor,capital,and the technology that the community uses to produce output.These factors of production have been the focus of tra- ditional economic development policies,but we maintain that there are latent factors of production including innovation,amenities,and publicly provided goods and services.Innovation is the abil- ity to capitalize on new ideas,products, and ways of doing things. Public capital refers, among other things,to roads,schools,parks,and landfill sites.Increasingly important in the functioning of local economies is the amenity base.Amenities can involve cultural,historic,natural,or built environmental resources that increasingly contribute to our notion of quality of life.By broadening our thinking about the resources at the disposal of the community, we can expand economic development policy options significantly. Land, labor, and capital. Much of the thinking on economic growth and development, from both a theoretical and policy perspective,has taken blended views of export base and the neoclassi- cal view with a focus on the traditional factors of production,land,labor,and capital,and how they are allocated in production decisions.First-wave economic development policies hinge on attract- ing labor and capital into a specific geographic location.Policy focuses on the movement of land, labor,and capital within a geographic region to a more productive use.The end result of either per- spective is the creation of more goods to export from the community. Consider the case of the north woods of the upper Great Lakes states of Michigan,Minnesota, and Wisconsin. While the Midwest was being settled, the virgin timber represented a critical resource that stimulated local economic growth.Labor and capital flowed to the resource that was represented by trees growing on the land.Whole forests were clear-cut for lumber and exported for the construction of Chicago and Detroit and converted to pulp for paper production. Once that resource was exhausted,policy makers attempted to promote more traditional economic activities by moving labor and capital away from forestry into agriculture. The land and climate, Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 64 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 unfortunately,were not conducive to crop agriculture,and the region witnessed significant failure. The region was more conducive to livestock agriculture,particularly dairy,which is still practiced. Over the years,the forests have regrown and,with abundant water resources such as lakes,tourism is now a dominant industry.Clearly,what we have seen is a movement of resources either into the area or to more productive uses within the area. Economic development theory and policy have tended to focus narrowly on the traditional fac- tors of production and how they are best allocated in a spatial world.We argue that community eco- nomic development must be broader than simply worrying about land, labor, and capital. This broader dimension includes amenities,public capital,technology and innovation,society and cul- ture,institutions,and the decision-making capacity of the community. Amenities and public goods.Nonmarket goods and services such as amenities and public ser- vices can be viewed as part of a community's set of economic assets, extending the traditional notion of primary factors of production.In addition to the traditional market-based aspects of land, labor,and capital,we have now begun to mix market-based assets with those that are fundamen- tally nonmarket in nature.Amenities and publicly provided goods and services serve as important latent inputs to production in amenity-rich communities.They exist as latent inputs and present a complex mixture of market-based and nonmarket goods and services into the analysis of commu- nity economic development(Marcoullier&Clendenning,in press;Power, 1996,in press).Rapid change experienced within amenity-rich communities continues to point to the importance of the less tangible resources as key drivers of community change (Green, 2001; Green, Deller, & Marcouiller,in press). Consider the case of natural amenities such as lakes and forests.Historically,economic devel- opment policy cast in the theory of export base or even the stages of development would view these resources as a part of a product to be harvested and exported.Today,changes in income and tastes and preferences have altered the markets for such resources.The north woods of the upper Great Lakes states are no longer just a source of timber and pulp but also a market for recreation and retirement migration. Effective community economic development will embrace such changes and look for new opportunities. A fundamental problem with amenities and public goods as part of the economic landscape of the community is the lack of clear market forces on which to base decisions.In the case of land, labor,and capital,market forces provide price signals about value.Because of market failure with amenities and public goods,the allocation decisions become a problem of public choice.As we will see, the ability of the community to make effective public choices is fundamental to community economic development. Innovation and technology.Since the 1980s,the name of the game has been competition,partic- ularly sectoral competition.But because sectors chose particular locations,we mean spatial com- petition as well(Ceh,2001).This is how communities become involved—sectorally and spatially. Historically,competition occurs among communities that are trying to present themselves as loca- tions with a comparative advantage.This harkens back to the first wave of economic development policy.Comparative advantage is the result of having some advantage in access to or costs of inputs and markets and is generally thought of as static.Dynamically,the key is innovation.'Whereas economists firmly believe that prices are a market signal that will eventually lead to equilibrium, changes in technology and innovation are constant disruptive forces. The