Posts Tagged ‘locally owned independent business’

What might sustainable, local firms do with $49 mil?

In my vision of sustainable communities, I picture a thriving economy built around locally owned, independent businesses that embrace the triple bottom line: people, planet and profits. So it is that I have little patience for economic development practices prevalent in Oregon and around the country that emphasize national business recruitment over local business development. 

I believe we should be doing much more to take care of the businesses that are already here putting down roots, hiring local residents, keeping their profits local and multiplying as they circulate in the local economy and being run by owners who are active in their communities — because they live here, too.

Editors at The Oregonian lost an opportunity to underscore that point in an editorial on Saturday about last week’s announcement of the Hynix semiconductor plant closure in Eugene. The decision puts 1,100 people out of work, many of them paid well above the average Eugene wage. Hynix, like any number of tech companies wooed by Oregon officials in the past several decades, was given large state and local tax credit incentives to locate in Eugene some 13 years ago. 

Although the Hynix plant closure is an opportunity to question the wisdom of showering national or international businesses with tax breaks to locate in Oregon, The Oregonian editors say forget about it:



It’s not productive to second-guess the state’s wooing of Hynix and its use of tax incentives, as some in the Legislature have begun to do. A 2003 study by University of Oregon economics students Melinda Rowan and Jennifer Witt found that the $49 million in tax breaks and road enhancements used to lure Hynix resulted in a positive impact in taxes, wages and system development charges of more than $275 million over the first five years of its operation. Had the state not offered its incentives, Hynix wouldn’t have built its plant, employed 1,100 people and paid taxes.

Their argument against re-examining the Hynix recruitment strategy is hardly convincing. The editors conclude Hynix would not have come here without the $49 million incentive package, so the positive impact in taxes, wages and whatever system development charges would not have been realized. But that’s assuming the $49 million in incentives were not spent at all. 

What might have happened had the state and city pledged that same $49 million in 1995 for support of locally owned, independent businesses? Hynix received the equivalent of $44,500 for each of its current 1,100 employees from state and local government. What might 1,100 locally owned, independent businesses in the Eugene area been able to do with $44,500 each? Or what might 110 of the best locally owned, independent businesses in Eugene been able to do with $445,000 each?

We’ll never know the answer, but I’m not aware of any state or local economic development group even asking those questions. Businesses based and owned in Oregon are getting the short end of the economic development stick. They can only dream of government officials coming to them and saying, “We believe in you and want you to thrive in Oregon. Here’s a half-million dollar package to help you grow your business.” 

Can you imagine what a select group of Oregon’s most innovative, most environmentally and socially committed business owners and their employees could and would do to reward the citizens of this state for making a meaningful public investment in their businesses? Not all of them would succeed, of course, but I’m certain enough would to add at least the equivalent of 1,100 quality jobs. 

And most important of all, those successful locally owned, independent and sustainable businesses would keep repaying Oregon’s investment long after the 13-year life span of Hynix in Eugene.



Dick & Joe vs. Mom & Pop

“Dick vs. Joe!” the headline screamed in Sunday’s paper. As if we are supposed to care about the looming showdown in Oregon between national retail giant Dick’s Sporting Goods, Inc. and the Oregon retail fixture Joe’s Sports, Outdoor & More. Dick’s just opened a store in Portland last week, the first of perhaps 10 across the state. This could spell trouble for Joe’s, we are led to believe by The Oregonian. Coincidentally, this could also spell trouble for the newspaper if Joe’s starts advertising less because of lost sales to Dick’s, and Dick’s doesn’t make up the difference.

While the newspaper attends to the battle between big box retailers, the real victims in the retail wars are the remaining locally owned, independent sporting goods stores struggling to compete. Joe’s is not one of them. Joe’s founder Norm Daniels sold majority interest in his company last year to a private equity firm in San Francisco. The Oregonian says the firm told it a year ago “that it would sell off Joe’s in a few years.” It’s possible the next ownership group could be local, but I doubt it. The article speculated that Dick’s could buy Joe’s, although that was not considered likely. So look for Joe’s ownership to remain out of state.

Dick vs. Joe is simply a battle of two non-local chain retailers for sporting goods supremacy in Oregon. Since Joe’s got its start here, we still think of them as one of us. It would be natural to pull for them over Dick’s. But Joe’s is one of us in memory only. Joe’s majority owners are elsewhere now, and they control Joe’s future. Our choice to spend money with Joe’s may be only less bad than a decision to support Dick’s, from the standpoint of local economic benefit. Better, however, to skip both chains and shop instead at a locally owned, independent sporting goods store. That keeps more of our money in our community, instead of heading to Pittsburgh, in the case of Dick’s, or San Francisco, in the case of Joe’s. With a recession looming, this argument is stronger than ever.

