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Economic Development Planning as a Relay: Dayton’s Experience Robert Premus and John P. Blair

Wright State University

As a result of the many economic and institutional changes in the 1970s and early 1980s, the Dayton region began to explore new approaches to economic development. An interesting feature of the Dayton experience was the importance of a flexible policy process that allowed for the shifting of leadership roles among the business, government, and university sectors, at various phases of the planning process. The shifting leadership model evolved by serendipity rather than design. Like runners in a relay, the sectors would pass the baton to other sectors, or other groups, at appropriate times. The business community provided the initial impetus for development and was instrumental in setting the broad agenda. Although the planning process was ”business-led,” the leadership role had to be shared among a variety of groups. Political leaders stepped into the forefront of some key issues. Currently, a regonal university is providing leadership to strengthen the consensus for regional goals.

The Dayton region is the backdrop for this study, because it represents a successful economic restructuring effort following major dislocations. An important lesson of the Dayton experience is that successful regional development planning requires the creation of an interactive, flexible process that draws from the unique strengths of the private, public, and university sectors. Responsibilities will shift among various sectors as the process unfolds. While particulars may differ, similar business-led regional development strategies have surfaced among other U.S. regions such as Memphis, Tennessee, and Cleveland, Ohio.

THE ECONOMIC BACKGROUND

After being jolted by a series of five major plant closing in the 1970s, and after a period of less dramatic decline during the early 1980s, Dayton’s economy has rebounded. In recent years, Dayton’s employment growth has been substantially higher than that of the nation. Its unemployment rate has plunged well below the Ohio and the national rates. Per capita income growth still lags the national average, reflecting a continuing predominance of the high wage but slow wage-growth jobs in the region’s automobile and related sectors.

The revival of the Dayton region’s economy, to a degree, occurred as a result of individual company actions to strengthen their own businesses. For example, declines in the automobile sector were halted and a significant center of automobile agglomeration remained in the region in spite of restructuring within that industry. Also, major Fortune 500

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corporations headquartered in the Dayton area, including NCR, Mead, Phillips Industries, and Reynolds and Reynolds, reconfigured their corporate products and operations around new technologes. At the same time, Dayton’s large machine tool sector began the long process of attempting to regain the technologically lofty position it held in the 1960s, but let slip by in the 1970s. Further growth impetus came from an avalanche of numerous new aerospace-related activities in the Dayton region supported by Wright Patterson Air Force Base, a major research and logistics center employing about 35,000 persons.

The stabilization of individual corporations was important, because without a solid business base many corporate leaders would lack the time and other resources needed to involve themselves in community-wide economic development activities. Even though the markets for major Dayton-based corporations are national and international, the involvement of leaders of these exporting companies in regional development may be attributed to a desire to protect their existing investments in the region by maintaining an environment capable of attracting employees, and by their realization that the loss of agglomeration economies within the region could reduce corporate profitability. Businesses that serve local markets such as financial institutions and real estate development corporations have a more direct financial interest in regional prosperity. Not surprisingly, executives in these companies were in the forefront of focusing the business sector’s attention on the need for economic development.

The response of the Dayton business community to the economic difficulties of the 1970s and early 1980s goes well beyond individual corporate actions, restructuring, and movements into new markets. The magnitude of the Dayton region’s decline convinced many area business and political leaders that new economic development initiatives were necessary. It was feared that another round of job Iosses of similar magnitude to those of the 1970s and early 1980s would set the region on a course of cumulative decline. In response, the business leaders laid the basis for creating a new collective approach to economic development in the Dayton region. The new approach, initiated in the 1980s and still evolving, was based on the philosophy that the region must find ways to grow from within and that a united, region-wide approach that encompasses a variety of institutions is more effective for residents of the region than uncoordinated efforts of a few businesses or fragmented local governments.

PRIOR GOVERNMENT-LED DEVELOPMENT PLANNING EFFORTS

In the 1960s and 1970s, Dayton’s development policy mirrored trends in other U.S. regions. Federal grants to state and local governments fueled regional development policies. Municipal development plans were largely

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aimed at attracting large industrial plants. The principal tools in use at the time were industrial location grants, low interest loans, tax abatement, and other financial inducements.

During this period, Dayton’s business sector played a minor role in economic development. The high profile entrepreneurs who founded major businesses had all but disappeared. As corporate control was inherited by less well-known corporate executives lacking the personal resources, and perhaps the interest, to gain leadership positions through community and philanthropic activities. In previous crises, “powerful leaders” such as John Patterson (National Cash Register), Charles Kettering (Delco Products, General Motors), might have taken charge of community affairs. This “old style” business leadership is in contrast to the ”new style” and more pluralistic business-led economic development process now underway in the Dayton region.’