innovation process is not linear.The relationship of science to technology and technology to economic growth and development is complex,interactive,and iterative.The entire process is characterized by uncertainty,risk,trial,and error.Adopting an innovation does not guarantee that the firm can capitalize on it because the ability to profit from the innovation hinges on the firm's technical capacity,organizational ability,and knowledge of the markets. In the simplest sense,technology is the means or methods by which land,labor,and capital are brought together to produce an output.Technological advances are changes in how the inputs of capital and labor are brought together.When a community or industry experiences technological change, the inputs required in the production process are likely to change. When these inputs change, other areas may become competitive or gain comparative advantage in the delivery of those inputs.Another way to look at technology is to view the products being produced;as change Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 65 occurs,communities and industries can probably gain some type of competitive advantage(i.e., profits and wealth). Technology is not a single item but is knowledge and the incorporation of this knowledge into products,processes,and management improvements.New technology is the flash of insight that provides new understanding of basic questions,specifically,an invention,and tends to be a physi- cal, biological, and/or chemical phenomenon related to production processes. Invention can be either autonomous,largely a random event,or induced,the result of focused research and develop- ment expenditures.Invention may be conceiving and presenting new combinations of preexisting ideas,the result of an inventive act,or the discovery of something previously only imagined. The neoclassical approach essentially assumes that information about technology,a prerequi- site for transfer,is easy to obtain,does not cost much,and is comprehended by the receiver.Within the neoclassical framework,technology transfer,or innovation,may be broadly defined as a tech- nique or knowledge that has been developed in one organization and transferred to another,where it is adopted and used.Historically,space has played an important role in how innovations are dis- persed throughout the economy.For example, a farmer within a community is the first to adopt global positioning system(GPS)cropping technologies,and as neighboring farmers are exposed to the new technology,they may or may not adopt that innovation.Agglomerations,of which inno- vation is an integral part,have traditionally been thought of as clusters or nodes on an economic plane.Firms would cluster,in a spatial sense,to take advantage of the positive spillovers associated with agglomeration(Thisse&Fujita,2002).But the advent of network theory within agglomera- tion economics,coupled with rapid advances in communication technologies,has reemphasized the fact that communities no longer function in isolation(Johansson&Quigley,2004). The emphasis on innovation to spur economic development is not new.A widely accepted view is that new technology is an early link in a chain of activities that lead to a reworked industrial struc- ture.6 This view holds that technology is catalytic and can be expected to stimulate the rise of new industries.The adoption of a technology by a firm or number of firms,however,does not necessar- ily lead to the creation of new economic opportunities and growth in a community,which causes much concern in communities. Technology and innovation are very critical in a dynamic economy in which,invariably,win- ners and losers are created when new technology is applied.Technology tends to be sector specific, although there are many examples throughout history when that has not been the case(e.g.,small electric motors, computers, and the Internet). Technology also tends to be fairly spatial in its impact because the industries and the inputs are located within space.The losers in the technology game are those who see the decline of their welfare,their wealth,their job prospects,and occupa- tional desires.On the other hand,those places and workers who naturally can capture the benefits from the application of new technology will see their welfare increase. It is important to understand this discussion in the context of community technology.First,the . . .the technology in the technology in the community is the sum of the technology of individual firms, the sectors they community is the sum of belong to,and the technology employed by the local public sector.Second,much of the commu the technology of nity's technology is process technology, such as interaction between constituents and governing individual firms,the bodies;the manner in which teachers approach teaching;and,more broadly,how we deal with one another. sectors they belong to, We maintain that a vital element of the third wave of community economic development is the and the technology ability of the community to foster and embrace technological change and innovation. Successful employed by the local communities are those that seek new ways of doing things.We can think of innovation as a charac- public sector. teristic of the community's culture.Again,because technology tends to be sectorally and spatially specific, innovation-effective community economic development requires communities to become engaged. Markets Typically,we think of markets in the form of supply and demand for goods and services,and factor inputs for supply and demand capture the forces that are at play in a capitalist economy.In the context of a community,the markets node represents local and nonlocal markets in the spirit of Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 66 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 export-base theory.The local market is composed of businesses buying and selling locally to other businesses and households.It is important to remember that the local market is composed