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HomeMy WebLinkAbout02.27.12 EDA Packet mil•<vvo+`BAo AGENDA REGULAR ECONOMIC DEVELOPMENT AUTHORITY MEETING FEBRUARY 27, 2012 6:30 P.M. CITY COUNCIL CHAMBERS Todd Larson, Chair Julie May, Vice-Chair Jason Bartholomay, Terry Donnelly, Christy Fogarty Action Taken 1. Call Meeting to Order 2. Pledge of Allegiance 3. Roll Call 4. Approve Agenda 5. Citizen Comments/Presentations 6. Consent Agenda a) Meeting Minutes (1/23/12 Regular) Approved b) Bills: 1/23/12—2/26/12 Approved 7. Public Hearings 8. Continued Business a) EDA Powers and Status/Future Restructure EDA during 2012 b) EDA Strategic Plan Information Received i. Target Businesses Hotel, Grocery, Retail ii. Review Strategic Plan Tracking Sheet 9. New Business 10. City Staff Reports/Open Forum/Discussion a) GROW Update Information Received 11. Adjourn MINUTES ECONOMIC DEVELOPMENT AUTHORITY Regular Meeting January 23, 2012 1. CALL TO ORDER The meeting was called to order by Chair Bartholomay at 6:30 p.m. Members Present: Larson,Bartholomay, Donnelly, Fogarty, May (arrived 6:31 p.m.), Bonar, Jolley Members Absent: None Also Present: David McKnight, City Administrator; Tina Hansmeier, Economic Development Specialist; Lee Smick, City Planner; Cynthia Muller, Executive Assistant 2. PLEDGE OF ALLEGIANCE 3. APPROVE AGENDA MOTION by Fogarty, second by Bartholomay to approve the Agenda. APIF, MOTION CARRIED. a) Annual Organizational Matters i. Election of Officers MOTION by Bartholomay, second by Fogarty,to nominate Mayor Larson for Chair. Voting for: Bartholomay, Donnelly, Fogarty. Abstain: Larson. MOTION CARRIED. (Member May arrived). MOTION by Fogarty, second by Bartholomay to nominate Member May as Vice Chair. Voting for: Bartholomay, Donnelly, Fogarty, Larson. Abstain: May. MOTION CARRIED. ii. Meeting Schedule EDA meetings are held on the fourth Monday every month at 6:30 p.m. iii. Adoption of By-Laws iv. Official Newspaper A change was proposed in the By-laws for the EDA to adopt the same legal newspaper as the City Council. MOTION by Fogarty, second by Donnelly to approve the By-laws with changes. APIF, MOTION CARRIED. 4. CITIZEN COMMENTS/PRESENTATIONS 5. CONSENT AGENDA MOTION by Fogarty, second by Bartholomay to approve the Consent Agenda as follows: a) Approved EDA minutes December 27, 2011 b) Approved the Certificate of Completion—Immanuel Dental c) Received Information January Activity EDA Minutes(Regular) January 23,2012 Page 2 d) Approved Bills 12/27/11 — 1/22/12 APIF, MOTION CARRIED. 6. PUBLIC HEARINGS 7. CONTINUED BUSINESS a) Economic Development Strategic Plan—Executive Summary City Planner Smick has condensed the strategic plan into an executive summary. The ideas are organize,market, expand and retain, and recruit. Under each priority are strategies. Organize - Review the vision and mission statements. - Determine roles. - Determine local regulations and how they will benefit economic development. - Determine funding sources. Staff proposed removing an item concerning how/where GROW Farmington elements and initiatives are appropriate in the strategic plan as that is a role. There are a number of roles that need to be determined such as the EDA role, staff role, and GROW Farmington as an entity role. Market We need to improve and promote the community by improving the perception of the community. - Determine a unified message. - Identify targeted businesses we are looking for. - Have a marketing plan. - Have a shop local program. Member May suggested under Organize—Determine roles, under that should be to determine whether there should be an EDA. City Planner Smick noted that is included in the larger plan. Retain and Expand - Develop a business retention and expansion program. - Create an environment where businesses can prosper and grow. - Develop partnerships inside and outside of Farmington. - We need a program for communication. - We need a redevelopment plan for the downtown area. Regarding the redevelopment plan for downtown, Chair Larson asked how intense that would be. A few years ago we had an overlay zoning to determine the downtown area and asked if the plan would be within that area, or are we creating a new map. City Planner Smick replied it would be within that area,but there could be a redevelopment plan discussion of the fringes. In the Comp Plan there are certain areas outside of the overlay district that are also shown as business. Are we going to keep that? Are we going to expand the downtown and EDA Minutes(Regular) January 23,2012 Page 3 in the future buy homes that are for sale to create new business areas? Does the City want to be part of that? Does the City want developers to come in? We already have the architectural standards, but we also need to look at how the development of the downtown area will grow. Economic Development Specialist Hansmeier added that the cities or EDA's can apply for redevelopment incentive grants on behalf of individuals. This can help private property owners acquire additional properties to assemble a larger area for redevelopment or to expand their business. One of the things we don't have is a redevelopment plan,which is required for this program. She would like to move this up on the list as there is some land not being utilized at its best. Staff will provide a copy of the overlay map to the EDA. City Planner Smick will be talking with the Planning Commission about taking the business fringe land use areas and determining whether we want to take them back to residential. That is a huge discussion, because right now they are business and that is where the redevelopment plan is. Do we want to see the downtown expand when homes are no longer on the market and a developer comes in and wants to buy them and make it commercial? Those are the types of questions we need to answer. We may not want to remove the areas shown as business right now. Chair Larson asked about the timeline to begin these discussions. City Planner Smick noted the Planning Commission will discuss this tomorrow night and the Council will see this in 1 -2 months. Recruitment - Create a business attraction team that will put together a business recruitment program. -We want the market to attract businesses and need to determine how. - Identify businesses that we want. -Are there certain home builders we want to see the in community? -Determine how we will do the shovel ready initiative. In the future are we going to assemble land on the west side of the industrial park? Are we going to be in the land business? Are we going to allow developers to do that? Are we going to be the ones leading the assemblage of this land for developers? Are we going to put in the infrastructure to get the business park going? That is what we need to determine to be shovel ready. Chair Larson felt it would be important to talk to businesses that we want to attract and determine where they would like to see the rooftops and blend those two together. If the EDA is in favor of this strategic plan, staff will add some history and knowledge of what has happened, the summary of the plan, the strategies and action steps. Once the EDA approves these priorities, this is the plan and action steps staff will follow. City Planner Smick proposed to have the strategic plan put together to be given to the EDA at their February meeting. The strategic plan will help determine what type of businesses we want and how do we get them. We have to meet the requirements of the strategic plan. Chair Larson noted this is exactly what he wanted. All members agreed it is a good outline. Member Bonar EDA Minutes(Regular) January 23,2012 Page 4 asked if this summary would be attached to the full document. City Planner Smick suggested keeping the larger portion separate. This summary would be if someone wants to see what the EDA is doing. Member Bonar asked when dates will be assigned to the tasks. City Administrator McKnight stated staff will start on this tomorrow. 8. NEW BUSINESS a) 2011 Public Service CDBG—Scholarship Program Regarding the 2011 CDBG allocation,the EDA and Council previously approved allocating$16,000 towards a public service or a program to add a part time staff person to the senior center to allow for expansion of programs. Since then,the interpretations of the requirements are better understood, as HUD and the CDA have been discussing the requirements. A part time staff position is no longer a viable option. Economic Development Specialist Hansmeier suggested using the funds to create a scholarship program to help those 62 years of age or older or of low/moderate income to help them participate in a fee based activity at the Rambling River Center. Chair Larson asked about the demand for a scholarship. A number of individuals have indicated they cannot afford to participate in some programs. Staff has also looked at using the scholarship to offset membership fees. Member Bonar asked about the current membership of the senior center. Parks and Recreation Director Distad replied in 2011 the membership was 400 people. The other goal of the program would be to assist with the membership fee similar to the Rotary program for youths. Staff feels they could capture more dollars through this program, because people want to participate, but do not have the finances to do so. Chair Larson asked if there was a plan to promote this program if it does go through. Parks and Recreation Director Distad stated it would be tailored similar to the Rotary Club's youth scholarship program where there is criteria that has to be met. There is an application process,people between the ages of 50-62 would need to verify income levels, anyone 62 or over would automatically qualify and not have to verify their income. Member May did not realize the Rotary Club scholarship was just for the youth and felt it could be expanded. She had a concern with public funds being used to pay City fees. She asked if the money could be used for more business development grants. Economic Development Specialist Hansmeier noted it can be allocated to the micro enterprise program for business owners that are of low/moderate income and have five or fewer employees to help offset the cost of rent up to 12 months. There is also the commercial rehab fund. Member May was more in favor of directing the funds toward businesses. If there is a need to pay for fees and memberships, we should talk to the Rotary Club. Staff noted the maximum amount a person would be able to access is $60. Member Bonar understood Member May's position. He noted if there is $16,000 available in$60 increments,that is 266 scholarship opportunities. Parks and Recreation Director Distad confirmed this and added the program could last several years, not just one year. Member Bonar stated the pool of money is ongoing. Staff added until it is spent down. Member Bonar encouraged a EDA Minutes(Regular) January 23,2012 Page 5 balanced approach, but suggested being closer aligned to what the need would be. We need to use our tax dollars as wisely as possible. This is one potential use,but he would not use the entire amount over a period of time. We need to also look at other ways, such as micro enterprise to make sure we utilize these dollars to the greatest good possible. Member Jolley asked if it was one time only funding or renewable. Staff stated it is a one time allocation, but if the City sees there is a need, we could continue to fund that need through CDBG dollars. Member Bartholomay asked about the number of membership drives done. Parks and Recreation Director Distad noted there is a membership drive done every year where letters are sent to previous members and to the public. The membership to the senior center has been reduced to $25 and there is no non-resident fee. There has been an increase with the number of people outside of Farmington from the last two years. Member Bartholomay asked if there could be more membership drives or any type of fundraising. Staff noted the membership is advertised to the public. Member May stated we are talking about the senior center and this is the EDA. She did not feel this is the EDA's role. With these funds we should be talking about business development. She was in favor of supporting the senior center, but this seems odd. Parks and Recreation Director Distad noted it is an allowable expense through the CDBG program and when the attempt to hire part time staff did not work out, staff looked in another direction to determine how the money could stay with the senior center to help the revenue stream. Economic Development Specialist Hansmeier noted the EDA was included in the recommendation to Council to use the $16,000 towards public service so we want to get the EDA's opinion on this program also. Parks and Recreation Director Distad noted other cities do use this money for senior programs. Mr. Clyde Rath, Farmington Business Association President, stated he would agree with Member May on this. Taking funds away from the EDA for the senior citizens will not be popular, but the position of the EDA is to do EDA work. He did not think senior citizens would be opening stores downtown. We have an opportunity downtown where a church is possibly moving out of downtown and if that happens, it opens a large storefront downtown. If we have funds available to attract more retail stores to help with their rent, that would be a clear direction to take rather than providing membership to the senior center. Chair Larson noted it is a good idea, but we can accomplish the same thing through the Rotary or the Lion's. Member Fogarty agreed the purpose of the EDA is to spur economic development in the community. The one thing is that the EDA becomes responsible for the CDBG funds and the funds are not directed in that direction. We are the body that has to decide what to do with those funds. Many of the initiatives that have been very effective in the City,the County or federal government decides they do not like what we are doing. Member May is right, we are talking about the senior center which is not hand in hand, but that is because this body has to decide. If we were to dismantle the EDA, it would come to Council which would make the conversation very appropriate. She did not think we need to make any decisions EDA Minutes(Regular) January 23,2012 Page 6 tonight and she wants to know whether the funds can be used to offset membership fees. To come up with a membership drive to help the senior center be sustainable on its own is worth using CDBG funds. That comes back to the larger picture with budget discussions and that we come up with a game plan at the senior center to make it more self-sufficient. Member Bonar agreed the expanded scope of the senior center long term may be one of the best options for its self-sufficiency. Whether that means bringing in the youth or something else, we do need to look seriously at how that particular entity prospers in the future. Chair Larson asked about direction for staff. Member Fogarty was not willing to vote until it can be incorporated into a larger budget. She would like to see it go to micro enterprise if it will help businesses get started, but if we can spur something at the senior center, people will see the benefit and it becomes a higher priority in their budgets. Member Fogarty felt the majority of the EDA would like the funds used somewhere else. Member Bartholomay asked if there are seniors that would take advantage of this or do we know how many. Staff has not gone that far until approval was received. Member Donnelly would rather see the money used for business development. He did not see the connection with the senior center. Economic Development Specialist Hansmeier stated the main purpose of the funds is to benefit those of low/moderate income or to improve slum or blight. Associated with that is public service where you can utilize the money for seniors of low/moderate income or of a certain age. Member May asked if we allocate to mirco enterprise, can you pull it out later for other uses. Staff stated it is flexible. 9. EXECUTIVE DIRECTOR'S REPORT/OPEN FORUM Pellicci's have finished their sprinkler improvements so they will be finishing their first round of grant reimbursement. A new business is coming, B&B Motors, in the former Lamperts location. The 2011 employment figures are up by 23 people from 2010 for Farmington. Staff will provide the figures to the EDA. Member Bartholomay thanked the EDA members for allowing him to serve as Chair the past year. He agreed the position should change yearly. Member Jolley stated there was a ribbon cutting today at the car wash for a new automatic bay on hwy 3. She understood the Steering Committee for GROW Farmington met and asked if there was any report. Mr. Clyde Rath stated the Steering Committee met and they discussed roles and past events with the EGC, EDA, and GROW Farmington. Everyone wanted to make sure the discussions continued. Having the School Board included is very good as there were discussions about sharing facilities. The next Steering Committee meeting will be January 26, 2012. EDA Minutes(Regular) January 23,2012 Page 7 10. ADJOURN MOTION by Fogarty, second by Bartholomay to adjourn at 7:20 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant � 6d o P O II C c4 8 p 0 N N N sp O O z a a g 2 a o- O 0 J J ❑ O O 0 0 z o ci U 0 m• I 2 co H Z SW O re O a o • J a N O 13 co 7IN O i- E o E c0 of co o 1 ❑I § o0 LLU N m N N 0 'TS N W S "_ O. U W g O 0 0 Z N C7 CO s - a Z co N t9 8 g v ✓ N Z 8Iz ' 0 a O ❑ rn ES g y Z F en ...= 2 > 2 ZR Co o , ul t9 V co d 0? i 11.1 w 6 n a " o w w d g r g 1 H N o a 0 o V o c u�u o°o co rn d co co re N C (D (0 T --- E Q N N at O N TO 1L t ❑ ' a is Ul 4k W coo r. F- Y 00 r c s IZ Z = r 0 UQ., MEMORANDUM TO: Farmington Mayor and Council FROM: Joel J. Jamnik, City Attorney DATE: February 27, 2012 RE: EDA/CITY COUNCIL Mayor and Council: I have been asked to address the question of what are the powers of an EDA compared to having no EDA and having the Council perform economic development activities. This is both an easy and a difficult request. Luckily, there is already some information on the topic. See page 4 of the EDA Handbook (link below) that lists the primary powers of an EDA. http://www.positivelyminnesota.com/Data Publications/Publications/Economic Develop ment Guidance/Economic Development Authority Hbook.pdf Also, the Community Development Section of the League Handbook discusses City community development powers, including HRA and EDA powers: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&ved=OCFEQFjA H&url=http%3A%2F%2Fwww.lmc.org%2Fmedia%2Fdocument%2F1%2Fchapterl5.pdf &ei=y0Q5T9X6Cc7E2QX88ISyAq&usq=AFQjCN FHJIcxKbfFj- rDQtBZL57kAzVQ1Q&sig2=NBuIUQbXjeQWbc FxPkDKQ These resources provide a broad overview of a city (and its EDA's) role in promoting community development. To more directly address the issue of whether an HRA/EDA is necessary is a little more difficult and legally confusing. Historically cities and counties were not direct participants in economic stimulus or housing programs. When the legislature first authorized local governments to become involved in certain housing and redevelopment programs, they placed in law certain requirements. Some of the requirements included establishing or using certain separate agencies or bodies to undertake these programs or initiatives, and to pass enabling resolutions making findings, or to adopt a plan of some type. There were multiple reasons for the creation of separate bodies, including the desire to provide for specialization, justify a dedicated fund or tax, and to depoliticize operations, often owing at least in part to the fact that these authorities were first granted to the largest local governments. 1 These separate agencies or entities (which include housing and redevelopment authorities, port authorities, and economic development authorities) were authorized to issue revenue bonds backed by tax increments from the projects, or to make a separate levy outside of levy limits to finance these programs, powers that cities generally didn't have previously. . Over time, more and more cities sought the same or similar authority, and asked the legislature for more flexibility in the procedural or structural requirements. While the legislature for the most part agreed to broaden the eligibility to engage in these programs by smaller local government entities, they granted the authority but most often did so while retaining the various procedural and structural requirements. In short, while a city can exercise eminent domain and spend money to buy and sell property for public purposes (such as for city halls, other public buildings) under the statutory authority provided in Chapter 412, if the City desires to condemn, purchase or sell property for housing or redevelopment purposes, or to pay for these costs or the costs of providing municipal services to the property through tax increment revenue bonds, it needs to base those acts on authority provided in other statutes, most notably Chapter 469, which authorizes that activity by the City's HRA or EDA, even if the Council is serving in that capacity. Powers vested in the HRA or EDA that generally are not available (or of much more limited availability) absent their existence include: 1) Acquisition and sale of property for housing or economic development purposes. 2) Use of tax increment financing. 3) Issuance of loans to businesses. 4) Special levy for housing and economic development purposes outside of general levy limits. 