An Economic Development Strategy for Hinton
How to tackle the challenge of stagnant population and brain drain
One of the key responsibilities for local governments is to grow and maintain a sustainable local economy, that supports the quality of life desired by the local residents and attracts new people to the community. The principal way Canadian municipalities have approached this responsibility is by having an economic development strategy (See Town of Hinton’s most recent strategy document here). Yet, municipalities’ growing responsibilities have been impacted by shrinking resources to fund them, as provincial governments are cutting back on their transfers to municipal governments. Add to that the adverse financial impacts of the Covid-19 pandemic. However, this makes economic development even more of an imperative for the municipalities, so that they can have self-sustainable economies. More needs to be done if the municipalities want to raise living standards, become sustainable and competitive in the national and global marketplace.
Covid-19 has massively disrupted labour, doubling down on disruption we already saw from technology, automation and the gig economy. It’s been rough for many, but it also presents a huge opportunity for towns which want to attract many existing urban residents to more green-and-clean places with many of the urban amenities, added with the beautiful nature and relaxed lifestyle.
In order to be successful, municipalities must have a focused strategy and get buy-in from all crucial stakeholders in the community to implement the strategy. There is much uncertainty involved with this work and it is hard to determine what causal link exists between economic development strategy, actions and the outcomes; whether such outcomes are mostly driven by exogenous events or not. Regardless, a long term strategy can help guide the actions of the municipality and enable seizing opportunities when they arise.
The following is the roadmap for this essay: first, I define economic development, strategy, and economic development strategy and why it is important to have for a community. Next, I discuss the key components of the economic development strategy of the Town of Hinton. Finally, I explore how the results and outcomes of the plan will be measured.
What is Economic Development from municipality’s perspective?
Economic scholars Blakely and Leigh (2017, pg. 85) note that traditionally, increasing the tax base and job creation, tend to be the main objectives of municipal economic planners, and often economic development is equated with economic growth. However, they argue that local economic development should consider more than economic growth and instead focus on sustainable local economic development. According to Blakely and Leigh (2017, pg. 87) sustainable economic development can be defined as a process by which a community’s standard of living can be preserved and increased over time through human and physical development that is based on principles of equity and sustainability.
What is Strategy?
A strategy is making informed choices and not trying to do everything. I define strategy as such, inspired by a contemporary guru of business strategy, Harvard Professor Michael Porter’s (1996) quote: “The essence of strategy is choosing what not to do.”
A good strategy doesn’t have fluffy language or buzzwords that masquerades as expertise and analysis. It also defines the problems being targeted clearly and rightly. A strategy is a path to overcome or respond to a or many challenges. If the problems are not correctly identified, then the resultant strategy is fruitless. Finally, as alluded to earlier, a good strategy is a focused strategy. This is the opposite of what Economist Rubin (1988) alluded to traditionally being the most common approach of most municipalities: “shoot anything that flies and claim anything that falls” i.e. trying different things without having any focus and claim success if results improve.
What is Economic Development Strategy? Why is it important to have one?
According to scholars Morgan, Hoyman and McCall (2019, pg. 276), economic development strategy can be defined broadly to include a wide range of activities and discrete policy tools used to stimulate and support private investment and job creation; not just via tax incentives and traditional business climate ideas, but through building and maintaining a sustainable town that prioritizes people’s quality of life. Successful economic development strategies should identify and build on existing and potential community assets, not just focus on deficits and minimizing disadvantages (Porter, 2016, pg. 106).
It is important to have an economic development strategy to guide focused action by the municipality to achieve the desired outcomes and to have sustainable growth and finances. It is essential given the municipality cannot just depend on transfers/grants from the provincial or federal government. Morgan, Hoyman and McCall (2019, pg. 275) show via regression analysis that having a strategic plan for economic development is a significant determinant in having successful economic development. A strategic plan strongly signals the intentional approach of the community.
Three factors that I think are critical to keep in mind, while formulating economic development strategies are: uncertainty, system bias and anchor institutions.
