A different approach to economic development for Boyle County

Published 5:14 pm Saturday, May 6, 2017


Fairchild & Associates

More taxes and more funds to the Danville-Boyle County Economic Development Partnership will not bring more jobs. Danville taxpayers are looking at three substantial job-related tax rate increases since 2007. During that time, net profit tax rates have gone from 1 percent to a proposed 1.75 percent; and occupational tax rates have increased from 1.25 percent to a proposed 2 percent.

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Those increased tax rates are the direct result of job related taxes failing to keep pace with inflation. High tax rates are not conducive to economic growth or attracting relocating companies. Unfortunately, the rates will continue to rise until Danville-Boyle County learns how to succeed at economic development.

The key to improving our results at attracting new money into the area lies in developing an honest assessment of our strengths and weaknesses. We need to invest in correcting the weaknesses; and our strengths must be proactively marketed to carefully identified opportunities.

I want to suggest a scenario different and much less expensive than that being proposed by RKG’s Kyle Talente.

I agree with his idea that the EDP has too many organizational entities. I also agree that the position he identifies as a chief operating officer is needed, along with a marketing staff position.

I do not agree with the need or cost effectiveness of a nearly full-time traveling ambassador (the CEO position). Corporate visits that do not present substantive data regarding the merit of operating a component of the company in Danville-Boyle County are not effective in creating beneficial relationships.

Here is an alternative organizational structure that is a probably more effective and certainly a better value for Danville-Boyle County taxpayers. Let me identify the proposed organizational structure first, and then discuss the work to be done.

The core economic development function needs to be a government activity rather than a public-private enterprise. It needs to be subject to financial performance measures and public accountability. Except for in-process negotiations, its activity needs to be transparent to the taxpayers.

The existing partnership agencies are not directly related to economic development. It would be helpful for taxpayers to understand that they are focused on community development, not economic development.  Yes, there is a beneficial contribution to the area’s economy, but they should not be involved in policy decisions or direct pursuit of targeted development opportunities.

These agencies should be returned to their original purpose and means. The Industrial Foundation should be self-supporting and the other organizations should be funded by tourism tax, dues and fund raising.

The government’s economic development entity does not need a CEO, but a chief operating officer is acceptable. He or she must understand that companies relocate to solve problems that cannot be cost effectively solved in their current location.

Most community economic development authorities wait to be contacted by prospective companies and then offer supportive services and financial incentives in an attempt to “close” the deal.

A more effective strategy is to maintain a well-designed website dedicated to providing the most frequently requested quantitative economic and demographic data to companies that are casting a wide net to screen relocation candidates. But a good website is not enough.

Danville/Boyle County needs to identify and proactively market our strengths to potential new or relocating businesses and affluent retirees (10,000 people retire every day per the Social Security Administration). Retiring Baby Boomers (born 1946-1964) control 70 percent of the discretionary income in the United States. They seek good healthcare, travel-related continuing education and leisure activities. Think Ephraim McDowell, Centre College and the Convention and Visitors Bureau.

Identifying companies that are likely to relocate in the near future is not difficult.  Think about the ongoing shifts that could work to Danville/Boyle County’s economic advantage:

• As retirees age, their need of in-home healthcare services increases, as does their interest in home security, shopping services and meals preparation.

• A shift away from storefronts to online retail creates growth in distribution companies like UPS and FedEx, and the need for forward distribution of merchandise (warehouses).

• Growth of high speed internet and shared databases, video chats, conference calls, VPN networks and wireless internet make it possible to stay connected without sitting in an office, allowing workers to enjoy small town living and no traffic hassles.

• Improvements in 3D printing of metal composites promises opportunities for new specialized, small-batch manufacturing startups with very low capital investment.

• Constructing upscale retirement communities creates jobs and enhances attracting affluent retirees.

The economic development focus must be switched from manufacturing to service industries.

According to the U.S. Bureau of Labor Statistics’ latest report, covering the period 2014-2024, the services sector will account for 81 percent of the jobs. Goods producing sectors, including manufacturing, will account for only 12 percent and will be flat to decreasing in total jobs. The largest number of new jobs from 2014 to 2014 will be in: 1) healthcare and social services, 4 million jobs; 2) professional and business services, 2 million jobs; and 3) leisure & hospitality, 1million jobs.

All goods producing sectors except construction at +800,000 jobs and mining at +80,000 jobs will see negative job growth. Manufacturing ranks last — 17th out of 17 — with 800,000 jobs lost.

Dave Fairchild is a Danville resident who worked for more than 35 years in competitive assessment and market development. He heads the consulting company Fairchild and Associates and has completed studies of markets and economic factors for multiple local businesses and governments.