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Want to Build Your City’s Economy? Think Transportation, Not Tax Breaks - CityLab

Regions with an efficient transportation network stand a better chance of boosting productivity through shorter commutes.

The local economic development field has had a rough go of it lately.


Charged with recruiting new businesses and supporting existing ones, economic development practitioners could only do so much in the face of a crippling pandemic. But their tactics have been under increasing scrutiny for years, especially in the wake of high-profile debacles like the Foxconn deal to bring a $10 billion tech manufacturer to Wisconsin and the multi-city bidding war over Amazon’s “HQ2” hub, which ended with the company pulling out of New York City after furious local opposition.


My own skepticism has been growing for a decade, ever since I worked in the Washington, D.C., mayor’s office leading the city’s business development efforts. One moment particularly stands out. Through months of negotiations, I had become friendly with a man who led the relocation process for his company’s headquarters. Chatting after a meeting one afternoon, his face broke into an impish grin: “David, did you know there is a 100-page book about how to recruit a company?” I did not, so he continued. “The first 99 pages are blank, and the last page reads: ‘Where does the CEO want to live?’”


A few weeks later his company announced the location of its new headquarters: a Virginia community a few minutes drive from where the CEO had bought a house.


If that experience wasn’t a strong enough hint (there are many similar stories), I soon realized that my painstaking efforts to craft incentive packages raised other policy problems as well. Relocation competitions are inherently zero sum, since one city’s gain of an employer mirrors another’s loss. And they’re unfair, because small businesses generally lack the scale needed to arrange their own deal.


Nevertheless, business attraction remains a linchpin of local economic development, a field whose emphasis on tax breaks, real estate development and job training can seem frozen in time. “I worry our economic development profession is rooted in a recipe book from the mid-20th century,” says James Corless, who leads the Sacramento Area Council of Governments.


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