5) Receive federal or state grants or loans for certain housing or redevelopment projects, or qualify residents for certain subsidies under programs. While cities without HRA/EDA entities or enabling resolutions can undertake some community development initiatives such as creating industrial parks or districts or creating a commercial rehab loan program (see Chapter 15 of the Handbook), they cannot make full use of all the community development powers granted by the legislature without creating an HRA/EDA. cc: David McKnight, City Administrator 2 NIISSION and VISION The mission is the starting point of the strategy,which provides a purpose for the EDA organization. It articulates why you exist as an organization, describes what the organization does in clear terms,describes the purpose of the organization, and answers the question"Why are you here?" Notes: The Economic Development Authority's mission is to create Farmington as one of Minnesota's most desirable cities to open a business by being business friendly, responsive, and innovative in the realm of economic development services. The vision describes the roadmap of the strategy providing a d rection for the plan. The vision provides a clear and compelling view of the future and answers the question "Where are we headed?" ��c x f r x3.'s n as.a ` r ", `r s rys t 'It4Y FarmI gto is a vibran, t Cit,6 that co braes atural resources; `; . and sense o�f comm unit` with ian -s ablish ownto:wn ,, ,,ti The Cit 4-*.offers"a'166,, erse grow in e economically sustarneo!; ,, i , �.x j ax �"e9:J k �e.. � ��S.,r s� 3af uk s-. � a ., �f_ communrt` with 'excellent schoo/s quality jobs` and unique r 1 � �� m , a'�'s,, w , ,+t „r1{ '4 '.{�.,,'i.xt}s i.t�r }., ;� ^}'sroS s;,-, ':,,, it, .h r �: � :1,. , shop in an o .sing options, x�� , r� . 4, �'' ,fir��, ,em 3 ,. . � Notes: The Farmington FDA's vision is to improve the economic vitality of the City of Farmington and to enhance the overall quality of life by creating partnerships, fostering employment opportunities, promoting workforce housing and by expanding the tax base through development and redevelopment. Ai ARM/ City of Farmington 430 Third Street , Farmington, Minnesota 1�° 651.280.6800•Fax 651.280.6899 "pt0"� www.ci.farmington.mn.us TO: EDA Members FROM: Lee Smick, City Planner AICP, CNU-A SUBJECT: Economic Development Strategic Plan DATE: February 27, 2012 INTRODUCTION/DISCUSSION Attached to the agenda is the Economic Development Strategic Plan. The plan is in binder form to allow for insertion of additional information and hence, is considered a working document. Please bring your binders to EDA meetings in the future. Staff would like to accomplish the following list of items at the meeting tonight: 1) Review Mission and Vision statements to determine if revisions are required. 2) Review SWOT analysis from 2007 to determine if additional information should be submitted to list. 3) Make a list of targeted businesses and prioritize. The above-mentioned action steps are the initial kick-off items for the Strategic Plan. Once these are answered at the meeting we will check them as completed in the status column. Additionally, staff will discuss the Tracking Sheet to review the immediate items to complete and discuss upcoming action steps. The Tracking Sheet will also serve as a guide to the EDA for the next 3 years. Currently, years 2012 and 2013 are shown on the sheet in quarters. Due dates are March 31st, June'30th, September 30th, and December 315t. The Tracking Sheet will be discussed at each monthly meeting of the EDA. ACTION REQUIRED Review plan and provide comments to the above-mentioned items. Res' 11 s. . ed, ce- ee Smick, City Planner AICP, CNU-A ECONOMIC DEVELOPMENT IN A COMMUNITY Farmington,Minnesota has been known for its"village of farms". However,new excitement is occurring in the business and residential sectors in the community and Farmington is exploding with opportunities to continue to grow. In the past decade, Farmington's population grew by 70%,making it#5 in growth rate in the metro area behind Otsego, Hugo, St. Michael, and Shakopee. The Economic Development Authority has prepared an Economic Development Strategy in order to guide Farmington's economic direction for the next 3 years,building on its strengths to enhance the community's financial and cultural wealth. By diversifying the local economy supporting existing businesses,marketing the relatively close proximity of the downtowns of Minneapolis and St. Paul, and the International Airport, and providing assistance to businesses, Farmington has become a strong presence in the metro area. Why Undertake an Economic Development Strategy? The Economic Development Strategic Plan 2012-2015 describes a roadmap for the City and its partners (private,nonprofit,public sector)illustrating how they can work together to enhance employment,investment and quality of life opportunities that benefit the entire community. The strategy is based on the premise that the community can develop visions of what it wants to become,determine the strategies in which it has the best chance of being successful and apply resources to achieve them. If done systematically and over the long-term,Farmington can enhance its economic base while maintaining its core values. Because this plan is a"living"document, it will change and adapt over time to shifting economic,political and social conditions. Local leaders may decide to adjust various parts of the Strategy, including benchmarks and performance measures, as appropriate. Monitoring the progress of each strategic component will enable decision-makers to determine the effect of policies and programs on overall goals and identify what elements of the Strategy need to be expanded or altered. For Farmington,there are a number of motivating factors for this Economic Development Strategy. They include: • Establishing the role and direction for the activities of the City's Economic Development Authority, • Desiring to enhance its reputation as a proactive city that embraces partnerships with local and regional economic and business development organizations, • Welcoming new businesses and acknowledging the important contribution of existing businesses to the city's long-term economic sustainability, • Ensuring that municipal costs are competitive to other jurisdictions, especially within the industry sectors that are important to the city's economic success, 1 • Providing an environment of"certainty"for businesses by establishing clear, consistent policies for development,regulation, and taxation, • Streamlining regulatory and permit processes while balancing community goals, • Providing responsive and flexible customer service at City Hall, • Including economic impact considerations in municipal decision-making, • Acknowledging that communities must compete for investment,human resources and infrastructure, • And,presenting a positive image of Farmington through the media, citizens, and existing businesses. In reality,the City is continuously making decisions that affect economic development. The most obvious ways in which economic development is influenced by local government are through decisions on land use and property taxation. But,there are many other ways in which economic development can also be either positively or negatively affected. Examples include the working relationship between local government and the business community,the cost and time required to move through municipal review and approval processes, and the effort made to understand and respond to the needs of new business. The single most important thing a community can do to support and encourage development is to manage and reduce developer/investor's risk,provide as much certainty as possible about the permitting process, and provide as much clarity as possible about economic development policies. Economic development is about more than attracting companies and investments to a community. These opportunities are part of stimulating growth, but they should not be pursued at the expense of overlooking the needs of the community and existing businesses. In fact,research from numerous sources shows that existing businesses create 60%-90%of all new economic growth in a community. This percentage should not be taken lightly, but included in a strategy that maintains our base of businesses by providing resources to assist those businesses. Methodology This Economic Development Strategy presents a plan for Farmington's future, and outlines four priorities that the community will strive for in its economic development efforts for the next 3 years. Each priority includes a set of strategies that represent the key strategies to focus on to attain it. Recommended action steps are provided for each strategy. Action steps are the specific items that Farmington will need to implement the strategies, and ultimately achieve the mission and vision of the EDA. For this Strategy to be successful,the progress of implementation must be monitored to keep the work focused on the most pressing issues and completing the action steps in a timely manner. This can be done by regularly collecting and analyzing data pertaining to the benchmarks and performance measures that accompany each goal. The benchmarks and performance measures will allow the EDA to gauge the impact of individual action steps and assess the overall progress of achieving the goals. Benchmarks and 2 performance measures will enable Farmington to track the progress of strategy elements and determine if additional efforts are needed to reach the EDA's priorities. What's in a Strategic Plan? The following flow chart shows how the strategy is laid out to eventually meet the mission of the EDA. The mission is the starting point of the strategy which provides a purpose for the EDA organization. It articulates why you exist as an organization, describes what the organization does in clear terms,describes the purpose of the organization,and answers the question"Why are you here?" The vision describes the roadmap of the strategy providing a direction for the plan. The vision provides a clear and compelling view of the future and answers the question "Where are we headed?" Benchmarks and Mission Performance Measures ft Vision Action Steps Priorities I Strategies Priorities are overarching issues that the EDA wants to address. The priorities were set in early 2011 which include the Organizational Plan for the EDA. The Marketing,Business Retention and Expansion,and Business Recruitment are the most important issues that need to be addressed in the Strategic Plan as determined by the EDA. 3 Strategies zero in on the priorities and determine how you will achieve those priorities. Action steps guide your daily,weekly, and monthly tasks for accomplishing the strategies. And fmally,benchmarks and performance measures holds the organization accountable to meet the mission. Mission A mission statement conveys the purpose of the economic development organization. It helps an organization clearly communicate its purpose and direction. The mission statement was adopted in 2006. The Farmington EDA's mission is to improve the economic of the City of Farmington and, ,to enhance the overall quality of life by creating partnerships,' fostering, 'employment opportunities, promoting workforce " a housing and by expanding the tax base through development and redevelopment iV � �, '�� :'b w "Vf I�' "'ra l!' "*'� �Y ��'14 '9 hcrw,k. .w�s.ri ymy i...'�8aasG Vision A vision allows the planning group to see the community in the future,provides a foundation for all economic development activities, and should be creative but based on reality. Every organization needs a vision of how it will operate. The vision statement determines"where do you want to go?"The vision statement is your inspiration,the framework for all your strategic planning. ..Farmington is a vibrant City that combines natural ';01;:ii,` resourcesand sense of community with an established downtown, ' Thee City offers a diverse, growing, w , ; "' �� ear gee ; , 'economically sustained community with excellent V schools, quality jobs, and unique'shopping and housing y: options, The City Council,EDA, and key staff participated in several visioning sessions during the summer of 2007. The idea of what the EDA's dreams were for the City,the existing strengths that would result in the achievement of those dreams, and the weaknesses that may stand in the way were all key discussion points that assisted with the creation of a 4 vision for the City of Farmington EDA. The vision is intended to guide the work of the EDA. A Measured Approach to Chasing Development As Farmington considers strategies for economic development,it is important to understand the reality of chasing huge boxes of retail or production space. Economic development programs continually focused on attracting industry as the most effective strategy for job creation have often failed. For many communities, and in particular rural areas,this strategy often "lines the pockets" of the real estate development community while creating less than living wage jobs in big box stores that undermine local retail and service enterprises. In contrast,those communities able to retain retail and service sector local businesses may see profits invested locally and contributed to local causes. The result, according to Rupasingha and Goetz(2003)is that "self-employment is associated with lower poverty rates,while the presence of Big-box retailers is associated with higher poverty rates." Community leaders often assume that incentives offered for relocations will be returned many times over in new tax revenue and support for schools and local infrastructure. The reality,however,is much different. Relocations often create new costs in the future when infrastructure ages,the workforce needs change, or the incentives run out and the operation moves again(Humphrey, 1988;Flora&Flora 2004). An aggressive strategy to "chase"development also requires significant staffing and operating funds to support the necessary travel and public relations costs. Small communities such as Farmington generally do not have the resources to do this. The reality however,is that industrial recruitment,while generating jobs in some communities, accounts for only a small portion of overall new job creation. Indeed, research indicates that this strategy has limited effectiveness for most cities (Kauffinan, 2002). "Grow Your Own" as a Strategy The most effective approach may be to adopt an"enterprise development" strategy, which simply means supporting the development of small to medium sized business in the community through a variety of proactive measures. According to Thomas S. Lyons (2002), "Enterprise development is increasingly recognized as a relatively low-cost, 'bottom up' strategy for economic development that is particularly well-suited for a variety of rural and urban communities" (p.1). The following is put forth as a rationale for focusing on a"growing your own" strategy for economic development: 1. The majority of businesses are small or medium sized, and they employ the majority of people in the United States. 5 2. Entrepreneurial growth companies account for "at least two-thirds of net new jobs in the American economy." 3. Small businesses incubate innovation leading to new businesses opportunity. They are responsible for more than 50 percent of all innovations, 67 percent of inventions, and 95 percent of all radical innovations. 4. We are living in a"new'Entrepreneurial Age' in which entrepreneurs and their companies are transforming the economic landscape." 5. Entrepreneurs,those focused on innovation and fast growth, comprise 5 to 15 percent of all U.S. businesses, and there are some in every location. 6. Entrepreneurs and the companies they lead play a critical role in fostering economic prosperity and are vital to our ability to compete internationally. 7. Fast growth companies occupy a variety of business sectors,but they often start at the kitchen table or in the garage with less than$50,000. 8. Both our defense capability and homeland security require a robust small business sector. 9. Once established, a strong entrepreneurial environment in distressed or remote communities can lead to success in regional relocations of related businesses. If the first element in a proactive approach to entrepreneurship is well-organized and effective business support services,then the second essential element is community leadership. Case studies collected at the Heartland Center indicate that service providers alone cannot make a successful"grow your own" approach. In the Heartland Center study(2003), leaders play key roles in businesses success by: o Creating a compelling vision; o Communicating the vision to others; o Developing a plan to support business success; o Demonstrating commitment. Communities that are successful in growing their own indicate that "nearly all of the citizens become cheerleaders to promote the successes of new enterprises. They understand the importance of operation between businesses and all other parts of a total community. Where communities focus on creating their own jobs,leaders build a culture to nurture entrepreneurship in all three arenas:civic,social, and business. They also develop a support infrastructure,or system as Lyons described,that addresses the need for services, space,networking, and capital." 6 Economic Development Strategic Plan 2012-2015 The following pages represent an outline of the priorities, strategies, action steps and performance measurements of the Economic Development Strategic Plan. Directing the strategic plan are 4 priorities that need to be addressed and the 15 strategies to accomplish each of the priorities set forth below. Priority#1: ORGANIZATIONAL PLAN Priority#2: MARKETING Priority#3: BUSINESS RETENTION AND EXPANSION Priority#4: BUSINESS RECRUITMENT It is essential that the strategies identified to meet the priorities outlined above,be clear, concise and measurable. In order to provide focus to the priorities outlined below,the following economic development strategies are established. It is staff's intent to communicate progress on the strategic plan to the EDA on a quarterly basis. The City's Economic Development Authority(EDA)promotes the retention and expansion of existing businesses, and the attraction of new businesses to the community in order to endorse a diversified tax base, additional job opportunities, and convenient shopping options for its residents. The following is an executive summary of Farmington's Economic Development Strategic Plan which will enable the EDA to focus its efforts to achieve desired results. The plan will be developed to guide the work of the EDA and staff over the next two to three years. Each priority lists items that have been completed since January 2012. Priority#1: ORGANIZATIONAL PLAN - UNITE A unified effort amongst various stakeholders is necessary for successful implementation of the plan. Objective(Organize for Success): Develop an organizational plan. 1. Review components in economic development strategic plan. a) Review existing Mission and Vision Statements. b) Review SWOT analysis for 2012 Strategic Plan. a) Determine duties of EDA Board. b) Determine duties of EDA staff. c) Identify stakeholders and determine role and duties. 2. Define roles of staff and EDA Board and identify stakeholders. a) Determine duties of EDA Board. b) Determine duties of EDA staff. 7 3. Develop a policy for EDA Board for a"business friendly"approach to economic development. a) Remove barriers to conducting business within the city. b) Improve the regulatory environment for businesses by ensuring that development review process and other policies are streamlined,transparent, and consistent. c) Provide owners/developers with the opportunity to meet with staff associated with project for kick-off meeting. 4. Ensure local regulations work to benefit economic growth. a) Prepare text amendments within reason when process is slowed. b) Continue to evaluate the 30-day Development Review Process to determine inefficiencies or improvements to be made. c) Consider formalizing a "development assistance" sponsor for each case. This representative would be the primary point of contact for an applicant, and would help the applicant resolve issues throughout the process. d) The City will create an updated "Doing Business Guide" to assist businesses with obtaining services, including, for example, when licenses and permits are needed, a timeline describing the process for approval and associated fees. e)Research electronic plan review implementation. (f) Continue to coordinate with the State health department to facilitate compliance with regulations that impact businesses. g) Create an exit survey. 5. Prepare summary of funding sources for supporting operations and management of economic development initiatives. a) Devise plan to pay down the negative fund balance. b) Identify grants, loans and technical assistance to fund economic development. c) Develop a revolving loan fund to finance attraction of exiting business expansion projects especially for those in the City's"new target category"areas. Items completed: Vision and mission have been set; Improved internal communication about development projects; ongoing internal business friendly approach for all development and/or infill projects; Downtown Commercial District defined and design standards approved; GROW Farmington partnership is ongoing and process to align economic efforts and initiatives will be refined by newly established Community Leadership Steering Committee; Business Development Grant and Commercial Rehabilitation grant programs created and grants awarded to five different businesses. Priority#2: MARKETING - PROMOTE Marketing is a tool of Economic Development that has two functions,to improve and to promote a community as a viable location for economic activity. Great economic development initiatives involve the entire community working together to improve the local"product"while the EDA works to improve the awareness and perception of the community overall. 