A Maze of Economic Development Agencies

(from Maine Townsman, August/September 2004)
By Alan Elliott, Freelance Writer

A quick test: What is the common link between these three, familiar Maine agencies: the Southern Regional Planning Commission, the Androscoggin Valley Council of Governments and the Eastern Maine Development Corporation?

The answer was outlined by legislation introduced in June by U.S. Representative Michael Michaud. The bill proposed a Northeast Regional Economic Development Commission — a multi-state agency operated under the Dept. of Commerce’s Economic Development Administration (EDA). Michaud’s concept was based on models in place in West Virginia and Alaska. If created, $40 million in new federal funds would be channeled annually into Maine, Mass., Vt. NH and NY communities based on specific economic need. The commission would coordinate the EDA’s existing network of regional economic development districts – six of which are in Maine and include SMRPC, AVCOG, EMDC.

The districts are part of a federal initiative which has grown over the past four decades to represent a fundamental layer among Maine’s complex hierarchy of local, county, state and federal economic development entities. Called commissions, development corporations and councils of government, the development districts (called EDDs) vary in their roles from region-to-region. They also contribute to a sense that Maine’s collective economic development system is, at least at times, more bewildering than effective.

“In the best of worlds, in a rural state, you have strong regional organizations and they would be responsible economic development and other inter-municipal function in those regions,” said Henry Bourgeois, former director of the Maine Development Foundation. “We have, in Maine, this hodegpodge of six economic development districts, 16 counties and some inter-municipal operations. So it’s not simple and coherent and it’s really confusing to a local business person.”

Even before Michaud’s proposal, the EDDs appeared set to become omnipresent on the development landscape in Maine. The first, Androscoggin Valley Council of Governments, was established in 1962. The network has since spread to cover all but  Lincoln and Sagadahoc counties. Those two holdouts are now in the final stages of a three-year effort to earn EDD designation.

With that final puzzle-piece about to be filled, there is an enormous amount of movement afoot within Maine’s EDD realm. In addition to the proposed multi-state planning commission and the pending establishment of a Lincoln-Sagadahoc district, Eastern Maine Development Corp. is extending its influence in Hancock County by subsuming the administrative functions of the previously independent Coastal Acadia Development Corp. An ambitious public-private development initiative underway at Northern Maine Development Commission has, since November, wooed $1.5 million in funding from Aroostook businesses. And the state this year named the EDDs as the administrating regional agencies for its Pine Tree Development Zones program.

Combined, the changes signal that the regional planning process prescribed and managed by the EDA is fast becoming the blueprint for future economic development in the state.

The district organizations are, strictly speaking, federally organized entities. Conceived in the early 1960s to address the nation’s mounting metropolitan planning challenges, the vehicle quickly caught on among unincorporated rural areas as a means to fast-track federal funds. After AVCOG, Northern Maine Development Corp. was established in 1967. A legislative act formalized the growing network of Economic Development Districts in 1969.

Rules require 51 percent of the members on each district board to be elected officials representing communities within that district. The feds also require each organization to create, then annually update, a document called a Comprehensive Economic Development Strategy (CEDS). The process demands close contact with communities within a development district. The results are submitted to the EDA’s regional office in Philadelphia. To qualify for EDA funds, development projects must fit concisely into the plan submitted for the district.  (Non-EDD entities can qualify to receive EDA funds, but the process is more difficult, time-consuming and there are fewer funds available.)

EDD budgets and staffs operate under a briar patch of state/local/federal funding sources. While federal funds constitute about 30 percent of each EDD’s budget (annual budgets in Maine range from around $2 million to more than $7 million) state funds constitute approximately 20 percent. The EDA contributes around $55,000 to each of the existing EDDs. Because EDA is at its limit for EDD agencies, however, a Mid-Coast EDD would not receive such funds.

The EDA distributes about $25 million in development funds across the country each year according to a demanding formula for levels of private sector investment.

“If it costs a million of our dollars, for example, to put in the infrastructure, the water , sewer, roads, for an industrial park, we’re hoping that $22 million of private sector [investment] will come in as either new companies or building facilities in the park,” said Paul Raetsch, director of EDA’s eastern district.

State agencies also play a significant role in Maine’s EDD operations. Of the 11 regional planning commissions recognized by the state planning office, six are EDDs. Salaries for the directors and staff in four of the five remaining planning commissions are paid by EDD budgets.

Business development specialists employed by the state’s Department of Economic and Community Development (DECD) also staff each EDD office. The DECD expanded its relationship with the EDDs with this introduction of the Pine Tree Zones program, which the EDDs administer in their respective regions.

The result is a blurred line, leaving many who do business with EDD agencies unable to explain whether they are local, state or federal operations. Compare that to Small Business Administration offices which operate using combined state, federal and university funding, but with a concise mission and target clientele.

In Maine, each non-profit EDD organization has shaped its services around the specific needs of its region.

Groups like AVCOG and Eastern Maine Development Corp. have taken on ambitious roles, providing some economic development support and an array of planning, administration and  support services, plus a broad palette of multi-community management functions associated in many states with county-level governments. In southern Maine, the Southern Maine Region Planning Commission’s role is to act as a kind of a clearinghouse for research, expertise and services pertaining to municipal planning and development within the region.