of two distinct parts—households and businesses.The nonlocal market refers to those goods and services that the community produces locally and sells to nonlocal households and businesses.It is impor- tant to remember that the critical element of the nonlocal market is that it is essentially an external source of sales and income. The provision of goods and services by community merchants(local markets)affects the well- being of community residents.Two dimensions of supplying these goods and services are of par- ticular interest for community economic development:(a)the interdependence among businesses in various communities (urban hierarchies) and (b) businesses' interpretation of the market's socioeconomic characteristics and how they influence decisions to provide particular goods and services.Community businesses marketing to households compete for customers in a multitude of ways including prices,access to stores,variety of goods or services,store hours,clerks'attitudes, credit policies,delivery policies,and personal knowledge of the customer. Today,the popular idea surrounding the notion of clusters focuses on tightening interindustry linkages within and across sectors as well as social networks(Feser&Bergman,2000;Johansson &Quigley,2004).In practice at the community or regional level,the development of clusters often flows from concerted efforts to better network existing businesses.Here,the idea of"gaps and dis- connects"within the local economy comes to the forefront. Gaps are said to exist if certain busi- nesses are not located within the area and consumers are required to import the goods or services.If these gaps are sufficiently large,they represent new business opportunities for entrepreneurs.Dis- connects are present when a local firm is able to supply locally demanded goods or services but the lack of information prevents the firms from connecting. Rules and Institutions The rules of the game are an often overlooked and assumed given element(i.e.,all else being equal) but are critically important to community economic development (Beauregard, 1993; Behrman&Rondinelli, 1992;Wolman, 1996).Rules are important because they govern what can be done with markets,resources,and space.Rules of the game often focus on rights and responsi- bilities of ownership and their respective enforcement. These rules are human-made limits or openings that guide the use of community resources and exploitation of markets. As discussed below,rules to a large extent are subsumed in culture. Institutions are basic to any form of social interaction,although their importance is not usually recognized except when changes are proposed or when they are not performing satisfactorily.The interest here is limited to institutions facilitating or impeding community economic development. Institutions are the rights and obligations or social,political,and legal rules that govern what has to be taken into account in the use of a community's factors of production,exchange,and the distribu- tion of rewards(Davis&North, 1971). Generally,one thinks of institutions as being formally defined and easily identifiable,such as the network of local governments and their abilities to tax and regulate.But this view is too narrow; for example,institutions can include local churches,civic and business organizations,and social organizations. All these institutions, both formal and informal, help to establish the rules and norms by which the community functions.In addition to establishing the rules,institutions are also responsible for enforcement. But here, differences in formal and informal institutions become apparent. Formal institutions such as local governments have police power that sets them apart from informal institutions that may be able to enforce rules only through peer pressure. Rules need to be in place to help resolve conflict about which set of values governs the goals the community is going to pursue. Consequently,conflict resolution is essential in effective rule set- ting.Rules are needed to determine the fairness and equity the community chooses to adopt,which frame the efficiency arguments and exchange between parties. Finally, rules are necessary to aggregate individual preferences and efforts into a community set of ideas and preference.How do you handle the contradiction of the individual versus the collective? How do you balance Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 67 individual initiative and greed against the needs of a larger group?Whose interests are considered in benefit-cost? Institutions also affect economic markets as they set the framework for the bargaining process and the resolution of inevitable conflicts.Institutions that focus on the enforcement of agreements, such as contracts,affect the functioning of markets especially over great distances with unfamiliar actors.Likewise,institutions with different methods of settling transactions,such as barter,cash, or credit cards,influence markets.Institutions affect markets in their ability to define what is an acceptable market.For example,the United States currently has restrictions on trading with Cuba and North Korea.These markets are simply unavailable to U.S.companies,as were formerly the People's Republic of China and Iraq. Institutions affect income distribution directly by defining rates of reimbursement including minimum wages,by whom and how resources are owned, and how the returns from the use of resources are distributed. The distribution of income directly affects development through its impact on incentives, willingness to save, willingness to invest, and the aggregate demand of society. Institutions related to the ownership of resources and capital accumulation affect community economic development by defining the mechanisms to acquire and control capital.Other institu- tions influencing capital accumulation are income and inheritance taxes.Income tax rules affect consumption and investment decisions as well as work incentives.The tax system encourages vari- ous