The Avon Lake Economic Development Committee 3R Proposal: Business Retention, Renewal and Recruitment

9/13/11 I. What is Economic Development and Why it Must be a Top Priority

Economic Development can be divided into three Rs retention, renewal and recruitment. First, we must retain the businesses that are here and give them reason to not relocate. Second, we must create an environment in which businesses can renew by growing existing jobs through increased salary or hours. Finally, the newly created environment must be one which enables the City to recruit new businesses to locate to Avon Lake. Economic Development and the three Rs must be a top priority so the burden on the residents can be minimized. Without business activity and corporate taxes, the residents will be left with a greater share of the burden of funding the municipal government. The best way to maintain the current high level of services with out adding to the residential tax burden is to create more revenue from business. II. Background

City Council created a new Committee on Council devoted to the issue of economic development in March 2010. Creation of the Economic Development Committee of City Council (the Committee) incentivized the Administration to take a more active role and resulted in the institution of a popular small business workforce program and a strong working relationship with groups such as COSE and SCORE. However, more action is needed to take the next step in the process and ensure that Avon Lakes existing businesses are retained, provided an atmosphere in which they can thrive and expand, and, ultimately, new businesses are attracted to Avon Lake. Proposals to create the position of Economic Development Director, either on a full or part time basis, were informally rejected by City Council. It appeared that support for development of a long-term economic plan or strategy (the Plan) did enjoy support. III. The Committees Efforts

Therefore, over the last few months, in an effort to determine what should be included in the Plan, and to craft a carefully designed request for proposal from which professionals would bid on drafting the Plan, the Committee met with key community stakeholders, including: retail property owners; development companies with a significant stake in Avon Lake; its largest employers; companies located on Pin Oak Parkway; and, most importantly, the residents of Avon Lake (the Stakeholders and Stakeholder Meetings). The Committee Chairman also met separately over the last two years with

numerous other Stakeholders, including: Avon Lake business owners; retired executives; economic development professionals; marketing professionals; and, residents. IV. Findings of the Committee

The Stakeholders offered many ideas and suggestions. However, the following items were either recurring themes or garnered a fair amount of support (in no particular order): V. Avon Lake must determine what sets it apart from its neighbors and similarly situated cities in the region and across the country. Attraction of additional retail should not be a primary goal. Residents could be more proactive in supporting local businesses. Avon Lake must aggressively market itself. Avon Lake does not effectively utilize Lake Erie. The businesses Avon Lake should target to locate on Pin Oak Parkway include: those that are water-intensive; advanced, hi-tech manufacturing; bio-technology; and, light-industrial. Avon Lake should also target professionals such as doctors, attorneys, architects and engineers. Avon Lake must capitalize on the coming I-90 interchange and the growth of Crocker Park. Avon Lake should strive to fill its existing retail facilities. Utilization of a grant writer could assist both the City and its businesses. Immediate Proposals (implemented by years end) to Initiate the Three Rs: Business Retention, Renewal and Recruitment A. Sense of Council Resolution

The original intent of the Committee was to gather input and advice from various community stakeholders so that a narrowly tailored request for proposal could be drafted from which economic development professionals could bid on drafting the Plan. Based on the Committee findings as outlined in Section IV above, the goal has been accomplished. The direction in which the current and future Administration(s) and Council(s) should proceed is evident, also as outlined in Section IV. To ensure all parties are proceeding toward the same goal, a Sense of Council Resolution, or some sort of memorandum of understanding between Council and the Mayor should be passed to ensure that all branches of City government are united on the goals and targets, as outlined in Section IV. B. The Job Growth Incentive Program

Discussions were had during the Stakeholder meetings regarding Avon Lake attributes that set it apart from similarly situated communities. Some common themes included:

Comparatively low water and sewer rates Proximity to Lake Erie Property availability An educated workforce and population Excellent school system and library Abundant housing stock in a variety of price ranges

Quite frankly, with the exception of the first two bullet points, most communities in Northeast Ohio can lay claim to the same attributes. Therefore, Avon Lake must differentiate itself from all of the surrounding communities. One way the City can stand apart from other municipalities throughout the Nation, incentivize existing businesses to remain and grow in Avon Lake, and persuade others to locate in Avon Lake is to adopt the Job Growth Incentive Program, which is a local version of the States Job Creation Tax Credit (JCTC). The JCTC was established in 1993 and provides a refundable tax credit against a company's corporate franchise or income tax based on the state income tax withheld from new, full-time employees. Because the City maintains a relatively small finance department, the Job Growth Incentive Program must be easy to understand and even easier to administer. It must provide certainty to business owners. Most importantly, it must provide an incentive to maintain, grow and create jobs. The Job Growth Incentive Program will use each businesss RITA income tax as its starting point. When a company pays more income tax one of four things has occurred: additional employees have been hired; current employees are working more hours; current employees are earning higher wages; or, a combination of the three. That success must be fostered, and the City can do so by sharing in the success with the company. The Job Growth Incentive Program is very simple in its operation. The Program will provide an incentive to each business in the City of Avon Lake, regardless of size, in the amount of 25% of the additional income tax paid as compared to the previous year. For example, assume that in 2010 Company X paid $100,000 in income tax to Avon Lake. Demand skyrocketed and they doubled their workforce. In 2011 they pay $200,000 in income tax, resulting in an additional $100,000 to the City. The City would then return 25% of that amount, or $25,000, as an incentive to remain in Avon Lake and grow even more jobs. Lets further assume that in 2012, Company X pays $220,000 in income tax, or $20,000 over the previous year (2011). Company Xs incentive would be $5,000 (25% of $20,000). However, should Company X pay $200,000 or less in 2012, no incentive would be provided. There are a number of positive characteristics of the Job Growth Incentive Plan. First, it does not cost the City anything. The incentive is paid completely out of additional tax revenues that are strictly in amounts above and beyond what a company paid the previous year. For lack of a better term, this is new money. Second, it treats companies of differing sizes equally. Each company is incentivized in proportion to its ability to make

