fostering economic development

Copyright © 2013 by ScottMadden. All rights reserved.

Fostering Economic Development

A Generation and Transmission Cooperative Strategic Priority

January 2013

Contact: Brad Kitchens ([email protected])

Marc Miller ([email protected])

mailto:[email protected]




Introduction

This ScottMadden insight is the fourth in a series on “Five Strategic Priorities for Generation and Transmission Cooperatives.”

Contents

Overview

Economic Impacts of Electric Cooperatives

Economic Development Today

Measuring Success

Planning and Executing an Effective Economic Development Program

Thinking Strategically

Contact Us

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Gaining Access to

Capital Markets

Improving the Effectiveness

of Stakeholder Management

Fostering Economic

Development

Fostering

Economic

Development

Managing

Generation

Assets

Ensuring Grid

Security and

Reliability

Gaining

Access to

Capital

Markets

Improving the

Effectiveness

of

Stakeholder

Management

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Overview

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Cooperatives can be powerful drivers of economic development for their communities. In spite of competing demands on financial resources, economic development is a perennial top priority at best-in-class companies, with the most successful sharing a few common characteristics

Visible and Accountable Leadership: Support for initiatives is maintained throughout the organization, leadership is accountable, and progress is reviewed and communicated regularly

Consistent and Significant Resources: Every year substantial technical, financial, and human resources are dedicated to fostering economic development

Focused and Measurable Objectives: Customized initiatives with clear goals are designed, based on a broad set of proven approaches

Required Commitment

Data and Analytical Resources

Site Selection/Certification: Providing access to geographic information systems (GIS)

Economic Data: Providing access to analysis of industry sectors, demographic data, economic trends, and electric usage estimates

Publications: Publishing documents or periodicals addressing local or regional economic concerns

Planning and Direct Development

Engineering and Project Management: Providing engineering services for site evaluation and planning or project managers to navigate the site development process

Energy Efficiency and Environmental Projects: Providing energy audits or investing in environmental projects

Industrial Parks/Speculative Development: Financing and constructing industrial parks or properties to encourage entities to relocate

Community and Industry

Collaboration

Funds: Creating funds for economic development, job creation, or the enhancement of infrastructure

Grants: Awarding development grants to deserving entities

Incentives: Providing businesses with incentives to conserve or improve energy efficiency

Educational Programs: Working with local colleges to create educational sessions or comprehensive grant programs

Impact

How Do Top Performing Companies Approach Economic Development?


Economic Impacts of Electric Cooperatives

Economic Impact Direct1 Indirect1 Induced1 Total

Revenues ($M) $34,275 $4,039 $5,033 $43,347

Income ($M) $6,318 $2,035 $2,747 $11,100

Wages ($M) $3,757 $1,262 $1,552 $6,571

Employment (Jobs) 67,625 24,525 36,825 128,975

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Electric cooperatives contribute greatly to rural economies. Each year, more than 900 electric cooperatives nationwide account for more than $40 billion in revenue, nearly 130,000 jobs, $6.6 billion in wages paid, and $11 billion in value-added income (including direct, indirect, and induced).

Source(s): (1) University of Wisconsin Center for Cooperatives, Research on the Economic Impact of Cooperatives, 2009

National Rural Electric Cooperative Association, www.nreca.coop

Average Revenue per Cooperative by County Electric Cooperatives Serve More Than 75% of the

United States Land Mass

http://www.nreca.coop/


Site Selection/Certification: Providing access to geographic information systems (GIS)

Economic Data: Providing access to analysis of industry sectors, demographic data, economic trends, and electric usage estimates

Publications: Publishing documents or periodicals addressing local or regional economic concerns

Engineering and Project Management: Providing engineering services for site evaluation and planning, or project managers to navigate the site development process

Energy Efficiency and Environmental Projects: Providing energy audits or investing in environmental projects

Industrial Parks/Speculative Development: Financing and constructing industrial parks or properties to encourage entities to relocate

Funds: Creating funds for economic development, job creation, or the enhancement of infrastructure