Uncertainty is involved in all events and decisions, and we tend to overestimate the impact of our actions and underestimate the uncertainties involved. Hence, even having a great, focused economic development strategy, might not result in the desired outcomes. This makes evaluation of strategy difficult, yet having a focused strategy is better than having none. The way forward is acknowledging it and getting the senior leadership of administration and elected officials on board with the strategy.
This uncertainty leads to a System bias in favor of business interests such as tax incentives and subsidies. System bias occurs when public administrators, in an attempt to make their jobs more manageable, make ordinary decisions that systematically favor one interest group over another (Rubin, 1988, pg. 236). For economic development practitioners, such system bias in favor of businesses is very common because of the uncertain nature of their job and the nature of business interests and requests. The demands provided by businesses are often better prepared, better informed and are clearly defined. Hence, this provides the administrators a set of achievable goals that can be targeted. This is especially helpful for them when measuring their performance by evaluating whether they did a checklist of activities, as opposed to the broad, undefinable task of promoting economic development, and hence the system bias.
Finally, the importance of anchor institutions cannot be underestimated. According to Harvard Strategy Professor Michael Porter (2016, pg. 110), anchor institutions are large organizations with strong roots in the community, including universities, hospitals and medical centers, sports teams, cultural organizations, and large corporations with legacy. Anchors play a significant role in raising the profile of the host community and have a stake in the success of their surrounding communities. Example of a successful strategy built around an anchor institution is how Pittsburgh, Pennsylvania succeeded in promoting the medical and education capacity of the Pittsburgh region with Carnegie Mellon University (the anchor institution) being the catalyst for new investments, after the local economy crashed with auto manufacturing sector leaving the town in the 1980s.
Steps to formulate the strategy:
Formulating the economic development strategy essentially means following the following four steps.
1. Organize:
The first step should always be focused on taking a collaborative approach in formulating the economic development strategy and having buy-in from all rights-holders, key stakeholders and the broader community. A more participatory approach enables the community to come together and prioritize what challenges to tackle.
Strategies must reflect the collective mindset of the local community because sound arguments, innovative strategies, and strong leadership might not be enough to overcome the apathy of the existing political culture of a community. Hence, even a sound strategy would fail if there is no community buy-in.
The challenge is that local communities are not homogenous, different groups have different views on what strategies should be pursued and differ on basic questions such as how much taxation is optimal for having a sustainable community. There can be a number of tools that may help organize, from town halls to citizen committees, or even mapping the stakeholders in the community along power and influence. However, with this first step, the collaborative approach is established.
2. Environmental Scan:
The opportunities, challenges and external factors influencing the future of the municipality have to be considered. Often this means documenting the things that influence the municipality’s success, but are beyond the control of the municipality. Then, the community’s vision and expectations have to be identified. Furthermore, we have to also take stock of the legislation and mandates. In consulting with the stakeholders and the community, the focus is on finding out what the community values and what its aspirations are. This can result into a broadly agreed upon community vision, after which further deliberations can happen about what economic development mission the municipality should have. Finally, the current assets in the community also are taken into consideration, which are strengths of the community.
3. Identifying key problems:
After documenting all the challenges in front of the community, we have to prioritize which problems are most important to tackle. This prioritization will help us develop a focused economic development strategy targeting to solve that/those problems.
4. Develop goals and objectives:
The strategy would be incomplete without concrete goals and objectives. A strategy is essentially a set of goals and objectives, accompanied by tools and tactics to address identified challenges.
