COVID-19 Economic Response and Recovery
Redesign your Business Attraction, Expansion and Retention Incentives
During an economic downturn, you should consider refocusing the financial incentives that were used to recruit new businesses, such as tax breaks, attractive loan financing and grants, to support retention and expansion of existing businesses.
Examples of US Financial Incentives Include:
- Industrial development bonds
- HUD CDBG revolving capital fund
- EDA loans
- Revolving capital fund
- SBA 504 loans
- Restoration tax abatement
- Business retention and modernization tax credits (e.g. payroll, sales/use, investment, clean energy)
- FastStart/on the job/incumbent worker training program
Source: Georgia Institute of Technology, 2010
COVID-19 Economic Response and Recovery
Refresh your business attraction sector propositions and collect lead generation insights
While opportunities to attract businesses to your city will be significantly reduced during an economic downturn, there may still be opportunities, either in industries that are seeing a demand surge or are being restructured.
Revisit your sector propositions and update your commercial real estate database (assessed value and taxes, last sale date and amount, availability for sale or rent, total square footage, amenities, zoning classes, historic status, condition, current tenants) for a post-pandemic economy.
Also, maintain relationships with industry leaders, “multipliers” (such as professional services firms, and real estate brokers) and site selectors; and/or get early intelligence from investment attraction platforms, such as ROI Gazelle, Conway Analytics, or FDI Markets with investor signals.
COVID-19 Economic Response and Recovery
Retool Incentives to Support Small Businesses
Retool existing incentive programs to (1) include small businesses and (2) support the hiring of local residents, particularly those with barriers to employment.
Small businesses are being disproportionately impacted by this crisis and often do not qualify for incentive programs, due to minimum requirements on investment and jobs created. By opening incentive programs to smaller firms, cities can support local businesses through the recession and advance other policy goals (e.g. workforce, equity, living wage, etc.).
Business Expansion Incentive Program – Austin, TX
The City of Austin has experienced two decades of rapid growth and expansion, which has led to challenges around equity and inclusion. In 2018, the City adopted new guiding principles, which put “equitable prosperity, opportunity, and affordability” at the center of the City’s economic development policy. The City retooled its incentive programs to align with this policy, prioritizing small and local businesses, hiring residents with barriers to employment, and paying a living wage.
Austin’s Business Expansion Incentive Program offers three types of assistance:
- Local Austin Business: Offers up to 3% wage reimbursement per job/per year maxing out at $1,800, and up to 50% property tax reimbursement. The incentive is available to all registered Austin businesses, which pay Austin’s living wage.
- Targeted Hiring: Provides $3,000 per target job/per year and up to 50% property tax reimbursement for the creation of 1 job in targeted populations or for residents who have barriers to employment, and pay Austin’s living wage.
- Relocating: Offers a 3% wage reimbursement per job/per year maxing out at $1,800, and up to 50% property tax reimbursement for businesses new to the city and creating 75+ jobs over 10 year paying Austin’s living wage.
While still open to larger and relocating employers, typical of most incentive programs, the City’s Local Austin Business and Targeted Hiring programs have eligibility criteria designed to allow smaller, local businesses to qualify for these incentives. Program elements include:
- All incentive projects are evaluated by staff using a cost benefit analysis to determine fiscal impact. Importantly, to ensure smaller local firms can qualify, the City does not require the project to have a net revenue positive impact for the City, but it must be revenue neutral.
- Austin uses a return on investment calculus, which includes a broad definition of community benefits such as development and hiring underrepresented groups; demonstrating diversity, inclusion, and equity practices and policies; neighborhood connection; local partnerships; sustainable business practices; and civic engagement.
- The City provides bonus qualifiers for small businesses, cooperatively owned businesses, businesses, which engage local music and arts community, and businesses that provide on-site day care.
- All three incentives require that qualifying jobs must pay the Austin living wage of $15 per hour.
- All grants are performance based and quality controls include a third-party audit system.
- While most incentive projects must be approved by the City Council, the Economic Development Department is able to negotiate and award incentive deals up to $61,000 per project for a total up to $5 million per year.
Small businesses and MWBEs have benefited from the City’s new individualized focus on smaller incentive deals.
For example, a local minority-owned restaurant, L’Oca d’Oro, agreed to retain 20 individuals over 5 years from the program’s targeted population, and make 10 new hires. In return, the restaurant receives $2,000 annually on a declining basis for each retained employee and $220 per year for each new hire.
Another minority-owned firm, AllPro Hospitality Staffing, committed to creating 10 new jobs under the targeted hiring incentive.
