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Economic development is big business as Montana groups work to create jobs
If the more the merrier counts in economic development, Montana is doing well.
The state, with a population of just under 1 million people, has about 150 economic development organizations in cities, towns and regions, all more or less competing with each other to attract jobs. And that doesn’t count all the federal programs funneling money to scores of Montana businesses.
By JAN FALSTAD
Of The Gazette Staff
Are Montana and its cities and towns getting enough bang for its development buck? And how can the cost and benefits be measured?
Dave Gibson, who heads the Governor’s Office of Economic Opportunity in Helena, said he’s had to learn to live with tighter funding. After starting in 2001 with a budget for a staff of six, there are now just three employees, which includes Gibson. Two employees, not confident in their job security, left after Gov. Judy Martz announced she wasn’t running for re-election.
"I’m dying with work. I’ve got a five-mile stack of papers and a plan to write and no staff," he said.
When the office was created, Gibson had a budget of $1.2 million, then watched it quickly fall to $682,411. Some of the money went to fund security officers for Gov. Martz following the 9/11 attacks.
"They specifically cut the funding for marketing," said Gibson, who is paid $98,800 a year. "We’ve never been able to get a program going."
There have even been attempts to kill the office altogether.
Still, Gibson continues to work with different cities to generate jobs.
"We took our lumps, but we got pretty good results," he said. "The bipartisan support for economic development amazed me."
Economic development is big business in the Big Sky state.
Missoula has three development groups, including the Chamber of Commerce.
Billings has two: The Chamber and the Big Sky Economic Development Authority. There’s also a regional development group called the Beartooth Resource and Development Council.
Big Sky EDA actually is part of Yellowstone County, but that setup is rare. Most development organizations are public/private partnerships and the city or county is a member.
Other states
Comparing economic development programs and budgets among states is challenging because they all have different structures and approaches.
However, some comparisons help explain the process.
Montana is different because it has no sales tax. Neither do Alaska, Delaware, Oregon or New Hampshire.
Montana also allows only a few cities to have local options where people can tax themselves for local projects, including economic development.
Gibson said Montana is unique in another way. The state generally sends federal Community Development Block Grant money back to cities or regional organizations that make their own loans for business development. When the loans are repaid, the money doesn’t go back to the state. The loan and the interest stay in the area for future loans.
Gibson said Montana has about 40 revolving loan funds totaling more than $40 million. The largest is about $6 million, and the smallest is less than $1 million.
"There is no state pool for the big-bang projects," Gibson said. "I’m not so sure it’s not a good idea to have that money out in the smaller communities where local people look in the eyeballs of the business owners getting the funds and who aren’t up for re-election."
Different strokes
Idaho is focusing geographically by going where the jobs are and trying to lure them north.
"Our strategy is a low-cost message targeted to high-cost areas of southern and northern California," said Jay Engstrom, Idaho’s economic development administrator.
Idaho has 14 employees working in business recruitment and a yearly state budget of $1.5 million. Although the exact comparison depends on how economic development is defined, that’s four times as much as Montana spends. A third of Idaho’s budget is spent on economically depressed rural areas, meaning not to the big cities like Boise and Coeur d’Alene.
States need to fund economic development, Engstrom said, or they just shoot themselves in the foot.
"If a business gives a state a call and there’s no one at home to answer the phone, why would they deal with that state?" he asked.
Boise has been especially successful at attracting businesses and is the corporate home of Micron Technologies, Albertsons Inc. and Hewlett-Packard.
In 2002, Twin Falls got a Dell Computers center, which has delivered far more than promised for the town and for the region, according to Jan Rogers, executive director of the South Idaho Economic Development Organization.
Instead of 250 jobs at a technical support center for consumers, as promised, Dell now employs between 600 to 700 people, Rogers said.
She said the consumer center is being converted to a business support center this summer, which probably means more job security.
Twin Falls spent $1.5 million to lure Dell to town: equal parts federal, private and local funding. This is an example of the state keeping the federal dollars rather than passing them out to local communities as Montana does.