Key components of Economic Development Strategy for the Town of Hinton:
Current Assets:
Hinton has many significant assets, the primary of which is its unique location on the doorstep to the Rocky Mountains, offering a beautiful lifestyle for those who can work during the day and step out into nature afterwards. Surrounding mountains, lakes and local parks and trails make Hinton an amazing alternative for living for people who want to get away from the urban setting, yet have all the modern amenities. One of those amenities is high speed internet and Hinton is the smallest Town in Alberta with fiber internet infrastructure. Moreover, Hinton also offers amazing amenities for families, with high quality schools, the Dr. Duncan Murray Recreation Centre and access to healthcare. Hinton is also home to many cultural events such as music festivals and ‘run in the Rockies’ marathon. Hinton is also community minded, with various civic organizations and clubs such as the Hinton Mountain Bike Association which was instrumental in building the largest bike park in Alberta and now sees people from all over Canada travel to utilize the trails. Given Hinton’s proximity to Jasper National Park (only 15 minutes drive from the park gates) and being situated beside Highway 216 from Edmonton to Jasper, millions of visitors and dollars worth of goods pass through every year on extensive transportation infrastructure. Economically, Hinton has major natural resource extraction and processing firms located in and around the community. These have proved to be excellent corporate citizens beyond providing stable and well-paying employment to residents. Hence, Hinton also has a diversified economy with Tourism and hospitality, natural resource extraction and processing, and medical services as its core sectors.
Overall, Hinton’s proximity to Jasper national park and surrounding Rocky mountains and beautiful nature, abundant recreational opportunities, high quality transportation and internet infrastructure, regional healthcare facilities, diversified economy, and high community engagement makes Hinton an amazing place to live and work.
Aspirations:
Hinton wants to become a desired place to live for younger Canadians and families, and an amazing community for people to retire. Hinton also wants to capitalize on Tourism traffic to market itself as more than just a gateway to the Rockies, rather an amazing place to live for people who are seeking a lifestyle without urban problems like traffic and air pollution. Hinton also wants to gradually decrease its dependence on natural resource industries and embrace green technology. Hinton also wants to have a more diversified economy, with more well-paying jobs. The town wants to be the preferred place for entrepreneurs to establish or open a branch of their business, with strong small business support from the municipality and attracting independent international entrepreneurs who are capable of working remotely.
Key Challenges:
In the past two decades, Hinton has seen a stagnant population, with around 10,000 people, and significant brain drain. The outmigration of youth for post-secondary education and other life experiences, have not returned to Hinton to raise their families. While such out-migration will always be there, failure to attract many new residents, especially younger families and more knowledge workers, needs to be addressed.
Even though there are a number of industries in Hinton, a majority of it is still natural resource based, with oil, gas and coal mines around the community. With declining demand for such resources and extremely volatile global commodity market, added to the important challenge of climate change that will force the world to decrease natural resource consumption, Hinton needs to further diversify its economy.
Hinton also faces physical challenges, such as rocky, sloped terrain, resulting in higher costs for residential, commercial and industrial development. In many business surveys, lack of affordable housing is often cited as a reason why people do not want to relocate to Hinton.
Objectives of Economic Development Strategy for the Town of Hinton:
In my opinion, Hinton’s economic development strategy should mainly focus on the challenge of stagnant population and brain drain. This is identified as the most important challenge, that also relates to other challenges.
To have a focused strategy, Town of Hinton should have three principal objectives:
- Transforming Hinton to be a preferred destination to live for knowledge workers and creative people.
- Having a higher-education anchor institution in Hinton providing high-quality education and associated community spillover benefits.
- Making Hinton a model for small Canadian towns as an entrepreneurship hub.
1. Transforming Hinton to be a preferred destination for knowledge workers and creative people:
With the current assets of Hinton, it has the potential to become the preferred destination for knowledge workers, entrepreneurs and creative people. So why has it not succeeded in attracting more people in the past decade?
Human capital + urban amenities = economic growth + population attraction
Sociologist Terry Clark (2004, pg. 132) argues that creative professionals are seeking out localities with beautiful natural places where the temperatures are moderate with rolling hills and lakes, as well as communities that construct and maintain libraries, quality book stores, cafes, and host outdoor events that attract university graduates and young professionals.
