Sugar Beets are Still not the Answer

Many years ago a man on his high horse rode into Maine and proclaimed that he had arrived to transform the Aroostook County economy by converting potato acreage into sugar beet production. Sugar processing plants would grow up like weeds and Maine would become the beet sugar capital of the universe. Many state supported or generated dollars later the Aroostook County economy was about where it had been before the silver bullet savior had arrived and there were no sugar beet procession plants to be found.

I cite this example of long ago economic development wishful thinking not to revive sugar beets, but to lead into the fact that our state economic development programs have not changed a great deal since this example.  It eludes me why after over forty years of experience we are unable to move away from economic development models that may work in South Carolina or Ohio or Texas, but are tools that do not fit Maine: its economy, its demographics, nor its strengths.

Certainly, there is more political benefit from announcing a new business or business expansion where one hundred or two hundred new jobs are in the offing.  (Whether or not they actually materialize does not get the same kind of hoopla coverage)  Five new jobs in Skowhegan or six new jobs in Eastport simply to not have the cache, nor need as much state subsidy and cash, as the big silver bullet business noise.  While the state has spent some effort in supporting the smaller job businesses the thrust of state policy remains to go after the large business proposals or to be conned by out of state hustlers who play our system to their short term benefit and our long term loss and disappointment. Questions about thin, if not occasionally mythical, data supporting the big ticket proposal get lost in the forest of proclaimed big success. Maine has never had and does not have now the economic base, the tax base, or the financial strength to be successful with this economic development model.  We should simple walk away from it.

This of course begs the question of what we should do to encourage economic development.  For the last many years discussions about economic development policy have been about how to make the existing gimmicks, like TIFFs, Pine Tree Districts, nifty little and large tax breaks/credits and what not, work rather than recognizing that most of them are “beggar thy neighbor ” programs whose only success is to drain money from local, regional and the state economies to the detriment of other areas of the State.  To stand out from the national economic development big ticket development models used around the country we need to stop trying to replicate them, push all that is in place into the trash and create something that fits Maine.

First, large dollar expenditures to support business development should be rigorously limited to infrastructure projects.  For example, if we had used all the money we have spent in the last fifteen years chasing and subsidizing big dollar projects which generated thin or no benefits we could have leveraged the building of a high speed internet delivery network covering the entire state that would have created more jobs in construction being built and ongoing new jobs in the internet business culture than a few successful new business efforts have done. The Turnpike Authority could have generated thousands of dollars to support highway maintenance by leasing out its median for an internet spine along its entire length.

We should build on the one area of economic development where we have had some success.  The Technical College and Community College systems have created  educational tie ins to local and regional businesses to train and re-train employees for jobs that are available.  This work needs to be strengthened and supported so that any business that needs new employees or employees with new skills can readily go to Maine schools to train Maine people to do those jobs. This is no easy task and requires a long term commitment to supporting some inefficient operational structures in these schools to quickly be able to create new training courses for limited numbers of people.

A fierce attack on paper work needs to be organized, paid for and implemented.  Businesses are distracted and almost blinded in some cases by the blizzard of local, state and federal paper work even the smallest business must deal with. Most if not all this paper work has been created for good cause and seeks good outcomes but the sheer volume of layered good intentions has now generated the unintended consequence of  inhibiting economic growth.  This task cannot be accomplished through  a “big review” of existing paper work requirements. To have any effect this project must scrap the paper work piles down to the basic statutory language that generated the paper work and start over again.  The goal should be to reduce the total volume of paper work by at least fifty percent, not necessarily eliminating any individual requirement.

The way to pay for this not inexpensive transition to a new state supported economic development model is to phase out all of the business tax breaks, credits, incentives and the like that distort the tax code and find many businesses spending too much money and time trying to figure out how to milk the state economic development system rather than expanding their business and hiring new people.  The elimination of revenue losses to state and local governments created by the current hodge-podge of tax gimmicks can pay for work needed to create the Maine Model for economic development. The wails of outraged virtue that will greet such action must be ignored and the eventual elimination of such government welfare be pursued with single minded determination.

Finally, the focus for the Maine Model should be the creation and support of small businesses.  We cannot compete in luring large manufacturing or service businesses to Maine and we should not try. The large silver bullet propositions have a lousy track record in Maine.  Such businesses are of course welcome but we are not going to try to compete with Texas in giving them tax breaks and state subsidies.

The creation of a new economic development model is not a short term fix.  It will take sustained commitment over many years.  It will be expensive.  It will cause economic and personal disruption.  The alternative is to continue with the same old same old and toss money down the rat hole of a model that has demonstrably not worked.

We can create a unique Maine economic development model that focuses on infrastructure to support all businesses, educational structures that quickly respond to the training needs of  businesses large and small, the lowest operational expenses for business created by local and state law and regulation, and a tax structure that does not create favorites in the business community but rather says we are all in this together and that we will not drain money from one community, area of the State or the State itself to supposedly generate economic development in another area of the State. Pie in the sky? Perhaps, but  our current economic development money has given us too much pie in the face.

 

 

Robert Lenna

About Robert Lenna

My professional career has been involved in bringing to Maine the financial capital to build our infrastructure of housing, schools, roads, hospitals, colleges, water and sewer districts. As Executive Director of four independent state authorities charged with putting together public financing for hundreds of infrastructure projects I was responsible for bringing billions of dollar into the Maine economy.