2005 Rural Partners Forum
Remarks by Rick Carlisle
Good morning everyone. I'm trying out a new voice today so you can let me know later what you think about it. I do apologize. I've been fighting a cold for the past few days, and I'm heavily medicated, so I'm really interested in what I'm going to say this morning. I was going to say a lot of good things about Tom Lambeth and Billy Ray Hall but we're running late so I'm going to skip all those, they hear enough of that anyway. But I will say it's always a pleasure to be here with so many good friends every year. When I look out into the audience I've worked with many of you over 20+ years of working in economic development, particularly rural development in North Carolina. And I think this event has become the world's biggest rural cocktail party. I think it's a testament again to what Billy Ray and Elaine Matthews and the entire team at the Rural Center have been able to accomplish over the last eighteen years.
North Carolina is a state of small towns. Anita talked about traveling in Africa, seeing some of the issues in Africa. I just came back in late August from traveling in Vietnam for two weeks. I read the Vietnam news everyday, the English language newspaper, in Vietnam and it was always about economic development. And certainly there are issues of international development in the newspaper, but a large part of what they talked about was small town development in Vietnam. How to keep small towns healthy and vital because they were facing some of the same pressures that we see in developed countries which is prosperity moving to more urban areas. And interestingly, I thought they promoted tourism as a big part of that. Not as the end goal, but tourism as a way of generating cash to help finance other kinds of projects. The other thing that struck me, I guess, is in all rural areas including rural areas in Vietnam and Cambodia, despite the isolation, just how connected everything is. I saw Internet cafes everywhere, at 25 cents and hour, which should be what it costs here, I think, to get on the Internet, but we haven't been able to accomplish that yet.
So I want to, in a very limited time, touch on a couple of issues facing small towns, one of which is how do you finance the growth of the local economy and second, to touch on some issues around overall finance for services that affect small towns. I want to give you two quick stories, one of which you saw a little bit of yesterday. You saw the story of Sparta. When I was Secretary of Commerce, I visited Sparta in 2000 to give them the Main Street Award, and it's remarkable what they had done: a vital town, boutiques, shops, restaurants. I was back there about two years ago, and it was a very different story. Most of those businesses had closed; there was a lot of empty space on main street, in large part because the local plant had closed, which reduced the spending, so it couldn't support all those small businesses. Fortunately, Martin Marietta came into Alleghany County with the Main Street effort; it kept going, and now they only have one vacant storefront in Sparta. But I think the point is that sometimes we fall into the trap of talking about industrial recruitment vs. downtown development vs. small business development. I think they are all a part of trying to keep the local economy healthy, and we need to not be at war with each other over those, but understand that it takes all those to make something happen. Another quick story. I was at a conference about a year or so ago, looking at the impact of the closing of Stone Cutter Mills in Spindale. Spindale was a thriving community; Stone Cutter was the major employer. Stone Cutter closed. The town had invested in a water and sewer system to meet the needs of Stone Cutter and the revenues from that were a big part of retiring the debt used to finance it. And so the loss of both the sales taxes and the property taxes and the payment for the water sewer service no longer used placed a big impact on Spindale's ability to finance goods and services. They were managing through that, depending a lot, though on reserves that built up over the years and they were doing, I think an excellent job of trying to manage through a difficult period, but the question was what do they do long term. And I want to come back to that in a moment.
Nancy talked about some of the governance issues around local economic development, and I, again, want to talk about that in the context of small towns - how they can use existing tools to try to attract investment, stimulate small business development and do downtown restoration. I want to make a couple of points about the effects of some of these programs and how I think they can be tweaked to better serve the needs of small towns.
First, it's difficult for smaller town managers, and often, in towns under 5000, there are no managers, to keep track of the array of existing programs. We really have a lot of programs in North Carolina, both at the nonprofit level, at the state government level and the federal government level that can help support local downtown development or local small town development. The problem is, keeping track of that array, figuring out which one to use, how to put them together is a daunting task. I think what that calls for is for our regional economic development organizations to have a much greater role in helping small towns be aware of and apply for those kinds of programs. They are there, there's a lot of money in them, but in a small town, you never have the access to those resources because you don't have the technical staff to do it.
Second, I think programs aren't geared to the smaller projects more typically in small towns. It can take a lot of work to get a small amount of money from a program. I think we need to look at small project modifications to a lot of our existing programs where there is a streamlined way of accessing those dollars. I think one example was, fairly recent, a composite bond program which allows smaller jurisdictions to bond together through a statewide financing authority and get access to revenue bond financing for projects, which would be very difficult to do jurisdiction by jurisdiction. So again, I think there are ways of providing access to that kind of financing. Texas, for example has a rural municipal finance program, which directly provides small amounts of debt for small town development projects.
Third, and this is going to echo what Nancy said, a small amount of money sometimes goes a long way. I visited a small town in the western part of the state that was working on a river restoration project, designed to be part of their overall tourism effort. They were working with that over a period of years, spending about $10,000 a year as they could get that up. The whole cost of the project was probably only about $80,000 but it was just impossible for them to raise it except spreading that out over a period of years. So I think if we had a flexible pot of money, again I think flexibility is the key, there are pieces around that are fairly small, but your project has got to fit exactly in that box for it to work. I'm a bit reluctant to say some of the things I'm going to say because there are reporters in the room, but I will say, these are ideas. Not necessarily my personal recommendations, but I would challenge the state legislature and the Golden LEAF Foundation to look at creating flexible pots of money that can be used for a wide variety of projects in small towns and I think grants of $5,000 - 50,000 will go a long way.