In today’s knowledge based economy, businesses are attracted to areas where talented people live; and talented people demand to work and live in areas with vibrant neighborhoods and rich, diverse environments. Hence, many community leaders also agree that municipal support for recreational programs, arts and culture is not the luxury it has often been depicted as, rather an essential component of municipal economic development. As scholar Florida (2014, pg. 198) notes “places that attract talent attract companies” and what attracts smart talented people to a place are its natural, cultural, and built amenities. This is what is called having an economic development strategy focused on attracting the creative class of people, modern day knowledge workers who can work remotely. Creative class includes people such as scientists, engineers, professors, poets, architects, entertainers and others whose economic function is to create new technology, new ideas and creative content.
This is also aided by the recent digitization of work spaces, with high-speed internet enabling people to work from any place they choose to. Employment opportunities no longer have to be in-person.
One of the factors critical for attracting the creative class of people and large tech organizations, according to Florida (2014, pg. 198), is tolerance of the society to embrace the misfits and all kinds of people. Talent is mobile and they flock to places that are most welcoming, which is evidenced by the fascinating statistic that the places which scored high on the Gay Index (Index charting concentrations of gay people) were also places with cluster of high-tech companies, and this correlation increased over time. Of course, the gay people do not cause high-tech growth, rather it is an indicator that shows a place’s tolerance. Such correlations also exist for immigrants, ethnic minorities, and creative people with eccentric personalities. New York City’s Mayor Bloomberg also emphasized this in his 2012 speech, saying “most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities” (Florida, 2014, pg. 202).
Hence, the focus should be on building a “people climate” that attracts talented people, not just the conventional business climate with low taxes and minimal regulation. Hinton already has the natural assets and beauty, and it should build and maintain more of the urban amenities, adding to the existing ones.
The central challenge is how to fund such amenities and services, given general aversion to tax raises, especially in the current context. Economists Kitchen, McMillan and Slack argue that tax and revenue policies should match payment for services with benefits received (Module 6 course notes, pg. 8). Also better awareness and communication to citizens about how tax dollars are utilized, can be helpful to get community buy-in. Ultimately, local residents also benefit from higher investments in local community amenities.
2. Having a higher-education anchor institution in Hinton
Anchor institutions can be a crucial part of any town’s development strategy. Hinton, with its existing assets, can be attractive for higher educational institutions to establish a branch, in nature, with focus on subjects such as forest management. With its central location between Edmonton and Jasper, and location right beside the highway, having a higher-education institution will serve the whole region. It can be a significant boost for Hinton as well, economically and culturally. It will provide higher education opportunities to youth in Hinton, so they don’t have to leave for higher education. It will also bring in other young people in the community, who can settle in Hinton.
This higher educational institution can also play a role in the Green energy transformation for Hinton, Alberta and Canada. Hinton can be a leader in Alberta for retraining current oil, gas and mine workers, in partnership with energy companies who already have infrastructure in and around the town.
3. Making Hinton a model for small Canadian towns as an entrepreneurship hub.
Hinton is already home to a number of local entrepreneurs. But it can further strengthen its local entrepreneurship community and encourage more local residents to become entrepreneurs. With support in place conducive to entrepreneurship, it will also draw in other entrepreneurs from around the world, taking advantage of high-speed internet infrastructure and other existing community assets. Instead of hoping that businesses relocate/open branches in Hinton, this strategy focuses on building and providing opportunities to the existing human capital!
The municipality can host and encourage business networking events, involving other local partners such as the Chamber of Commerce. It can provide administrative and financial support to would-be entrepreneurs to kick-start their business. Finally, Hinton needs to market its assets and current local entrepreneurs through networking events and information sessions. Such growing awareness will put Hinton in the map of preferred destinations for entrepreneurs. Ultimately, entrepreneurs are high value residents who create jobs, enable economic diversity and innovation.
How we measure the results of the plan:
Economic development strategy and associated planning is formulated on the basis of the assumption that such actions determine the economic development outcomes for the community. Hence, success is often measured in terms of specific quantitative and qualitative metrics. However, how certain can we be about the causal link of such actions and economic development outcomes, or how much does outcomes depend on specific economic development strategy and actions in reality?
