REFERENCES A. "Report on Economic Opportunities," vol. 1, No. 2: An evaluation of the North Mississippi Industrial Development Association, Industrial Planning Associates, San Francisco, 1956. B. "San Francisco Bay Area Council," a brochure prepared by the Council World Trade Center, San Francisco, Calif. C. "Key to Industrial Progress," Tidewater Virginia Development Council, a brochure prepared by the council, 300 Boush Street, Norfolk, Va. COMMUNITY INDUSTRIAL DEVELOPMENT A NATIONWIDE SURVEY1 Some time ago the Office of Area Development of the U.S. Department of Commerce undertook, at the request of State development agencies, a study of what appeared to be a new departure in community activity-expansion and diversification of the local economy through community sponsored and supported development corporations. With the cooperation of State and local government agencies, chambers of commerce, and other similar organizations, as well as private individuals interested in the problem, we now have accumuÎated a large mass of information. The data at hand, although by no means exhaustive, have enabled us to get a fairly good picture of these community corporations-their geographic spread, how and why they are established, how they are financed, how they function, and some idea of their relative effectiveness. To begin with, I should like to emphasize that organized industrial development groups, as such, are not a recent innovation. They date back to the private societies which were established during colonial times to promote industrial enterprises and to the groups that were organized in the decades following the Revolution for the purpose of stimulating industrialization in certain areas. What is new and what distinguishes the more recent industrial development corporations from these early groups is the motivation behind their establishment. These early groups were strictly "business" combines, financed with private capital for private gain. With the beginnings of surplus-labor problems in the latter part of the 19th century, a new industrial development concept emerged. The local business community began to underwrite risk capital for new industries, not primarily with a view to profit but to protect its investment in the area. Sometimes these groups acted through specially formed profit-sharing corporations, which were usually formed to carry out projects requiring substantial capital investment. But most often, industrial development activities were promoted and carried out more or less on a day-to-day basis through local organizations-boards of trade, chambers of commerce, and trade associa tions. The growth of community-sponsored development corporations is particularly marked in the period beginning with the end of World War II. A number of factors were responsible for stimulating the community self-help idea, but most important was the need for jobs. Communities whose economies had been geared in large part to defense production were faced simultaneously with industrial cutbacks and the need of additional jobs for returning veterans. In farming areas, wartime shortages of labor had accelerated mechanization, and more 1 Talk by Victor Roterus, Director, Office of Area Development, U.S. Department of Commerce, before Louisiana's 5th Annual Industrial Development Conference, Baton Rouge, La., Feb. 4, 1958. and more young men were moving from the farms to nearby towns to find jobs. In the mining regions, too, men were being replaced by machines and alternate industries were either not available or did not have the capacity of absorb displaced workers. A good many business leaders in these areas where jobs were drying up recognized that this was a continuing problem which could no longer be solved through single or sporadic shots in the economic arm. They realized that to maintain the economic health of their communities they would have to maintain constant vigilance through a permanent group supplied with funds, and having flexibility to further industrial development in any way that seemed appropriate. It also became apparent that the business community could no longer carry the whole burden, and the entire community would have to share in the program and financing. This thinking is reflected in the basic characteristics of most industrial development corporations established since the end of the war. They are permanent community sponsored and financed organizations, set up with a variety of functions to carry on continuing industrial development and expansion activities. Number of industrial development corporations and where they are located We estimate that today some 1,800 communities throughout the country have active development corporations. The largest concentration of such communities is in the Midwest, where some 760 communities have established development corporations. Wisconsin has the largest number, 180; Missouri has 141; Minnesota, 130; and North Dakota the fewest, 6. The Southeastern States have a combined total of 468 communities with industrial development corporations, with Georgia and Tennessee having over 90 each; North Carolina, 86; and Mississippi the smallest number, 4. The West South Central States rank third with 223 communities. Here, Arkansas has the largest number, 90; Texas, 74; Oklahoma, 34; and Louisiana, 23. (The Louisiana figure does not include the 38 parish planning and development organizations.) The New England States combined have only 142 communities with industrial development corporations. The Middle Eastern States have 184 communities, 112 of which are in Pennsylvania. I am citing these figures to point up the fact that these development corporations have been formed predominantly in nonindustrialized areas or in industrialized areas with serious unemployment problems. What is startling is the predominance of very small communities with industrial development corporations. About half of the 130 Minnesota development corporations, for example, are located in towns with populations of 2,000 and under, and 70 percent in communities of 5,000 and under. In Arkansas 60 percent of the communities with industrial development corporations have populations of 5,000 and under, and in Louisiana 14 of the 23 communities are in this population bracket. Finally, and equally startling, is the rapid spread of these organizations. Not only have