8 Objective (Promoting for Success): Market Farmington to bring business and quality housing development to the community. 1. Determine a unified message. a) Work with GROW Farmington to determine fmal brand. b) Name commercial districts. 2. Identify industry sectors to target(i.e. industrial,retail, office). a) Brainstorm types of desired industry. b) Choose priority industry to market. c) Ask residents about shopping needs. 3. Prepare a marketing plan. a) EDA is questioned on validity of marketing plan. b) Additional steps will be provided if plan is desired. 4. Create a"shop local"program. a) Discuss campaign of targeting local residents and employees to "shop local". b) Educate the public about the economic impact of shopping in town vs. out of town. Run the sample ad in the Farmington Independent: "Ten Reasons to Shop Local."Market benefits of"shop local"awareness to residents. c) Encourage increased business-to-business purchasing. d) Discuss creative ways to improve awareness of local business offerings such as meet merchants campaign,business spot light at Council meetings, anniversary of businesses at Council meetings,Farmington website,videos. Items completed: Farmington's Business Guide is included in the Resident's Guide and is maintained regularly; Development page is included in the City News and Recreation Guide; Economic Update was created and published monthly for 3 years; Two (2) Realtors Forums held;Unified messages have been proposed; staff attends networking events locally and regionally,Economic Development section of website created/maintained; ribbon cuttings coordinated,promoted and press releases provided to local news papers; Farmington 1st Flyer created(top 10 reasons to shop local). Priority#3: BUSINESS RETENTION AND EXPANSION- UNITE Existing businesses are significant contributors to the local economy and tax base and a healthy and vibrant local economy depends on their well-being. Statistics show that existing businesses create 60%-90% of all new economic growth in a community. Business retention and expansion efforts will be defined to support existing businesses, assist with expansions that add jobs, increase their competitiveness,and help them withstand economic difficulties. It's imperative that we build upon a coordinated effort between the Economic Development Authority and key players to assistant with retention and expansion efforts. 9 Objective (Maintaining for Success): Build solid working relationships with all existing merchants, service providers and businesses. 1. Define the structure of a business retention and expansion program. a) Determine objective for BR&E. b) Determine staffing, structure of visits, dates for visits,follow up with identified issues or concerns, and reporting of results from each visit. c) Determine the stakeholders in the process. 2. Create an environment where businesses can prosper and grow. a) Proactively contact local businesses to provide support and assistance. b) Hold sponsored entrepreneur events (e.g. speakers, consultants,business appreciation lunch)for local businesses. c) Make website user friendly. 3. Develop partnerships throughout the region. a) Attend EDAM seminars, classes, etc. to make connections within the metro. b) Meet potential business owners at the Dakota Regional Chamber events. Items completed: Farmington Business Association(FBA) , Farmington-Business Networking International (BNI), and Dakota County Regional (DCR) Chamber of Commerce meetings and networking events are attended regularly; Created and implemented the Business Outreach Program;Available Space spreadsheet maintained;business incentive programs created(Business Development& Commercial Rehab); sale of McVicker lot(expansion of Immanuel Dental). Priority#4: BUSINESS RECRUITMENT - BRAND Farmington will continue to grow and reinvent its economy by new businesses locating in the area. To attract businesses the City must have an environment that is conducive for businesses to locate here. The principal focus of the City's efforts should be to diversify the tax base, create a broad range of employment opportunities,and provide necessary goods and services for local residents to ensure the highest"quality of life"possible while promoting a positive image of the city in general,and its business environment in particular. Objective (what we want to achieve): Increase employment opportunities and local tax revenue. 1. Create a business attraction team. a) Determine participants on team. b) Determine Mission and Vision. c) Identify desired business sectors. d) Compile information of interest to business prospects. e) Demonstrate Farmington as a profitable place to do business. f) Determine workforce supply in region to ensure jobs to businesses. 10 g) Determine if City can/should provide incentives to potential businesses. 2. Develop marketing initiative to attract targeted businesses and jobs. a) Determine whom to target for marketing. b) Contact brokers weekly. 3. Recruit business to serve other downtown businesses. a) Build a stronger downtown business community,retaining cash flow and the profitability of downtown businesses. b) As more goods and services needed by the residents are available,the community will be less inclined to travel to neighboring communities. 4. Provide"shovel ready"initiatives(discuss the city's role)to facilitate future commerce park development. a) Review other"shovel ready" communities in the metro. b) Procure funding for infrastructure installation at Industrial Park West. c) Facilitate an open discussion with land owners of the future industrial park to understand their future plans and timeline. d) Assist in bringing lots to plat. e) Develop structure to proactively assist in gathering key land pieces together. f) Infrastructure is installed. Items completed: Established a Clear Downtown Boundary; Instituted Downtown Design Standards;Promote Infill Development; Promote available commercial buildings; Attended webinars; Microenterprise Grant program created; sale of EDA— owned property results in two (2)new businesses locating in Farmington. History of the Economic Development Plan The Farmington Housing and Redevelopment Authority transitioned into a seven- member Economic Development Authority in February 2006. Later that year,the Farmington City Council and Economic Development Authority(EDA)hired the International City-County Management Association(ICMA)to develop an economic development strategy and to identify best practices in economic development. The project was undertaken using a"peer assistance"approach,with ICMA providing overall project management,but enlisting the voluntary services of a"peer"group of experienced current and former city managers with extensive backgrounds in economic development. Responding to the scope of services outlined by the city,the project team established the following methodology for the project: • assessment of current conditions, • review of competitive environment/common practices, • identification of internal capacity, • review of best practice, • facilitated strategic planning process. 11 The project was initiated in October, 2006 and culminated in a joint meeting of the City Council,EDA and key staff on January 22,2007. By February 2007, an Economic Development Strategy was developed which included six strategic issues confronting the city. Once those issues were identified, a series of action steps to address them were developed, and responsiblities for follow-through and initial timetables were set forth. See Appendix B for a copy of the Economic Development Strategy 2007 developed by the ICMA Peer Team. Parties involved- Consultants: Craig Rapp, Craig Waldron, Mark Nagel, and Richard Fursman, City Council:Kevan Soderberg, Mayor; Councilmember, David Pritzlaff; Councilmember, Steve Wilson, Economic DevelopmentAuthority: Todd Arey, Chair; Paul Hardt, Vice-Chair; Yvonne Flaherty, Erik Starkman, Chad Collignon, . Councilmembers Christy Jo Fogarty, and David McKnight, City Staff Peter Herlofsky, City Administrator; Lee Smick City Planner; Tina Hansmeier, Economic Development Specialist; Others:Ruthe Batulis, NDC Chamber;Brooke Walsh, ThisWeek News In June 2007,the City of Farmington hired Community Development Consultants: Richard Fursman and Jim Norman to aid the City Council,EDA, and key staff with the creation of a vision and Economic Development Plan. The following top areas for the concentration of time, energy, and resources were agreed upon by all parties and are specified in order as follows: 1. Downtown Development and Redevelopment 2. Industrial Development 3. Commercial Development outside of the Downtown area Parties involved—Consultants:Richard Fursman and Jim Norman, Economic Development Authority: Todd Arey, Chair;Paul Hardt, Vice-Chair, Yvonne Flaherty, Erik Starkman, Chad Collignon, Councilmember Christy Jo Fogarty, City Staff Peter Herlofsky, City Administrator;Lee Smick, City Planner; Tina Hansmeier, Economic Development Specialist; Others:Ruthe Batulis, NDC Chamber of Commerce; Ladonna Boyd, Dakota Electric Association; Doug Bonar, ISD 192 In January 2008 the City Council decided to disband the seven-member EDA board and begin serving as the representatives on the Economic Development Authority Board becoming responsible for all economic development initiatives. The new members of the EDA continued to focus their efforts on the priorities listed above which include: Downtown Development and Redevelopment,Industrial Development, and Commercial Development outside of the Downtown area. Parties involved—City Council:Kevan Soderberg, Mayor; Christy Jo Fogarty, David McKnight, David Pritzlaff, Steve Wilson, Economic Development Authority:David Pritzlaff;EDA Chair; Christy Jo Fogarty, Vice-Chair; David McKnight, Kevan Soderberg, Steve Wilson 12 In January 2009 the composition of the EDA changed again as the Board received three newly elected officials that will also serve as representatives of the EDA. Parties involved—Economic Development Authority: Christy Jo Fogarty, Chair; Steve Wilson, Vice-Chair, Terry Donnelly, Todd Larson, Mayor;Julie May. (new EDA members are underlined) In January 2011 —EDA composition was modified again with the addition of a newly elected Councilmember; Jason Bartholomay. Councilmember Bartholomay was elected as Chair of the EDA. Parties involved—Economic Development Authority:Jason Bartholomay, Chair; Christy Jo Fogarty, Vice-Chair; Terry Donnelly, Todd Larson, Mayor;Julie May In August 2011,EDA Ex-Officio members: Doug Bonar and Geraldine (Jeri)Jolley were sworn in as ex-officio members. In January of 2012,the EDA approved the Economic Development Strategic Plan 2012- 2015 and revised the Economic Development Element in the 2011 version of 2030 Comprehensive Plan. EDA's current 2012 composition: Todd Larson, Chair;Julie May, Vice-Chair; Christy- Jo Fogarty, Jason Bartholomay, Terry Donnelly and ex-officio members; Doug Bonar and Jeri Jolley Historical Timeline and Achievements of the Economic Development Authority(EDA), 2006 -Present: Jan `06 Farmington HRA transitions to an EDA. `06 City/EDA hired consultants to develop an Economic Development Strategy and identify best practices in Economic Development. Nov `06 EDA adopted Mission Statement Nov `06 ICMA Bus Tour with City Council,EDA, and key staff. Cities toured included: Rosemount, Oakdale,Anoka, and Elk River. Nov `06 SWOT Analysis Conducted Jan `07 A joint meeting of the City Council was held. Building on the information generated by the SWOT analysis, interviews and research process,the group identified the six most important strategic issues confronting the City. Once those issues were identified, a series of action steps to address them were 13 developed, and responsibilities for follow-through and initial timetables were set forth. Feb `07 Economic Development Strategy developed. June `07 Community Development Consultants hired to assist with development of a vision and Economic Development Plan. July `07 Visioning Process Began: Visioning Session focused on the structure of the EDA and organization of City Staff as it pertained to the EDA. July `07 McComb Group LTD hired to conduct a Market Study to assist the city in understanding the future demand for commercial and industrial development. Aug `07 Second Visioning Session: group participated in exercises to develop the vision for the EDA. Aug `07 First economic development newsletter was created and distributed to EDA members. Sept `07 Final Visioning Session: EDA's top three priorities identified. The information compiled was used to begin forming the economic development chapter for the 2030 Comprehensive Plan—2008 Update and to create strategies and work plans for staff. Sept `07 Last remaining HRA-owned industrial park lot sold. Oct `07 Economic Development Element of the Comprehensive Plan was developed. Oct `07 General Marketing Folder created. Oct `07 Commercial/Industrial Market Study completed,results assist City Planners with identifying future acreages needed to support additional commercial and industrial development/growth for 2030 Comprehensive Plan Nov `07 The EDA acquired and approved the demolition of a blighted building locally known as the"Riste"Building to make way for future redevelopment efforts. `07 Business Reinvestment Loan Program Created(CDBG) Jan `08 Transisition of EDA from 5 at large members and 2 council back to 5 council members `08 Industrial Park expansion research began, consultants hired, supportable 14 acreage identified, development of preliminary cost estimates. `08 Business Outreach Program developed(77 businesses visited: year 1) `08 Aesthetic Improvements to EDA-owned properties (McVicker and Riste) and renovation to EDA owned building(305 31.d Street) completed. `08 Business Development Grant Program Created(CDBG) `08 First Business (Service, Retail, &Dining) Guide Created `09 New EDA Members: Todd Larson; Mayor,Terry Donnelly, Julie May `10 2010 accomplishments include: park garage sold(5/2010) May `10 Sold EDA owned 308 Elm Street property(former parks garage)to AK Performance Graphics May `11 Sold EDA owned 305 3rd Street property(former liquor store)on 5/31 to Threet Properties, Inc. 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L E N Y 3 v w C > V C ra i O C U C O 0a • O a • a ° o. a 0 To • a o o C on a s CIO O. C C O . 00 V aJ C C C a] r ti • a c n, a C O o .�. Y v Y u O = > u H y w Q O C C _0 u O a w .17 MISSION and VISION The mission is the starting point of the strategy, which provides a purpose for the EDA organization. It articulates why you exist as an organization, describes what the organization does in clear terms, describes the purpose of the organization, and answers the question"Why are you here?" The Farmington EDA's mission is to improve the economic vitality of the City of Farmington and to enhance the overall quality of life by creating partnerships, fostering employment opportunities, promoting workforce housing and by expanding the tax base through development and redevelopment. Notes: The vision describes the roadmap of the strategy providing a direction for the plan. The vision provides a clear and compelling view of the future and answers the question "Where are we headed?" Farmington is a vibrant City that combines natural resources and sense of community with an established downtown. The City offers a diverse, growing, economically sustained community with excellent schools, quality jobs, and unique shopping and housing options. Notes: To: Peter Herlofsky From: Craig R. Rapp RE: SWOT summary Date: December 12, 2006 The following is a summary of the facilitated process that took place on November 27th with the City Council, EDA, staff and the Peer Assistance group at Round Bank. In addition to recounting the information generated during the SWOT process, I have identified some preliminary connections between various strengths and opportunities, as well as weaknesses and threats. These connections are meant to be"first cut" look at ways of focusing our future action. The purpose of providing this information is to enable everyone to clearly see the current economic development environment that exists in Farmington, and to give folks time to absorb new ideas and concepts. Strengths, 1. Professional Staff 2. Traditional downtown 3. Involved City Council 4. In-place functioning and involved EDA 5. Land available for development and redevelopment 6. Vermillion River—quality trout stream in middle of city 7. City supports growth 8. Active business community 9. Located in the `path' of metropolitan development 10. Educated population 11. Quality school district 12. Low crime 13. Quality public services Opportunities 1. Good fiber optic cable availability-potential for fiber-to-the-premises 2. Because Farmington is largely unknown-chance to create or define an image 3. Learn and leverage the knowledge of other cities 4. City has time to get organized and focused—with lots of people currently engaged 5. Economy is getting better 6. Opportunity to compete globally 7. Recruitment—going from zero to something focused 8. Marketing the city's"small town"feel 9. Ability to coordinate the Comprehensive Plan with an Economic Development Plan a. Comprehensive Plan first, Economic Development Plan second 10. Rail service—marketing opportunity to users that need rail 11. Trout stream—market the image and potential to draw people 12. Improve relationships with the townships 13. Opportunities to "network"—develop and improve relationships with County, State and developers 14. Location—market the fact that Farmington is close, but a little off the beaten path 15. Pull three groups together—City Council, EDA, Economic Growth Committee 16. Engagement of the business community 17. High School—infrastructure extensions 18. Follow models of other successful cities—Naperville example—riverwalk Strengths/Opportunities—Possible connections 1. Strengths- Involved City Council; in-place functioning EDA Opportunities: • Learn and leverage knowledge from other cities • Ability to coordinate Comprehensive Plan with Economic Development Plan • Improve relationships with townships • Opportunities to "network"-develop and improve relationships with County, State and developers • Pull three groups together—City Council,EDA, Economic Growth Committee • Engagement of the business community 2. Strengths—Traditional downtown; land available for development and redevelopment Opportunities: • Marketing the city's"small town"feel • Location—the fact that Farmington is close,but a little off the beaten path 3. Strengths - City supports growth; active business community; located in the"path" of metropolitan development Opportunities: • City has time to get organized and focused-with lots of people currently engaged • Because Farmington is unknown- chance to create or define and image • Recruitment—going from zero to something focused • Rail service—marketing opportunity to users that need rail 4. Strengths—Vermillion River—quality trout stream in the middle of the city Opportunity: • Trout stream—market the image and potential to draw people Weaknesses 1. Location—not on I-35 2. City has image of bedroom community 3. Population currently too small for `big box' retail interest 4. Limited land available for industrial development 5. "Fragmented"downtown business community—lack of direction 6. Lack of common vision 7. Transportation a. Railroad b. Intra-city options are poor c. Lack of good access to I-35 8. Lack of expertise making development deals 9. Three separate groups working on economic development 10. The community at large is disengaged 11. Poor image or lack of image with business community 12. Poor relationship with townships 13. School District fragmentation Threats 1. Developable land closer to the Twin Cities a. Retail b. Other 2. Lakeville annexation encroachment a. Possibility of surrounding Farmington 3. Gravel mines blocking economic development 4. Long-term holding of agricultural land—limiting land for development 5. Opening up of Elko-New Market due to sewer extension 6. Future push back against development 7. Slow down in the housing market 8. High gasoline prices 9. State of Minnesota actions are unpredictable a. LGA cuts b. TIF limitations 10. Desirable development is close to Farmington, but outside our city a. Example: Flagstaff Ave. 11. Highway 3 congestion 12. Acting alone on economic development resulting in being land-locked Weaknesses/Threats —Possible Connections 1. Weaknesses- "Fragmented" downtown business community—lack of direction; lack of common vision;three separate groups working on economic development;the community at large is disengaged Threats: • Developable land closer to the Twin Cities • Opening up of Elko-New Market due to sewer extension • Desirable development is close to Farmington,but outside our city 2. Weaknesses—limited land available for industrial development Threats: • Long-term holding of agricultural land—limiting land for development • Lakeville annexation encroachment-possible surrounding of Farmington • Acting alone on economic development resulting in being land-locked Other Issues / Connections 1. Transportation- enhancing connections to serve new development 2. Deal making capabilities—staff development 3. Interesting and unique city—creative and unique approaches—fiber optics, etc. STRATEGIC ECONOMIC DEVELOPMENT PLAN 2011-2015 CITY OF FARMINGTON ECONOMIC DEVELOPMENT AUTHORITY � F ARIA ti j o Z 723. ,4w-0:40._....01 i G Q ■ 4ST•A P ROMPS\ I j!) Ii , 4 ' , i. : i , • , • . - 1 ,,: .. kk0 dot Introduction The key to successful communities is their heart and soul—the unique cultures, landscapes, traditions and values that people cherish—and with people themselves taking action to enhance and sustain the places they love. Many communities are ready to protect their unique character, deeply engage their citizens, and meet the challenges of the 21st Century. Economic Development is one of those challenges and citizens can assist with it by shopping locally and creating awareness to other citizens about the businesses within the City. The Role of the Economic Development Strategy It is not possible, with a single definition,to capture all the facets of economic development. It is usually described either in terms of objectives such as employment creation, wealth generation and the improvement of quality of life, or as a process that influences growth, competitiveness, sustainability and the overall economic well being of a community. What is most common amongst all definitions is the implied and, in some cases, explicitly recognized, role of government, as it is responsible for creating the environment in which economic development occurs. Because a consensus definition for economic development does not exist, there is no single strategy, policy or program direction for achieving success. The unique mix of geographic, political, economic and social attributes of a community will present a distinctive set of challenges, and requires different solutions, for economic development to be successful. Because this plan is a "living" document, it will change and adapt over time to shifting economic, political and social conditions. Local leaders may decide to adjust various parts of the Strategy, including benchmarks and performance measures, as appropriate. Monitoring the progress of each strategic component will enable decision-makers to determine the effect of policies and programs on overall goals, and identify what elements of the Strategy need to be expanded or altered. Why Undertake an Economic Development Strategy? The Economic Development Strategy describes a roadmap for the City and its partners (private, nonprofit, public sector) illustrating how they can work together to enhance employment, investment and quality of life opportunities that benefit the entire community. The strategy is based on the premise that the community can develop visions of what it wants to become, determine the strategies in which it has the best chance of being successful and apply resources to achieve them. If done systematically and over the long-term, Farmington can enhance its economic base while maintaining its core values. For Farmington, there are a number of motivating factors for this Economic Development Strategy.They include: • Establishing the role and direction for the activities of the City's Economic Development Authority. 