By the 1960s, there were numerous business and civic leaders who collectively represented enormous wealth and power, but individually lacked the resources to initiate an economic development plan. The solution to the “leadership gap” called for coalition building and shared responsibility. In spite of clear business interest in influencing economic development policy, high decision-making costs and the restructuring that was occurring within many of the area’s major corporations made it difficult for the business community to mobilize region wide efforts. Thus, because the public sector was relatively flush with federal funds and because of organizational difficulties within the business community, the local public-sector determined regional economic development planning.

The public sector-led approach to development was predicated on two key assumptions: (1) Local public officials possess sufficient information to subsidize private sector investments that have the highest economic development potential within each municipality, and (2) these officials would be sufficiently immune from political pressure to make investment decisions strictly on the basis of public benefits and costs. However, it was not until the early 1980s when Dayton acquired a ”rust bowl” image, and federal cutbacks made it difficult for individual municipalities to continue their subsidies, that people began to seriously question the philosophical underpinnings of the public sector-led approach to economic development.

Similar experiences with the public sector-led economic development approach throughout the U.S, suggested that this approach may have a number of serious limitations. First, it would appear that local public officials lacked the detailed business and marketing knowledge to determine regional location advantages and how to spot and exploit development opportunities. In practice, the municipalities were unable to attract the industries they targeted; they subsidized construction-oriented projects that provided a large portion of space to businesses serving the local market, and attracted firms that often relocated from within the

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region to take advantage of the improved facilities. Second, local public officials rightfully placed emphasis on social and

equity issues. .While projects that relieve social distress and enhance the quality of life can contribute to job creation efforts, budgetary conflicts often favored these programs at the expense of more focused economic development projects. For example, housing and neighborhood improvement issues often dominate economic development planning, because they normally have stronger political support than programs that directly improve the business environment.z

Third, the planning horizon of local political leaders is too short to keep the region focused on its long-term development needs. As a result, projects that had more immediate job creation potential were favored. When almost any firm expressed an interest in locating in the area, strategic plans were ignored in a rush to put together an attractive subsidy package. Hotel construction and other high profile projects became economic development centerpieces of the Dayton region.

Within the Dayton region, individual municipalities competed fiercely with one another. Tax abatement became the most important economic development incentive in their battle for industry, resulting in significant long-term distortions in local tax structures. Also, costly annexation battles broke out among the communities, and major investment projects that were important to the economic health of the region were sacrificed.

The competition for industry was aggravated because many public officials considered enhancing the local tax base rather than job creation as the primary purpose of economic development. When jobs are created in a local jurisdiction, individuals from throughout the metropolitan area have roughly equal access to the new jobs. Consequently, it is not surprising that the fiscal residuum-expenditure benefits in excess of local taxes-a new enterprise generates was of more concern to municipal officials than job creation. But from the point of view of residents of the region as a whole, good jobs are probably the most important benefit of economic development.

In summary, the Dayton region learned the painful way-by experiencethat while a decentralized state and local political structure may be efficient in providing local public services, it proved inadequate at providing a coordinated economic development framework for a metropolitan region. Furthermore, the uncoordinated municipal economic development efforts that targeted specific industries generally failed to accomplish their goals.

THE BUSINESS-LED, SHIFTING RESPONSBILITY MODEL

The policy revolution in Dayton is that the new business-led development strategy, which surfaced in the 1980s, successfully transcended municipal agencies, and focused public attention on regional

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opportunities. The business-led approach has sought ways to strengthen community assets that will help business already here as well as help make the area more appealing to future businesses.

The Catalytic Role of Business Leaders The transition of the Dayton region strategy from the government-led

model to the shifting responsibility economic development process began with a group of concerned business and civic leaders on the Dayton Area Progress Council (APC) which includes the CEOs of the region’s major corporations and other institutions. The Dayton APC began its search for alternative economic development paths in the early 1980s leading to new institutions, a restructuring of many existing institutions, and a much more focused effort aimed at building regional assets that benefit all businesses and the community-at-large.

The Dayton APC began by undertaking a careful study of the strengths and weaknesses of the region’s business environment though the formation of a Subcommittee on Economy and Statistics, consisting of about 20 business leaders and chaired by the Chairman and CEO of a major Dayton area bank. The subcommittee employed the services of two university economists to conduct detailed studies of the automotive, aerospace, advanced technology, regional offices, and warehousing sectors.