“Outsiders look at Maine’s system (of economic development agencies) and say there are too many boxes,” said Jeff Sosnaud, DECD deputy commissioner. “But the test of efficiency is, how well does it serve the users — the businesses of the state?”

A quick poll of businesses suggests those who come away with checks say the system works just fine.  Those who don’t have their doubts.

Blue Hill business owner Jim Buddington built his fresh salsa operation up from a one man, one van outfit to a going concern business with more than $400,000 in annual revenue. Credit history, however, was not one of the entrepreneur’s strong suits. He eventually funded his expansions from cash flow, but not before a frustrating, time-consuming preamble to being declined.

“You do a lot of work to find out you are 90 percent qualified,” he said.

Failure to Communicate

A half-century-long war of attrition in Aroostook County has been tallied in lost jobs, failed businesses and an exodus of residents. Southern Aroostook Development Corp., Upper Valley Economic Council and the Loring Development Authority are a few of the economic development organizations bred to counter the trend.

An ambitious newcomer joined that group late last year, pledging to create 1,500 net new jobs and attract $50 million in private sector investment within four years. The Aroostook Partnership for Progress, a public-private initiative which operates under auspices of the Northern Maine Development Corp., has thus far attracted a ground-breaking $1.2 million in private investment. Four year, $100,000 commitments have come from companies including Maine Public Service, Katahdin Trust, Maine Mutual Group and Dead River Oil

The partnership’s multi-pronged strategy includes exploring the idea of funding a high-end vacation resort/conference center development, possibly near Mars Hills, and perhaps three smaller resorts to cater to snowmobilers and expand the Maine Winter Ski Sport Center in Limestone. Partnership president Barry McCrumb said plans call for a shake-the-tree approach aimed at reaching out to pull in new business.

“One of the components of our initiative is that we be non-traditional,” McCrum said. “We’re at the point where if there is a business somewhere that is distressed that would make a good fit for Northern Maine, we’re certainly not above buying it, relocating it here and staffing it with local folks.”

The partnership stands on a framework of federal designations carefully fashioned over the past 14 years by NMDC under director Robert Clark. Those years of effort succeeded in earning Champion Community status for three Aroostook regions in 1998, which was notched-up to a Rural Empowerment Zone by the U.S. Dept. of Agriculture in January, 2002. The partnership, Clark says, provides a means to leverage the empowerment zone benefits across the entire region.

Unlike their efforts to garner federal support, Clark and NMDC found their ability to exact commitments from local business was another, less successful story.  The turning point in that story came in the form of Nicholas Bayne, who arrived in Aroostook two years ago to take a seat as chief executive of Maine & Maritimes Corp., the parent of Aroostook County’s power provider, Maine Public Service Co.

Years earlier, in West Virginia, Bayne had worked on an economic development initiative named the Appalachian Partnership for Progress. That partnership helped retune an economy hit hard by industry shifts and coal industry jobs lost to automation. (The partnership, coincidentally, also worked in tandem with the Appalachian Regional Commission – the EDA entity on which Michaud’s proposal is modeled.)

Now, well on route to the partnership’s goal of $1.5 million in private investment (which would trigger an additional $1.5 million in USDA matching funds), Clark credits Bayne’s fresh perspective.

“We’ve tried to do it before, but it’s always been the public sector trying to energize and get the private sector involved,” Clark said. “This time we have a private sector champion.”

Before the partnership, Aroostook County was not necessarily starved for development funding. Its Champion Community status brought $27 million in federal funds between 1998 and 2002 through a variety of federal agencies. That included the $12.9 million in EDA funds taken in by Aroostook between 1994 and 2004 – more than any other county in the state. Also during that period, the state DECD awarded Aroostook communities $37.9 million in community development block grants.

But the long chain of improvements and programs tied to those millions were disjointed and often short-lived. Clark believes the same is largely true on a broader scale, across regions within the state.

“Funds are awarded not based on a comprehensive, statewide economic development plan,” Clark said. “They are awarded based on how well someone writes an application or the distress of that particular area.”

The EDD’s CEDS plans tend to get little attention at the state level, which has traditionally meant regional EDA officials in Philadelphia tend to know certain things about development in Aroostook County that people in Augusta don’t. A multi-state commission like the one Michaud envisions, built around the CEDS plans, is one approach to turning that trend around.

“Most of the fault in delivering economic development services is the coordination and the communication piece,” Clark said. “We just need to coordinate what we have.”

On the Way to the Forum

The traditional flow chart of economic development funding in Lincoln and Sagadahoc counties has been almost the inverse of that in Aroostook. There, private sector participation has been the mainstay,  supplemented by federal and foundation loans, grants and awards.

At or near the center of much of the region’s public-private success has been Coastal Enterprises Inc., a Wiscasset-based non-profit. CEI has facilitated on the order of $500 million in economic development, creating 15,000 jobs around the state since it was founded in 1977. The 85-person organization also provides research and policy development services, with a focus on social services and housing related projects in the mid-coast region.