2 • Desire to enhance its reputation as a proactive city that embraces partnerships with local and regional economic and business development organizations. • Welcome new businesses and acknowledge the important contribution of existing businesses to the city's long-term economic sustainability. • Ensure that municipal costs are competitive to other jurisdictions, especially within the industry sectors that are important to the city's economic success. • Provide an environment of"certainty" for businesses by establishing clear, consistent policies for development, regulation, and taxation. • Streamline regulatory and permit processes while balancing community goals. • Provide responsive and flexible customer service at City Hall. • Include economic impact considerations in municipal decision-making. • Acknowledge that communities must compete for investment, human resources and infrastructure. • Present a positive image of Farmington through the media, citizens, and existing businesses. In reality, the City is continuously making decisions that affect economic development.The most obvious ways in which economic development is influenced by local government are through decisions on land use and property taxation, but there are many other ways in which economic development can also be either positively or negatively affected. Examples include the working relationship between local government and the business community,the cost and time required to move through municipal review and approval processes and the effort made to understand and respond to the needs of business. The single most important thing a community can do to support and encourage development is manage and reduce developer/ investor's risk, provide as much certainty as possible about the permitting process, and provide as much clarity as possible about economic development policies. Economic development is about more than attracting companies and investments to a community.These opportunities are part of stimulating growth, but they should not be pursued at the expense of overlooking the needs of the community and existing businesses. In fact, research from numerous sources shows that existing businesses create 60%-90% of all new economic growth in a community. Methodology This Economic Development Strategy presents a plan for Farmington's future, and outlines four priorities that the community will strive for in its economic development efforts. Each priority includes a set of strategies that represent the key strategies to focus on to attain it. Recommended action steps are provided for each strategy. Action steps are the specific items that Farmington will need to implement the strategies, and ultimately achieve the mission and vision of the EDA. For this Strategy to be successful, the progress of implementation must be monitored to keep the work focused on the most pressing issues and completing the action steps in a timely manner. This can be done by regularly collecting and analyzing data pertaining to the benchmarks and performance measures that accompany each goal. The benchmarks and performance measures will allow the EDA to gauge the impact of individual action steps and assess the overall progress of achieving the goals. Benchmarks and performance measures will enable Farmington to track the progress of strategy elements and determine if additional efforts are needed to reach the EDA's priorities. 3 What's in a Strategic Plan? The following flow chart shows how the strategy is laid out to eventually meet the mission of the EDA. The mission is the starting point of the strategy which provides a purpose for the EDA organization. It articulates why you exist as an organization, describes what the organization does in clear terms, describes the purpose of the organization, and answers the question "Why are you here?" The vision describes the roadmap of the strategy providing a direction for the plan. The vision provides a clear and compelling view of the future and answers the question "Where are we headed?" Priorities are overarching issues that the EDA wants to address. The priorities were set in early 2011 which include the Organizational Plan for the EDA. The Marketing, Business Retention and Expansion, and Business Recruitment are the most important issues that need to be addressed in the Strategic Plan as determined by the EDA. Strategies zero in on the priorities and determine how you will achieve those priorities. Action steps guide your daily, weekly, and monthly tasks for accomplishing the strategies. And finally, benchmarks and performance measures holds the organization accountable to meet the mission. Benchmarks and Mission Performance Measures Vision Action Steps Priorities Strategies Mission A mission statement conveys the purpose of the economic development organization. It helps an organization clearly communicate its purpose and direction. The mission statement was adopted in 2006. The Farmington EDA's mission is to improve the economic vitality of the City of Farmington and to enhance the overall quality of life by creating partnerships, fostering employment opportunities, promoting workforce housing and by expanding the tax base through development and redevelopment. Vision A vision allows the planning group to see the community in the future, provides a foundation for all economic development activities, and should be creative but based on reality. Every organization needs a vision of how it will operate. The vision statement determines "where do you want to go?" The vision statement is your inspiration, the framework for all your strategic planning. The City Council, EDA, and key staff participated in several visioning sessions during the summer of 2007. The idea of what the EDA's dreams were for the City, the existing strengths that would result in the achievement of those dreams, and the weaknesses that may stand in the way were all key discussion points that assisted with the creation of a vision for the City of Farmington EDA. The vision is intended to guide the work of the EDA. Farmington is a vibrant City that combines natural resources and sense of community with an established downtown. The City offers a diverse, growing, economically sustained community with excellent schools, quality jobs, and unique shopping and housing options. 5 Economic Development Strategic Plan The following pages represent an outline of the priorities, strategies, action steps and performance measurements of the Economic Development Strategic Plan. Directing the strategic plan are 4 priorities that need to be addressed and the 15 strategies to accomplish each of the priorities set forth below. Priority #1: ORGANIZATIONAL PLAN Priority #2: MARKETING Priority #3: BUSINESS RETENTION AND EXPANSION Priority #4: BUSINESS RECRUITMENT It is essential that the strategies identified to meet the priorities outlined above, be clear, concise and measurable. In order to provide focus to the priorities outlined below, the following economic development strategies are established. It is staff's intent to continue to provide the EDA with a monthly economic development activities report and to communicate progress on the strategic plan to the EDA on a quarterly basis. Priority #1: ORGANIZATIONAL PLAN It is important that organizational components of a strategy are identified. The Economic Development Authority (EDA) has a number of items that need to be addressed at the beginning of the strategic plan before the plan can be implemented. Items to address include: • Path and philosophy of the EDA, • configuration of EDA, • roles and responsibilities of the EDA and staff, • funding for the EDA such as incentives to new businesses, the purchase of land, budget opportunities, etc.. The following items are strategies for the priority and the items numbered 1.1 to 1.8 are additional action steps to complete the strategies: 1. Review economic development vision and mission. 2. Define roles of staff and EDA Board, and identify stakeholders. 3. Ensure local regulations work to benefit economic growth. 4. Prepare summary of funding sources for supporting operations and management of economic development initiatives. 1 .1 Organizing for Success: Farmington's Economic Development Strategy Action 1.1.1: Develop a path and philosophy for Economic Development in Farmington Implementation Steps: 6 (a) Review the existing Mission Statement. (b) Review the existing Vision to build consensus for Economic Success. (c) Review SWOT analysis for 2011 Strategic Plan. (d) Develop a policy for a "business friendly" approach to economic development. • Remove barriers to conducting business within the city. • Improve the regulatory environment for businesses by ensuring that development review process and other policies are streamlined,transparent, and consistent. (e) Review City status/progress on economic development priorities on a quarterly basis. (f) Update overall Strategic Plan every 3 years and continue to seek buy in from key local economic development players. 1 .2 Organizing for Success: Roles and Responsibilities Action 1.2.1: Create a 7-member Economic Development Board of Commissioners (EDA). Implementation Steps: (a) Develop steps to implement a 7-member Economic Development Board of Commissioners (EDA). (b) Develop a transition plan from the City Council to the 7-member board. (c) Compile list of past interested residents to serve on Board. (d) Determine duties and responsibilities of EDA. (e) Prepare organizational and procedures manual. Action 1.2.2: Create Economic Development Department Organization Chart Implementation Steps: (a)Show all key staff members and clearly state their role, services offered and project responsibilities. (b) Establish consensus on focus and roles regarding Economic Development. (c) Identify desired roles of partners and how they could assist as resources in the plan implementation. (d) Post on website and share internally and externally with key partners. Action 1.2.3: Monitor and Measure Progress on the Economic Development Strategic Plan Implementation Steps: (a) Use the Strategic Plan's implementation matrix to provide annual reports to Council and staff on progress made on key initiatives. (b)Summarize annually outcomes achieved related to the EDA's Economic Development Priorities. (c)Actively promote the results to key partners and the City as a whole. 1 .3 Organizing for Success: External Visibility and Collaboration Action 1.3.1: Promote the Economic Development Strategic Plan Implementation Steps: 7 (a) Make presentations to the community and residents to share the key initiatives and next steps and ask for support as appropriate. (b) Develop press release and distribute to key media for a formal launch of the Economic Development Strategic Plan - key initiatives. (c) Post the plan on the Economic Development Department website and update regularly with key accomplishments. 1 .4 Organizing for Success: City Council, Boards and Commissions, Media Action 1.4.1:Work to create a positive perception of Farmington. • Implementation Steps: (a) Proactively counter detrimental media coverage with a steady stream of positive counter messaging,•promotion, and public relations activities. (b) Renew sense of pride in who we are, our aspirations, and way of life through marketing. (c)Turn the tide from negative to positive communication in all aspects of business. (d) Encourage community partners and citizens to actively dispel and counter negative public media communications. (e) Improve the regional perception of Farmington through the GROW Farmington Branding initiative. (f) City Council and Boards and Commissions welcome new business development plans and offer "business friendly" solutions to any development challenges. (g)Support projects and events of the Farmington Business Association (FBA)through the GROW Farmington initiative. • Attend GROW Farmington meetings (h) Develop a clear and consistent message about economic development in Farmington. 1 .5 Organizing for Success: Website Action 1.5.1: Strengthen the Economic Development section of website Implementation Steps: (a) Create one direct"Economic Development" link on the City's homepage. • No information on the site should be more than three clicks away from homepage. • Poll key local economic development players to make site user friendly. (b) "Economic Development" home and welcome-pages should articulate the EDA's mission statement and include a condensed list of easily navigable links to the different service offerings of the Economic Development Department.The site should also include: • Information specifically pertaining to the identified target industries, including a list of local businesses. • Marketing language/descriptions demonstrating the benefits of business location within Farmington. • Commercial real estate land and building options with maps. • Updated demographic and labor market data. • Easy-to-understand programs for development. 8 • Review partner links to include DCR Chamber, Dakota County, and state economic development organizations. • Include business endorsements, quotes, and testimonials from businesses that have successfully located/expanded in Farmington. • Ensure that URIs and web links for City of Farmington economic development sites are featured prominently in all marketing materials. • Review economic development websites of similar sized communities. 1 .6 Organizing for Success: Research Action 1.6.1: Review various publications Implementation Steps: (a) Compile a list of the journals, newspapers, and articles to determine marketing opportunities. (b) Create a database of active retail brokers and developers including names, addresses, contact numbers, etc.—target south metro area. (c) Conduct an analysis of surrounding jurisdictions business fees and taxes. 1 .7 Organizing for Success: Development Assistance and Customer Service Action 1.7.1: Continue to strengthen the Development Review Process Implementation Steps: (a) Include the business licensing component of developing a business into the Development Review Process. (b) Continue to evaluate the 30-Day Development Review Process in the City to look for efficiencies and improvements. (c) Consider formalizing a "development assistance" sponsor for each case. This representative would be the primary point of contact for an applicant, and would help the applicant resolve issues throughout the process. (d) The City will create an updated "Doing Business Guide" to assist businesses with obtaining services, including, for example, when licenses and permits are needed, a timeline describing the process for approval and associated fees. (e) Research electronic plan review implementation. (f) Continue to coordinate with the State health department to facilitate compliance with regulations that impact businesses. (g) Create an exit survey. 1.8 Organize for Success: Funding and Incentives Action 1.8.1: Determine funding and incentives for Economic Development Implementation Steps: (a) Devise a plan to pay down the negative fund balance. (b) Identify grants, loans and technical assistance to fund economic development initiatives. 9 (c) Develop a revolving loan fund to finance attraction or existing business expansion projects, especially for those in the City's 'new'target industry areas. Priority# 2: MARKETING, Marketing is a tool of Economic Development that has two functions,to improve and to promote a community as a viable location for economic activity. The City's image, specifically the logo,the City's web site, content and appearance of City publications and printed materials, coverage in external media, and our presence at local and regional events are all components of Marketing and Branding. Great economic development initiatives involve the entire community working together to improve the local "product" while the EDA works to improve the awareness and perception of the community in the outside world. The following items are strategies for the priority and the items numbered 2.1 are additional action steps to complete the strategies: 1. Determine a unified message. 2. Identify industry sectors to target (i.e. industrial, retail, office). 3. Prepare a marketing plan. 4. Create a "shop local" program. 2.1 Promoting for Success: Marketing and Branding— Managing our Reputation Action 2.1.1: Prepare a marketing plan. Implementation Steps: (a) Work with the GROW Farmington collaborative to create a unified economic development message for Farmington. • Initiate and manage a process for developing a new message. • Determine objectives and standards to develop the marketing plan. • Identify and clearly define strengths, assets, goals, opportunities including the competitive advantages of our community, its amenities, and progress and market it. (b) Define, expand, and formalize communications with the Farmington business community. • Hold quarterly meetings with the business community to learn about any issues or trends. (c) Research what other Cities use and determine how important printed materials are to the marketing efforts. (d) Coordinate with Communications staff to strategically plan message delivery including newsletter, newspapers,website, social media, Channel 16, etc. (e) Continue to attend or plan new efforts through GROW Farmington to promote the City to developers, brokers, retailers, entrepreneurs, etc. (f) Develop programs to enhance and highlight the City's economic development efforts via signage throughout the City. • Explore the use of City street signs to highlight community accomplishments i.e. Playful City, Tree City USA, etc. 10 • Research the feasibility of an electronic sign in downtown and on 195th Street to promote and market Farmington and its economic development efforts. • Encourage blade signs perpendicular to the street to capture shoppers. • Design and install wayfinding signage for awareness of citywide attractions that will increase visitor stays in Farmington. (g) Promote Farmington businesses via a "shop local" program. • Educate the public about the economic impact of shopping in town vs. out of town. Run the sample ad in the Farmington Independent: "Ten Reasons to Shop Local." Market benefits of "shop local" awareness to residents. • The program should educate local residents and businesses on the importance of buying from other local businesses. • Encourage increased business-to-business purchasing. • Utilize the City's business directory to market local businesses to the community both inside and outside of Farmington. • Discuss creative ways to improve awareness of local business offerings such as meet merchants campaign, business spot light at Council meetings, anniversary of businesses at Council meetings, Farmington website,videos. • Coordinate the City's overall marketing effort via newsletter; newspapers; website; social media; Channel 16; etc. highlight the "shop local" program. (h) Staff and EDA attends gatherings and conferences pertaining to Economic Development. • Attend gatherings of DEED, EDAM, Dakota County Regional Chamber, etc. (i) Artists'studios and living spaces within the downtown area could be one of the few suitable uses for spaces no longer appropriate for most modern retail. • Encourage the arts in community plans. City leadership should support the existing DVAC. • Periodically convene the current artist organization to identify better ways the City can support their objectives. • Encourage more public displays for local art work(City Hall, empty storefronts, Riste Lot, etc.). • Local designers/artists could be engaged by the City to create artwork for light posts, banners, and publications. (j) Research "shovel ready" initiatives to determine if the future industrial park could meet these requirements. • Discuss the City's role in "shovel ready" sites. • Review other"shovel ready" communities in the metro. • Facilitate an open discussion with land owners of the future industrial park to understand their future plans and timeline. (k) Work with regional economic development to assist business prospects coming to Farmington and the region. • Respond to prospect requests in a timely manner. 