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Wednesday, 03 January 2007 00:00

The EDC question: Comparing and contrasting various models, as Jackson looks toward the future

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By Sarah Kucharski • Staff Writer

If there’s one thing economic development officials agree on, it’s that there’s no one right way to do it.

 

“Every community is a little different,” said Mark Clasby, Haywood County EDC director.

The statement is at once liberating and almost overwhelmingly open ended. It gives the Jackson County Economic Development Commission a host of options to consider in the process of restructuring following a period of turbulence and duress that left the commission short on members and money (see related article).

The commission is most likely looking at a complete overhaul, from membership to where funding comes from, how the commission spends its money to who’s in charge.

“We’re really proud of what we’ve done, but it’s not getting the job done,” said Sylva Mayor Brenda Oliver, who co-chairs the EDC along with Dillsboro Mayor Jean Hartbarger.

To begin, EDC members would be happy just bringing county commissioners back to the negotiations table. The county suspended its participation in the EDC two years ago amid controversy over how EDC funds were being used.

EDC members are hopeful that the new board of county commissioners will be more willing to discuss re-instating the county’s partnership with the EDC than the previous board of commissioners, who were scrutinized for their attempts to remove former EDC chairman Tom McClure from his posts in 2005.

McClure also was chairman of the Jackson County Airport Authority. Commissioners’ tried to oust him upon calling for an investigation into EDC spending; however, the move resulted in a lawsuit against the county that cost several thousand dollars of taxpayers’ money to fight and ultimately lose.

Mending damaged relations between the county and the EDC could be what paves the way for the hiring of an executive director to oversee economic development.

“The county has support staff and they have the money to really fund a position, and we feel that the county needs to be a player in the EDC in order for us to make the best possible efforts for a successful EDC in Jackson County,” Oliver said.

An executive director could provide direction for the future.

“When new businesses are contemplating coming in those businesses have to be assisted in a lot of different ways and an economic development commission does more than say ‘here’s some money’ or ‘here’s a loan,’” said Chris Matheson, the EDC’s newest member. “Our goal is to provide them with some assistance and that’s a tough thing to do when you’re all volunteers.”

 

Who’s on the EDC?

The primary goal of the Economic Development Commission is job creation.

The EDC in its current form is a standalone organization created in December 1999/January 2000. The 10-member commission was comprised of representatives of the county, towns of Dillsboro, Sylva, Forest Hills and Webster, as well as Southwestern Community College and Western Carolina University.

County commissioners got three appointments, Sylva two, and the remaining towns one each. Both WCU and SCC’s representatives were to be permanent, voting, ex-officio members, either being the chancellor or president or his appointed representative, according to EDC bylaws. Each member elected is to serve a one-year term. After initial terms of appointment, members may serve three full consecutive terms.

Bylaw changes have been in the works for more than a year, many of which were made to bring the EDC into statutory compliance, Oliver said. However, some changes county commissioners already have taken issue with.

For example, the new bylaws reduce EDC membership from 10 members to nine. The reduction means that county commissioners will have two rather than three appointments to the EDC. Commissioner Tom Massie said he did not understand the reason for the reduction. Oliver said it was a statutory compliance issue. But commission size could instead go up.

The Henderson County Partnership for Economic Development has a 15-member board elected by the membership. Members — such as banks, utility companies, attorneys, and industries — can choose one of three membership levels, paying dues of $250, $500 or $1,000.

“It’s a mix of people that have and share an interest in growing the economy of Henderson County and helping create quality jobs for the people who live here,” said Scott Hamilton, HCPED executive director.

In order to belong to the HCPED, members must also belong to the local chamber of commerce.

HCPED board members form a committee that nominates individuals to serve. Ballots are sent out to the full membership, which chooses five members at a time to serve three-year terms, for as many as three consecutive terms. Board members in turn elect a chairman each year. Officers may serve no more than two consecutive terms. One board seat is reserved for the chairman of the chamber of commerce.

Buncombe County has contracted with the Asheville Area Chamber of Commerce to provide economic development. An inter-local agreement established an EDC comprised of nine-members, which oversees a staff employed by the chamber. The county appoints six of the nine board members; the other three are appointed by the chamber. County appointments should be able to address county concerns; however, there’s more too it, said Buncombe County Manager Wanda Greene.