forms of capital accumulation.Tax-free interest on municipal bonds encourages public capital formation,whereas depreciation rules and tax credits encourage investment in new buildings or the rehabilitation of existing buildings. Society and Culture Economic development practitioners often speak of a community's underlying social structure and culture as the community's business climate. In its narrowest sense, business climate is equated with the formal rules relating to taxes and regulatory burdens as discussed above.Gener- ally,lower taxes and a weaker regulatory climate imply a better business climate.Although taxa- tion levels and the regulatory climate are important, they represent only a small part of the components that help define a community's business climate. In the broadest sense,a community's business climate speaks to the attitudes of the community toward change,experimentation,entrepreneurship,institutional capacity,and communication lev- els.Business climate is a specific way to discuss what the Floras(C.B.Flora&Flora, 1990, 1993) call entrepreneurial social infrastructure or Putnam(1995)calls social capital.This specific way relates to the rules that govern how a community functions(DeFilippis,2001;Taylor-Ide&Taylor, 2002). As described above, these can be formal rules that are established by governments and informal rules that are established by the culture of the community.Formal rules range from land use, signage, and environmental regulations to workplace safety and child labor laws. Informal rules are dictated by society and culture and speak to what is socially acceptable and not acceptable. Business climate and culture speak to both formal and informal rules.Unfortunately,because the formal rules are determined and enforced by government,it is easy to focus attention on those rules.In essence,formal rules are written down and can be easily pointed to in economic develop- ment discussions.Informal rules,or the culture of the community,are more difficult to pin down, debate,and alter in the short term,when business decisions are often made.For example,in some communities failure is frowned upon,and to fail breaks an informal rule.This type of informal rule can place a serious barrier on entrepreneurial activity.Most successful entrepreneurs fail three to five times before their businesses are successful.If failure is unacceptable in the community,what does this say about the business climate within the community? Alternatively,for some communities the culture of success is ill defined.To rise above the aver- age of the community is discouraged,and success is not rewarded.There is perverse peer pressure not to succeed.A community where people are expected to be average has a poor business climate Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 68 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 regardless of what the public sector does in terms of taxation and regulatory policy.These types of expectations within the community are powerful forces that can overpower any public policy. . . .business climate A narrower way of thinking about the business climate of community hinges on the quality of the relationship between the private and public sector in pursuing community economic develop- speaks to the social ment.What is the nature of the partnership?Is it harmonious or turbulent?Although there is rarely capital of the community, complete agreement between business and government,high-quality business climates foster the the ability of the public situation in which businesses accept their social responsibilities and government supports legiti- and private sectors to mate business needs.In essence,the business climate is but one small part of the overall culture of work together,and the the community.Unfortunately,the fullness of this relationship is often collapsed into the simplistic flexibility of rules,both tax-burden issue.' formal and informal,to In the end,business climate speaks to the social capital of the community,the ability of the pub- be adjusted when lic and private sectors to work together,and the flexibility of rules,both formal and informal,to be economic opportunities adjusted when economic opportunities present themselves.Is the public sector willing to listen to present themselves. the concerns of the private sector?Is the private sector willing to compromise on their plans if they impede the well-being of the residents of the community?If there are barriers to change imposed from outside the community,such as federal regulations,can the public and private sectors form partnerships to address these barriers?The business climate of the community is a reflection of these rules,both formal and informal. Culture and rules intersect in the area of attitudes about resource use. For example, attitudes about resource conservation or exploitation in Western society are quite different from those in a Buddhist society,providing a partial explanation of past differences in development and accept- able alternatives for future development.An example of a cultural change affecting labor supply is that of women participating in the labor force.After World War II and through the early 1950s,few women pursued permanent careers outside the home.Since the mid-1960s,this has become a com- mon phenomenon. Now, more than half of the women age 16 to 60 participate in the formal workforce. As a result of this change, the labor supply and the economy's productive capacity increased dramatically. Societal standards on retirement age also affect labor supply and the availability of valuable human capital and experience. Again,the intersection between economic development and community development is what we refer to as community economic development.Much of community development hinges on the building of social capital and infrastructure. We maintain,however,that economic development occurs within the contextual definition of the culture of the community.Effective community eco- nomic development must take into