11 Priority#3: BUSINESS RETENTION AND EXPANSION Existing businesses are significant contributors to the local economy and tax base and a healthy and vibrant local economy depends on their well-being. As mentioned earlier research from numerous sources shows that existing businesses create 60%-90%of all new economic growth in a community. Business retention and expansion efforts to support existing businesses should be an integral part of the economic development strategy. The priority is to establish and/or maintain a solid working relationship and frequent communication with all existing merchants, service providers and businesses within Farmington. Keeping an existing business is often easier and less costly than recruiting a new business. It's also important to create an environment to encourage the expansion of commerce within the City which in-turn will encourage other existing businesses to expand. It's imperative that we build upon a coordinated effort between the Economic Development Authority and the key Economic Development players to assistant with the retention and expansion of businesses to: • keep them from relocating to other areas, • assist with expansions that add jobs, • increase their competitiveness, and • help them withstand economic difficulties. The following items are strategies for the priority and the items numbered 3.1 are additional action steps to complete the strategies: 1. Define the structure of a business retention and expansion program. 2. Create an environment where businesses can prosper and grow. 3. Develop partnerships throughout the region. 4. Develop a program for regular open communication between local officials and existing business owners. 5. Prepare a redevelopment plan for the downtown area. 3.1 Maintaining for Success: Business Retention and Expansion (BR&E) Action 3.1.1: Create a more formal Business Retention and Expansion Program Implementation Steps: (a) Determine the most effective structure for a formalized business retention program in Farmington. • Review existing Business Outreach Program objectives. • Research model retention programs to find and develop the best materials and tools (.i.e., U of M Extension BR&E). (b) Outline and formalize the BR&E program. • Components to include: process for setting up retention visits, completing the visits, following up with identified issues or concerns, assigning follow-up items to City staff as appropriate, and reporting on the results of each visit. 12 • To develop retention team, solicit volunteers from City Council, Dakota County Regional Chamber, the business community or other groups who would attend visits along with the EDA members and staff • Establish a goal for the number of retention visits the City would like to conduct per year • Set benchmarks for visits per month and continually monitor the number of visits completed relative to the goal. • Prepare schedule of visits. (c) Develop questionnaire(s)to be used in retention visits. • Prepare questionnaire to discuss in BRE visits. • Expand the Business Retention and Expansion program to add more emphasis on questions identifying suppliers and other related firms that could be recruitment candidates. • Consider taking staff to communities with more established Executive Call/BRE programs. (d) Organize and hold training for all retention volunteers. • Provide an overview of the format of the retention visits, including scheduling procedures, attendance, and follow-up. • Review questionnaire and explain why each question is asked. • Anticipate some typical concerns and formulate responses. (e) Create list of businesses to target for retention visits. • Utilize a variety of information to formulate this list such as sales tax generation, number of jobs,targeted geographic areas, rumors of closing or relocating, critical industries, etc. • Communicate regularly with economic development partners to identify at-risk businesses to visit. • Develop Rapid Response Team of Economic Development Partners including City staff, FBA, and DRC to immediately respond to the needs of existing companies who may be expanding or relocating to another community. • Consider the use of a "watch list"for businesses at risk of closing or leaving. (f) Develop list of resources and referrals to use during retention visits. • This list could include City Council, Planning Commission, Dakota County Regional Chamber, internal City staff in Economic Development, Finance, Public Works, Parks and Recreation, and Planning or retention team contact information. (g) Host a business appreciation event once per year and invite all businesses in the City to attend. • Discuss appropriate timing and type of event. • Determine budget for an event of this nature. Identify funding sources, sponsorship opportunities, and programming for a business appreciation event. • Celebrate incremental successes and milestones. (h) Consider developing additional resources or programs that the City could offer to its existing businesses based on the resulting"issues" or"needs" learned during the retention visits. • Possible programs to consider could include providing loans or grants for physical improvements such as facades, signage, parking lots, interior remodels. (i)Augment the business licensing process to promote economic development programs and obtain information about Farmington businesses. • Refine business license application form to include more questions about related to economic development. • As part of the licensing and renewal process, provide all businesses with information about the City's Economic Development programs. 13 (j) Create an informal business retention program that businesses can regularly meet with elected officials. • Canvas business community to gauge interest/availability for a "Coffee with the Mayor"type of event. • Target business community to attend "Coffee with the Mayor"type events to specifically talk about the business environment in Farmington. Priority#4: BUSINESS RECRUITMENT Farmington will continue to grow and reinvent its economy through the attraction of new businesses to the area.This priority addresses efforts that the City will make in bringing additional primary industries,jobs, and other types of services that demonstrate strong economic benefit to Farmington.The principal focus of the City's efforts should be to: • Diversify the tax base. • Create a broad range of employment opportunities. • Provide necessary goods and services for local residents. • Ensure the highest "quality of life" possible. • Promote a positive image of the city in general, and its business environment in particular. Accomplishment will require a focused effort on the part of numerous organizations, all working toward this common goal. The following items are strategies for the priority and the items numbered 4.1 to 4.5 are additional action steps to complete the strategies: 1. Create a business attraction team that will identify high potential business sectors; compile information of interest to business prospects, and that can demonstrate that Farmington is a profitable place to do business. 2. Develop marketing initiative to attract targeted businesses and jobs. 3. Build, execute, and maintain a business recruitment program 4. Identify desired businesses. 5. Provide "shovel ready" initiatives (discuss the city's role)to facilitate future commerce park development. 4.1 Recruiting for Success: Business Recruiting Action 4.1.1: Business Attraction Concepts Implementation Steps: (a) Establish standardized programs that staff can confidently discuss with potential businesses. • Determine if City can/should provide incentives to new businesses. 14 • Develop hardcopy materials that explain available programs and the City's policy on incentives. • Become fluent in understanding how incentives may be leveraged and coupled with the greatest benefit. (b) Develop new relationships and foster existing relationships with brokers who work in Farmington and the metro region. • Make contact with brokers involved with specific properties in the City. • Inform the brokers about the existing incentive programs and the City's perspective on offering incentives. • Research different events to attend or host to highlight both commercial and residential properties (i.e., "brokers forum"for real estate professionals). (c) Continue to maintain and update the real estate database of available properties. • Investigate other marketing opportunities to promote available properties in the City. (d) Identify new networking opportunities that will allow the City to engage with new businesses, developers, entrepreneurs, and real estate brokers. • Attend EDAM and Dakota County Regional Chamber events regularly. (e) Determine targeted retail prospect identification. • Identify and target retailers (both national and local)whose business model is not wholly dependent on foot-traffic. • Canvass local business districts for non-national retailers • Prepare targeted marketing packets for each niche 4.2 Recruiting for Success: Business Recruiting—The Downtown Action 4.2.1: Downtown Business Attraction Implementation Steps: (a) Work with existing businesses to assist the EDA in recruiting complimentary retail (target businesses)to build downtown as a strong destination for shopping. (b) Evaluate which available properties are suitable for varied food and beverage establishments which attract a broader population downtown. (c) Evaluate the benefit of recruiting cultural experiences including studios and galleries to provide activities downtown. (d) Continue to partner with local organizations that provide regular and highly visible events and festivals to attract attention to downtown and bring crowds to it. (e) Recruit the expansion of the professional sector,which will add downtown businesses and will attract people to downtown to shop, dine, and experience the arts. (f) Recruit businesses to serve other downtown businesses. • Build a stronger downtown business community, retaining the cash flow and the profitability of downtown businesses. • As more goods and services needed by downtown businesses are available,the community will be less inclined to travel to neighboring communities. (g) Recruit"destination businesses". • Destination businesses are businesses that are uniquely present in the downtown area and they tend to be focused on "interesting" or"personalized" shopping. 15 4.3 Recruiting for Success: Office Development Action 4.3.1: Recruit Office Development Implementation Steps: (a) Recruit office (target businesses)to locate them in Spruce Street Commercial and Business/Commercial Flex zones. (b) Explore feasibility of providing assistance with infrastructure in the Spruce Street Commercial and Business/Commercial Flex zones. (c) Define to potential office tenants the key competitive advantages of locating within the Spruce Street Commercial and Business/Commercial Flex zones. (d) Initiate office prospecting through contact with brokers. 4.4 Recruiting for Success: Industrial Property Availability Action 4.4.1: Clearly Identify and Maintain Industrial Job Creation Sites Implementation Steps: (a) Facilitate an open discussion with land owners of the existing and future industrial park area to understand their future plans and timeline. (b) Fully inventory vacant and underdeveloped industrial property to earmark those with the greatest development potential based upon location, infrastructure, access and related factors. • Identify needed infrastructure upgrades/extensions for getting sites'shovel-ready'. (c) Recruit industry (target businesses) in order to locate them in the proposed industrial park in the future. 4.5 Recruiting for Success: Promote Commercial Development and Revitalization Action 4.5.1:Anticipate New Businesses Implementation Steps: (a) Develop a new business welcome guide which includes pertinent contact information for various departments, agencies and partners; answers to frequently asked questions; and information about City licensing and registration programs. (b) Develop a strategic marketing plan to promote Farmington's available commercial properties and revitalization and redevelopment opportunities. (c) Participate in long-range and sub-area planning efforts to ensure the long-term vitality of the City's existing commercial properties. (d) Compile a list of properties available for commercial development and in-fill in Farmington. (e) Conduct an analysis of surrounding jurisdictions fees and taxes. (f) Explore strategic annexations at the City's edge to enhance potential commercial development opportunities. (g) Evaluate building code regulations to better understand how they may inhibit reinvestment in existing facilities. 16 A Measured Approach to Chasing Development As Farmington considers strategies for economic development, it is important to understand the reality of chasing huge boxes of retail or production space. Economic development programs continually focused on attracting industry as the most effective strategy for job creation have often failed. For many communities, and in particular rural areas,this strategy often "lines the pockets" of the real estate development community while creating less than living wage jobs in big box stores that undermine local retail and service enterprises. In contrast,those communities able to retain retail and service sector local businesses may see profits invested locally and contributed to local causes.The result, according to Rupasingha and Goetz (2003) is that "self-employment is associated with lower poverty rates, while the presence of Big-box retailers is associated with higher poverty rates." Community leaders often assume that incentives offered for relocations will be returned many times over in new tax revenue and support for schools and local infrastructure.The reality, however, is much different. Relocations often create new costs in the future when infrastructure ages,the workforce needs change, or the incentives run out and the operation moves again (Humphrey, 1988; Flora & Flora 2004). An aggressive strategy to "chase" development also requires significant staffing and operating funds to support the necessary travel and public relations costs. Small communities such as Farmington generally do not have the resources to do this.The reality however, is that industrial recruitment,while generating jobs in some communities, accounts for only a small portion of overall new job creation. Indeed, research indicates that this strategy has limited effectiveness for most cities (Kauffman, 2002). "Grow Your Own"as a Strategy The most effective approach may be to adopt an "enterprise development" strategy, which simply means supporting the development of small to medium sized business in the community through a variety of proactive measures.According to Thomas S. Lyons (2002), "Enterprise development is increasingly recognized as a relatively low-cost, 'bottom up' strategy for economic development that is particularly well- suited for a variety of rural and urban communities" (p.1).The following is put forth as a rationale for focusing on a "growing your own" strategy for economic development: 1.The majority of businesses are small or medium sized, and they employ the majority of people in the United States. 2. Entrepreneurial growth companies account for"at least two-thirds of net new jobs in the American economy" (Kauffman, 2002, p. 3). 17 3. Small businesses incubate innovation leading to new businesses opportunity.They are responsible for more than 50 percent of all innovations, 67 percent of inventions, and 95 percent of all radical innovations (Kauffman, 2002, p. 5). 4.We are living in a "new'Entrepreneurial Age' in which entrepreneurs and their companies are transforming the economic landscape." (Kauffman, 2002, p.4). 5. Entrepreneurs,those focused on innovation and fast growth, comprise 5 to 15 percent of all U.S. businesses (Kauffman, 2002), and there are some in every location. 6. Entrepreneurs and the companies they lead play a critical role in fostering economic prosperity and are vital to our ability to compete internationally. 7. Fast growth companies occupy a variety of business sectors, but they often start at the kitchen table or in the garage with less than $50,000 (Kauffman, 2002, p. 7). 8. Both our defense capability and homeland security require a robust small business sector. 9. Once established, a strong entrepreneurial environment in distressed or remote communities can lead to success in regional relocations of related businesses. If the first element in a proactive approach to entrepreneurship is well-organized and effective business support services,then the second essential element is community leadership. Case studies collected at the Heartland Center indicate that service providers alone cannot make a successful "grow your own" approach. In the Heartland Center study(2003), leaders play key roles in businesses success by: o Creating a compelling vision; o Communicating the vision to others; o Developing a plan to support business success; o Demonstrating commitment(Wall&Luther,2003,p. 5). Communities that are successful in growing their own indicate that"nearly all of the citizens become cheerleaders to promote the successes of new enterprises.They understand the importance of operation between businesses and all other parts of a total community. Where communities focus on creating their own jobs,leaders build a culture to nurture entrepreneurship in all three arenas:civic,social, and business.They also develop a support infrastructure, or system as Lyons described,that addresses the need for services, space, networking, and capital" (Wall & Luther, 2003, page 5). 