N o matter where you live in the United States, the situation is usually the same. Companies expanding into a particular metro area invariably choose a site in “the suburbs.” Not only that, many “downtown” businesses are also picking up and moving to the ‘burbs.
City leaders don’t like it and they don’t hesitate to let people know it ... and how.
Everywhere I travel throughout the country, the local newspaper seems to be blasting suburban economic development efforts, especially when a company moves to the metro area from another part of the country and doesn’t select a location downtown or, even worse, when the central city loses an existing company to the suburbs.
| If a company decides to move from one part of the metro area to another location within the same metro area, that should be looked upon as a good thing. Why? Because the real alternative is for that company to leave the metro area entirely for a location where it can operate more profitably. |
The criticism has been leveled so often and for so long that many suburban economic developers actually believe it is valid. Many of them even feel guilty about it. They shouldn’t. To me, suburban economic developers are, in fact, simply doing what’s best for the entire metro area.
In that vein, here is my list of the top five myths about the urban vs. suburban competition:
Myth No. 1
— The strength of the metro area depends upon the strength of the main city. This school of thought looks upon economic growth anywhere outside the bounds of the central city proper as being bad for the metro because it did not take place in the urban center, which in most cases is in dire need of shoring up its declining tax base.
While that certainly is a problem, we also need to accept the fact that the population growth in our metros is taking place in the outer suburbs, not in the city center, so it’s only natural that that’s where the job growth is.
We need to quit looking at the artificial political boundaries that delineate our major cities from their suburban offspring, and look at the entire metro as being one big happy family. Remember, the labor market extends throughout the entire MSA, not just the downtown area.
Myth No. 2 — Companies and businesses relocating form one part of the metro to another is a zero-sum game for the community. This is absolute nonsense, and yet you hear it all the time. If a company decides to move from one part of the metro area to another location within the same metro area, that should be looked upon as a good thing. Why? Because the real alternative is for that company to leave the metro area entirely for a location where it can operate more profitably.
You can be sure that one option no business person in their right mind will choose is to remain in their present, unsatisfactory location and eventually go broke. If they determine they need to relocate in order to stay in business, that’s exactly what they’re going to do.
At least if they relocate somewhere else within the overall metro area, the jobs and tax revenue remain within the metro. If you’re in the Kansas City metro, for example, it’s a whole lot better to see that company move to suburban Overland Park than it is to have them pick up and move to Dallas or Denver.
Myth No. 3 — The suburbs and ring cities are attracting companies only because of the incentives they offer. This myth gets its legs from the fact that the leadership of the central city is in denial about the relative non-competitiveness of the downtown in relation to the suburbs.
Companies do not move because of incentives; they move to improve the business climate in which they operate. For some, it means increased profits. For others, it means life or death for the business.
Incentives don’t cause companies to move, although they may influence where they go once the decision has been made to relocate. As for the high growth areas in the suburbs, most of them don’t even have to offer incentives — other than those incentives available to any company in the state that qualifies — in order to convince a company to locate there.
Companies that choose to leave the downtown area for the suburbs do so for any number of reasons: it is almost always cheaper to operate there; they have access to a more highly-educated work force; their tax rate will also probably be lower. Whatever the reason(s), the one thing they have in common is a healthier bottom line.
As they say in the movies, “It’s not personal. It’s just business.”
Myth No. 4 — A few well-placed tax incentives, such as TIF or ETZ money, are enough to make businesses locate in available property downtown. People who believe this also believe that the only reason that local company moved its manufacturing facility from an 80 year old building downtown (with equipment dating back to the 1950s) to a brand new building (with a new line) at the intersection of two interstate highways on the edge of town is because of the work force training incentives the state offered them.
Let’s face it. If you have an area that offers TIF or ETZ incentives, it’s because you are having a difficult time getting businesses to set up shop there. There’s only so much that those incentives can offset on a prospective company’s balance sheet.
Don’t expect to lure a biotech plant or other similar high-tech facilities there. And if you do, it’s a safe bet that you’re probably giving away the farm.
Myth No. 5 — Business leaders will do what’s in the best interests of revitalizing the downtown area, if only they would open their minds to smart growth, sustainability, and other fashionable theories of social and economic management.
All I can say is that if smart growth is so smart, we must have the dumbest business leaders in the world in this country. While many of them may possess a great deal of civic pride, they also have a fiduciary responsibility to their company that requires them to do what’s in the best interest of the company.
If they can honor that trust and still locate in the downtown area, that’s great, but it’ll be because it’s in the best interests of the company, not the city.
So if you’re a suburban or county economic developer, be proud of your efforts to keep businesses from leaving your metro area, even if it occasionally means that your gain is your neighbor’s loss.
And if you’re an urban economic developer, be glad the company at least stayed in the metro. After all, would you really feel better if it left the state?
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