Grants: Awarding development grants to deserving entities

Incentives: Providing businesses with incentives to conserve or improve energy efficiency

Educational Programs: Working with local colleges to create educational sessions or comprehensive grant programs

Economic Development Today

In the United States today, the mission of “rural electrification” is virtually complete as 99% of farms are electrified. As such, electric cooperatives have shifted their focus from construction to operations. Accompanying this shift has been the rise of standalone economic development programs at top-performing cooperatives. Well-designed economic development programs employ one or more of the following methods:

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Source(s): National Rural Electric Cooperative Association, www.nreca.coop

Community and Industry Collaboration



http://www.nreca.coop/


Economic Development Today:


Cooperatives typically provide prospective corporate customers with access to research studies, useful data, and other analytical tools. These often include valuable information on industry sectors, economic impact studies, site selection resources, and mapping applications. Examples include:

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Source(s): Company websites

Examples:

•Wabash Valley Power Association offers a user-friendly siting tool, where one can find sites based on county, acreage, and/or square footage.

Site Selection/Certification

Leading cooperatives commonly offer online geographic information system (GIS) maps, which allow prospects to conduct online searches for the site selection process. Some cooperatives create

certification programs intended to identify and assess sites in their service areas.

•Hoosier Energy features an extremely comprehensive website, where prospects can gather information on demographic trends, local labor force data, leading regional employers, education, transportation, quality of life, and local utilities. Hoosier also provides a library of pertinent case studies.

Economic Data

Many cooperatives provide valuable information and online tools, often including analysis of

industry sectors, demographic data, site listings, economic trends, electric usage cost estimates,

community comparisons, financing and incentives information, template documents, and workforce

data.

•Associated Electric Cooperative published several resource guides, including “Speculative Building Resource Guide” and several others on topics such as how to set up a 501(c)(3).

Publications

Industry-leading cooperatives sometimes self-publish or fund the publication of periodicals or resource documents addressing local, state, or

regional economic issues.

Examples:







Cooperatives spearhead development by funding projects within their communities. Often working with corporate partners, cooperatives invest in renewable energy, provide capital for economic development, fund enhancements to existing infrastructure, and award development grants to deserving entities. Cooperatives also support education and civic programs. Examples include:

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Examples:

•East River Electric Power Cooperative, Inc. administrates the REED Fund, which offers financing for projects involving infrastructure and quality-of-life elements necessary to assist rural communities to attract and retain businesses.

Funds

Cooperatives use revolving loan funds to stimulate growth and leverage capital

investment within communities, and promote economic expansion and job creation.

•Between 2009 and 2011, Corn Belt Power Cooperative awarded $1.2 million in grants to local entities through the USDA’s Rural Economic Development Loan & Grant program.

Grants

Cooperatives sometimes offer outright grants, either as a cash infusion or as a matching grant

to qualify for another state or federal grant.

•North Carolina Electric Membership Corporation offers flexibility in rate design for businesses that want to relocate to the state.

Incentives

Cooperatives offer incentive programs for qualifying companies willing to make long-term

commitments to a region.

•Basin Electric Power Cooperative supports Mitchell Technical Institute's Wind Turbine Technology Program, which trains aspiring wind energy technicians.

Educational Programs

Cooperatives commonly sponsor educational programs, from basic information sessions to

vocational training.


Planning and Direct

Development


Source(s): Public Sources




Good economic development teams provide special programs and customized services to the communities and corporations they serve. Planning can take on a variety of forms, from planning assistance and project management to engineering services. Cooperatives also engage in direct development through various means, including constructing industrial parks or setting up business “clusters.” Examples include:

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Source(s): Company websites, Public Sources

Examples:

•Georgia Electric Membership Corporation has a staff of three project managers who work with businesses relocating to the state to provide customized, confidential information at no cost to the business.

Engineering and Project Management

Some electric cooperatives provide project managers to help prospective businesses navigate the complicated site development

process.

•Old Dominion Electric Cooperative launched Mid-Atlantic Broadband Cooperative to deploy a fiber-optic backbone to help spur economic development in rural Southern Virginia. Millions of dollars of corporate investment have been made in the area as a direct result of the new services.