18 APPENDIX 19 APPENDIX 1 Economic Development Strategy City of Farmington, Minnesota February 2007 Introduction In the summer of 2006,the.Farmington City Council and Economic Development Commission hired the International City-County Management Association (ICMA)to develop an economic development strategy and to identify best practices in economic development. The project was undertaken using a "peer assistance" approach,with ICMA providing overall project management, but enlisting the voluntary services of a "peer" group of experienced current and former city managers with extensive backgrounds in economic development. The project was initiated in October, 2006 and culminated in a joint meeting of the City Council, Economic Development Authority and key staff on January 22, 2007. Project Methodology Responding to the scope of services outlined by the City,the project team established the following methodology for the project: I. Peer Assistance Fundamental to the process was the engagement of a team of current and former city managers who had a depth of experience in economic development.The group included: Craig Waldron, City Manager in Oakdale, MN. In addition to his experience in Oakdale, Dr. Waldron has been a Community Development Director and worked for the Department of Economic Development at the State of Minnesota; Mark Nagel,former City Manager in Anoka, MN. Mr. Nagel, in addition to his experience as a City Manager, has also served as an Executive Director of a County Housing and Redevelopment Authority; Richard Fursman,former City Manager in a number of communities, most recently Maplewood, MN. In addition to his City Manager experiences, Mr. Fursman also served as an Economic Development Director. II. Assessment of current conditions To establish a baseline and determine the current state of economic development in the City of Farmington,the project team conducted an extensive series of interviews.The interviews included 20 all current City Council, EDA members, key City staff, major business and property owners, and developers in and around the city. In addition,the team made an assessment of the current environment based upon their own knowledge of the area and through discussions with industry professionals. III. Review of competitive environment/common practices Understanding the competitive environment was a key component of developing a new economic development strategy.To do this,the project team organized a bus tour of communities that had similar characteristics to Farmington, but had been successful in their economic development efforts. On Saturday, November 18, 2006,the City Council, EDA staff and project team toured the cities of Rosemount, Oakdale, Roseville, New Brighton,Anoka and Elk River. In each city, an overview of issues and project "lessons learned"was presented, including questions and answers for the officials from Farmington. IV. Identification of Internal Capacity Once City officials began to understand the competitive environment and the common practices used by other communities,the project team led City officials on an examination of the City's capacity to respond to the challenges of economic development. On November 27, 2006,the City Council and EDA met in joint session and participated in a facilitated process focused on identifying Farmington's internal strenths and weaknesses, and the external opportunities and threats (SWOT analysis) in connection with acheiving economic development success. A summary of that session is attached as Appendix_. V. Review of Best Practice The City of Farmington requested that the project team provide information on best practice in economic development as an ongoing source of information and guidance.A review and summary of best practice in economic development was prepared, identifying a list of most common elements and approaches used by successful communities, as well as common mistakes made by economic development authorities. In additon,the team provided a separate, but related examination of downtown development practice. Given Farmington's unique circumstance as a outer tier community in the metropolitan area with a distinct downtown, it was determined that a focus on downtown redevelopment practices was merited.The best practice documentation is attached to this report in Appendix_. VI. Facilitated Strategic Planning Process The project team strongly recommended that the City of Farmington generate its own strategic direction and work plan, not merely choose a set of actions based upon the research and interviews conducted by the project team. 21 To that end, a facilitated joint meeting of the City Council, EDA and key staff was held on January 22, 2007. Building on the information generated by the SWOT analysis, interviews and research process, the group identified the six most important strategic issues confronting the City. Once those issues were identified, a series of action steps to address them were developed, and both responsibities for follow-through and initial timetables were set forth. General Findings The project team found that Farmington has a solid foundation from which to build a successful economic development program.The existence of a core downtown area, expanding residential base,good schools and low crime are all assets that will serve the City well and can be leveraged to attract economic development. The primary concerns expressed regarding the future of economic development were: lack of focus and consistency amongst public officials, lack of good industrial land,technical capabilities of economic development staff and the absence of an economic development plan. Nearly all parties connected to this process agreed, however,that the City's effort to undertake this study and commit to a focused strategy was worthwhile. Best Practice Recommendations A detailed review of best practice for both general economic development as well as downtown revitalization is contained in Appendix_.All of the information contained within that document should be carefully considered as implementation of the Economic Development Strategy moves forward. Our most specific recommendation is to make sure to link the approach to the circumstances in Farmington. One of the greatest mistakes in economic development is to embark on a program simply because it was successful in another community.There is no substitute for understanding the local economy, and the unique strengths and weaknesses of the community. With that in mind,the project team recommends serious consideration of these best practices: • Establishing a plan and sticking to it(patience) • A Shared Community Vision (part of a strategic plan) • Focused Leadership-all members of the process aligned and committed • Cooperation among the chamber, government, etc. (no turf wars) • Effective governance—consistent, clear processing of development applications and decision-making • A supportive regulatory environment—creating policies and approaches that support private investment • Understanding the regulatory environment—particularly how it affects businesses operating within the city, while also contributing to the physical and social environment. 22 • Clear approach to coordinating land use and economic development—understanding how these relate, and clearly articulating this philosophy to the citizens and development community. • For downtown development, adopt the "Main Street Approach"and its four principles: 1 organization of downtown interests, 2 design and historic preservation to enhance the built environment, 3 economic restructuring to diversify the downtown economy, 4 marketing and promotion of the downtown Additional Observations In order to effectively implement the actions identified in the Economic Development Strategy,the city will have to address two key issues addressed in this report (1) staffing, or staff capacity; and (2) cooperation and alignment of policy makers. With respect to the issue of staffing,the project team recommends expanding the City's capacity to analyze and conduct economic development negotiations and finalize "deals".This should be done as soon as practical.This can be accomplished by either contracting for this service, or hiring a qualified economic development professional. As City officials learned during this process, even the most sophisticated cities use economic development consultants. For that reason,the project team suggests initiating the process to engage the services of qualified consultants for that purpose. In addition, serious consideration should be given to hiring a full- time economic development professional. Although no recommendation is being made as to title and internal responsibilities, based upon the City's current needs, a professional with broad oversight of all development activities,with the strongest experience in economic development would seem to be the best course of action. In terms of cooperation and alignment of policy makers,this issue appeared to the project team to be the single issue most likely to affect success or failure of the City's effort.As a result,the team recommends that the City Council, EDA and key staff spend additional time focused on team building, developing a plan for communicating and coordinating effort, roles and responsibilities, and how conflict will be handled. Extra effort in these specific areas will help to strengthen the implementation of this plan. APPENDIX 1-A Economic Development Strategy I. Create an Economic Development Framework What are we going to do and how are we going to manage this project Action Steps: 23 1. Make a decision for managing this process by March/April '07 a.Administrator makes a recommendation to EDA; EDA recommends to City Council by end of February/next City Council Meeting. b. Have project management in place by April 2"d, 2007 II. Understand Farmington's Market Determining our niche Action Steps: 1. Evaluate relevance of McComb Study for supporting an ED Plan 2. Make recommendation for evaluating industrial and downtown segments a. City Planner to do by February 26, 2007 (next EDA meeting) 3. Identify"downtown" Farmington a. Develop a process to define a downtown district 1. City Planner to do by April 15, 2007 2. Develop marketing plan for market segments of highest interest/capacity based upon market study results III. Coordinate Comprehensive Plan with Economic Development Strategy Action Steps: 1. Administrator and City Planner will create a joint meeting/communication process for coordinated development of Comp Plan and Economic Development Plans. a. Specify purpose b. Identify outcomes IV. Create adequate staffing and technical capacity to support economic development activities Action Steps: 1. Administrator will make a resource/capacity recommendation to the EDA by March '07 with recommendation to go to CC by April '07. Recommendation to include the following factors: a. Technical b. Staffing(hours) c. Training V. Unification of all groups behind the Economic Development Strategy Action Steps: 1. Decide on Economic Growth Committee role 24 a. EDA recommends to City Council in April '07 2. Establish a schedule for CC/EDA/PC to meet and discuss issues and direction by February 8, 2007 a. Include"old"warriors as revered guests 3. City Planner will prepare a communication plan/process for community information/updates a. Coordinate w/comp plan update process b. Public relations and success dissemination VI. Ensure necessary financial resources to support economic development activities Action Steps: 1. Prepare a summary of funding sources for supporting operations and management by February 2007 2. Summarize/create budget to implement planning and evaluation activities by March 2007 3. Recommend a process to analyze funding sources by June 2007 4. Analyze all sources of funds for underwriting development deals by October 2007 The Appendix represents actions that have been completed or in the process of being completed. This information continues to be important to the overall achievements of the EDA but may be outdated. Accomplishments of the strategies outlined in the Economic Development Chapter of the 2030 Comprehensive Plan —2010 Update: Met Goal Progress No /Ongoing Made Progress Downtown Development and Redevelopment Establish a Clear Downtown Boundary X ▪ SWOT Analysis of existing & potential communication links within the community • Design and Implement a Public Informational Campaign • Joint Meetings • Public Meetings • Create map to show boundary of Downtown Commercial District Design Standards X © Identify primary group to lead creation of design standards © Joint Meetings ® Develop preliminary design standards 25 © Review with.public and receive input ® Develop final draft and adopt supporting ordinance Promote Infill Development X • Downtown Outreach Program • Promotion of infill includes: business activities complimentary to downtown, identifying types of businesses to be targeted and outreach to developers • Parks and Public Spaces: identify opportunities for park and green spaces • Identify Incentives: investigate possible incentive programs/options to develop, research available grant and loan funding • Land Assembly Strategy: ongoing attention will be paid to the possibility of land assembly Industrial Development Business Retention Program X ▪ Visits (identify questions and discussion topics for visits, data review, follow-up) Promotion of Available Industrial Property and Buildings X • Inventory • Identify desired businesses • Determine if land assembly is appropriate • Rezone... • Promo materials... • Marketing packet for inquiries Advocate with Stakeholders X Enforce Building Standards X Establishment of Incubator buildings and/or inventory of vacant X buildings for start-ups Extend Light-Industrial Areas of the City X Commercial Development Outside of Downtown Area Promotion of Available Commercial Property and Buildings X Build, execute, and maintain a business retention program X 26 History of the EDA's Strategic Planning Efforts The Farmington Housing and Redevelopment Authority transitioned into a seven-member Economic Development Authority in February 2006. Later that year,the Farmington City Council and Economic Development Authority (EDA) hired the International City-County Management Association (ICMA)to develop an economic development strategy and to identify best practices in economic development. The project was undertaken using a "peer assistance" approach,with ICMA providing overall project management, but enlisting the voluntary services of a "peer"group of experienced current and former city managers with extensive backgrounds in economic development. Responding to the scope of services outlined by the city,the project team established the following methodology for the project: • assessment of current conditions, • review of competitive environment/common practices, • identification of internal capacity, • review of best practice, • facilitated strategic planning process. The project was initiated in October, 2006 and culminated in a joint meeting of the City Council, EDA and key staff on January 22, 2007. By February 2007, an Economic Development Strategy was developed which included six strategic issues confronting the city. Once those issues were identified, a series of action steps to address them were developed, and responsiblities for follow-through and initial timetables were set forth. See Attachment A for a copy of the Economic Development Strategy developed by the ICMA Peer Team. Parties involved-Consultants:Craig Rapp, Craig Waldron,Mark Nagel,and Richard Fursman, City Council:Kevan Soderberg,Mayor;Councilmember,David Pritzlaff Councilmember,Steve Wilson,Economic Development Authority:Todd Arey,Chair;Paul Hardt, Vice-Chair;Yvonne Flaherty,Erik Starkman, Chad Collignon, Councilmembers Christy Jo Fogarty,and David McKnight,City Staff Peter Herlofsky, City Administrator;Lee Smick, City Planner;Tina Hansmeler,Economic Development Specialist;Others:Ruthe Batulls,NDC Chamber;Brooke Walsh, This Week News In June 2007,the City of Farmington hired Community Development Consultants: Richard Fursman and Jim Norman to aid the City Council, EDA, and key staff with the creation of a vision and Economic Development Plan.The following top areas for the concentration of time, energy, and resources were agreed upon by all parties and are specified in order as follows: 1. Downtown Development and Redevelopment 2. Industrial Development 3. Commercial Development outside of the Downtown area • 27 Please see Attachment B for additional information that assisted in the identification of the EDA's top priorities. Parties involved—Consultants:Richard Fursman and Jim Norman,Economic Development Authority:Todd Arey, Chair;Paul Hardt, Vice-Chair, Yvonne Flaherty,Erik Starkman, Chad Collignon, Councilmember Christy Jo Fogarty, City Staff:Peter Herlofsky, City Administrator;Lee Smick, City Planner;Tina Hansmeier,Economic Development Specialist;Others:Ruthe Batulis,NDC Chamber of Commerce;Ladonna Boyd,Dakota Electric Association;Doug Bonar,ISD 192 In January 2008 the City Council decided to disband the seven-member EDA board and begin serving as the representatives on the Economic Development Authority Board becoming responsible for all economic development initiatives. The new members of the EDA continued to focus their efforts on the priorities listed above which include: Downtown Development and Redevelopment, Industrial Development, and Commercial Development outside of the Downtown area. Parties involved—City Council:Kevan Soderberg,Mayor;Christy Jo Fogarty,David McKnight,David Pritzlaff,Steve Wilson, Economic Development Authority:David Pritzlaff;EDA Chair;Christy Jo Fogarty, Vice-Chair;David McKnight,Kevan Soderberg, Steve Wilson In January 2009 the composition of the EDA changed again as the Board received three newly elected officials that will also serve as representatives of the EDA. Parties involved—Economic Development Authority:Christy Jo Fogarty, Chair;Steve Wilson, Vice-Chair, Terry Donnelly, Todd Larson,Mayor;Julie May. (new EDA members are underlined) In January 2011—EDA composition was modified again with the addition of a newly elected Councilmember; Jason Bartholomay. Councilmember Bartholomay was elected as Chair of the EDA. Parties involved—Economic Development Authority:Jason Bartholomay, Chair;Christy Jo Fogarty, Vice-Chair;Terry Donnelly, Todd Larson,Mayor;Julie May In August 2011, EDA Ex-Officio members: Doug Bonar and Geraldine (Jeri)Jolley were sworn in as ex-officio members. EDA's current composition: Todd Larson, Chair;Julie May Vice-Chair;Jason Bartholomay,;Christy Jo Fogarty, Terry Donnelly and ex-officio members;Doug Bonar and Jeri Jolley Historical Timeline and Achievements of the Economic Development Authority (EDA), 2006- Present: Jan '06 Farmington HRA transitions to an EDA. '06 City/EDA hired consultants to develop an Economic Development Strategy and identify best practices in Economic Development. Budget Impact: $26,780 Nov '06 EDA adopted Mission Statement Nov '06 ICMA Bus Tour with City Council, EDA, and key staff. Cities toured included: Rosemount, Oakdale,Anoka, and Elk River. 28 Nov '06 SWOT Analysis Conducted (Exhibit_) Jan '07 A joint meeting of the City Council was held. Building on the information generated by the SWOT analysis, interviews and research process,the group identified the six most important strategic issues confronting the City. Once those issues were identified, a series of action steps to address them were developed, and responsibities for follow-through and initial timetables were set forth. Feb '07 Economic Development Strategy developed. June '07 Community Development Consultants hired to assist with development of a vision and Economic Development Plan. Budget Impact: $9,517 July '07 Visioning Process Began:Visioning Session focused on the structure of the EDA and organization of City Staff as it pertained to the EDA. July '07 McComb Group LTD hired to conduct a Market Study to assist the city in understanding the future demand for commercial and industrial development. Budget Impact:$67,739.50 Aug '07 Second Visioning Session:group participated in exercises to develop the vision for the EDA. Aug '07 First economic development newsletter was created and distributed to EDA members. Sept '07 Final Visioning Session: EDA's top three priorities identified. The information compiled was used to begin forming the economic development chapter for the 2030 Comprehensive Plan— 2008 Update and to create strategies and work plans for staff. Sept '07 Last remaining HRA-owned industrial park lot sold (revenue??). Oct '07 Economic Development Element of the Comprehensive Plan was developed. Oct '07 General Marketing Folder created. Oct '07 C/I Market Study completed, results assist City Planners with identifying future acreages needed to support additional commercial and industrial development/growth for 2030 Comprehensive Plan Nov '07 The EDA acquired and approved the demolition of a blighted building locally known as the "Riste" Building to make way for future redevelopment efforts. '07 Business Reinvestment Loan Created (CDBG) Jan '08 Transisition of EDA from 5 at large members and 2 council back to 5 council members '08 Industrial Park expansion research began, consultants hired, supportable acreage identified, 29 development of preliminary cost estimates. Budget Impact:$32,000 '08 Business Outreach Program developed (77 businesses visited:year 1) '08 Aesthetic Improvements to EDA-owned properties (McVicker and Riste) and renovation to EDA owned building (305 3rd Street) completed. Budget Impact: $ '08 Business Development Grant Program Created (CDBG) (Include number of grants awarded and amounts) '08 First Business (Service, Retail, & Dining) Guide Created '09 New EDA Members:Todd Larson; Mayor,Terry Donnelly,Julie May '10 2010 accomplishments include: park garage sold (5/2010)... May'10 Sold EDA owned 308 Elm Street property (former parks garage)to AK Performance Graphics May'11 Sold EDA owned 305 3rd Street property(former liquor store) on 5/31 to Threet Properties, Inc. July'11 Sold EDA owned 323 3rd Street property (McVicker Lot)to Philippians 4:19, LLC Aug '11 Ex-Officio members:Jeri Jolley (Term: 1/31/2014) and Doug Bonar (1/31/2016k. Notes: Possible Issues • Need for review of Mission Statement • Review of Vision Statement • Provide goals for 2011 strategic plan • Review and update as needed SWOT Analysis for 2011 Strategic plan • Business friendly movement • Target businesses for marketing • 7-member EDA • More art in downtown? • Funding of economic development • Research and determine revenue sources for EDA 30 014$4 AV*International Council of Shopping Centers Inside Site Selection: Retailers' search for strategic business locations March 2008 WWW. ICSC . ORG I WWW. SOCIALCOMPACT. ORG Acknowledgments The Inside Site Selection report would not be possible but for the generous contributions of time, treasury and talent of the International Council of Shopping Centers (ICSC) and its Underserved Urban Markets Task Force. Social Compact gratefully acknowledges the crucial support of ICSC's Director of Community Relations Cynthia Stewart, whose leadership and ability to identify tools for better investments in inner cities is helpful and crucial to Social Compact's efforts. Social Compact would like to specially recognize and acknowledge that the present research builds on previous research work from ICSC with Business for Social Responsibility. In addition, we recognize the need and call for future quantitative analysis of retail trade areas, underserved markets and their relationship. The field has seen important efforts regarding economic development through private sector investments. Acknowledging the role of cities such as Chicago, Washington, D.C., and Louisville and the efforts made by leaders like John Fisher,Assistant Director of the City of Louisville Economic Department, and Michael Stevens, Executive Director of the Capitol Riverfront Business Improvement District, and Fran Spence, City of Chicago, is essential. Special thanks are in order to the Underserved Markets Task Force, in particular to Harvey Gutman, Lyneir Richardson, Lamont Blackstone, Norris Eber, and Cynthia Kratchman. Social Compact would also like to extend thanks to Alyssa Lee of the Urban Markets Initiative at the Brookings Institution. Finally, this work would not have been possible without the continued leadership and support of Social Compact's dedicated Board of Directors. 