How to Adapt This Approach:
- Review past outcome data to assess the effectiveness of current incentives in advancing inclusive goals
- Engage a diverse set of local business groups, merchant associations, chambers of commerce, and other community stakeholders to determine potential changes to current incentive offerings or identify the need for a new incentive program
- Develop proposed modifications to existing incentive programs, which align with the City’s broader equitable economic development strategy/recovery plan. These modifications could include:
– Opening existing programs to local small businesses
– Targeting incentives to businesses located in LMI neighborhoods
– Incentivizing the hiring of residents with barriers to employment
– Supporting businesses investing in upskilling of existing employees
- Revise eligibility requirements to align with these modifications (e.g., reducing new job creation/ retention minimums, reducing investment requirements, reducing the complexity/legislative requirements for incentive approval, setting a neutral fiscal impact standard, including a broader set of community benefits in return on investment analysis, etc.)
- Conduct analysis to model the potential uptake of the modified incentives and assess potential fiscal impact
- Share proposal with stakeholders and incorporate feedback
- Articulate policy case for the proposal to policy makers and secure approval
- Partner with merchant associations, local/ethnic chambers, and other community groups which are trusted partners in the communities, to drive outreach and promote the modified incentives.
- Track and publish KPIs on a regular basis. Include impact, demographic and neighborhood data on each incentive project. (See KPIs section)
Support local incubators or makerspaces, which offer affordable rents, flexible terms, shared equipment and services, room-to-scale operations, networking events, and communities of peer entrepreneurs.
Such projects can be catalytic, helping entrepreneurs create businesses and existing businesses to grow, thereby building local wealth. By establishing and preserving affordable spaces for light manufacturing, business incubation, maker/artist studios, and cultural activities, cities can foster quality middle-skill job opportunities for LMI residents.
East End Maker Hub – Houston, TX
Urban Partnerships CDC (UP CDC), a nonprofit real estate development company, partnered with TXRX labs, a nonprofit high tech maker space, to develop the East End Maker Hub in a historically marginalized part of Houston with a majority Latinx population.
It offers 300,000 square feet of multi-tenant, multiuse manufacturing and fabrication space, which supports makers, manufacturers, corporate tenants, and other small businesses. It features multiple spaces of varying sizes to target manufacturers and makers looking for affordable long-term rents, collaborative space, and access to equipment.
The hub was funded by HUD Section 108 and CDBG grants, which the project procured from the City. UP CDC also procured an EDA grant. The project received a New Markets Tax Credit allocation through the People Fund, Urban Research Park and McCormack Baron Salazar and also received support from LISC, a CDFI.
TXRX labs, Houston’s largest manufacturing business incubator and accelerator, is the anchor tenant of the East End Maker Hub. TXRX provides access to over $2 million worth of machinery and equipment, classes, and technical support, job training programs.
It focuses outreach on minority-owned manufacturers, makers, and other small businesses located within a three-mile radius of the building. It also sees its role as supporting wealth building in the local community.
As part of TXRX’s Youth Education program, its staff speak at local community events and give presentations at local churches and schools. They also build relationships with local teachers to help them understand the role of manufacturing as a pathway to middle-income jobs. Further, they encourage the students to visit the hub and participate in afterschool programs. Each year, the hub provides job training for 75 adults and hands-on learning for over 500 teenagers.
The hub is projected to have an annual economic impact of $153 million and create 400+ direct and 200+ indirect jobs.
How to Adapt This Approach:
- Identify and support local CDCs and CDFIs with a mission to support local manufacturing/ makers/entrepreneurship
- Engage local communities, entrepreneurs and neighborhood groups, to involve them in the project
- Help them to secure HUD Section 108 funding, New Markets Tax Credits, and other government funding to purchase/renovate a disused/underutilized building in a disinvested neighborhood
- Support land-use changes to facilitate the project
- In pre-development planning and space considerations, strike the right balance between creating a workplace and community asset that contributes to placemaking
- Plan to open doors to the public and forge ties with the local community, catalyzing public understanding of the importance of industrial spaces
- Support community-based organizations providing programs and services to local businesses
- Connect City/regional workforce training and placement programs and prioritize local hiring
COVID-19 Economic Response and Recovery
Provide Technical Assistance to Small Businesses
Create strategies and partnerships that will make your destination more sustainable and inclusive. And tell that story to visitors
Since COVID-19, travelers, particularly younger travelers, have a heightened awareness of environmental sustainability and social and racial equity. As a result, they are more likely to look for evidence that destinations are taking steps to address these issues.
Numerous reports and studies have found that the pandemic has reinforced, even accelerated, people’s views on sustainability, with more consumers focused on helping to create a better, healthier world.
