15 Nov Alphabet Soup: CDAs, RDAs, BIDs – which is right for your community?
It makes sense that organization is a critical factor in successfully executing an economic development strategy. However, there are a wide variety of organizational structures which can serve as the lead implementation team. Which is best suited to face the unique challenges facing your community? If your community is undertaking a new initiative or considering a more proactive approach to economic development, what steps should be taken to create a framework to facilitate success?
Step 1) Weighing organizational options
There are a wide variety of organizational structures commonly used to facilitate economic development projects. One main thing that they all have in common is a tendency to refer to themselves in acronyms. In Wisconsin, CDAs (Community Development Authoritys), RDAs (ReDevelopment Authorities), BIDs (Business Improvement Districts), and EDCs (Economic Development Corporations or, sometimes, Committees, are a few of the more common. Each entity has different principles guiding its formation, operations and guiding the types of projects that it can take on.
In general, there are three categories of organizations typically involved in economic development which serve distinct purposes within a community:
Organization Type: Public (governmental)
Structure: Public bodies operate under the oversight of the local unit of government (including CDAs, RDAs, and sometimes EDCs). In the case of an Economic Development Committee the group is primarily a work group comprised of municipal council or board members which discusses issues associated with economic development matters. Capabilities: The group’s role is primarily to advise the governing body on topics associated with economic development in the community and to serve as an authority on issues concerning business and community economic health. CDAs and RDAs, on the other hand, have statutory powers of their own, and can undertake projects and manage funds on behalf of the municipality. The differentiating factor between CDAs and RDAs is the ability of CDAs to focus on both housing and redevelopment, while RDAs focus primarily on redevelopment activities. Housing Authorities, a third organizational type, focus only on housing issues. Each of these organizations operates as a separate organization with a governing body including not more than two Council/Board members. The entities can then condemn property, buy and sell real estate, issue bonds (less of an option in the current financial climate) and enter into contracts. The entities also have the ability to utilize TIF funding through the municipality, and also to raise funds from real estate contracts, leases and sales to fund projects. Many successful CDA or RDA-led projects are featured in other blog posts.
Best Suited For: Facilitating strategic redevelopment which requires municipal funding or support to succeed, carrying out long term initiatives associated with land use planning.
Organization Type: Public-Private
Public-private economic development entities can carry out marketing and outreach initiatives to attract private sector investment.
Structure: In some communities, the bulk of the heavy lifting associated with economic development is conducted by a public-private entity. Because these entities are not statutorily defined, they vary greatly in composition and operations. One example is the Business Improvement District. BIDs are geographically defined and receive property tax dollars from a special assessment on commercial and industrial taxable properties within their district to fund operations. These districts are most successful if created based on a desire of local property owners, although they must receive approval from the municipal government (including a public hearing), and BID board members are officially appointed by the President/Mayor of the municipality, although at least five of the members must be property owners in the district.
Aside from BIDs, public-private economic development entities in most cases represent economic development corporations. In some cases these groups operate as a separate entity, while in others they may be associated with a local Chamber of Commerce or Private Investment Club. Some of these entities are focused on a specific area – i.e. industrial development corporations which oversee industrial park development, management and operations, while others are geographic in scope, serving municipalities or Counties. However, organizations that receive a majority of funding from public sources may be subject to open meetings laws. In practice, these groups often have formal agreements with the local municipality to represent its interests in specifically defined areas such as business retention or recruitment or industrial park development or operations, but also raise funds from business members, real estate transactions and operating revenue from leased properties.
Capabilities: Public-private entities possess all of the powers of a private corporation or individual and can buy and sell real estate or enter into contracts. Because these organizations have members or investors, the guidelines for activities will be driven by member interests and supported by the organization’s bylaws. Because public-private groups are non-elected and have fewer open records restrictions, they often serve as the point organization for prospective businesses in a community. The organization can provide relevant information and initial guidance without risk of disclosure.
Best Suited For: Development of business or industry-supported infrastructure, facilitating business to business relationships, marketing development sites or owned real estate.