new hires, pay higher wages, or work additional hours. Third, unlike property tax abatements, the Job Growth Incentive Program treats existing and new businesses the same. Many times existing businesses will lament the fact that the City never offers incentives for them, while rolling out the red carpet for a newly located company. This creates an even playing field.1 Fourth, also unlike property tax abatement, this Program holds the school system harmless. Fifth, talk is cheap. The incentive truly demonstrates that Avon Lake is business-friendly. Not only does it show in a concrete way that the City is willing to work with its businesses giving them a reason to stay in Avon Lake, it gives them resources to grow or potentially create jobs. Finally, this is innovative and unique I am unaware of any other municipalities that operate a similar Program. Therefore, a substantial buzz will be generated if our innovative thinking is marketed correctly to nationwide trade journals. This truly sets Avon Lake as business friendly and will put us in a better position to attract new businesses. C. Grant Writer

Avon Lake should hire a grant writer to be utilized not only by the City itself but also to assist its businesses. The grant writer would be paid either on a commission basis or through funds included in the grant, resulting in no net charge to the City. Such an initiative garnered strong support by the Stakeholders and similar support already exists on Council VI. Short-term Proposals (implemented within six months) to Initiate the Three Rs: Business Retention, Renewal and Recruitment A. Advertise a Request for Proposal for a Long-Term Economic Development Plan and Marketing Campaign

The Plan, as originally envisioned, must be modified to include an aggressive marketing plan. The Stakeholders, as well as the Mayor and members of the Economic Development Advisory Board, were all quite adamant that such an aggressive marketing plan is very much needed. Similarly, the Job Growth Incentive Program is not the end all be all that will on its own increase the Citys tax revenue. Rather, similar to the small business seminars, it is simply one of the many moving parts. The City would benefit greatly from the professional advice from experts in the field that would help us determine what the other moving parts are, and how we get the parts to work together. Finally, the professionals would set out a marketing strategy to immediately sell the Job Growth Incentive Plan and ultimately, in the near future, sell a total package. Topics to be covered in the RFP include:
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Appropriateness of the findings in Section IV; Other areas that demand focus; Initiatives the City must undertake to retain, renew and recruit;

It should be noted, however, that a newly located business will be granted a sizable incentive in year one, as it will not have paid any income tax to Avon Lake the previous year.

Ways strengths can be exploited; Ways challenges can be overcome; Short-term marketing plan for the City, including the Job Growth Incentive Plan; and, Long-term marketing plan for the City. B. Institution of a Buy Local Campaign Run by the Private Sector but Strongly Supported and Promoted by the Administration and

Council A recurring theme, especially among the retailers, was that Avon Lake residents do not support local businesses. While only anecdotal evidence exists to back up this claim, an effort to get residents to spend more money in town can do nothing but help. Five local business owners should be chosen (three by the Administration, two by Council) to design a buy local campaign. While the Administration and Council should be consulted on the final version of the Campaign, great deference should be afforded to those that make their living in Avon Lake. They are in a much better position than the elected officials to know how to drive customers to their businesses. VII. Mid-term Proposals (implemented within twelve months) to Initiate the Three Rs: Business Retention, Renewal and Recruitment A. A Signature Event

Many Avon Lake residents have voiced a desire for a City-wide signature event. I am working with a group of residents on such an event featuring the restaurants of Avon Lake. The goal of the event is to showcase local businesses at an event that will attract visitors (and ultimately repeat customers) from out of town. If successful it could grow into a yearly event. While the Administration and Council must be supportive, this will be a private enterprise. B. Integrate Economic Development Initiatives into a Single, City-Wide Master Plan.

A recurring theme was frustration with spot-zoning or locating incompatible businesses in close proximity. When revised, City Master Plans must be drafted with the effects of business in mind. VIII. Longer-term Focus Areas (implemented after twelve months) to Initiate the Three Rs: Business Retention, Renewal and Recruitment

We must walk before we run. However, long-term initiatives must include development and utilization of the lakefront as well as a method of consolidating and repackaging the Pin Oak Parkway parcels.

IX.

Conclusion

With each challenge lies an opportunity. While there is much work ahead, the preceding provides a number of actions that will create an impact immediately, in the short-term, in the mid-term and long-term. Some of these initiatives will require education, consideration and debate. Such is the case with innovation and original ideas. No one person or group possesses all of the good ideas or solutions so Council and the Administration must remain open to additional thoughts, ideas and suggestions.