Economic development a complex subject

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By Harold Morgan

Economic development is one thing. Developing the economy is another. Conflating the two runs rampant, to the detriment of everyone involved, especially those paying the bill, taxpayers and that small subset of taxpayers, businesses, drawn into supporting economic development.
Economic development in concept is straightforward. It is a sales task. Developing the economy is social engineering, a far more complex matter.
At the state level, the sales task goes to the New Mexico Partnership, a small (five-person, two-consultant) private organization.
The partnership, based in Albuquerque, spun out of the Economic Development Department about 10 years ago. The rationale was that state employees, restricted by necessary government procedures, were unable to “sell” competitively. They couldn’t even buy dinner for a prospect.
A prospect is a company that might expand its existing facility or move an operation or start something new. Such things do happen. The developer sells geography.
Conventional elected official-chamber of commerce thinking lays a totally unfair burden on economic developers, that a company will come to town — or to the state and through its presence, solve all problems.
A complication for the partnership is that firms do not locate in — or expand in — the state as a whole. Firms go to a community. Inevitably, then, some whine about not getting appropriate attention. Nah, never here. Space limits preclude listing the web of relationships in which the partnership must operate.
Understanding the advantages and disadvantages of the given geographic slice is a basic task for a developer.
Steve Vierck, partnership president and CEO, listed plusses and minuses for the Legislative Finance Committee in May.
The happy news — Vierck’s list of selected competitive advantages — includes good transportation infrastructure (especially rail, which is improving), the usual research and testing facilities and scientific talent, energy, accessibility to leadership, quality of life, bi-lingual workers, low property tax, no inventory tax and job training programs.
The eight competitive disadvantages list, gleaned from executives and consultants, places not being a right-to-work state last. Right-to-work laws govern the degree to which, as a condition of employment, employees are required to join established unions and other matters. With more states passing right-to-work laws (Wisconsin in 2011, Indiana in 2012), I have been told, totally off the record, that RTW has become a top-level criterion for companies considering putting operations in a new state. We lose.
Taxes offer two disadvantages. New Mexico’s system is confusing. (No kidding.) Applying the gross receipts tax to research and development creates a “seven percent NM penalty.”
New Mexico’s relatively small population is a problem. Though a dozen or so states have fewer people, just half of our two million are concentrated (in Albuquerque and Santa Fe). The rest spread across the state, a situation quite different than Arizona, Colorado and Utah. With communities smaller and distant from one another, the problem of lacking trained, experienced workers is more noticeable. (This, in my opinion, is a function of our rotten schools.)
“Limited awareness of New Mexico as a place to do business” is the last item on my revised ordering of the disadvantages list. This chicken-and-egg problem has existed since I have tracked economic development. For any small business to get customer attention, the marketing effort must beat the competition.
Here tourism has an advantage. New Mexico’s land and cultures are inherently appealing. With an intelligent message (“New Mexico True”) intelligently delivered, results have improved. Further, I doubt that tourists much care about right-to-work or the gross receipts tax; it is the experience that counts.
For the economic developers, the sell is a slog. Vierck pitched the LFC for more money. That would be a good idea. Marketers need resources to combat to competitive disadvantages.