For example, 60% of travelers say that their future booking decisions would be influenced by sustainable initiatives at the property, even if it meant spending a modest premium.
Travelers’ behavior, loyalty, and values are also being redefined by the economic downturn, restrictions in day-to-day living caused by COVID-19, and flashpoint events highlighting systemic racism within our communities.
It is widely expected that the pandemic will accelerate the trend of travelers seeking “travel with a purpose,” with 67% of recently polled travelers saying they want their bookings to make a positive difference for communities affected by the pandemic.
Travelers are also now placing greater importance on pre-trip planning.
Destinations can respond to these trends by developing a shared understanding of what it means to be a sustainable destination.
For example, Sedona, AZ engaged the Global Sustainable Tourism Council to conduct a sustainability assessment of its tourism economy.
The goal was to enable the destination to design and target policies, programs, and campaigns which demonstrate sustainable destination management, maximize economic benefits to the host community, and minimize negative impacts on the environment.
Programs could include:
- Sector-wide sustainable guidelines.
- Technical assistance to small businesses to help them adopt more sustainable practices (e.g., relating to energy and water use, single use plastics and recycling, food procurement, laundry operations, and reporting).
- Destination management tools to “nudge” visitors around the city, to manage crowds, and/or to help tourists engage local communities.
- Investments in green infrastructure.
- Communicating the destination’s commitments to travelers.
City of Boston
In 2020, the City of Boston drew down $2.5M of CARES Act Federal relief funding to launch a marketing campaign to market the city to Black and Brown residents and visitors.
The campaign’s goals were to “build Boston’s brand as a travel destination, increase awareness and active promotion, and drive visits to Boston from diverse local and regional visitors.“ It was part of the city’s strategy to build back a stronger and more equitable economy.
In particular, the campaign sought to “examine the ways in which Boston communicates about the offerings of the city, and highlight attractions and events that speak to the experiences of people of color.”
The Greater Boston Convention & Visitors Bureau selected two award-winning agencies with deep roots in the city. One was Boston’s oldest, minorityowned and operated marketing communications agency. The other was a Boston-based, minority owned, award-winning creative branding, design,
and advertising agency.
They soon discovered that the city had allowed others to create a narrative of Boston as an all white, masculine, sports- and alcohol- dominated city. Visitors and some residents had low awareness of the city’s vibrant Black neighborhoods, and the contributions of Black and Brown residents to the city.
The campaign featured different Boston neighborhoods with neighborhood maps and guides and short-form videos, as well as social media influencers from some of the city’s oldest Black neighborhoods. It also celebrated Black and Brownowned businesses in local and national media, in order to drive local spend.
Like many campaigns during the pandemic, its primary audience was local residents. However, as travel becomes safer, the city plans to continue its efforts to encourage a wider audience to change their perceptions and, ultimately, actions.
COVID-19 Economic Response and Recovery
Maximize federal funding sources by using new markets tax credits (NMTC), which are available for a wide range of applications
Cities should partner with Community Development Entities (CDEs) to access New Markets Tax Credits (NMTCs) to fund real estate developments.
NMTC investments can fund catalytic development projects in low- and moderate-income communities. By partnering with a CDE to access NMTCs, cities can attract third-party funding that might otherwise have had to come from the general fund.
NMTCs can be an important source of funding for businesses and community facilities in distressed urban and rural communities. Individual and corporate investors can receive a 39% tax credit (taken over seven years) for qualified investments into CDEs. CDEs can then use the proceeds of those investments to fund business expansions, community facilities, and other community projects.1
The project owner makes annual interest payments to the CDE during the seven-year life of the loan structure, eventually closing out the transaction at a substantial discount.
Examples of NMTC-funded projects include:
- Business expansions: $10 million NMTCs contributed to the construction of a $13 million, twin bay airplane paint shop, as part of a $22.36 million investment in an Airbus facility in Mobile, AL.2
- Infrastructure improvements: NMTCs contributed to the conversion of a vacant mall into a 750-car parking garage and retail/ entertainment complex in St. Louis, MO.3
To become certified as a CDE, an organization must submit a CDE Certification. Application to the Department of the Treasury CDFI Fund. The application must demonstrate that the applicant meets each of the following requirements:
- Be a legal entity at the time of application.
- Have a primary mission of serving low-income communities.
- Maintain accountability to the residents of its targeted low-income communities.
2: https://munistrategies.com/project_portfolio/maas-aviation/ and https://nmtccoalition.org/project/maas-aviation/
A CDE can be a Community Development Finance Institution (CDFI), mainstream financial institution, government/quasi-government, nonprofit, or for-profit. A city government can become a CDE.