That same year, Billings came in second for another Dell project. That sales center went to Roseburg, Ore., an economically-depressed city of 20,000 in the southwest part of that state.
Helga Conrad, economic development director serving Douglas County, said Roseburg offered to pay the cost of training employees for Dell.
"The jobs probably exceeded what they promised. They’re probably up to 300 and adding more this summer," she said.
Folks who answer the phone with the Dell greeting, "What can I build for you today?" have brought a payroll of about $8 million a year to Roseburg.
North Dakota
Linda Butts, North Dakota’s director of Economic Development & Finance, said her state spends $22 million in each two-year budget cycle on economic development, which is combined with strong local efforts.
North Dakota, which has a sales tax, also gives local cities home charters. That means residents can vote to tax themselves a 1 percent additional sales tax to use for economic development or other public projects.
North Dakota is the only state with another advantage: It owns its own bank. In 1919, the state went into banking to promote agriculture and commerce.
When Bank of North Dakota loans are repaid, the money and the interest go back to the state’s general fund, not to out-of-state megabanks.
"What the Bank of North Dakota offers the citizens of North Dakota is a funding mechanism whereby those dollars are recirculated within the state," Butts said. "It’s usually $74 million per year."
The Bresnan deal
Gibson said the incentive package that BSEDA has offered to Bresnan appears to be a good investment when the project’s economic benefits are considered.
Bresnan was offered an incentive package worth about $1.6 million to build a regional network center in Billings. Bresnan expects the center will generate 100 new jobs, and Gibson thinks that’s a pretty good deal.
"I think we can do things like the Bresnan deal with a pretty reasonable amount of money. We’re just never going to be in the game of trying to attract a whole bunch of big projects," Gibson said.
He said his top accomplishments have been getting five bills through the last session, working on getting the university system more in tune with economic development, and clustering or concentrating industries. These are long-term efforts whose results won’t be seen for 10 years, he said.
Gibson would be happy if Montana could land more projects like Bresnan’s operations center – but don’t expect the state to flash big money at businesses thinking about relocating. "You don’t want to give away the farm," he said. "You aren’t going to see incentives of $200,000 to $300,000 per job. That’s just not going to happen."
Pawns in the game
There is no way for states or local development organizations to know if they are being played for pawns: Is the company serious about moving, or just trying to wrestle concessions from its home state?
Boeing searched for a new site to build the 7E7 airplane, then stayed where it was after the Washington governor offered $3 billion in tax breaks over 20 years. That amounted to a 40-percent tax cut for Boeing, money that was taken, in part, out of the state’s unemployment benefits.
Another organization is trying to develop Montana by breeding brain power.
Bruce Whittenberg, executive director of Leadership Montana and a former Gazette publisher, said the program is taking its first class of 40 people next fall and spending nine months teaching them to be leaders.
"It’s not about a sales tax or another policy agenda. It’s about giving people the skills to make a difference in government, non-profits or business," he said.
Finally, even those who do it for a living say measuring the success of private or public incentives is impossible.
Dr. Scott Rickard, director of the Center for Applied Economic Research at Montana State University-Billings, said only executives heading up the company really know what tipped the decision.
"Most everyone agrees we need coordinated economic activity," Rickard said. "But it always comes down to this: Did this last effort make the difference?"
Jan Falstad can be contacted at (406) 657-1306 or at [email protected]
***********
Fiscal year budget for the Governor’s Office of Economic Opportunity
* 2002 — $1,212,000**
* 2003 — $ 682,411
* 2004 — $ 683,350
* 2005 — $ 689,176
** While the Montana Legislature appropriated $1,212,000 to establish the Governor’s Office of Economic Opportunity in 2001, $149,000 was taken away after the 9/11 terrorist attacks to pay for protecting Gov. Judy Martz.
This cut and others in 2003 trimmed $530,000 from the Office of Economic Opportunity’s budget.
Source: Dave Gibson, Montana’s chief business officer.
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