Organization Type: Non-Profit
Structure: Organizations are typically structured as 501c3 entities under IRS statutes, which provide tax exempt status. Some organizations may also have educational or lobbying arms. Although EDCs or other vehicles discussed above may be structured as a not-for-profit entity for tax purposes, the non-profits covered in this section operate primarily for the public good. While many community non-profits benefit the economic interests of a community, including churches, civic organizations, community foundations and food pantries, there are several organizational types which conduct activities closely tied to economic development activities. These include downtown organizations, chambers of commerce, community foundations, arts councils and event sponsoring organizations.
Capabilities: Non-profit designation allows entities to accept foundation or other grant dollars and offer tax advantages to investors. These groups are essential to a community for their ability to recruit a wider variety of citizen members and volunteers and receive charitable donations. In many cases, the activities of these organizations are also the most visible and publically recognized forms of economic development. Because non-profits typically conduct events, sponsor contests and include retail and consumer-focused members in their mix, these groups can have a significant impact on the overall culture and character of a community. Recognizing the effectiveness of non-profits in economic development, many communities have established programs supporting non-profit organizations or activities. Outside support is also available which can be leveraged by the creation of certain types of organizations, including the Wisconsin Main Street Program, regional Community Foundations and the Wisconsin Arts Board, all of which provide funding, training and support for organizations acting in certain capacities within local communities.
Best Suited For: Event planning and management, community marketing, residentially-oriented community development programming.
Step 2) Assessing Local Partnership Potential
In practice, many communities, even small ones, have more than one type of organization working on their behalf. The wide variety of economic development project types requires a significant base of local knowledge, time and expertise. The likelihood of attracting individuals to participate in events is greater when they are able to work specifically on issues which are of greatest interest to them, and where they feel their presence has an impact. Both of these are more likely to occur via multiple smaller organizations than within one large body. The table below identifies the organizations that are or have been active in several communities commonly seen as economic development success stories from a downtown development perspective. Each of these communities has achieved great success, and as shown in the chart, they have not done so single-handedly.
Ultimately, issues of scope, focus, funding and control will dictate the number and nature of organizations necessary to carry out an economic development vision. Because of the need for confidential and flexible negotiations associated with redevelopment activities, some form of a publically-authorized entity (CDA, RDA, Housing Authority) are likely necessary. Additionally, supporting those organizations which serve as the public face of the community and actively encourage public engagement and participation in community development are also important. The number and type of these organizations will vary depending on the size and character of the community and its citizens, but ideally one organization will exist for each major strategic asset (i.e. downtown, recreation, arts). The need for a public-private organization is driven largely by the business makeup of the community. If a County-wide organization exists which can adequately support local growth and development, a local entity may not be necessary. However, in rural communities, the ability to raise private capital to support business and infrastructure growth may be a critical factor in providing modern facilities to sustain local businesses and recruit new complementary businesses. Rural communities are less able to attract private sector developers for speculative or quasi-speculative projects, making the availability of local funding sources to fill private financing gaps a useful tool.
Step 3) Laying the Foundation
Regardless of organization type, the process of establishing a new entity requires strategic decision making. For instance, the composition of the board is critically important. The board must be appointed to reflect a variety of areas of knowledge and expertise which will be valuable in carrying out activities (legal, financial, real estate), and should also be comprised of members who are able to dedicate sufficient time to attend meetings and carry out organizational business. Having a dedicated advisor is also beneficial when exploring best practices, new project ideas or following through on outreach and marketing initiatives. This advisor can be a municipal staff member or outside consultant, depending on local resources. Their role will include compliance with meeting minutes and posting requirements, as well as following up on or carrying out day to day business for the entity. Examples of services provided might include real estate or financial analysis of proposed developments, solicitations to developers or potential tenants, hosting site tours or leg work on projects such as websites or marketing initiatives. Having a dedicated advisor will ensure that board members time is spent most effectively and focused on decision making and strategic planning, thereby avoiding burnout.