most of the currently active corporations been established since the war, but the majority have been formed during the past 5 years. How community development corporations get started Before a formal organization is set up, the community usually must be sold on the need and value of a development program. In most communities the move is initiated by a single individual. In North Carolina, a local banker started the ball rolling; in a Pennsylvania town, the salaried manager of the local Community Chest was responsible for initiating a development program; in a small Illinois town, a radio-station operator sparked community interest. In Danbury, Conn., it was a hat manufacturer, while in Hazleton, Pa., a local dentist. Once the idea of a development program has gained popular support, the town leadership (usually the chamber of commerce) takes over the job of organizing and operating a development corporation. In communities where the local chamber of commerce may have been sponsoring an active industrial development program, it may decide that it can operate more effectively through a separately chartered body and establish a development corporation There are certain advantages to a formally constituted development organization: It provides a centralized and continuing authority for implementing a program. It is a convenient instrument for carrying out aspects of a program involving financial transactions and other legalitiesnegotiating loans and mortgages, purchasing and selling sites and buildings, initiating and surpervising construction projects, managing property, etc. It affords protection against personal liability to the backers of a development program. Types of corporations The large majority of presently active development corporations has been established as nonprofit organizations. Some are set up as profit-sharing corporations, but even these generally operate on a nonprofit basis, and few, if any, are paying dividends today. Earnings are plowed back into the corporations for expanded operation. In addition to the permanent development organizations, many one-shot organizations have been established, usually as ancillary groups to permanent corporations. They are set up to carry out a particular project-build a plant, buy property, float a loan for a prospect. When the job is done, they are dissolved. How funds are raised There appears to be no fixed pattern for raising funds. Depending on the type of corporation, initial capital may be raised through the sale of bonds or shares in the corporation and/or through public drives for outright contributions. Some groups hire professional talent to raise their capital. Most frequently, however, fund-raising campaigns are planned, directed, and carried out by the community group sponsoring the corporation. Depending on the program and the capital target it may set for itself, an organization may start out with less than $1,000 or more than $1 million. But initial funds are only the first step toward establishing corporate viability. Through good management and turnover of its funds, a development corporation may parlay its initial capital into assets considerably greater than its funding dollars. The combined initial capital of the four Scranton plan corporations, for example, was around $4.4 million. Today they claim assets in excess of $19 million. These assets represent investments in plants purchased or built for incoming industries, industrial sites owned by the plan, mortgages and loans, and operating cash. The gains realized on the original capital will not be returned to the investors. They will continue to be used for expanding and diversifying the industrial base of the community to create jobs. By the way, in connection with the Scranton plan corporations, of which there are four, I should like to add a word of explanation about the reason for multiple development corporations in a community. Additional corporations are organized to raise new capital for the community's development program or to establish new credit when the going development corporation has exhausted its borrowing limit with local banks. (A bank may loan only up to 10 percent of its funds to any one creditor.) Except for their legal separation, these individual development corporations are operated as a cohesive unit. Finally, many development corporations have no standing capital. Needed funds are raised as the occasion for them arises. These corporations have been set up primarily to provide the community with a formal organization through which quick action can be taken when a prospective industry materializes. Services to industry Depending on its charter and funds, a corporation may offer one or all of the following types of services to prospective incoming industries as well as to industries already established in the community: 1. Financial assistance. This may be in the form of loans, purchase of a block of the company's stock, cash grants. While still in use, the practice of offering cash grants or subsidies is no longer as common as it once was. 2. Industrial sites and plants for lease or sale.-Many development corporations build plants to a prospect's specifications under a directsale contract or, more frequently, under a lease-purchase agreement. There is also an increasing trend toward speculative building. Plants put up on speculation vary, from unfinished shells with three walls, no flooring, and utilities roughed in, to fully finished, ultramodern, brick and glass construction requiring only machinery and workers to start operations. Most common speculative buildings are between 40,000 and 60,000 square feet in size. 3. Counseling and intermediary service.-Nearly all industrial development corporations are prepared to give some form of management and technical assistance to their clients. Many development organizations also act as intermediaries for their clients in securing services which they are unable to get for themselves-special concessions from the local power company, municipality, etc. 4. Preferential State and local tax rates.-These inducements for incoming industry are still fairly common. They are particularly a questionable practice in communities which need to expand their services and facilities, such as water, sewers, and schools, upon the advent of a new industry. Most substantial industries realize that |