Why Regional Economic Development Efforts Repeatedly Fail

January 30, 2019 | By Guest Author

I have been integrally involved in economic development in the Washington region since 1988, and in that time have seen repeated attempts to foster regional cooperation. Some have gone so far as to include joint marketing and recruitment. In the 1980s we had the Area Business Development Officials Committee (ABDOC) which was a committee of the Greater Washington Board of Trade (GWBOT). Feeling increased competition from better organized regions, especially Dallas and Atlanta at the time, the Greater Washington Initiative (GWI) was formed in the early 1990s as a public private partnership, aided and largely controlled by the GWBOT. This group actually fell apart twice before collapsing entirely in 2012.

Now, we are about to re-launch the Council of Economic Development Officials (CEDO), once again a committee of the GWBOT as a loose coalition of local and state agencies responsible for economic development in the region. Why is it so difficult to develop an effective regional economic development effort? Perhaps we should look at why these previous efforts have failed, and the counterintuitive measures that led to those failures:

The tax structures of the states, cities and counties create a "winner take all" set of incentives. For instance, in Virginia virtually all of the benefits of a corporate recruitment accrue to the community in which the firm locates. This is due to the heavy reliance on real estate and business taxes. In Maryland the incentive is a little less because there is a reliance on income taxes paid where the employees live, e.g. Prince George's County may gain some benefit if a firm locates in Montgomery County. At the local level however, we have always been about taxes, not jobs, and the taxes generally go solely to the winner.

Tenants, including the federal government, play localities and states against each other, hoping to get subsidies for locating there. One blatant example was the Northrop Grumman move from California, during which Virginia, Maryland and DC had a virtual bidding war for the relocation. GSA is creating a similar atmosphere with the FBI relocation, although in that case there will be no new jobs or taxes and therefore no economic benefit to the region.

It seems as though localities cannot help themselves from competing and actually hurting each other. For example, Alexandria targeted an Arlington agency through a GSA open procurement with the idea that other tenants would follow. In another example, I was recently on a panel sponsored by the National Capital Planning Commission and the Economic Development Administration on regional cooperation. I listened to the Maryland speaker talk proudly of relocating the Defense Intelligence Systems Agency (DISA) from Arlington to Ft. Meade and to the DC speaker describe plans to move all of the Department of Homeland Security assets from Arlington to the St. Elisabeth's campus.

If the region has a brand, it is considered to be big government with a bloated bureaucracy and companies feeding at the public trough. While the entire country sends their representatives to Washington, it is Washington that gets the reputation for ineptitude. The current efforts by the Council of Governments (COG) in their Region Forward initiative are to create a regional brand, but we do not have an economic base that invites description in a way that would please each jurisdiction. Even more important, economic developers try to differentiate ourselves from each other, not communicate our commonalities. Changing a brand that is reinforced by the national press all day every day can be futile.

Finally, the Washington region has some of the largest and most talented economic development efforts to be found in any region. They are all at the local level however, and I believe that none of us has a sincere interest in playing well together.

There is a real opportunity here for the re-invented CEDO. While it has limited resources, I ask these leaders to step up and change previous philosophies and begin to think of our region as a whole. Picking the region apart piece by piece does nothing in the long run but affect the entire region negatively. This is the chance to truly think about our collective challenges and present a unified front to counter the national and global perceptions of the Washington region. In tough economic times, it may be the only successful solution.

AED Director, Terry Holtzheimer