Bottom line: Oregon doesn’t need Dick’s. Dick’s needs Oregon, so it can keep satisfying shareholder demand for growth. Dick’s arrival here is part of the chain retail trend so well documented by Stacy Mitchell in her book, “Big-Box Swindle”:

Consider that in 1996, the top ten retail chains accounted for a remarkable 15 percent of consumer spending. Less than a decade later, in 2005, the top ten captured nearly 30 percent of the more than $2.3 trillion that Americans spend in stores each year. Two or three corporations now dominate each retail sector. As the chains have gained market share, tens of thousands of independent businesses have disappeared.

Dick’s is hell-bent on dominating the sporting goods category and Joe’s will do all it can to protect its turf. But the story isn’t Dick vs. Joe; it’s Dick & Joe vs. Mom & Pop. Local owners of independent, usually small, stores are the big losers in the battle of big box opponents. And so are the communities that watch these stores disappear. I’ll let Stacy Mitchell have the final words:

The effect of mega-retailers on local economies does not end with shuttered local merchants and their laid-off employees. Most local retailers buy many goods and services locally: they bank at local banks, advertise in local newspapers, carry goods produced by local firms, and hire a range of professionals, from accountants to Web designers. Every dollar spent at a locally owned store sends a ripple of benefits through the local economy, supporting not only the store itself, but many other local businesses, which in turn provide jobs — often the sort of well-paid positions that form the backbone of a city’s middle class and the core of its tax base. When chains displace local merchants, all of these economic relationships are severed. Money that used to flow through the community — from a local office-supply store that hires a local accountant, who in turn uses a local bank that lends money to a new entrepreneur, who stocks up at the local office-supply store, and so on — ceases to do so.


The fool’s gold of economic development

More than 200 people lost their jobs yesterday in Roseburg, Oregon after Dell closed its call center there. While the closure came as a shock to many employees and the community, no one should be the least bit surprised it came to this. What’s surprising is that elected and economic development officials, desperate for jobs, keep rolling out the red carpet for global corporations whose only long-term allegiance is to making money for their shareholders.

Back in 2002, Dell chose Roseburg for its call center after starting with a list of 3,300 communities as potential sites for the center, according to a December 23, 2002 article in The News-Review of Roseburg. To win the selection process, the city, Douglas County and the state of Oregon agreed to give Dell a package of tax breaks and other inducements. According to The News Review, the package included a property tax waiver of up to three years, a state income tax credit worth up to 25 percent of property investments that relate to online trade, a reimbursement of $250,000 for Dell expenditures on telecommunications upgrades and equipment, and even an agreement to build a 75-car parking lot at no cost to Dell.

In that same newspaper piece five years ago, well-known Oregon economist Joe Cortright warned, “Places that are going after call centers have to be very cautious.” He was very aware that the trend then (and now) was toward moving corporate call centers overseas to save costs. It’s also the case that business conditions change rapidly and companies react accordingly. That same month of December 2002, as the article noted, DirecTV closed its call center in Beaverton, Oregon and laid off 400 people after shutting down its Internet subsidiary.

The warning signs were there five years ago, making what happened yesterday in Roseburg no surprise. Too often winning the chase for jobs from outside corporations is nothing more than fool’s gold. It may look like real economic development, but it is soon followed by the realization that the same thing that draws large companies to a community – lower costs and higher profits – is what sends them on their way when their business declines or better opportunities present themselves elsewhere. Dell is just the latest example of this. As has been widely reported, Dell sales have been falling, and they are in the process of shedding jobs.

So what’s the choice for communities hungry for jobs, like Roseburg, which has long struggled to overcome the deterioration of timber industry employment? It’s doing everything possible to take care of existing local employers and to encourage local entrepreneurship. This is not the quick-fix answer public officials seek, and it doesn’t let them bask in the glow of ribbon-cutting ceremonies with out-of-town corporate fat cats. But independent locally owned businesses are the long-term foundation for a sustainable economy.

One Roseburg resident summed it up well yesterday in comments to The News Review:

“Did anyone know Dell was going to close?” Absolutely! Everyone who has been paying attention to the business world for the past few decades (at least). Small towns bend over backward to give big corporations whatever they want; the companies fail to deliver, and then leave in five years. If half the worth of incentives and tax breaks had gone to supporting locally-owned businesses instead of Dell, the people of Roseburg would be better off today.