Small business owners in the Pacific Northwest, especially in rural areas, are getting increasingly hot under the collar about economic development. The reason: They feel the state is spending too much money attracting large out-of-state companies, and not enough on them.
The issue is one of the top priorities at a three-day conference that started in the Columbia River Gorge Thursday. Kristian Foden-Vencil attended the 'Regards to Rural' symposium and files this report.
Jim Roman is 53 years old and lives in Myrtle Point on the Southern Oregon Coast. He's worked in construction since high school, but recently developed a new way of building walls quickly.
Jim Roman: “I've reinvented home building from the ground up.”
He's created a system of a two-foot wide by eight-foot high wood panels that snap together.
Jim Roman: “You can build a house on site, without hardly any fasteners, the panels interlock quickly, they're completely finished. And it's a superior strength, higher quality home. And I'm striving to build these things more affordable than what's available now.”
Roman managed to convince the USDA he was onto something. It gave him grants totaling more than $300-thousand dollars to test the idea and build his first home. That process is now complete. But he says, the next step — raising up to $5 million dollars to build a factory – is proving problematic.
Jim Roman: “I thought, okay, once I've proven this concept… I felt the phone would be ringing off the hook and people would be knocking down my door. They'd really see the potential…I'm just surprised that I'm sitting here twiddling my fingers trying to figure out what to do. I'm definitely frustrated.”
Roman contacted the Oregon Department of Economic and Community Development, and several other organizations. He says they've been helpful, but not with cold, hard, cash.
Jim Roman: “The feeling I got was because of the scale of the amount of money that we needed to get this thing going. That I just didn't get any response of what we could do to get that kind of financing.”
The state does have large grants. But Roman says he's being overlooked.
Jim Roman: “They're all going…to these larger businesses. We tried to apply for them and we were basically just squeezed out.”
Roman's problem is all too commonplace, says Michael Shuman, a keynote speaker at the 'Regards to Rural' conference. He says that Oregon and a dozen other states that he's studied, spend far too much money enticing large corporations to relocate, rather than helping entrepreneurs like Roman.
Michael Shuman: “In Lane County five years ago there was an analysis done by the Register Guard looking at several years of tax abatements and they found that 95 percent of the tax abatements went to six non-local businesses. Three came, took the benefits and then quickly left town. Two came and under delivered the jobs and one was more or less on target.”
In comparison, he says, the 100 local businesses that received money, basically kept the small modest promises they made. In summary, he says, the cost of generating a job at a local business — in tax abatement terms — was about $2,000. The cost for a non-local business was $67,000.
In addition, says Shuman, local businesses do a much better job of plowing finances back into their local economy. For example, by hiring a local CPA to do their taxes, or by buying from a local supplier.
Michael Shuman: “There was a great study done in Austin, Texas, about 5 years ago, looking at the impact of $100 spent at a Borders Books store versus $100 spent at a local book store. $100 spent at a Boarders left $13 in the local economy. $100 spent at the local book store left $45 in the local economy.”
The Oregon Department of Economic and Community Development has heard such complaints before, but insists 70 percent of it's money goes to help and retain small and medium sized businesses. Deputy Director, Mike Salsgiver, says the problem is, people only hear about the big out-of-state companies they attract.
Mike Salsgiver: “If you put it in a sports analogy, it's sort of like, when you turn on Sports Center you don't see the bunts or the singles getting hit. You usually see the double plays or the big fancy plays or the grand slams or the home runs that win a game. And it's kind of the same case in our business. I mean we spend the vast majority of our time supporting small and medium sized businesses.”
Salsgiver says he hadn't heard of John Roman's Myrtle Point construction business, and couldn't speak directly about the company.
But he says his agency tends to make grants to companies that produce the most jobs for the money. And that, he says, sometimes means that risky start-ups don't get funded.
At the 'Regards to Rural' conference, attendees sit down for beef broccoli and coconut rice. So the question I have for them is: Do they feel the state should spend more on retaining small local businesses, rather than recruiting big companies from elsewhere?
Kathy Longholland is the president of a small design firm, and Kathi Jaworski directs a non-profit aimed at helping small businesses.
Kathy Longholland: “I think it probably should be a conscious mix. One, realizing that when you recruit from out of state, that corporate headquarters are not here. So downsizing, you always have exposure, because there's a good chance those jobs will move. And then looking, are they types of jobs you really want to be recruiting or types of industries, are they environmentally destructive, and they pay such a low wage, you're still in transfer payment zone.”
Kathi Jaworski: “The direct funding that's going to start up businesses in Oregon, is a small percentage of the budget.”
Their comments were echoed by Lesita Flemming, a publicist for Douglas, Coos and Lincoln Counties, and library director, Sue Jenkins.
Lesita Flemming: “I think it's very important that the state and the government in general should help with small businesses, the small rural enterprises, because there are so many people who need that kind of assistance and it's just not really available in the local area sometimes.”
Sue Jenkins: “I think we get a great investment result from small local businesses, in turn over of assets and in expansion of creativity and productivity than we ever will from an out of state corporation that has no roots.”
The conference at the Skamania Lodge runs through Saturday. The debate on where to spend economic development funds promises to last much, much longer.