The CDFI Fund conducts an annual competition (incredibly competitive) for NMTC allocations. Applications are scored against four criteria: community impact, business strategy, capitalization strategy, and management capacity.
CDEs typically engage a consultant to support their allocation. CDEs that are awarded NMTC allocations sign an allocation agreement, before raising private investment to deploy to appropriate projects. Most NMTC allocations go to CFDIs, followed by mainstream financial institutions, and then governments.4
A benefit of becoming a CDE is the access to unrestricted funding, via received interest payments.
Union City, TN – Williams Sausage Company Expansion
Williams Sausage Company, founded and based in Tennessee, needed risk capital to fund a $48m project, comprising of a 200,000 ft2 production facility, distribution center, truck maintenance shop, and corporate office.
The company engaged a site selector consultant to review 13 sites. Tennessee state, Union City, Obion County, and the Tennessee Valley Authority offered an incentive which included $44m in NMTCs. But for the NMTCs, Williams would have not located at a distressed site in Union City.
The project components included the following:
- Williams employed site selector and incentives consulting firm, HWH Group, which identified funds and helped coordinate the incentive package.
- Five CDEs contributed NMTCs to the incentive package, which also included state and local incentives.
- CDE, Stonehenge Capital (not located in TN), provided $10 million of qualified low-income community investments (QLICIs) to fund the purchase of equipment. This qualified under its allocation agreement as an innovative use of NMTCs.
The project created 210 new jobs in a distressed neighborhood. It is also expected to create a further 321 jobs over the next 5 years.
The company is working with local workforce development agencies to train and hire underserved, low-income residents to become technicians and professionals at the facility.
How to Adapt this Approach
- Develop a relationship with local, or even non-local, CDEs, which can apply for NMTCs for priority project(s). CDEs can make investments within their approved service areas. These range from local to national.
- The CDFI Fund website has a mapping tool that shows approved service areas (see example below).
- The CDFI Fund website has a search function that allows you to identify CDEs that have remaining, available NMTC allocation authority.
- If you are a CDE, identify projects that meet your goals and NMTC usage requirements prior to application. Alternatively, propose your project to a CDE which has unused allocation. (The CDFI Fund publishes Qualified Equity Investment Reports monthly. See example report.)
- Work with the CDE to submit an electronic allocation application via the Awards Management Information System (AMIS)
- This “how to apply” report contains detailed advice on how to prepare your application
- Report your compliance via AMIS.
- Be aware of NMTC application deadlines, which are shared on the Department of the Treasury CDFI Fund website.
- Identify potential projects which are NMTC-eligible. Help projects to become NMTC-ready, through land use approvals.
- Talk with other cities that have successfully worked with CDEs to capture NMTC investment in their community.
- Engage local stakeholders to ensure support for the project.
- Work with existing experienced CDEs:
- Applying for a NMTC allocation is a complex process.
- Most successful applicants are existing CDEs and CDFIs with significant experience.
- Working with the CDE can ensure that your project makes it into its application, or is allocated excess credits
- Don’t go into this process alone, or without advice.
- Don’t partner with only one CDE. Multiple CDEs can invest in the same project.
- Don’t underestimate the severity of “recapture.” While this risk is low if the transaction is structured properly and compliance is up to date, penalties are harsh (100% of the credits can be recaptured with interest and penalties).
COVID-19 Economic Response and Recovery
Implement incentives to help low-income and minority communities
For decades, cities have used incentives to attract and retain businesses. Historically, incentives often caused “race-to-the-bottom” dynamics that hurt all cities involved, where cities give significant tax breaks without considering overall economic goals, because they felt the need to compete on cost with other cities. Research shows that this has led to the “prisoner’s dilemma”, where each city offers additional incentives until it may not be in a city’s interest to have the company located there given the tradeoffs.
However, this does not mean that incentives should never be used. When crafted thoughtfully to align with local economic development goals and drive local growth and jobs, incentives can be a useful tool. With many businesses struggling due to COVID – with an expectation that all companies will continue to suffer due to the pandemic – cities need to think about how they will support their local businesses. As the economy starts to recover and businesses are looking to expand again, local communities need to be situated to capture this growth.
Cities should retool existing and/or develop new business incentives to advance equitable economic growth. Incentives should be structured to successfully attract and retain good jobs while requiring employers to develop local talent, particularly for low-income residents and people of color.
Birmingham, Alabama “TIP TAP TOP” Program
Shipt was a start-up founded in Birmingham, AL, in 2014. The online grocery delivery platform grew rapidly and was acquired by Target in 2017. After acquisition, the company projected 881 jobs would be added over the next three years, but the question was where those jobs would be located: would they place those jobs in the Bay Area – where some employees were already based? Would they move jobs and headquarters to Minneapolis where Target is headquartered? Or, would they keep those jobs in Birmingham?