account the culture of the community(i.e.,interdisciplinary), something that economists seldom feel comfortable with. Decision Making The decision-making capacity of the community centers on the ability to distinguish between problems and symptoms and then to identify and implement solutions.A symptom is a visible sign that there is an underlying problem,but treating the symptom does not correct the problem. Implicit in decision making is the need to establish community values and priorities (Johannison, 1990;McDowell, 1995;Stohr, 1989;Swanson, 1996;Turner, 1999).Each commu- nity,at any given time,is faced with a range of issues,and effective decision making requires the community to not only identify issues but also rank them in terms of priority.How these issues are identified and ranked hinges on the values that the community possesses.Values,to a large extent, indicate what we identify or define as problems.These values are driven by the larger society.Each community faces a plethora of problems,and community priorities go a long way in determining which ones will be addressed first,second,or not at all. Decision making translates into how the community goes about making decisions and sets up and implements policies and strategies.In a sense,we are speaking to the public choice process in the broadest sense. Does the community integrate sound analysis with community perspectives and desires?Does it involve a broad spectrum of interests or just a select few?Can the community separate problems that it can have some influence over and problems that are beyond its control? Does the community really get at the problem or problems or just treat symptoms? Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et a1./COMMUNITY ECONOMIC DEVELOPMENT 69 No amount of decision making is of value unless it is accompanied by action.Lack of action is the bane of professional planners and many community development practitioners when detailed plans and reports are approved and then collect dust on a shelf.The willingness of a broad spectrum of local citizens to take risks and commit resources is essential to effective community economic development. Community economic development is not a one-time event. It is achievable only through continuing analyses,decisions,and actions over an extended time period.Limitations of time and money permit only a few concerns to be addressed at once. Furthermore, conditions change and prior decisions must be modified. Social capital, as described above, is an important element in community decision making. Social capital is often referred to as the glue that holds communities together.In the perfect neo- classical marketplace,anonymous transactions,in which trust and reciprocity are not considered or needed, occur among self-interested, rational buyers and sellers in a world of complete information. The difference among communities in terms of civic engagement is due largely to the level of social capital as outlined by Coleman(1988),Putnam(1995),and more recently by Turner(1999). Networks of civic engagement foster norms of general reciprocity and encourage the emergence of social trust.Social capital consists of the social networks in a community,the level of trust between community members,relationships,and local norms.These networks,norms,and trust help local people work together for their mutual benefit(J.L.Flora, 1998;Swanson, 1996).Networks facili- tate coordination and communication and thus allow dilemmas of collective action to be resolved (Putnam, 1995).At the same time,networks of civic engagement embody past success and collab- oration that can serve as a cultural template for future collaboration(Lovan et al.,2004). Success of community-based development is the result of political entrepreneurs who are skilled at creating the political environment in which communities can succeed.It is political atti- tude,will, and activism that find ways to create change in a community. Successful community economic development,then,involves a partnership between nonprofit community groups,local government, and the private sectors (Gaunt, 1998; Lovan et al., 2004; Sharp & Bath, 1993). Community-based organizations must build technical capacity to undertake development projects and attract investors as well as the community capacity to organize people and develop leadership to plan and implement successful strategies. Community development is the ability to mobilize economic capital (investment) and social capital (capacity building) over a long period in an entrepreneurial approach. Pulling It All Together We have argued that the third wave of development is built on the premise that economic and We have argued that the noneconomic development forces are equally important in community economic development. third wave of We maintain that community economic development is the blending of economic development development is built on and community development and is a holistic approach to community problem solving.To truly understand why one community prospers and another struggles,one must take an interdisciplinary the premise that view of the community.Economics provides strong insights,but sociology,political science,and economic and planning also provide powerful insights. One can think of the science of community economic noneconomic development as a three-legged stool,with the three legs being economics,sociology,and political development forces are science.If any one of the three legs is ignored(i.e.,all else being equal),the stool will collapse.The equally important in paradigm we offer in Figure 1 is but one modest way to pull all of the elements of effective commu- community economic nity economic development together.If we were forced to narrowly focus on one key element of development. effective community economic development,it would be the ability of the community to make and implement informed decisions. STRATEGIES Community decision making implies group action.For successful group action,even more so than for