“When you look at it, you want to make sure that you have something that reflects your community too,” she said.

The City of Asheville has its own economic development department and the regional economic development entity AdvantageWest also is very active in the area.

In Catawba County, there’s also a nine-member board, with five members appointed by the county, two appointed by the City of Hickory and one appointed by each Newton and Conover. The board sets policy for a staff of four full-time and one part-time employee.

Haywood County’s EDC was restructured in 2003. The nine-member board is comprised of two county commissioners, a representative from Waynesville, Maggie, Canton, and Clyde each, and from the Chamber of Commerce, Employment Security Commission and the Haywood Advancement Foundation.

The HAF is a 501c3 property buying organization, similar to the Jackson County Development Corporation. Currently EDC Executive Director Clasby also is chairman of the HAF, much like McClure was chairman of both the EDC and JDC, the EDC’s property buying subsidiary. However, Clasby said that perceived conflicts of interest have not been a problem for Haywood.

“We have our two distinct organizations and we never mix the funds,” he said.

Haywood EDC terms are variable, with no real term limits, Clasby said. In general, terms are determined by the people filling the positions — if they are serving in a public office and win re-election, they stay, if not they go. Otherwise appointing entities are in control.

So far, the commission has been fairly consistent in its makeup.

“With the recent county elections this is the biggest change we’ve had with two new county commissioners coming on,” Clasby said.

County commissioners Mark Swanger and Kevin Ensley, who served on the EDC, lost re-election.

 

Where does the money come from?

In 2005, Jackson County commissioners said that as the largest contributors to the EDC they had a right and responsibility to look into how funds were being spent.

In the 2003-04 budget year, commissioners allotted $100,000 to go to the EDC but spent just slightly more than $83,000. For 2004-05, commissioners again budgeted $100,000 and received an additional grant for $12,000. Only $33,333 was spent before the county suspended its participation. The county’s total EDC contributions from 1993 to 2005 total approximately $1.4 million.

Wrapped up in the EDC was the county’s revolving loan fund. Originally was established in 1982 with a $750,000 community development block grant issued to Jackson County government, the fund created a separate pot of monies that could be loaned out to assist local businesses. Revolving loans are considered high-risk as they are most often issued to start-ups or struggling businesses as a means of injecting capital. Two revolving loans were issued to companies located on property the EDC purchased — QC Apparel in the Tuckasegee Mills building and Clearwood Inc. on the Drexel Heritage property.

With more than $1.2 million in outstanding revolving loans at the time the EDC investigation was launched, the county pointed fingers at the EDC, saying it was the commission’s job to oversee their payment. McClure also was chairman of the county’s revolving loan committee.

McClure said he told county officials it was their responsibility, that the loan committee has no authority unto itself, that the EDC has no authority over the committee and all loan records are under the county finance officer’s care. County Manager Ken Westmoreland said that monitoring of the loans was delegated to the EDC in a memorandum of agreement creating the position of economic development coordinator. However, no part of the agreement specifically addresses the revolving loan fund or the revolving loan committee.

Without the loans, the county’s contribution to the EDC is less than that from county governments in Buncombe, Catawba, Haywood, or Henderson. Buncombe contributes $400,000, which mostly goes to EDC staff salaries, Catawba gives $250,000 a year, Haywood contributes about $284,000 per year, and in Henderson commissioners give $220,000.

Additional funds come from a variety of sources including municipal governments, grants, membership dues.

Such financial contributions do buy a certain amount of power.

“We couldn’t function without that,” said Catawba EDC Director Scott Millar, of the county’s contribution. “While they don’t have a direct voice on our board, they certainly have control of our pocketbook.”

While the Jackson County commissioners’ contributions haven’t been as large as in other counties, their decision to withdraw from the EDC and suspend funding severely reduce its budget. Municipal contributions are relatively nominal — a $2,000 contribution from the town of Sylva; $1,000 from Dillsboro; and $500 each from Webster and Forest Hills. In comparison, Henderson County’s town of Fletcher, Mills River and Hendersonville give $10,000 each to the local EDC.

Last year the Jackson EDC budget was a mere $62,588.45. And this year’s budget was slated to hit around the $40,000 mark until the mortgage came due on the former Buster Brown property.