The City of Birmingham realized that to ensure Shipt and Target would keep jobs in their city, it would need to incentivize them to stay. But, the City did not want to just offer incentives that lowered tax collection without furthering economic development goals. Therefore, the City developed an innovative incentive program: “TIP TAP TOP.” All three elements described below are tax abatements against the taxes that SHIPT owes the City in exchange for the investment in three areas:
- Talent Investment Program (TIP): Shipt invests in training for “demand-driven” occupations via occupational tax abatements. The program focuses on recruiting people for positions that are difficult to source locally (e.g., web developers, software engineers) who relocate and move to the area. It could include providing supplemental salary, relocation assistance, etc.
- Talent Acceleration Program (TAP): Shipt supports tuition assistance, learning, and skill development designated for enabling existing low-wage and lower-skilled employees to grow into other positions within the company. This includes enrolling in skill training programs, classes, and other entities.
- Talent Optimization Program (TOP): Shipt supports the hiring of local talent, training, and development (e.g. management training and continuing education) for current employees; and the attraction of national talent. This is the main element of the program and includes targeted funding to hire local university students.
Shipt is responsible for all program expenses and is only able to apply for reimbursement for a portion (up to ~$1.76M). In its draft project agreement (attached), Birmingham explicitly describes which costs are eligible/ not eligible for reimbursement, and Shipt only receives reimbursement after successful implementation (e.g., only can receive reimbursement for TOP if new local talent is hired).
Birmingham implemented the program in 2018 and convinced Shipt to keep jobs — and expand — locally. The City has a robust set of success metrics to evaluate the program (see document in resources section). All the above incentives are only provided based on individuals who have successfully gone through the program.
Several other cities have implemented similar, targeted incentives programs. For example, Austin’s Business Expansion Incentive Program provides support for businesses that are growing and looking to hire local, hiring employees with barriers, or reconsidering moving to Austin. These incentives include some wage reimbursement and are paid out annually at the end of the year. To apply, businesses can submit an incentive inquiry to start the process.
The program offers incentives to three types of businesses:
- Local Austin businesses (e.g., those already based in the area)
- Businesses that are growing locally can get up to 3% wages reimbursement per job / per year (max $1,800) and up to 50% property tax reimbursement
- To be eligible for these incentives, businesses must have registered and been operational in Austin for at least 12 months and have created at least 5 jobs over 5 years paying (at minimum) the Austin living wage.
- Employers hiring targeted populations
- Businesses hiring employees with barriers can receive up to $3,000 per target job / per year and up to 50% property tax reimbursement
- To be eligible for these incentives, businesses must have created 1 job for targeted populations and the pay must be (at minimum) the Austin living wage
- Businesses relocating to Austin.
- Businesses that relocate to Austin can get up to 3% wages reimbursement per job / per year (max $1,800) and up to 50% property tax reimbursement
- To be eligible for these incentives, businesses must have no significant presence in Austin (defined as 5 or fewer Austin employees) and create at least 75 jobs over 10 years paying (at minimum) the Austin living wage.
How to adapt this approach:
- Identify community priorities that should be served by an incentives program (e.g., talent investment, local hiring, business attraction)
- This should be done by looking at the greatest community needs (e.g., if a community has a lack of a certain type of high-in-demand job type or if a university has a particular program that produces many graduates with specific skills).
- Develop new or retool existing incentives program with incentives linked to clear equitable outcomes/metrics (See template in resources section)
- A reasonable tax abatement should be set per job created/ attracted/ saved, depending on local circumstances. Incentives should focus on low-income and communities of color (look to Birmingham and Austin examples, below, for suggested figures for incentives).
- Note: Incentives should be given after companies have demonstrated impact (e.g., provide data to city officials showing # of local hires)
- Reach out to local and prospective businesses to market test incentives. Confirm with companies that the incentives will be useful for them.
- Obtain approval for incentives program from authorizing body (generally city council)
- Develop materials to explain incentives program and how businesses can take advantage of them
- Reach out actively to local businesses to highlight new incentives program
- Engage potential businesses that would consider expansion
- Develop agreements with businesses for incentives program
- Track success of program using clearly established and agreed-upon metrics with individual businesses (See template in resources section)
- Attracts businesses and talent to local community
Leverages employers to invest in low income and people of color and connect them to good jobs.
- Lost tax revenue for the city
- Companies may threaten to leave and/or not commit to the community unless they receive incentives
Implementation time: Slow
Cost: Low. Your city will need FTE to implement the program and monitor progress.