1 ICSC Underserved Markets Task Force Chair John Haake Norris Eber Vice President Executive Vice President, Ed Smith&Associates Asset Management&Acquisitions Troy, MI Joseph Freed&Associates LLC Palatine,IL Lawrence E.Kilduff President G.Lamont Blackstone The Kilduff Company Principal Mequon,WI G.L.Blackstone&Associates Mount Vernon,NY Cynthia J.Kratchman Landmark Commercial Real Estate Glen E.Boyer Farmington Hills,MI Director,RE Market Research Ross Stores,Inc. Joan Primo Newark,CA Principal The Strategic Edge John Cirillo Southfield,MI Director,Site Market Research New York&Company Lynier Richardson New York,NY Vice President General Growth Properties Inc. Thomas J.Connolly,CLS Chicago, IL Divisional Vice President Walgreen Co. Michael A Schmid Deerfield IL Director of Market Research Lowe's Companies Inc. Tim Corzine Mooresville,NC Manager,Research&Planning Target Corporation Frances Spencer,SCSM,SCMD Minneapolis, MN City of Chicago,Asst.Commissioner Dept of Planning&Development Hon.Paris Glendening Chicago,IL President Smart Growth America Michael G.Stevens Washington, D.C. Executive Director Capitol Riverfront Business Harvey M.Gutman Improvement District President Washington,D.C. Brookside Advisors LLC Glastonbury,CT Deborah Weinswig Retail Analyst Citigroup Smith Barney New York,NY Staff: Michael P.Niemira Cynthia Stewart Chief Economist,Director of Research Director,Local Government Relations International Council of Shopping Centers International Council of Shopping Centers 1221 Avenue of the Americas 1399 New York Ave.NW,Ste.720 New York,NY 10020-1099 Washington,D.C.2005-4725 Phone.(646)728-3472 Phone:(864)968-9342 mniemira(c icsc.org cstewart @icsc.org 2 Analysis conducted and written by Social Compact 738 7th St. SE Washington, D.C. 20003 Phone: (202) 547 2581 jtalmage(csocialcompact.org 3 Social Compact is a national not-for-profit corporation led by a board of business leaders whose mission is to help strengthen neighborhoods by stimulating private market investment in underserved communities. Social Compact accomplishes this through a variety of tools developed to accurately measure community economic indicators and to provide this information as a resource to community organizations, government decision makers and the private sector. Social Compact is at the forefront of identifying the market potential of these areas and believes that a public—private partnership that involves community members and leverages private investment is the most sustainable form of community economic development. Social Compact's primary analytic tool is the Neighborhood Market DrillDown, developed to address some of the key barriers to private investment in and around inner-city neighborhoods — a lack of dependable market information and negative stereotypes. The Neighborhood Market DrillDown uses numerous sources of market data to identify the fundamental business attributes and market characteristics of urban communities. Poverty and deficiency data is replaced with business indicators of market strength. Some of the best private market analysis models, designed for the suburban market, are adapted to respond to the unique characteristics of the inner city in order to capture density, hidden populations, cash economies and micro-market • development patterns that are not captured by traditional market analyses. This innovative work was piloted in Chicago in 1998 with generous support from State Farm, the Ford Foundation and the MacArthur Foundation. To date, Social Compact has conducted DrillDowns in over 300 neighborhoods across the country in Baltimore, MD; Cleveland, OH; Cincinnati, OH; Detroit, Ml; Houston, TX; Jacksonville, FL; Los Angeles, CA; Miami, FL; New York, NY; Oakland, CA; San Francisco, CA; Santa Ana, CA; and Washington, D.C. Social Compact has found these communities to be larger, safer and with far greater buying power than previously thought. The business investment in economic development leveraged by this information is the best indicator of its success. Cumulatively, Social Compact has identified: • Aggregate household income $32 billion (29%) higher than census trend projections • 350,000 more households than census trend projections • I million more residents than census trend projections 4 INSIDE SITE SELECTION: Retailers' search for strategic business locations Retail development is often heralded as a pathway to urban economic development that benefits both the business community and neighborhood residents. Despite this insight, many retailers encounter difficulties in identifying profitable store or branch locations in inner-city markets. Challenges such as nontraditional housing arrangements, ethnic diversity and prevalent cash economies together with certain "urban myths"' complicate the process of adapting suburban store models to the urban landscape and catering to the needs and preferences of urban consumers (Miara, 2007). Understanding retailers' site-selection processes in urban areas will lead to a better understanding of the variety of challenges faced by retailers. The siting of new stores or branches can determine the retailer's success (or lack thereof). While all retailers use market and demographic data to assess a potential site, a large informational void exists regarding which indicators and data sources drive key decisions, how they impact decisions and why. The following paper presents the findings of a joint research effort between Social Compact and the International Council of Shopping Centers (ICSC) aimed at bridging this knowledge gap by conducting in-depth interviews with retailers from a wide range of industries. The consultations yielded several interesting and valuable conclusions, illustrated by the following key findings: • Despite similarities found in retailers' site-selection processes, varied approaches make site selection appear more of an art than science. 1 These myths include the belief that supermarkets cannot be successful in the inner city and that local residents will not make good employees.For a larger discussion about these myths see Gutman,2008. 5 • Site specifications, including indicators of market viability, vary widely. Comparing businesses within the same industry reduces some of this variation, yet it still exists. • Two fundamental indicators, median household income and the total number of households and/or people, drive retailers' site selection in any given market. Specialized retailers, however, may rely on additional indicators such as number of college graduates, ethnic composition, housing prices, etc. • Retailers expressed particular interest in finding data that reliably captures change at the neighborhood level. When talking about change, retailers focus on future change. They want to know what to expect in the future, for example, how a neighborhood will change one,two or five years from now. • Retailers are unaware of some new and informative data sets (i.e., Home Mortgage Disclosure Act data, HMDA) that can provide the type of neighborhood indicators they wish to include in their site-selection analysis. • Retailers cite three common barriers to locating in inner-city neighborhoods: land availability, market demand to support a particular business and evidence of that market demand. In addition to these indicators, construction and operations costs and the approval/zoning requirements factor into the site- selection process. • Retailers, aware of the potential in inner cities, are making concerted efforts to better understand urban markets. Methodology ICSC provided Social Compact with fundamental connections and contact information for 45 retailers representing the following retail categories: financial services, big box retail, apparel and shoes, books, grocers, home improvement and 6 home accents. In addition, Social Compact, utilizing its own network, increased the number of possible respondents from the following industries: financial services, big box retail and grocers.The finalized contact list consisted of 53 different retailers. Identifying the appropriate contact and obtaining their responses proved lengthy and impossible in many instances. On average, Social Compact made at least three attempts before obtaining a response from those retailers that did participate in this project. Social Compact was unable to reach an overwhelming 72% of potential respondents after trying to contact them at least five times? Social Compact completed a total of 13 in-depth interviews. All respondents were asked a list of 13 general questions based on the following four themes:3 I. Indicators that drive retailers' site-selection process 2. Data sets most commonly used by retailers 3. Indicators retailers wish to obtain yet are unable to 4. Factors that can transform an undesirable site into an attractive one In some cases, interviewees' responses prompted researchers to improvise with additional follow-up questions.All but two interviews were conducted over the phone, lasting between 25 to 60 minutes.4 Different factors, such as interviewee's time, availability and willingness to share information, affected the length of each interview. These same factors likely contributed to the overall low response rate. Findings The in-depth interviews revealed significant and valuable information for the field of economic development. In order to honor confidentiality of all parties involved, 2 Social Compact researchers made a minimum of five attempts to contact retailers over a three-month period(in some cases researchers made up to I0 attempts). 3 See Appendix A for the list of questions. 4 Thanks to Social Compact's strong relationship with two of the retailers,two of the interviews were conducted in person and included a visit to the retailers'headquarters. 7 the report uses general themes to organize the responses and, when appropriate, responses are further broken down by retail category. With specific examples, both the individual's and retailers' names remain anonymous. A. Confidentiality The first and most obvious finding of the study is that retailers are hesitant, and many times unwilling, to talk openly about their site-selection processes. In an increasingly competitive market, defined by ever-changing characteristics and growing diversity, retailers make great efforts to conduct accurate market research and site evaluation. Given that effective site selection remains a crucial component to the establishment and maintenance of profitable businesses, it is no wonder that obtaining detailed information about this process is an enormous challenge. Upon contact, retailers were informed that interview responses would remain anonymous and that findings would only be presented in generalized themes. Despite this clarification, only 23% of those contacted agreed to participate in the interviews. The other 77% either refused to participate or were unreachable. In addition, out of those who agreed to participate, only three were willing to answer all of the questions openly and without hesitation. Other respondents, at some point or another, stated that the information sought was proprietary. In addition, all retailers commented that their willingness to participate in the research was due to one, or all, of the following reasons: I. Social Compact's status as a not-for-profit organization, 2. the retailer's own strong relationship with ICSC and/or 3. their knowledge of Social Compact's efforts to promote sustainable economic development in a variety of cities across the United States. 8 B. The Site-Selection Process All retailers interviewed have a real estate department that leads the site-selection process. In addition, at least half of them hire outside real estate agents to work with the internal team. Generally,all retailers follow the four steps described below: I. Determine the number of stores they want to open, the time frame for opening and in which cities. 2. Gather demographic and business data to determine where, within each city, market demand can support their business. 3. Do some groundworks to assess: a. land availability in a location that makes sense (i.e., a business selling breakfast products would want a location in an area with substantial morning traffic), b. the location's visibility, access routes and the existing neighborhood customer base and c. potential barriers to successful retail development. 4. All the information is then placed in proprietary models that incorporate performance data from existing stores. Retailers use these models to estimate the potential performance of a store at the selected location. Consequently, as retailers open new stores or branches in similar neighborhoods their predictive models become more and more accurate. While these steps describe the general site-selection process that all retailers follow, there are certain variances and caveats worth noting. At least half of the retailers interviewed mentioned that the data gathered for the site-selection process 5 This particular step(the groundwork)is not common to all industries.Big box retailers and grocery stores are most likely to conduct such kind of assessments.Retailers from other industries might or might not partake in such a process. 9 does not always match their intuition, especially with respect to inner-city neighborhoods. In this case, retailers respond by I. seeking alternative data that corresponds to their intuition, 2. gathering evidence about the market potential of certain areas, 3. conducting their own field research to do a"reality check" about the site under consideration and/or 4. investigating incentives that could potentially decrease the cost of opening stores. For example, one interviewee shared that, in cases where traditional market data does not match their intuition about a neighborhood's market potential,the real estate team takes a trip to the site and nearby supermarkets. According to this respondent, visiting a neighborhood grocer provides a sense of that particular neighborhood's demographics (ethnic composition, age, etc.). C. Driving Indicators When assessing a potential location all retailers pay close attention to the total number of people and/or households in an area and household income. It is important to note that nine of the respondents affirmed that median household income gives a better measure of household buying power than average household income. In fact, three out of those nine mentioned that they only take into consideration median household income. All interviewees agree that, in urban areas, determining a site's suitability involves not only income or the number of households per se.They consider the complex relationship between these two indicators in addition to social characteristics such as homeownership, educational attainment and average household size, as well as physical characteristics concerning traffic, access, visibility and nearby competitors. 10 Indicators that impact site selection also vary by industry and specialization. While a children's clothing store considers school enrollment data, a home repair store will likely examine homeownership or home sale values. Table I depicts the list of indicators (in alphabetical order) that respondents use when determining new store locations. Table 2 indicates the minimum site requisites by industry and the desired trade area. The two tables demonstrate the range of information retailers depend upon to aid their site selection and the variety of characteristics that can define an ideal market. Table I.Site-Selection Indicators I.Average Household Size 2.Average Income 3.Competition(presence,type and location) 4.Crime 5.Daytime Population 6.Educational Attainment 7.Ethnic Composition 8.Homeownership 9.Home Sale Values 10.Income Change I I.Major Employers in the Area 12.Median Income 13.Neighborhood Orientation 14.Number of Households 15.Pedestrian Traffic 16.Population Change 17.Population Size 18.Visibility D. Data Sources All respondents affirmed that the data used in market predictability models comes from a variety of sources. Eight of the 13 retailers affirmed that they combine data purchased from proprietary sources (i.e., PopStats) with data that they collect on their 11 own. Among interviewees, the most commonly used data sources are: U.S. Census Bureau, Claritas,6 PopStats and the United States Postal Service (USPS). Table 2.Minimum Requirements and Trade Areas INDUSTRY INDICATORS URBAN SUBURBAN Grocers I.Number of People Varies 2.Population Size 50 K 3.Median Income 30 K 4.Trade Area I-to 2-mi.radius 2-mi.radius Traditional Financial Service I.Number of Households 10 to 12 K Providers 2.Median Income Varies 3.Trade Area I—mi.radius 2-mi.radius Big Box Retailers I.Number of Households Varies 2.Median Income Varies 3.Trade Area 3-to 5—mi.radius Varies Retailers' data-collection methods vary and range from sophisticated customer surveys to simple tactics such as observing and counting patrons in a grocery store. E. Desired Indicators Retailers expressed a general satisfaction with their ability to gather data and/or find alternate ways (such as site visits) to successfully evaluate a potential site. However, when asked which market indicators they desire that are currently unavailable to them, the three most common answers were: indicators that show short-term neighborhood change, ethnic composition and educational attainment. Table 3 contains a complete list (in alphabetical order) of all the answers to this question. Once again, special emphasis should be placed on the fact that when talking about neighborhood change the focus is on future change. The big question is, how would this neighborhood look one,two or five years from now? Interviewees' responses indicate that retailers may be unaware of the extent of data currently available. For example, at least half of retailers interviewed mentioned 6 Claritas is a marketing information company that generates census-derived economic and demographic profiles to inform businesses and their decision-making process. 12 that they would like to have data that demonstrates neighborhood change. However, these retailers also affirmed they did not use, nor were they familiar with, Home Mortgage Disclosure Act (HMDA) data. HMDA data sets contain the annual incomes and ethnicity of individuals who purchase homes and home sale values — information that can help determine neighborhood change over time. Table 3.Unavailable but Desired Indicators I.Daytime Population 2.Educational Attainment 3.Ethnic Composition 4.Household Change 5.Income Change 6.Pedestrian Traffic 7.Population Change F. Barriers to Retail Development While a number of possible impediments factor into opening a store in a particular location, this study reveals that the three most common barriers in urban settings include land availability, sufficient market demand for a particular business and evidence of that market demand. It is important to note that such barriers do not necessarily impede retail development. At least three of the retailers interviewed mentioned that some obstacles, such as a presence of gangs, the homeless and drug users, might initially cause concern. However, if the retailer thinks the location makes sense for business, they will take the measures necessary to respond to such barriers. In this particular case,the retailer simply provided additional security in and around the store. In certain instances, however, barriers unrelated to market potential, such as those mentioned above, may prevent retailers from opening stores in certain locations. This is more an exception than a norm. 13 G. The Power of the People One interesting and important factor that governments and developers should consider in their retail attraction strategy is the power of the people. One interviewee shared how residents pursued them to open a location in a neighborhood that did not meet their selection criteria. Determined to attract this particular retailer, area residents organized a series of visits to the company and wrote individual and group letters asking the retailer to consider a location in their neighborhood. According to this retailer, the company's main goals of serving and honoring the customer's opinion factored into the decision to open a store in that location. H. Predictability Overall, retailers affirmed the accuracy of their models when predicting new store revenues. Although urban stores perform differently from each other in different cities and neighborhoods, at least five interviewees affirmed that in many cases sales volumes of inner-city stores surpassed their expectations. Respondents also noted that as they open more locations in urban areas, in general, and in inner cities, in particular, their models continue to improve, enhancing their understanding of these markets. In addition, it is important to note that sales volumes do not always align with profits. Determining the most"profitable" items in a particular market is another piece of the puzzle that retailers struggle to figure out. In cases with high sales volumes but low profits, it takes retailers longer to determine the high-profit products purchased by customers on a regular basis. Some retailers, aware that urban markets present sizable untapped potential, make ongoing efforts to better understand the complexities of the urban market. Other, less responsible, retailers respond by selling frequently purchased products at higher prices in the stores where sales volumes do not correspond to sales revenues. 