Small-Town Economic Development: Housing, Business, or Both?

That Sioux Falls newspaper discusses the efforts of nearby small towns to reverse years of decline in population and economic activity [Steve Young, "Signs of Growth Energize Towns," that Sioux Falls paper that, like LodgeNet, profits from porn, 2007.08.08]. Towns like Parker, Centerville, and Viborg are seeing growth thanks to young families looking to combine small-town living with the well-paying jobs of the sprawling Sioux Falls megalopolis (and maybe the big oil refinery Hyperion is thinking of building in Elk Point).

The economic development coordinators interviewed for the article exhibit different approaches to promoting small-town growth. Recognizing the big commuter market, Parker and Centerville are focusing on housing. Says Bill Hansen, Centerville's economic development coordinator, Centerville wants to stabilize its population and attract young families:

"The majority of our efforts in the last couple of years has been to develop our housing projects.... If you can attract young families to the community, that keeps the school going. And when there's more people coming into town, there's more traffic in our businesses."

For small towns, keeping the school going is a matter not just of economic development but economic survival. The school district is one of the biggest employers, if not the biggest, in our small towns. The school also serves as the social hub of the community. Along with hosting the usual sports events, concerts, and plays, the small-town school is usually the best or only place to hold any sizable community gathering.

But when a town counts on the job market in neighboring Sioux Falls to drive its economic development, can it really count on more traffic in its own businesses? When people work 30 miles away, they will make some fraction of their purchases 30 miles away, sometimes by necessity ("Uh oh! I better fill up before I head home!"), sometimes by pocketbook preference ("Cereal's a buck cheaper a box at Hy-Vee in Sioux Falls"). Either way, by banking its economic growth on commuting jobs, a small town further forces its local businesses to compete with the big-city shops. The objective free-market theologian will say, "So what? Competition is good." The more holistically thinking small-town developer will tell you that a town needs a mingling of residents in various settings -- homes, schools, offices, and retail -- to develop a complete community spirit. After all, the term "bedroom community" is nearly an oxymoron. How can you be a real community when the only thing your residents have in common is that they sleep there?

That concept seems to motivate Viborg's city leaders. Banker Jon Overby, president of Viborg's Development Corporation, tells Young that his town is focusing "more on attracting business than increasing the available housing and work force":

Overby: "If we have places for people to work, they'll move here.... So the approach we've had is a little different than neighboring towns."

Overby doesn't want Viborg to follow the bedroom community model:

Overby: "That makes the business aspect important.... If people are driving to your town to work, they're not going to drive home and then drive somewhere else to purchase their goods.

Recruit new residents to build houses and then seek jobs, or recruit new businesses to attract workers who will then move to town and swell the tax rolls -- which chicken comes before which egg?

The answers for Centerville, Viborg, et al. likely differ from the answers for Madison. Our fair city sends workers and shoppers to Sioux Falls and Brookings, but we lie 45-60 minutes away from those two cities, meaning we are a little more insulated from those economic pressures. We have more employers and a university, so we can stake a better claim to being, as Young says of Viborg, a "community unto itself."

In terms of what specific actions cities and their economic development agencies should, perhaps we can consider what a community can do with the incentives it hands out. Suppose a community has $2.3 million to spend on economic development. It could dish out, say, a $200K grant to a business that wants to build a branch factory in Madison. It could take that same amount of money and offer 20 $10K housing grants for folks who want to move to Madison and build new houses. One new business or twenty new families -- which is the greater economic benefit? Both would help the community; maybe both should be part of the economic development strategy.

Or maybe we split the economic development money four ways:

1. a quarter targeted to attract new residents and help them buidl new houses
   
2. a quarter targeted to promote improvements in existing residential neighborhoods
3. a quarter targeted to recruit new businesses
4. a quarter targeted to help existing businesses renovate their storefronts (Main Street improvement!) and expand their operations

We certainly can't deny that Sioux Falls's growth has benefits for everyone in southeast South Dakota. But while we can take advantage of the jobs, goods, and services Sioux Falls can provide, towns like Viborg and Centerville and bigger, more distant burgs like Madison and even Brookings need to find economic development strategies that allow them to offer things Sioux Falls can't and maintain not just their economic viability but their identities as communities.

(p.s.: Or maybe we just do nothing and let the free market solve all of our problems, like it does with teacher salaries and non-compete clauses, right? At least that's what my free-market-theology friends would tell me. ;-) )

Update, noon: As I finally get my hands on the Tuesday MDL (things move a little more slowly sometimes out here in the country), I find the LAIC sees the need for improvements in housing in Madison. A Chuck Clement article ["City Transfers Land to Lake Area Improvement Corporation," MDL, 2007.08.07, p.1] says "the LAIC plans to place $100,000 into a fund that will help develop local housing resources. [LAIC executive director Dwaine Chapel] asked the city for another $100,000 to match LAIC's funding." Chapel wants to bring more jobs to town, but he wants those workers to be able to find decent places to live here as well.