Fourth, I think we need to regionalize some of our economic development programs. I want to toss out a few ideas. - Encourage multi-jurisdictional industrial development zones. There have been some attempts to do that, but I don't know of one yet that has really been put together. Allow cities and counties or across several cities or several counties to create a zone, use their revenues to finance infrastructure improvements needed for that industrial development project and then allow them to share the proceeds from that and the property taxes that arise from it. - Second, consider regionalizing the tier system for the William S. Lee Act. Pitt County, for example, is a Tier 4 county. Martin County is a Tier 1 County. But investment in Greenville could provide jobs for Martin County residents, although they wouldn't have the property taxes in Martin County. What if you allowed Tier 1 benefits, which are much higher, for more of a regional benefit and because you are more likely to attract some investment into these the larger cities. This gives that industry the benefits they would've gotten for a Tier 1 county, but then put some of the property taxes, sales taxes back into that smaller, poorer county. So it's a way of regionalizing benefiting through that. And let me say, we do a little bit of that already, and it sounds like a radical idea, but in the JDIG program (Jobs, Development, Investment Grant), if an industry that locates in a Tier 4 or 5 county gets that, 25 percent of the benefit, instead of going to the project, goes back into a fund to help fund economic development in smaller rural counties. So we do some of that already; I think there are ways of looking at doing more of that. - Third, and we've looked at this once, consider multi-jurisdictional tourism development zones. A number of jurisdictions have hotel and motel taxes to finance tourism development. What if you encourage several jurisdictions to come together that all have similar taxes to promote tourism, and allow that to finance regional destination projects which could then draw more tourists to the entire area, would provide more people to eat in the restaurants, stay in the hotels and motels, and so on. So I think, again, you can benefit individual places by making the entire region more competitive if they could share the revenues and share the benefits. There are other potential initiatives, but the point is we can increase the probability of a win if we look creatively at some of our existing programs and find ways so that within an area, if one jurisdiction benefits, other jurisdictions somewhat gain from that if they are willing to help pay for it.
In addition, I think we need to catalog some creative approaches that small towns can use to fund development. I saw an article recently about Springville, Alabama. It's a town of 2,500 that depends a lot on tourism retirees. They have, like a lot of small towns, older properties, older buildings, it creates that kind of look that attracts tourists because they can "get back to their roots." They're also trying to attract a shopping center. The shopping center was going to put in a fairly standard box that would not fit into the character of the town. What the town did, it said, if you will alter the facade, so it looks more in character, we'll help pay for it. The reason they helped pay for it was because the per-square-foot cost was about 30 percent higher than it would have been had they not paid for it. How did they pay for it? They issued debt and took a portion of the increased sales tax from the businesses that located in that shopping center to retire that debt. It's a mini-version of a tax increment financing which we now have in North Carolina, a larger scale. And again, I think tweaking that so that it could be used on a project-by-project basis, gives you a lot of flexibility.
Finally, I will take a few minutes to quickly touch on, at a very high level, some ideas that we need to think about, larger policies that we need to really look at to benefit small towns, given what's happened in the economy. Because some of the changes unfortunately aren't going to be reversed and pressures are going to continue, I think we need to face that, and facing that means looking creatively at how we have treated financing at the state and local level. Couple of examples: North Carolina assumes a lot of responsibility for funding K-12 education. Local governments are responsible for school construction, and to the extent possible, supplements for teacher's salaries, curriculum and so on. In smaller, rural jurisdictions, the ability to do this is limited, as we've all heard about in the Leandro case. Should the state shoulder a higher percentage of expenditures in education for smaller jurisdictions? And should that be coupled with consolidation of some jurisdictions? So if there's more consolidation, there's more assumption of the local funding burden. Similarly, a real hot button issue, Medicaid; it's one of the fastest growing parts of both the state budget and the county budgets. Can this really continue, particularly when costs are growing more rapidly in some of the poorer, smaller, rural counties? Should we revisit the compact in terms of the requirement that counties pay that portion of the Medicaid cost? Also, North Carolina is regulated through the local government commission and through state oversight of the ability of towns to raise taxes, which has been very beneficial. We run a very tight ship in North Carolina, and we're known very, very well for the good government and the good quality of our fiscal situation. But, should we look at giving local jurisdictions more flexibility in how and when they can raise taxes for particular kinds of investments to meet, particularly, economic development needs? These are, honestly, big issues, they're difficult issues, they're politically charged issues and they are issues that we probably don't want to talk about, but I think some of these need to be on the table, not for immediate action, because it's difficult to do that in the short term, but realize that we've got a radically changing environment out there and I think we do need to think somewhat differently about what we apportion for local governments vs. the state.
In conclusion, I think these are indeed difficult times for a lot of small towns. I've traveled a lot across North Carolina over the years. I think I've been in all 100 counties and about 200 and some of the about 400 small towns out there. Not as many as Tom Lambeth, but I'm getting close. That having been said, I think there are a lot of opportunities out there, in large part because of gatherings like this, because of organizations like the Rural Center, because I think the state has taken a serious responsibility for trying to put resources in place. So it's most important that we continue these kinds of discussions to look for opportunities to learn about new ideas, grow new tools, and particularly important that we continue to look across jurisdictional boundaries to look at ways that we can all pay and that we can all benefit. Thank you very much.