individual action,it is important to have a strategy of where,how, and what the group Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 70 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 desires to do. The overall purpose of community economic development policy is to reduce or abolish the barriers(economic,cultural,and/or political)in product and factor markets that prevent the positive culmination of economic development processes.Community economic development policy must be viewed in the long-run dynamic context of those markets and the surrounding socio-politico-physical environment(Schaeffer&Loveridge,2000).In a capitalist economy,the fundamental justification for community economic development policy is to ameliorate failures in product and factor markets(Halebsky et al., 1999). There are a variety of goals for community economic development to pursue.One goal that we prefer is that community economic development is meant to produce wealth and facilitate change or adjustment. It is important that we recognize both monetized (income) and nonmonetized wealth.Nonmonetized wealth includes increasing choices or opportunities for individuals.It also includes the community's appreciation of amenities such as the view of a beautiful sunset.In the broadest sense,nonmonetized wealth includes many qualitative aspects of quality of life.Facilitat- ing change or adjustment means that it is a dynamic process in which new resources,new markets, and new rules are appearing both inside and outside the community. The change or adjustment means that the community is able to absorb those new factors through increased economic resil- ience.In the broadest sense,we could think in terms of growth as monetized and development as nonmonetized. There are several tenets that underlie any attempt by the community to set economic develop- ment policy and generate community economic development action programs.A community is a logical economic unit that can exert some control over its economic future.Intervention in the form of conscious group decisions and actions will affect local economic welfare more than the sum of individual actions.The action or policy must be comprehensive and cannot focus just on economic activity but must also include noneconomic dimensions. Finally, the resources needed will be available or can be found to implement the policy.Here,resources are more than monetary and include all factors of production, especially social capital and what Kretzmann and McKnight (1993) call community assets. Our view of the economic system in a community hinges on the actions of people.In most communities,the success or failure of any specific economic develop- ment activity centers on the level and commitment of volunteer citizens. Beginning with the BAWI policies of the 1930s,virtually every state and community has sought to attract export or basic employers.Clearly,BAWL-type policies moved away from the neoclassi- cal view of policy formation,because government is now assumed to have a proactive role in eco- nomic development and growth. Today, the BAWI policy is widely referred to as smokestack chasing or the new war between the states. We offer an alternative way of thinking about community economic development policies or strategies.Rather than a laundry list of ideas,we turned to the theoretical foundations underpin- ning our new paradigm.For example,state-of-the-art thinking on economic growth theory empha- sizes the role of technology and innovation in not only growth but as part of profit-maximizing behavior on the part of the firm.From the community's perspective,the natural strategy that fol- lows is to work with new and existing business in using existing resources differently. This generally means that you have applied new technology and have found new ways to com- bine existing capital and labor to produce greater output per worker.It could also mean that existing capital and labor have been used differently to produce a new good or service that previously had not been produced locally.It could also mean that you now have local jobs for workers who previ- ously commuted elsewhere for work.Or it could mean that workers have received training and are now able to do different tasks from before. Our theoretical discussion of external and internal markets also points the way to a range of eco- nomic development policies.Indeed,the BAWI-type policies that dominated economic develop- ment thinking for so long were based on export-base theory.In our terminology,we are suggesting that the community increase the flow of dollars into the community.This means that the commu- nity is essentially bringing income into the community by attracting new basic employers.Other ways of bringing dollars into the community include existing basic employers increasing their sales outside the community,the community increasing its visitors,or the community increasing its intergovernmental aids.In areas endowed with rich natural amenities,communities must think Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 71 beyond traditional extractive industries and focus attention on newer opportunities such as recreation and retirement migration. These policies focused solely on the inflow of dollars into the community with no attention to internal markets.People and businesses must have someplace to spend the money.Too often,com- munities think all they have to do is attract a basic employer(i.e.,the buffalo hunt or smokestack chase)and their problems are solved.Firm location theory,specifically demand maximization,and central place theory open the door to numerous policy options including but not limited to increas- ing the recirculation of dollars in the community.This approach means that the community is plug- ging leakages out of the local community's economy.In other words,the community is actively seeking ways to get people and businesses to spend more locally. The community could undertake customer surveys,alter store hours,encourage new or differ- ent