The formation of a business-led strategy began with a careful analysis of the strengths and weaknesses of regional characteristics and economic development opportunities. Focus group sessions were conducted with key executives from each of the five sectors revealing local industry concerns and innovative ways to respond to the issues. In addition, formal surveys were conducted to solicit the response of the broader business community on the issues and opportunities that surfaced during the focus group sessions. “Near miss” companies (firms that seriously considered locating in Dayton, but did not), national location specialists, former commanders of Wright-Patterson Air Force Base, and executives at nearby Japanese transplants were also interviewed. This design was aimed at finding ways to improve the locational environment for activities in which the region had shown locational advantages.

From these various efforts, and from more traditional economic analysis, emerged the Dayton Community Factors Evaluation Report (Premus and Blair, 1988) which helped business leaders set a policy agenda for the region by identifying numerous sectoral economic development opportunities, and it served as a basis for major changes in the direction and orientation of the Dayton Chamber of Commerce activities. The major findings of the study were that municipal rivalries were hindering economic development efforts, and that the external image of the region was hurt insufficient downtown (central city) investment.

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The report also identified a broad array of quality of life issues that directly and indirectly affect the region’s economic development prospects.

The business community‘s desire to initiate change led to the formation of the Dayton Business Committee (consisting of about twenty business leaders who have agreed to commit some of their company’s resources to selected projects), the ”action arm” of the Dayton APC. The Dayton Business Committee’s main purpose is to marshall private sector resources to support major economic development projects identified as strategic for the region’s future. For example, the Committee is currently evaluating a number of projects that will capitalize on the Dayton region’s historical role as the ”birthplace of aviation” including rehabilitating the Wright Brother’s Bicycle Shop, establishment of several national landmarks, and designating several sites as a national park.

More important, the report sparked an intense coordinated dialogue within the business community and the public about challenges and opportunities confronting the Dayton area, including how best to develop regional assets and set realistic but challenging goals. It was from this dialogue that a new “vision” for the greater Dayton region began to emerge.

Broadening the Leadership Base For about two years, the Dayton APC provided the leadership in

economic development planning. Newly formed working groups around key issues included APC members as well as representatives of other interest groups. However, even these broadened subcommittees were seen as exclusive by the general public. The business elites first realized they needed a broader base of support to accomplish their regional development agenda when they proposed constructing an arts center in downtown Dayton. The Subcommittee on Cultural Activities recommended a $30 million arts complex to help revitalize the central business district, later drastically scaled back because its backers failed to gain the full support of the business community and the public. The lesson was clear: Citizens were not willing to automatically follow the lead of business elites, particularly when the business leaders were suggesting projects that would be partially tax financed. Also, many of the business leaders who were supporting the arts complex lacked the time and inclination to engage in the tough political battle that would be necessary to raise money for the project.

The need to share responsibility with other groups was a lesson quickly learned. For example, the region could encourage development in the aerospace and advanced technologies sectors by encouraging stronger ties between Wright Patterson Air Force Base and technology-related firms. By itself, the business community could not build the necessary institutional linkages to affect better working relations with the large government

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agency. However, the APC was influential in encouraging state and national elected officials to explore ways to improve technology transfers between WPAFB and the Dayton area.

Another example of broadening the leadership base to support development goals was an effort to improve intergovernmental cooperation. The business leaders, backed by strong editorial support from the major metropolitan newspaper, were successful in convincing representatives of municipalities to assume a more cooperative posture on economic development. One outcome of this effort was the adoption of a county-wide economic development plan. Elected officials continue to be sensitive to the need to cooperate in the economic development arena.

The community factors study revealed the importance of a broad range of issues, including quality of life, education, and intergovernmental coordination. The lack of an effective broad-based leadership to address these concerns threatened to sidetrack the regional development process. The leadership problem was exacerbated when the CEO of the major bank, who was spearheading the development effort, was promoted to the national corporate headquarters. Thus, for a time, the business-led regional development agenda was not being aggressively pursued.

Fortunately, the barrier was broken by the decision of Wright State University, one of the few region-wide public institutions, to become a catalyst for economic development. Specifically, the business community, through the Dayton Area Chamber of Commerce, contracted with Wright State University in 1989 to initiate a long-term strategic planning process, called “Challenge 95.” The earlier community factors study, also commissioned by the business community, has served as the basis for organizing the Challenge 95 committees. The objective of the planning study is to reach an area wide consensus on regional development goals (both economic and social) and to develop action plans for achieving these goals by 1995.

