Eye on the Pie and Opinion

MARCUS: Our economic development is endangered

January 8, 2011

Another year, another “new” legislative session, another season of Cubs baseball. Thus far, the saddest bill proposed in the General Assembly allows Hoosier local governments to seek bankruptcy and management by a state-appointed agent. This bill is a back-door confession that the state’s 30-year war on local governments has succeeded. Bankruptcy is the flag of surrender and state management is occupation by a foreign power.

Ostensibly, this legislation is aimed at Gary, where fiscal shenanigans are not the art form they are in Indianapolis. Gary today, where tomorrow? With so many communities in financial distress, essential governmental functions are starving for dollars and leadership.

It is difficult to head an agency no one wants to support, even if its activities are vital to the future of the locality. We know about the cutbacks in public safety and education across the state. But there are less-publicized problems of equal long-term importance.

For example, this may be the year economic development in Indiana comes apart.

In the past, we have been entertained by annual reports of the state’s Indiana Economic Development Corp. telling us about more jobs than ever promised and more capital investment than ever on the drawing board. But what is happening on the local level? Are all new or expansion projects the result of action by the state agency? Doesn’t any credit go to local economic development organizations? Are there deals made without the state’s gentle touch?

It is no secret that many LEDOs find the IEDC high-handed, secretive and uncooperative. In most cases, the IEDC, however, is trying to protect the client’s confidentiality with the implication that local groups have loose lips.

All the wondrous news out of the IEDC leaves the impression that LEDOs may be unnecessary and counterproductive. This concept is perfectly in accord with the financial squeeze on businesses and local governments. Why put up money for something the state covers so well without local input? When the IEDC brings the client to town for the ribbon-cutting, the mayor and the county council president will get an opportunity to utter some clichés; if the governor shows up, they may even get on TV.

When many LEDOs were formed in the early 1980s, the motivation was to restructure the local economy after the loss of significant firms. Those job and payroll losses endangered other local businesses and a severe, protracted slump could be anticipated locally. Leading citizens and government officials responded by supporting the LEDO movement.

In the next few years, there is a strong chance we will see many LEDOs submerged into regional groupings. Others will be swallowed by chambers of commerce. Still others will be split, so that one part is under the city and another under the county.

Because money is hard to find, some LEDO boards may decide to assign a fundraising task to the economic development professional they hired to head the LEDO. This is like asking the surgeon to raise money for the hospital.

Today, LEDOs throughout the state will be easy targets to scale back because they are “too expensive.” The economy today, however, demands that LEDOs be strengthened, not weakened. Competition will be intense for business expansions in 2011 and 2012. The best-prepared communities will have a strong advantage with a LEDO that has sustained support and a knowledgeable, flexible staff.

It will take more than simple property tax abatement and a welcoming smile to attract today’s business executive to Mytown, Indiana. A community ready for a new firm or an expanding company has a LEDO staff with the knowledge and skill to match the community’s resources to the needs of the searching firm.

That knowledge and skill do not survive a starvation budget and a minimalist mission.•

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Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.

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