store types,physically renovate downtowns, or even talk to businesses about buying inputs locally rather than from nonlocal sources.The end result is that dollars turn over at least one more time locally.Firm location theory in general,and central place theory specifically,point us in the correct direction to better understand this set of approaches(Shaffer et al.,2004).One could almost think of the current emphasis on business clustering in this same light.Here,firms within the clus- ter industry are encouraged to network and work more closely to build synergies (Gordon & McCann,2000;Johansson&Quigley,2004). Our discussion of the economy points to the importance of local factor resources.We have seen that technology as a factor is extremely important to the growth and development process, but equally important is the amount of land, labor, and capital.Increasing the amount of resources available simply means that the community has increased the amount of land,labor,and capital available for producing output. This increase could be local financial institutions making more loans available locally,an outside business making a local investment,or the forming of a credit union.It could be people moving or commuting into the community or working more hours.The important thing to remember is the spatial component.The resources are increased here rather than there. We have also discussed at length the importance of noneconomic factors in community eco- nomic development.From Figure 1,we see that the idea of decision making and rules comes to the forefront.Acting smarter translates into how the community goes about making decisions and sets up and implements strategies.Does it involve a broad spectrum of interests or just a select few? Does the community really get at the problem or problems or just treat symptoms?Does the com- munity integrate sound analysis with community perspectives and desires?Changing(reinterpret- ing)the rules means that the community seeks a change in rules that would benefit the community or seeks a change in interpretation of rules.For example,a land-use plan might encourage further development on some land by ensuring that incompatible uses do not occur next door.On the other hand,changes in some land-use regulation can impose major costs on some firms.Or maybe the community gets higher units of government to reinterpret eligibility rules on some type of man- power training fund, thus making some community residents eligible.Remember that rules are societal constraints that govern how we either use resources or exploit markets. We hope the reader will walk away from our discussion with an appreciation of the fact that the- ories within the social sciences are by necessity abstract and simplifying.Indeed,the main reason to develop theories in the first place is to help think through complex issues.As such,our theories always leave out some element of the real world.Even with this weakness,theory lends the practi- tioner one last policy option:getting lucky.This may seem like an unusual item,but think for a sec- ond:A small rural community could be by pure happenstance located within the commuting shed of a growing metropolitan area or 50 years ago could have been the birthplace of a budding entre- preneur.Although we like to think more than luck is involved—and it is—it also explains a lot of current economic activity. A comprehensive strategy that any community can pursue entails all of these seven elements. Clearly,most communities will pursue vigorously only one or two elements at a time,but over time the community should consider all seven.Based on our experiences working with communities, many communities that use these strategies as building blocks begin with a simple foundation and move upward over time with a more sophisticated approach. At each stage, the prior building Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. 72 ECONOMIC DEVELOPMENT QUARTERLY/February 2006 blocks are reinforced.It is important to remember that an economic development undertaking is part of a larger effort by the community to achieve some desired outcome or change. SUMMARY Community economic development is about how economic, social, and political theories explain community change.It is about how community structure influences the choices that we can make. It is about increasing community wealth, both monetary and nonmonetary. It is about growth and development.It is about how movement or flow of resources across community bound- aries influences choices.It is about how dynamics and the resultant disequilibrium or changing cir- cumstances create tensions within the community that require choices. It is about creating opportunities for the residents of the community.It is about enhancing human well-being,welfare, and quality of life.Implementing decisions and strategies means that people are intervening in the community with the idea that they can achieve some type of desired outcome. Community economic development represents a conscious attempt to improve the decision making associated with community economic development rather than simply waiting for fortu- itous circumstances.The emphasis in community economic development is on the technical and structural analysis of community versus individual decisions. This means consideration of the interaction of the economic,political,social,and institutional components of a community.Com- munity economic development is a dynamic concept concerned with movement and change,with overcoming obstacles and capturing opportunities. In this article,we have In this article,we have presented a paradigm that incorporates six elements we feel need to be presented a paradigm considered in trying to understand a community's economy or to initiate some change. The ele- that incorporates six ments are resources(land,labor,capital,amenities,public goods,and technology),markets(inter- elements we feel need to nal and external),space,institutions and rules,culture and society,and decision making.Although