Student Corner: What’s the Best Structure for an Economic Development Entity?

Community and Economic Development – Blog by UNC School of Government

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Student Corner: What’s the Best Structure for an Economic Development Entity?

By CED Program Interns & Students

Published November 18, 2010

Suzanne Julian is a UNC-Chapel Hill graduate student pursuing a master’s degree in Public Administration. She is currently working with the STEP leadership team in Pamlico County as part of the Carolina Economic Revitalization Corps program.

Here’s a scenario: you’re a business leader and a member of the Town Council in a small community. Over the last year, you’ve heard more and more talk among both your business associates and your fellow elected leaders about the town’s need for focused and effective economic development. Currently, the planning office of the county government is the only agency doing any official “economic development” activities on behalf of your town, and because it’s a small department, even those activities are limited. The leaders in the community want to expand the town’s capacity for economic development. They think creating some new entity is probably the answer, and turn to you for advice on what kind of agency the town should create.

What’s the right thing for the community to do in this situation?

A) Create a government-funded economic development commission.
B) Keep economic development functions in their current location (the county planning office) but hire a new staff person to focus solely on economic development.
C) Let the local Chamber of Commerce take the lead in planning and carrying out economic development projects, with some input and financial support from the local government.
D) Encourage interested private citizens to volunteer for an ad-hoc economic development advisory group.
E) It depends.

Give up?  As usual, the correct answer is “it depends.”

Groups that promote economic development come in all kinds of forms, and choosing a structure that matches the community’s specific needs, assets, and goals is an important foundation for effective economic development. Each possible structure has advantages and disadvantages, depending (of course!) both on what the community’s goals are and what resources, challenges, and options are available.

The many different kinds of economic development entities can be loosely grouped into 3 categories: public entities (like local governments), private organizations (like non-profits or business groups), and public-private partnerships.  Each type has its own advantages and limitations. Public organizations will have more authority over taxes, land use, and the ability to offer incentives to firms, but they will also be subject to broader scrutiny, and may sometimes fail to include representatives from the business community or other non-governmental sectors. Private organizations will perhaps have more flexibility and a more direct connection to the community, but they may have less influence over public policy and use of government authority, and may have limited access to public funding. Public-private partnerships can be a good way to mitigate some of these limitations on both sides, but they too have their challenges. Cross-sector collaborative approaches require especially thoughtful and attentive management, and the ambiguity of a public-private partnership can create questions about the ultimate accountability of the organization.

When making these decisions, it’s important to think about the community’s goals. What economic-development functions are most important? Wanting to be able to offer incentive packages to outside firms may lead to a very different place than wanting to create an economic development strategic plan that has broad community support. These decisons should also be guided by a good analysis of what resources and structures already exist in the community. Most communities, even very small ones, already have some kind of economic or community development happening. Using the community’s existing energy and capacity to help launch a successful new structuring of economic development activities can be a great strategy.

As is so often the case, there is no one “right” answer. The ideal economic development structure will probably be different for every community. But for every community, finding that ideal structure calls for a careful and thoughtful consideration of the community’s own goals, assets, and needs. Armed with that analysis, every community will have a better shot at creating effective and sustainable economic development structures.