Rubin (1988) notes that in his interviews with economic development professionals, this was a recurring concern that given the uncertainty involved and all the external factors beyond their control which influences business and individual decisions to relocate or invest, it is impossible to know what is working and what isn’t. A sound strategy does not guarantee good results, while a bad strategy can seem to result in good outcomes, although those outcomes may have happened anyway due to exogenous factors.
Despite this challenge, there needs to be quantitative and qualitative performance measures that will provide indications regarding the action plan associated with the strategy. Given our three objectives identified in the strategy, the obvious measures are:
- Whether the population has grown in Hinton in the next decade.
- Whether Hinton has a higher educational institution that is bringing in more knowledge workers and young people in the community.
- Total number of new companies in Hinton.
- Number of companies supported through the support efforts.
- How many jobs have been created from year to year.
- Whether Hinton has a reputation as a good location to live and raise a family.
- Whether Hinton has a reputation as a good location for start-ups.
While immediate results are often desired, economic development and human capital development are long term projects, which requires a long time horizon to see the desired results.
Conclusion:
Covid-19 has massively disrupted labour, doubling down on disruption we already saw from technology, automation and the gig economy. It’s been rough for many, but it also presents a huge opportunity for towns which want to attract many existing urban residents to more green-and-clean places with many of the urban amenities, added with the beautiful nature and relaxed lifestyle. This is the goal for Hinton in 2050. Achieving the objectives identified in this essay will help existing residents, but also attract more people to move to Hinton.
The main obstacle towards achieving this vision is the financial challenge for municipalities. Social services and amenities are important. But falling revenues added with funding cutbacks by the provincial government, have caused municipalities to be cautious in expanding or sometimes even maintaining existing amenities and services. Municipalities with growing demands but decreasing resources and revenues have traditionally responded with cutting services and slashing budgets to limit tax increases to levels they believe the local citizens will tolerate. But continuing down this path means going in a vicious cycle, where such budget cuts means service levels decline and thus, public perception of municipal services decrease and public tolerance for even modest tax increases decline.
Usually, Tax incentives are a common economic development strategy which is a result of the system bias that municipal economic administrators have, but this strategy has been unsuccessful so far. This is because businesses are attracted to places that have skilled people, not just low taxes. And skilled, talented people want to live in a culturally vibrant place with lots of services and local amenities. But such services and amenities require higher tax base and investment. Hence, it is a vicious cycle that needs to be broken.
Rather than waiting for transfers and grants from higher levels of government, local governments need to build on their strengths and pursue focused, sustainable economic development strategy and actions. Small things, not just large infrastructure projects, can have great impacts. What makes an enduring difference for raising the quality of life of a town is not building large stadiums, convention centers and casinos, rather low-cost, community initiated bottom-up projects such as bike paths, parks and other initiatives.
Citations:
Porter, Michael E. “What is strategy?.” Harvard business review 74, no. 6 (1996): 61–78.
Porter, Michael E. “Inner-city economic development: Learnings from 20 years of research and practice.” Economic Development Quarterly 30, no. 2 (2016): 105–116.
Blakely, Edward J. and Nancey Green Leigh. Planning Local Economic Development: Theory and Practice. Thousand Oaks, CA: Sage Publications, Inc., (2017).
Clark, Terry Nichols. The City as an Entertainment Machine. New York, NY: Elsevier Ltd., (2004)
Florida, Richard. “The creative class and economic development.” Economic development quarterly 28, no. 3 (2014): 196–205.
Rubin, Herbert J. “Shoot anything that flies; claim anything that falls: Conversations with economic development practitioners.” Economic Development Quarterly 2, no. 3 (1988): 236–251.
Morgan, Jonathan Q., Michele M. Hoyman, and Jamie R. McCall. “Everything but the kitchen sink? Factors associated with local economic development strategy use.” Economic Development Quarterly 33, no. 4 (2019): 267–278.