all elements need to be considered,the importance of each varies over time and with the situation. be considered in trying to As one thinks about community economic development,it is important to keep in mind all of these understand a elements,for any one of them or some combination becomes the focus of a community economic community's economy or development strategy. to initiate some change. From a practitioner's perspective, the idea that community economic development is a truly The elements are interdisciplinary area of study has been widely accepted; unfortunately, the academy has been resources(land,labor, slow in embracing this approach.Some say that communities have problems and universities have capital,amenities,public disciplinary departments. Whereas the primary academic disciplines of economics, sociology, goods,and technology), political science,and planning bring significant insights to the table,community economic devel- markets (internal and opment requires a unique blending of all relevant disciplines.By considering the underlying eco- external),space, nomic,social,and political forces at play,the community can better focus on the issues at hand. institutions and rules, culture and society,and decision making. NOTES 1.Many communities or political jurisdictions tend to view themselves in isolation,separate and independent from the larger region.We maintain that successful communities are those that can retain their own self-identity but are tied to the larger region economically,politically,and culturally.Indeed,the popular notion of cluster development has moved many "isolated"communities into multicommunity collaborative efforts. 2.Clearly,there are several theories of economic growth that have been offered by economists that we will not cover in this discussion. 3.It is recognized that the neoclassical theory of the 1960s and 1970s became popularized in the 1980s through the ascendancy of conservative political regimes such as the Reagan(United States),Thatcher(United Kingdom),Mulrony (Canada),and Kohl(Germany)governments. 4.One could argue that this"spreading out"of the spatial size of the community in which people reside results in a cer- tain degree of apathy in community issues.The sense of belonging or being a member of any particular community is diluted (Putnam,1995). 5.Innovation or technology transfer is the successful introduction of ideas perceived as new into a community or as the first commercial or genuine application of some new development outside of experimentation(Friedmann,1972). 6.Changing factor prices and changing demand structures also contribute to changes in industrial structure. Downloaded from http://edq.sagepub.com at PORTLAND STATE UNIV on May 1,2007 ©2006 SAGE Publications.All rights reserved.Not for commercial use or unauthorized distribution. Shaffer et al./COMMUNITY ECONOMIC DEVELOPMENT 73 7.Within the institutional economics literature,one could think of transactions costs associated with enforcement of these formal and informal rules(Chamberlin&Jackson,1987;Deller,1998;Hirsch,1995a,1995b;McCann,2004).What does it cost the community,or specifically,businesses and people within the community,to adhere to these rules?Time and effort to apply for a zoning variance on a commerce development,or the costs associated with altering construction plans to adhere to environmental concerns are examples of such transactions costs.As described above,discussions of business cli- mate are often limited to the transactions costs associated with following the formal rules(e.g.,zoning and worker safety regulations,among others).We would argue that there are also transactions costs imposed on residents that are often over- looked in the economic development literature.An example would be the peer pressure associated with the first business in the community to hire immigrant workers. 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Special Presentation and Panel Discussion on t4weeeS sitd 11111111 Economic Development Monday, February 28 / 7 - 9 p.m. / Tigard Town Hall Learn about new approaches to economic development and how to utilize them for Tigard's future. What efforts are most likely to pay off for the community? Do we invest in people or factories? Which techniques—clustering, import substitution, multiplier effect—make the most sense for Tigard? Does the future really lie with innovation, adaptability and knowledge? What can local government do to effectively impact economic activity? Do we need to work with other levels of government, and community organizations as well? ,,%kers / Sheila Martin Director, Institute of Portland Metropolitan Studies College of Urban&Public Affairs Portland State University / Ron Bunch Community Development Director City of Tigard J 11 TIGARD City of Tigard I Community Development Department 13125 SW Hall Boulevard,Tigard, Oregon 97223 I 503-639-4171 I www.tigard-or.gov City of Tigard TIGARD Memorandum To: Mayor Craig Dirksen and Members of the City Council From: Ron Bunch, Community Development Director Re: February 28,2011 Special Presentation&Panel Discussion - "Successful Economic Development" Date: February 25,2011 The accompanying agenda, memo, and attachments have been sent to the Planning Commission for the upcoming February 28 presentation and discussion. Hardcopies will be provided at the event itself. An all-inclusive public notice of possible quorum of the various invited groups has been posted. In addition to the Planning Commission,the City Council, and the general public, the following groups have been invited: • Budget Committee • Transportation Advisory Committee • High Capacity Transit Citizen Advisory Committee • City Center Advisory Commission • Tigard Chamber of Commerce I'm looking forward to having Sheila Martin,Director of the Institute of Portland Metropolitan Studies, join us for what we're anticipating to be an exciting,informative, and lively discussion. TVTVC will be there to videotape the event. We hope to see many of you there!