COVID-19 Economic Response and Recovery
Increase Broadband Connectivity to Enable More People to Work Remotely and Support Business Growth
The COVID-19 pandemic has underscored the importance of broadband access for employment, education, and overall quality of life. And yet, millions of Americans don’t have access to quality broadband (defined by the FCC as 25 mbps download and 3 mbps upload speeds). At least 21 million Americans (and perhaps as many as 40 million, according to some estimates) currently lack access to broadband; and, even among those Americans with access, approximately 100 million do not subscribe to the service. Improving access not only enables remote work but can increase property values.
While many jobs will return as “in-person”, an increasing number of companies have said they will focus on remote employment. COVID-19 forced millions of Americans to work from home and attend remote classes. Some businesses are realizing that their employees can successfully work remotely, and save related costs from doing so. Schools face uncertain paths to reopening with many districts using remote schooling for the foreseeable future. To address these fundamental changes, cities will need to ensure that all residents have access to broadband. This means both building the physical infrastructure and ensuring affordability.
Cities should provide broadband access to all residents through 1) extending broadband physical infrastructure and 2) providing funding for low-income residents to receive broadband. This will enable residents to work remotely, local businesses to compete at a larger scale, and students to receive remote education.
Facilitating access to broadband requires different solutions depending on local circumstances. For some communities, there are issues with physical broadband infrastructure. For others, most residents have access but are unable to access it due to affordability. The latter can be addressed through direct or indirect subsidies.
Wilson, North Carolina: Greenlight Community Broadband
Wilson, North Carolina (population ~50,000) was facing an uncertain and troubling economic future. The decline of the manufacturing and tobacco industries had impacted their economy and lack of job availability was causing many to leave the City. Recognizing that it needed to adapt to the changing employment landscape, the town decided to prioritize broadband installation to enable people to work remotely. Wilson met with its local cable provider and tried to convince them to expand access. But the cable company explained that it would be impractical to install high-speed internet because the City was not densely populated. After declining the City’s offer to handle the cost, the company “laughed” at Wilson’s suggestion that it would build its own wifi network. That prompted the City to create the “first-gigabit city”, establishing the Greenlight Community Broadband to provide broadband to the entire community.
After attempting to find partner companies, Wilson proceeded to build the network itself. The City borrowed $33 million to build the system, finishing construction and providing internet to the entire City by 2009. All schools have 100 mbps (or more) and the entire community is able to access gigabit speed. Greenlight is on track to pay back its loans on time.
Since providing the gigabit internet, Wilson has seen a significant increase in economic development, with businesses moving to the City and people able to more easily work remotely. Barton College has been able to attract better students, develop advanced curriculum, and better place students into jobs. Additionally, the launch of Greenlight has led to competitor prices dropping in the City. A study found that the community saved $1 million per year from more affordable rates because of Greenlight, while broadband rates have consistently increased in surrounding areas. Greenlight’s price for a 100 mbps internet connection is less than what some individuals in nearby communities pay for 10 mbps. Greenlight is community-owned and provides the full range of broadband services (e.g., installation, repair, etc.) to the community.
Note: Broadband deployment regulations vary by state. Some, such as North Carolina, prohibit municipal broadband and have prohibited Greenlight’s expansion into surrounding communities. However, there are several options to consider when deploying broadband. For some communities, short-term access can be provided through subsidies and mobile hotspots. One non-profit, Connected Nation, works with local communities to identify demand for broadband then presents this information to broadband providers to show the business case for broadband expansion. Their work expanded broadband availability in Kentucky from 60% to 95% of households.
Case Study: Balanced Public-Private Partnership
Westminster, MD: Carroll County Public Network (CCPN)
Westminster, Maryland (population ~18,000) had significant issues with broadband access and many residents lacked access. To facilitate access, the County, Public School System, Libraries, and Community College formed the Carroll County Public Network (CCPN) to focus on improving access. CCPN partnered with Ting – an internet service provider – to provide access to its residents. Westminster is responsible for network construction and owns all fiber infrastructure. Ting provides service to residents and leases access. After an initial exclusivity period, competitors will be allowed onto the network.
Initially designed for only businesses, the network has since broadened to include residents due to its popularity. Adoption rates have been high and one IT company even moved their operations to Westminster – a town of 18,000 residents – because of the improved connectivity and other low costs. The agreement requires Ting to answer all customer calls with a human representative.
How To Adapt this Approach:
A. Physical infrastructure
- Assess where gaps in broadband access exist due to lack of physical infrastructure
- Gather data on the potential upside to companies to expanding broadband access
- Survey residents to determine who has broadband
- Determine if there are “shovel-ready” projects that the city can act on immediately (e.g., projects where planning and approval have already been completed for wiring installation).