Non-related Co-ops or For-Profit Subsidiaries

Either by careful consideration or in reaction to a problem or crisis (e.g., no buyer for a popular

local business, social problem), acquiring or forming a non-related subsidiary or co-op.

•Southern Maryland Electric Cooperative has processed more than 1 million discounts for high-efficiency compact fluorescent light bulbs in less than three years and has dispatched nearly 5,000 aging appliances for recycling.

Energy Efficiency and Environmental Projects

Often due to regulation, cooperatives sometimes provide energy audits and weatherization services, or invest in

environmental projects.

•Prairie Power, Inc. constructed Baldwin Field Business Park-Spec Building, a 40,000 sq. ft. building available for sale or long-term lease.

Industrial Parks/Speculative Development

Financing and constructing industrial parks or other speculative property to encourage

commercial and industrial entities to relocate.


Planning and Direct

Development



won

• Created

• Retained

• It can be problematic to say that a non-business entity (such as an electric co-op or state agency) “created” a job. It is becoming customary to say that a non-business entity “fueled” a job

Jobs

• Private

• Economic development organization

• Other

• It is becoming more popular to cite how much funding comes from private versus public sources

Leveraged Funds

• Safety

• Education quality and opportunity

• Environmental quality

• Cultural and recreational amenities

• Poverty reduction

• Quality of life is dependent on environmental and cultural factors. It is largely related to the specific area of the country

Quality of Life

Measuring Success

Metrics or key performance indicators can be established to measure the success of an electric cooperative’s economic development program.

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Commonly Used Metrics

Source(s): International Economic Development Council, www.iedconline.org, personal communication; W. Edwards Deming

http://www.iedconline.org/


Planning and Executing an Effective Economic Development Program

Top-performing cooperatives are establishing robust standalone economic development programs, with the most successful sharing a few common characteristics.

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Visible and Accountable Leadership

Support for initiatives is maintained throughout the organization, leadership is

accountable, and progress is reviewed and communicated

regularly

- Documented accountabilities

- Agenda item

- Included in Annual Report

Consistent and Significant Resources

Every year, substantial technical, financial, and human resources are dedicated to fostering

economic development

- Executive-level position

- Adequate resources to facilitate siting and relocation process

Focused and Measurable Objectives

Customized initiatives, with clear goals, are designed based on a broad set of

proven approaches

- Peer benchmarking

- Goals that include metrics

- Tracking metrics To

ols

D

efi

nit

ion


Thinking Strategically

In today’s dynamic and challenging environment, it is more important than ever to ask the right questions and understand the implication of the answers.

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Is support for initiatives maintained throughout the organization, and is leadership accountable for clear objectives?

Are substantial resources (technical, financial, and human) dedicated to fostering economic development?

Considering the company’s current position and goals, are resources best focused on supplementing data and analytical tools, or on developing more customized opportunities for collaborating with community and industry?

How can more sophisticated planning and development services (for instance the provision of project management and strategic planning assistance for both industry and communities) be initiated to create immediate impact?

Practical Questions for Management

Possible Goals for the Organization

Identify new objectives where the organization may be most benefitted by new grants or direct investments, and perform an external assessment of options

Create customized initiatives, with focused and measureable objectives, and ensure each initiative has a single senior-level owner and/or champion

Establish a formal and annual process for the review, evaluation, and dedication of specific resources to support economic development


Contact Us

ScottMadden has undertaken numerous consulting projects for cooperatives across the country. If you are interested in learning more about fostering economic development, please contact us.

Marc Miller

Director ScottMadden, Inc.

3495 Piedmont Rd, Bldg 10

Suite 805

Atlanta, GA 30305

Phone: 404-814-0020

[email protected]

Brad Kitchens

President and CEO ScottMadden, Inc.

3495 Piedmont Rd, Bldg 10

Suite 805

Atlanta, GA 30305

Phone: 404-814-0020

[email protected]

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fostering economic development

Education

economic trends

direct development engineering

awarding development

county electric cooperatives

transmission cooperatives

project management

site evaluation

entities incentives