Fostering Economic Development

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Cooperatives have shown promise as powerful drivers of economic development for their communities. Despite 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 including visible and accountable leadership, consistent and significant resources, and focused and measurable objectives.

This ScottMadden insight is the fourth in a series on “Five Strategic Priorities for Generation and Transmission Cooperatives.” The report summary can be found here: http://www.scottmadden.com/insight/516/five-strategic-priorities-for-generation-and-transmission-cooperatives.html.

To learn more, please visit www.scottmadden.com.

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Fostering Economic Development

  1. 1. Copyright © 2013 by ScottMadden. All rights reserved. Fostering Economic Development A Generation and Transmission Cooperative Strategic Priority January 2013 Contact: Brad Kitchens (sbkitchens@scottmadden.com) Marc Miller (mdmiller@scottmadden.com)
  2. 2. Copyright © 2013 by ScottMadden. All rights reserved. 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 1 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
  3. 3. Copyright © 2013 by ScottMadden. All rights reserved. Overview 2 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?
  4. 4. Copyright © 2013 by ScottMadden. All rights reserved. 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 3 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
  5. 5. Copyright © 2013 by ScottMadden. All rights reserved.  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: 4 Source(s): National Rural Electric Cooperative Association, www.nreca.coop Community and Industry Collaboration Planning and Direct Development Data and Analytical Resources
  6. 6. Copyright © 2013 by ScottMadden. All rights reserved. Economic Development Today: Data and Analytical Resources 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: 5 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: Community and Industry Collaboration Planning and Direct Development Data and Analytical Resources
  7. 7. Copyright © 2013 by ScottMadden. All rights reserved. Economic Development Today: Community and Industry Collaboration 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: 6 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. Community and Industry Collaboration Planning and Direct Development Data and Analytical Resources Source(s): Public Sources
  8. 8. Copyright © 2013 by ScottMadden. All rights reserved. Economic Development Today: Planning and Direct Development 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: 7 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. Community and Industry Collaboration Planning and Direct Development Data and Analytical Resources
  9. 9. Copyright © 2013 by ScottMadden. All rights reserved. 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. 8 Commonly Used Metrics Source(s): International Economic Development Council, www.iedconline.org, personal communication; W. Edwards Deming
  10. 10. Copyright © 2013 by ScottMadden. All rights reserved. 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. 9 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 ToolsDefinition
  11. 11. Copyright © 2013 by ScottMadden. All rights reserved. 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. 10  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
  12. 12. Copyright © 2013 by ScottMadden. All rights reserved. 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 mdmiller@scottmadden.com Brad Kitchens President and CEO ScottMadden, Inc. 3495 Piedmont Rd, Bldg 10 Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 sbkitchens@scottmadden.com 11
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