But aside from CEI’s success, the region has passed-up large sums of available state and federal funds. Lincoln County claimed only $1.7 million in CDBG grants in the past decade, Sagadahoc, $6.2 million, compared to Aroostook’s $13 million. Neither county collected any funds from the EDA.

Part of the reason behind that funding blindspot is that qualifying for those EDA and CDBG funds is somewhat more complicated in a region like the mid-coast.

Lincoln County was among the earliest regions in the state where demographics shifted toward residents living off of retirement and investment income (17.2 percent of Lincoln County residents are over 65, compared to the state’s already comparatively high average of 13.9 percent). In addition, Lincoln County unemployment does not immediately suggest hardship (a paltry 2.5 percent in June, better than a third below the  state average.)

“It tends to shift the statistics out of their favor for a lot of state and federal money, unless you really work at it,” said Paul Harrison, director of the county’s Economic Development Office.

To begin to work at it, Lincoln County established its economic development office four years ago. Harrison said the area had no CDBG grant applications online at the time. Now the organization has four CDBG grants pending. Harrison is also heading up the Lincoln County side of the Mid-Coast Economic Development District, which formally submitted its application for EDD status in December last year.

As one of the more tenaciously independent regions in Maine, the idea of a federally blueprinted agency holding sway over local economic development plans was not a quick sell along the coast.

“When I first started working on this project to become a district, there were a lot of people who just said, ‘Good luck, we’ve tried this over-and-over during the last 25 years and it just isn’t going to happen,’” Harrison said. “But I think times are changing a bit.”

With a well-established agency like CEI in the picture, a Mid-Coast EDD is less likely to become a broad-based service center according to models like AVCOG, a GPCOG (Greater Portland Council of Governments) or even SMRPC. There was initially some discussion about CEI assuming the EDD role in order to qualify the region for the additional funds.

“CEI certainly is in a position to administer things and we’ve offered as such,” said CEI founder and director, Ron Philips.

The EDA rules governing the structure of district agencies would, however, require a total revamp of the CEI organization. (The existing 15-person CEI board includes leaders from business, social services and natural resources-based groups around the state.)

 Those rules would also require CEI to begin roundtabling with communities each year in order to develop a CEDS. While the project is well within CEI’s purview, Bath City Manager John Bubier says the region’s communities will see direct benefits, beyond funding, from taking more direct control of the process.

“The whole thrust of the EDD is to develop the regional economic development plan, that alone is probably worth more than the planning funds,” said Bubier (who is also the former director of GPCOG). “And having that forum, a place where you can conduct the conversation without penalty and on a regional basis, is as valuable as any of the individual planning functions that might come from it.”

The Forest for the Pine Tree Zones

The future for economic development in Hancock and Washington counties is a more gradually unfurling question mark. This year’s grafting of the independent Coastal Acadia Development Corp. onto Eastern Maine Development is a further expansion of EMDC’s influence in the region. But a memorandum of understanding between EMDC and the Hancock County Planning Commission promises an increasingly symbiotic approach to regional planning.

HCPC remains the only independently funded and operated planning commission within the state. The others were subsumed into EDDs. The commissions for Washington and Penobscot counties, as well as the Mid-Coast Regional Planning Commission (a predecessor of the Lincoln County Economic Development Office) now operate under the auspices of EMDC.

Within Hancock County, HCPC handles many planning and consulting-level services EDDs tend to offer. It also facilitates CDBG grants, which recently included a grants for a new fire truck for Cranberry Isle, for Winter Harbor’s water system and for portions of Ellsworth’s  Main Street.

The agency does not provide any direct business assistance. For services, counseling, loans, training and other support small businesses tend to go to the Washington-Hancock Community Action Agency, supported mostly by state and federal funding.

In some ways, the picture is becoming more complicated. Under its previous split-directorship, Coastal Acadia had directed about 70 percent of its efforts to business support and retention, the remainder to attracting new business to the area.

Cost management issues led the organization to consolidate administrative functions under EMDC. And in June,  CADC named Richard Malaby its new president. Malaby intends to press the organization’s balance to further emphasize the business support side — good news to existing business and employees in the area.

DECD has small business development specialists at each regional EDA agency. But naming those agencies as regional administrators of the Pine Tree Zone program has brought the department into more direct contact with economic planning at the community and regional level.

“It’s renewed our communication and our ability to understand the (community level) priorities,” Sosnaud said. “And I think that has a lot more practical value than knowing what a plan submitted to some agency in Philadelphia is all about.”

In some respects, aside from issues of funding, that is the argument behind a commission to coordinate the EDD network on a regional, multi-state scale. Whether near or far-fetched, Michaud’s proposal will go up against the regions of dozens of other U.S. Representatives currently pursuing similar EDA status (some of which are much further along in the process).

The EDA’s Raetsch had not heard of Michaud’s proposal, but said the model of the Appalachian Regional Commission presented neither a competing, nor a redundant effort to the EDA’s regional work.

“The ARC model is really the governors getting together and getting federal appropriations as well as states’ appropriations for a region wide program, so the governors can set their own priorities,” he said.