- Similarly, cities should explore “dark fiber” networks, where bandwidth on existing broadband networks are not being used to their full capacity (e.g., by corporations, universities, military, etc.). Newark, NJ has used this model to expand broadband access.
- Explore funding options and consider the different options for expansion
Municipal-owned broadband (e.g., Wilson, NC) -> broadband run by the city (more information below). This may be prohibited by state regulations.
State funding programs: some states such as Wisconsin’s Broadband Expansion Grant Program, allow a city and broadband provider to apply jointly.
PPPs related to broadband have varying degrees of public-sector involvement from private-led investment and minimal public sector support.
The government can take a leading role in construction (e.g., financing, constructing) and own the network, having private companies facilitate access.
Balanced partnerships where private and public sector entities share benefits and risks.
What model makes sense for your city depends on the funding available for the expansion, private-sector and philanthropic partners available, and local expertise. The degree of public-sector involvement should be determined based on the risk exposure your government is willing to assume. Often, balanced PPPs are pursued as a way to both retain public ownership and minimize risk.
- Launch physical broadband expansion, prioritizing areas with “shovel-ready” projects
- Track progress and revise as necessary
- Determine # of people who do not have broadband access due to lack of affordability
- Broadband providers often have data on who has not subscribed
- Note: some people do not subscribe to broadband because they have other ways to access data (e.g., 3-5G on their mobile); however it can make it challenging to perform more broadband-heavy tasks (e.g., video calls).
- Work with broadband providers to see if complimentary access can be provided
- Providers offer broadband to low-income Americans who qualify (generally eligibility is based on income levels and/or participation in certain programs), costing as little as $10/month. Many are unaware of this offering.
- Evaluate funding options
- Ask broadband providers if they are willing to extend access, especially during COVID times. The cost to these providers is negligent if access already exists in the building/area.
- Consider potential philanthropic partners to support this effort.
- Work with city council to meet short-term broadband needs for low-income residents.
- Funding should be provided until 1) businesses reopen and people can return to work and 2) schools reopen.
- Subsidies for a high number of residents could be significantly below cost (e.g., $5/month per customer or less). Broadband companies will want to set up many new accounts so there is a substantial upside here.
- Pay broadband companies directly to avoid additional bureaucratic work and potential economic harm while waiting for reimbursement (e.g., do not require residents to pay and request reimbursement).
- Launch effort to inform residents of the new broadband subsidy program.
- Be sure to focus on low-income and communities of color
- Track adoption rate and progress, altering program as necessary.
- If possible, offer discounted access to new entrepreneurs (those with 0 employees).
- Ensure that cost is tracked and that broadband does not become unaffordable
- Ensures equitable recovery by enabling people to access jobs that may not be in their immediate area
- Avoids health risks of travel (e.g., on public transit)
- Enables businesses to be more competitive by offering lower-cost and more reliable services in the community
- Costs can be high when facilitating access in more isolated communities
- Affordability can become a long-term cost if steps are not taken to work with businesses to lower costs and facilitate access
Implementation time: Slow (subsidies), L (physical infrastructure)
Cost: High. It will cost millions to expand physical infrastructure for broadband or issue subsidies. You can expect to pay at least ~$5-$10/month for subsidies for each family without the internet. Actual costs will depend on local circumstances.
COVID-19 Economic Response and Recovery
Establish a Midsize Business Support Program (e.g., up to $250k loan)
Many communities offer programs to start businesses, but less support is given to businesses looking to expand. Access to credit can be difficult, and many large contracts require surety bonds or other guarantees. Yet, businesses with 5-99 employees are critical to the US economy. They account for 29% of all jobs and are often the bedrock of US cities. Supporting these businesses enables them to scale and meet more of the community’s needs. In turn, this expansion creates more jobs and keeps more spending local. Given the growing concerns of the plight of small businesses and the associated economic and employment risks, providing support to help them maintain and expand operations will be critical. This will also help address unemployment and should be done in conjunction with reskilling programs.
Cities should provide loans through a government-backed fund to help midsize businesses expand and be able to compete for larger government and enterprise contracts. Additional access to capital should be provided as part of a broader program that offers guidance for businesses (e.g., through an entrepreneurial ecosystem).
San Francisco, CA: Surety Bonds Program
San Francisco created a surety bond program to enable local businesses to compete effectively for government contracts. For local businesses that need funds to compete for government contracts, the city government will guarantee up to 40 percent of the face amount of the bond, or $750,000. Launched in the mid-1990s, the city started the surety bond program as a pilot program for their international airport expansion project. Based on the positive feedback and success from the pilot, the city established the broader surety bonds program.