14 Findings by Industry Access to traditional financial services and fresh food are essential components of comprehensive community development, yet many mainstream financial institutions and supermarkets tend not to invest in the inner city as they are largely unaware of the economic potential. As a result, many urban neighborhoods have fewer traditional financial institutions and grocery stores per capita than suburban neighborhoods. Given Social Compact's concern with access to groceries and financial services, and because of government and residents' desire for big box retailers, this study presents a few additional insights for each of these industries. A. Grocery Providers An absence of affordable, quality food does not necessarily result from lack of market demand and can lead to demonstrable health complications such as obesity, diabetes and hypertension (Gallagher, 2006). Understanding the demand for groceries in communities is essential to development professionals and legislators as many urban areas have begun crafting incentives for grocers to locate in their communities. Compared to other retailers, grocery providers have a more complicated process for site selection due to certain characteristics specific to the industry, such as the sale of perishable goods and customer demand for low-priced products. Interviewees noted that the vast majority of inner-city grocers have large sales volumes that, in many instances, do not necessarily translate to profits, citing stores that struggle to make a profit although they are crowded at any time of the day. "People buy a lot of items," said one respondent, "but not the products that have profit margins. Other retailers solve this problem by raising prices in inner cities. [We] don't. We are trying to get a better sense of products where we can make a profit in these neighborhoods. In the mean time, we prefer not to service the areas where we 15 cannot offer good prices. In suburban areas people tend to have higher incomes and take home a basket of products that contains products with higher profit margins." The grocery industry appears to be one of the best at understanding the investment potential and complexities of urban markets. Respondents' answers revealed that although grocery retailers use a variety of indicators, the number one decision-driver for store location in urban neighborhoods is population density within the trade area. Grocers' site selection begins by gathering market information (including income and population) at the neighborhood and block group level. Using these numbers, a proprietary formula tells them the average amount a household will likely spend on groceries. The model then assesses how resident expenditures, within a given trade area, may be impacted by barriers such as competing stores, transportation and social barriers (i.e., real or imagined boundaries and perceptions of safety'). Retailers also clarified that their site evaluation does not concentrate on a one-time snapshot of a particular neighborhood; rather it incorporates analysis of historic trends, current numbers and projections of the future population. Market competition appears to be another fundamental factor for this industry. Grocery providers explained that competition does not necessarily include all those that sell food. In fact, large supermarkets claim their fundamental competition comes only from other full-service supermarkets and/or large discount stores, such as Target and Wal-Mart superstores, which also provide numerous food products. Grocers take into account the presence of mini marts, drugstores and/or convenience stores, but do 7 A few respondents mentioned that visits to the site are important to the site-selection process because important factors may not be apparent in the data.For instance,respondents revealed that when a low-income neighborhood borders a high-income neighborhood,it is very unlikely that people from one neighborhood will go to the stores located in the other.A product mix which may not meet the needs of some residents,perceptions of safety and relative discomfort when navigating other neighborhoods are likely to contribute to such behavior. 16 not consider them major competitors. When competing stores exist in a particular neighborhood, retailers affirmed that competitors' performance in those neighborhoods becomes a critical indicator of market strength. Other, less important, factors (such as parking,traffic counts and crime)vary city by city. While grocery providers agree that it is hard to define a trade area for inner cities, because it varies by location, an urban grocer generally serves customers within a two- mile radius of the store. Obviously,there are exceptions. For instance, one respondent affirmed that, "in Chicago, density is so high that the trade area is significantly smaller." However, when assessing their competition, grocers consider the presence of other grocery retailers within a three-mile radius. Several interviewees stated that grocery retailers measure demand as a ratio of grocery retail space per capita; a trade area is considered underserved when the grocery store space servicing one person is less than 3 sq.ft. Specialty grocery providers (such as organic grocers) have an even more complicated task when conducting their site-selection process. In this case, respondents affirmed, it is not simply about population density but concentrations of specific customers. Specialized retailers in all industries — not only in the grocery industry — use indicators such as number of college graduates or homeowners to determine market demand. With a middle-income or wealthier targeted market, retailers feel comfortable using census or census-derived data because of the likelihood of this population segment to be accurately portrayed by census demographics. In instances where the targeted market consists of lower-income residents, retailers struggle to find accurate and timely data. When asked which government interventions can make a site more attractive, grocers responded by noting that most incentives will only subsidize a very small, and 17 in many cases, insignificant amount of a grocery store's expenses. For instance, one respondent revealed that rent makes up 2% of the grocer's fixed costs. According to the Food Marketing Institute (FMI) the median rent percentage to sales in 2006 was 1.7%. That same respondent affirmed that, in some cases, even with an offer of a location free of charge, they still turned down the offer. Grocery providers also observed that government incentives are generally small and likely to come with restrictions. Pedestrian traffic appears to be the one thing that can encourage new private investments according to most respondents. B. Financial Institutions Limited access to traditional banking and financial services has long been a barrier to wealth creation in marginalized communities. This lack of access often translates to higher costs for basic financial transactions (Barr, 2004). Communities facing a high presence of check-cashing institutions, pay-day loan centers and other predatory financial service providers fall victim to higher transaction fees; a recent study found that"borrowers pay $4.2 billion every year in excessive payday lending fees" (King et. al, 2006). The site-selection process for traditional financial institutions is also unique when compared to other retailers. According to respondents from this industry, a key indicator of market viability is the total number of households. In general, banks think that a market of 10,000 to 12,000 households is likely to sustain a branch and generate the desired profit. In suburban areas this number of households is generally encompassed within a two-mile radius, while in high-density urban areas, a one-mile radius will suffice. While market size is the key indicator that drives financial service providers' site selection, other indicators, such as income, are also important. This industry looks at 18 income differently from most industries. In general, retailers look for locations with a number of households with a specified median or average income range. In the case of traditional financial service providers, such as banks and credit unions, different institutions cater to different niche markets. Thus, while some banks will look for a particular population size with a median income higher than $50,000, others will concentrate, for instance, on servicing lower- and middle-income households, focusing on neighborhoods with a median income below a particular range. Other important indicators for banks' site selection include competition, household density, population and income change, and pedestrian traffic. Interviewees affirm that neighborhood change and pedestrian traffic matter most in urban areas, yet this data is particularly hard to find. Thus, site selection in urban areas becomes more complex. However, differences between urban and suburban bank branches are not reflected in branch performance rather in the product mix that a bank branch will offer. For the most part, traditional financial institutions obtain data for their site- selection analysis from the census or census-derived data. In fact, most respondents within this industry affirmed that their regular data provider is Claritas. Respondents noted that although they are aware of its particular flaws, they prefer census-derived data because of the standardization of the data set obtainable for any geographic area. Nonetheless, some financial service providers do use more nuanced and up-to-date data sources, such as USPS postal counts, to validate what they intuitively know about particular sites but cannot justify with data they traditionally use. Respondents from traditional financial institutions mentioned that a lot of their business relies on local commercial and pedestrian activity. According to the respondents, "finding good real estate" in developed areas is a challenge. 19 Consequently, cities need to promote redevelopment of retail cores in underserved neighborhoods to make it easier for traditional financial service retailers to penetrate inner cities. C. Big Box Retailers Big box retailers (i.e., Target, Wal-Mart, Best Buy, Linens-N-Things) have two characteristics that make their site selection different from other retailers. First, big box stores tend to have a suburban prototype for which finding an urban location is unlikely and often impossible. One respondent from this category affirmed that "in urban areas, the size and configuration of space is often a challenge and generally requires dealing with more than one floor level." Thus, these types of retailers need either to adapt their store formats to urban locations or limit themselves to serving suburban and/or suburban-like neighborhoods. In urban areas being flexible with size plans, fixture plans and layout is essential. This is one of the disadvantages, and added costs, that big box retailers face when moving into inner-city neighborhoods. Some retailers have found innovative ways to make up for these added costs, such as working in partnership with local governments and community-based organizations (CBOs), particularly community development corporations (CDCs). These local partners help with a variety of tasks such as assembling, cleaning and preparing sites; support with infrastructure investment; as well as organizing community support. Consequently, local groups (public and private) play a critical function in site-selection processes for big box retailers in inner cities (ICIC, 2002). For those retailers who have demonstrated their flexibility by developing urban models and adapting to the site constraints of urban settings (i.e., building vertically instead of adhering to single-story models),the payoffs are visible (ICIC, 2002). 20 Retail Development Perspectives: Implications for City Officials The breadth of information revealed through these retailer surveys highlights the myriad approaches and dynamic nature of retailer site selection processes which has significant implications for city officials: I.Retailers look at locations from varying research perspectives.Cities should familiarize themselves with these perspectives in order to understand what kind of retail is best suited for each potential development site. Regularly scheduled forums as well as informal dialogues between city officials and retail site research firms and developers can help cities in this effort.For urban areas, retail research firms includes three types of research companies: I) large institutional research companies like Claritas, Map Info,Asterop, Experian;2) non-profit national companies with research skills like Social Compact, LISC's Metro Edge, and ICIC and 3) regional retail site location experts like Matt Casey of MPC or Elliot Olson of Dakota. ICSC's research capabilities will also be useful in these efforts. 2.Retailers might be unaware of future growth and development plans around a particular location and therefore require as much information about a site and city as possible.Cities should provide retailers with future development plans,which might contain evidence that can change retailers' decisions about a site. 3.When contacting and talking to retailers, it is important that the city demonstrates commitment to the project and willingness to smooth the process.Cities should be ready to overcome obstacles through different methods such as reconsidering business licensing and permitting costs and complexity and discussing incentives and benefits in the sites under consideration, etc. 4.Retailers are likely to move quickly when they believe a competitor might"steal"their site. Consequently, cities should make sure retailers are aware that they are not the only possible option. 5.Not all development projects need to be prepared/organized as a"home-run." Cities should recognize that even small shopping centers or store renovations can be an important first step to future and more substantial development. Harvey Gutman, Brookside Advisors LLC recruiting and training local workers, particularly CDCs, which can qualify for federal grants that support such efforts. Thus, creativity and knowledge of the different resources available for economic development become crucial. Other barriers reported by big box retailers included parking, signage, visibility and real estate costs. Many of these constraints (including the inability to find urban space that 21 accommodates suburban store models) are also true for large, full-service grocery stores. Conclusions The secrecy surrounding retailers' site selection in urban markets is not surprising given its importance and the high level of competition within the retail sector. While this study is unable to answer why there is such a disconnection between retailers and available data sources, the following reasons may potentially explain the situation: I. Traditional data providers, such as Claritas, dominate the field as the preferred source of information regardless of other, sometimes more complete and/or accurate, alternatives. 2. New data providers, such as the Federal Financial Institutions Examination Council, have yet to successfully advertise their data products to retailers. Further analysis is likely to provide more insights in this regard. What remains apparent is that, rather than any one method, a combination of the analytics retailers currently use to measure urban markets is likely to provide a more clear understanding of inner-city market potential. Furthermore, this study provides evidence regarding two fundamental aspects about retailers. First, when analyzing site locations, retailers apply a variety of lenses. Second, site-selection decisions are based on a large number of neighborhood indicators and characteristics. Given this reality, it is apparent that both cities and retailers will benefit from becoming better acquainted with the perspectives and approaches of each other. In so doing, cities should share as much information about a site as possible especially because cities may possess rich resources of past, present and future, untapped and underutilized data that could have an impact on location 22 decisions: Cities' supplemental information, regarding development plans, phasing or incentives uniquely available to certain sites could also be useful to retailers. Broader dialogue and increased collaboration between cities and retailers can only serve to bridge the information gap, resulting in shared understanding around urban development. The study does confirm that determining new store locations depends, in large part, on retailers' intuition and experience in particular markets and the field. Nonetheless, findings reveal at least three important characteristics of retailers' decision-making procedures regarding new store placement. First, all retailers follow a few general patterns and sets of indicators to establish new store/branch locations. Second, partly because of the differences between urban and suburban areas, retailers want data that can help them effectively understand demographic change and consumer behavior in urban areas. Finally, retailers need information on some existing data sets that can provide the kind of indicators that they want. Finally, the study highlights the need for further research regarding the following two issues: I. indicators (sources, adequate measures, hierarchy, etc.) and 2. how to measure, assess and/or quantify change in urban areas. More specifically, the current analysis identifies three main areas for future research: surveys, case studies and workshops. The surveys should focus on the following two themes: a) determining general patterns and characteristics of urban and suburban stores and b) obtaining further insight regarding indicators retailers use in their site-selection processes. The current study barely scratches the surface regarding indicators relevance, availability and usage. 23 The case studies should focus on both successful and unsuccessful urban retail to shed a light on factors that can alter stores' performance in underserved urban markets. These studies are also likely to highlight differences between urban and suburban retail. Finally, the workshops would provide the ideal setting to connect retailers, developers and city officials. These efforts would likely generate mutual understanding, identify commonalities amongst both parties and ascertain areas in which both stakeholders could benefit from collaborating with one another. 24 BIBLIOGRAPHY Barr, M. (2004). Banking the Poor: Policies to Bring Low-Income Americans Into the Financial Mainstream.Washington, D.C.: The Brookings Institution. Gallagher, M. (2006). Examining the Impact of Food Deserts on Public Health in Chicago. Chicago, IL: Mari Gallagher Research and Consulting Group. Gillham, Oliver. (2002). The Limitless City. A Primer on the Urban Sprawl Debate. Washington, D.C.: Island Press. Gottdiener, Mark, and Ray Hutchison. (2000). The New Urban Sociology. Boston, MA: The McGraw-Hill Companies. Gutman, Harvey M. (Spring 2008). The Inner City Supermarket — Myths and Reality. LISC Commercial Market Advisory Service Winter 2008, pp. I and 7. Porter, Michael E. (July 2002). The Changing Models of Inner City Grocery Retailing. Boston, MA: Initiative for a Competitive Inner City. Kaufman, Phil, and Steven M. Lutz. (May-August 1997). Competing Forces Affect Food Prices for Low-Income Households. FoodReview, pp. 8-12. King, U., L. Parrish and O.Tanik. (November 2006). Financial Quicksand: Payday lending sinks borrowers in debt with $4.2 billion in predatory fees every year. Durham, N.C.: Center for Responsible Lending. Miara,James. "Retail in Inner Cities," Urban Land January 2007, pp.98-105. 25 Appendix A: List of General Questions for Retailers 1. Can you describe, in general terms,your business' site-selection process? 2. What indicators does your business focus on when evaluating site selection? (i.e., how do you examine income density. are you more focused on median household income rather than average household income; per capita income; aggregate income? etc.) 3. Do you look at ethnicity, crime and traffic counts data? If so, from which source do you obtain this information? 4.What data and sources of data do you use for determining new store locations? Do you use census or census-derived data? 5. What are the indicators that are more relevant for your site-selection process? 6. Are you willing to look at alternate data sources? What indicators or factors would be attractive in an alternative data source? 7.What are the minimum necessary conditions that must be met before your business chooses to place a new store or branch in an inner-city neighborhood? Are these conditions different in suburban areas? 8.What is the trade area for businesses' inner-city branches? Is the trade area different in suburban areas? 9. When making site location decisions, does collocation with retailers factor into the decision? If so, how? Does the presence of competing or sister businesses affect your site-selection process? If so, how? 10. Do you limit the number of stores or branches that you place in a particular trade area? For instance, would you place one store or branch 10 blocks away from another? Is there a minimum distance between your stores or branches? If so, how is that distance determined? 11. How do you see urban markets? Are you considering any locations in urban markets? Does the average size of your branch limit your ability to enter urban markets? 12. Can you think of any types of possible interventions (i.e., street-scaping, improved access to parking, increased police presence, etc.) that might be necessary to reduce barriers to entry in urban markets? 13. How do your inner-city stores or branches perform when compared to your suburban ones? 26 Filename: 051208 SITE SELECTION FINALDRAFT.doc Directory: C:\Documents and Settings\Carolina\Local Settings\Temporary Internet Files\Content.Outlook\UZ62YPBG Template: C:\Documents and Settings\Carolina\Application Data\Microsoft\Templates\Normal.dotm Title: SITE SELECTION:An insight into the Subject: Author: Ing.Raul Valencia Keywords: Comments: Creation Date: 5/12/2008 3:00:00 PM Change Number: 2 Last Saved On: 5/12/2008 3:00:00 PM Last Saved By: Carolina Total Editing Time: 3 Minutes Last Printed On: 5/16/2008 5:12:00 PM As of Last Complete Printing Number of Pages: 27 Number of Words: 6,417(approx.) Number of Characters: 36,581 (approx.)