The initial involvement of the business sector was important in selecting the membership of the Challenge 95 committees. The support of high profile business leaders provided initial legitimacy for the recruitment effort, brought prestige to the project and encouraged other community leaders to serve. Chamber of Commerce officers developed a list of persons to be invited to serve on the Challenge 95 committees in consultation with representatives from Wright State and other community leaders. One selection criteria was that potential members be well known and active in the community. Since the Challenge 95 organization had no governmental powers, the ability to implement recommendations would depend upon the ability of members to influence the other committees, boards, and governmental agencies on which they served. Another criterion was that representatives form a wide variety of constituencies- racial, geographic, occupational and political-be represented. This decision was made to avoid the controversy that could result if certain

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groups felt they were left out. It reflected a reaction to the organization of the arts center project which in fact excluded important stakeholders and was fresh in everyone’s mind.

LESSONS AND EVALUATIONS

The Dayton region development policy renaissance initiated in the early 1980s is still evolving. Under the initial leadership of the business community, regional development policy took on a set of new characteristics that clearly delineate it from the previous public sector-led and old-style business-led approaches. The new-style Dayton planning process started as a result of the initiatives of a few “key” business leaders and soon expanded to include many other individuals and sectors. In particular, the local government and university sectors played vital roles in creating broad-based community support for the region-wide planning effort. Nevertheless, it was continued strong support from the private sector that kept the planning process moving forward.

Business leaders appear to have a relative advantage compared to public sector and grass roots planning in four areas:

1. Business leaders possess detailed knowledge of the local business environment and strategic opportunities while a lack of market knowledge limited the effectiveness of previous public sector-led efforts.

2. Business leaders who are able to transcend intra-regional boundaries and differences tend to see the metropolitan area as the operative unit for economic development, and are less concerned that growth can spill over from one local political jurisdiction to another. Thus, there was an important link between business initiation of the development process and the maintenance of the regional focus as the process unfolded.

3. Business leaders have the ability to command the respect of public officials, and often business leaders will have influence at the state and federal levels that surpasses that of municipal leaders. A clear and united voice of business leaders is usually taken very seriously by legislators. In contrast, municipal officials may have trouble speaking with a united voice to state and federal legislators because of jurisdictional boundaries and differences in political affiliations.

4. Business leaders are in a better position to keep issues focused on growth and job creation rather than spreading to equity concerns. This is not to say that equity matters are of no concern to a community, but it is important to be conceptually clear about these two goals, possible trade- offs, and policy alternatives.

These advantages notwithstanding, the Dayton experience suggests that the business sector must be willing to accept a subordinate role at appropriate times if the planning process is to evolve into a broad based, on-going process. Business leaders do not have the time, resources, or trust of the general public to be involved in every issue that evolves from the

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development planning process. Six features of the Dayton case indicate the need to broaden leadership

and shift responsibilities among institutions. 1. In times of severe corporate stress, other institutions may have to

take planning initiatives. 2. Turnover among business leaders can create continuity problems,

particularly since private-sector leadership roles are less formal and not uniquely associated with a particular job title.

3. Business leaders are often unable to create a public consensus because many segments in the community distrust business, and the business community itself may not always reach consensus. 4. Business leaders often do not want to be in the forefront on

controversial issues or face public criticism, particularly businesses that depend upon local customers.

5. Business leaders may use their influence to benefit themselves at the expense of the public.

6. Implementation of economic development plans invariably requires public funding thereby requiring managerial participation.

Because of these limitations, the region’s economic development planning had to include many groups, and leadership roles had to be shifted among appropriate regional institutions. It was through this process-cumbersome as it may be-that the Dayton area has been successful in overcoming many parochial community interests and in removing other impediments to economic growth. For other regions wishing to follow the Dayton example, the importance of creating a similar flexible policy process through which individuals, businesses, public officials, and others can share responsibility and express their collective goals must be stressed.

ENDNOTES ’ A brief example will illustrate what we have termed ”old style” business

leadership. Wright-Patterson Air Force Base was located in Dayton primarily through the efforts of two individuals: Charles Kettering and Colonel Deeds. They purchased the land for the air base with their own money. Deeds went to Washington and personally lobbied congressmen and Air Force officials for the base. The community supported their efforts because of the perceived benefits, but also because of the personal prestige of these two men.

* Indecentralized capitalist economy, businesses from a variety of regions compete with each other. If social programs contribute to increased costs at one location, or even if a locality provides fewer business subsidies, export oriented industries may be less able to sell their products profitably. In the long run, inter-regional compehtion makes it difficult to pass cost of social services to businesses, particularly businesses that export products outside the region. Consequently, it is difficult for a locality to maintain significantly greater levels of social spending unless local residents are willing to pick up the tab.

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REFERENCES

Premus, R. and Blair, J. (1988). Dayton Community Factors Evaluation Report. Dayton, OH: Wright State University.