On May 21, 1997, the Town of Sylva and Jackson County government jointly purchased Sylva’s Buster Brown property following the apparel company’s closure. But the joint purchase was nothing more than an agreement to serve as temporary stakeholders, setting up the county government as a front for an EDC property buy.

The May 21 deed states that the reason an agreement between county and town leaders was necessary was because the JDC — the EDC’s property buying entity — was not “duly organized” in accordance with state laws and thereby could not conduct the property transaction.

The EDC consequently put up half of Buster Brown’s $550,000 price tag, with the intent of the JDC later assuming control over the property.

The JDC mortgaged the Buster Brown property for $325,000 days before selling it to Diversified Exposition Services for $625,000 in July 2001, but financed slightly more than $590,000 of DES’s purchase price. By August of 2002, the JDC began renegotiating DES’s financing agreement, adding more than $50,000 of accrued interest to their balance and securing a two-points lower rate of interest.

The JDC transfer of $300,000 to pay back the EDC upped this year’s budget more than eight times over. Nearly the entire budget amount has been allocated to site acquisition, development and capital improvement projects.

 

What do you do with what you’ve got?

For any EDC the goal is creating jobs, most often through the retention and expansion of existing business and the recruitment of new business.

However, EDC’s face an important question of whether to try and diversify or focus on the sectors of their local economy they already know is strong.

“Our mission statement says that will we diversify the economy,” said Millar of Catawba County’s EDC.

The Catawba economy was for years firmly rooted in furniture and textiles. As the market changed, the EDC looked toward the telecom industry. But now, sites are set on the horizon, and the EDC has identified favored businesses that are expected to grow such as IT, automobile parts suppliers and food processing.

“We don’t do small business development, we don’t do tourism,” Millar said.

Millar gave local leaders copies of the book The World is Flat: A Brief History of the Twenty-First Century by Thomas L. Friedman, which explores globalization’s effects on the economy.

“It’s just one of the most right on books for our time right now,” Millar said.

And he just ordered a couple of cases of Patagonia founder Yvon Chouinard’s new book, Let My People Surf, which relates his and his company’s story and the core philosophies that have made it successful.

Forward thinking helped created Catawba’s eco-complex, which is centered around landfill gas recovery program. Clay was dug up to cover the trash in the landfill and the EDC in turn used the flattened sites where the dirt was removed to attract business.

A timber processing company located on one site and was throwing away its scraps. Now a pallet company is planning to use the scraps. The leftover sawdust is used to make steam to heat a 100-acre greenhouse.

The Catawba EDC doesn’t set goals such as creating X amount of jobs or X million dollars in investments. Rather staff creates a yearly plan. For example, the existing industry services staff member plans for 100 visits a year. Last year, she made 130 visits. Millar said that in general he’d like for the EDC to be more pro-active in scouting out new business — he himself heads up the manufacturing recruitment program — but says there are only so many hours in a day and the incoming inquiries are more than enough to fill them.

“We just landed about two months ago a $100 million Target distribution center, which will employ about 600 to 800 people,” Millar said.

The Henderson County Partnership for Economic Development has created a target market list and requires businesses to meet state incentives standards such as paying above the average county wage rate, which in 2006 was $558 per week.

Haywood County’s model is a bit different in that the EDC puts a lot of focus on entrepreneurs and small business. For example, the EDC helped sponsor a contest for new businesses in which the winner received $10,000 to help with start-up costs.

 

What breeds success?

EDC officials agreed that a strong relationship between the private and public sectors must exist in order for an EDC to succeed.

Garnering support from local governments, boards of directors and the community comes from being accountable for your actions.

The Buncombe County commissioners get reports from EDC officials and keep an eye on pre-established goals and measures, said county manager Greene.

“I think that’s tweaked every year so that we get more and better feedback about what’s going on,” she said.

However, partners also must allow those they have put in the decision-making position to do their job, Millar said.

“We are well trusted by each of those that we have their best interests at heart,” he said.

It’s a sentiment Clasby agrees with.

“Even though I’m on the payroll of the county I feel like I work for all the municipalities in economic development,” he said.

The Jackson EDC has created a task force to assess where the EDC’s future lies with the aim to bring in as much of the community as possible.

“The economic development of Jackson County is not just limited to a few select areas in the county, it involves a multitude of people and groups,” said EDC member Matheson.

The next Jackson County EDC meeting will be held Jan. 22.

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