The Surety Bonds program was established as a complement to the local business preference program and enables small businesses to compete for government contracts. As long as a business has been deemed eligible, they can apply for the surety bond. All city departments contribute a certain amount of their contracting budget to provide the guarantee for the bonds. Despite concerns about the potential cost of the government having to guarantee loans, only 2 projects with a surety bond have defaulted in the 20+ year history of the program.
Part of this success is due to the associated technical assistance. Most businesses that are receiving support are required to attend the bonding assistance training program. This programming includes assistance for completing bond applications and the pre-bond surety profile, help developing financial statements and establishing internal financial control systems, and how to implement accurate financial reporting tools.
Note: Although the program does not have defined metrics, the attached document highlights what should be considered with implementation. This includes tracking the # of businesses that apply for the program, the number of businesses awarded surety bonds, how many successfully win contracts, and long-term benefits (e.g., if a business is able to compete for other large contracts in the future).
While the San Francisco program focuses on city procurement and government contracting, cities should design programs that assist businesses in contracts with anchor institutions and other large corporations based in your city. Programs can be launched with a focus on government contracting – which may be easier to set parameters for – but with a goal of expanding for all larger contracts in the community.
How To Adapt this Approach:
- Meet with local businesses to understand the existing markets and landscape, and identify opportunities for growth.
- Discuss barriers to growth (e.g., why they are not competing for larger contracts, what they would need to be successful)
- Design program parameters (e.g., maximum loan amount, whether for all government contracts, etc.)
- The program design will vary by local circumstances. Elements to consider include:
- Maximum loan amount: in some cities, a $50K loan cap will be sufficient to enable businesses to expand and compete for larger contracts. For other places, this may be closer to $250K. During discussions with local businesses, review what would be necessary. Loan terms should be long-term, with low-interest (e.g., 2% over 10+ years)
- Government vs. private sector contracts: it may be easier to start with government contracting, but ideally this program would also help the businesses to compete for private-sector contracts.
- Determine the eligibility of businesses (easier if linked to a small business preference program)
- Raise funds to cover surety bond guarantees (for public sector contracts). Surety bonds are often required for public sector projects as a promise that the work will be performed. Getting a bond can be challenging for growing or newer companies as it is often contingent on previously performing projects of a similar size. Cities can raise funds for surety bond guarantees by requiring a certain percentage of each department’s contracting budget to go towards this.
- The program design will vary by local circumstances. Elements to consider include:
- Build oversight and technical assistance capacity (which can be added on to existing technical assistance services). As businesses take out loans, it will be necessary to support them, while ensuring the funds are being used correctly.
- Some businesses may not have applied for any significant loan or financing before. Walking them through this process, and ensuring compliance, will be key.
- This office should also help with bond applications, basic financial controls, and reporting requirements.
- This office does not need to be housed within your city’s economic development agency. It may be better housed within an existing city department.
- Draft program language and propose it to city council and other key stakeholders. (See template in resources section)
- Pilot a small version of the program. The full program could be expensive and will require considerable oversight.
- Collect learnings from the pilot and launch the broader program.
- Ensure that businesses are paid on-time and that there is sufficient oversight. Some cities require local businesses to be paid within 30 days of contracts.
- Track action progress and success, and revise as necessary. (See template in resources section)
- Enables local businesses to access funds and expand faster
- Offers flexibility for businesses, particularly if they are applying for larger government or commercial contracts
- Investments in growing local businesses can provide significant job growth for local communities
- Assume financial risk of supporting loans
- Can be problematic if offered without support programs (e.g., financial counseling, entrepreneurial culture)
Implementation time: Medium (pilot), Low (full program)
Cost: High. Although the actual cost of the program may be lower (e.g., issuing loans and receiving payback) it will seem high because it requires expenditures each year, even though it will be repaid. If offering loans between $50K – $250K, and assuming several FTE to run the program, it could cost over a million a year even for a smaller program.
Create a red-yellow-green flag scoring system for the businesses in your CRM tool, based on the company-specific situation (e.g. plans by the parent company to consolidate, disrupted supply lines, virus outbreak at site), the impact of the pandemic and related economic downturn on the industry sector, and/or the business’ ability to reform and restructure to survive and thrive in a post-pandemic economy.
It may also be useful to ask your US State dislocated worker unit, or local government official in which the site is located to share Worker Adjustment and Retraining Notification Act (WARN) notices about plant closings and mass layoffs.
Target your incentives and supports, and communicate state and federal supports towards the target employers most at risk of plant contraction, closings and relocations.