Rethinking Economic DevelopmentUsing Standard Tools to Promote a Local Food Economy

Closing the Loop

COABC’s 2010 Conference

Kamloops, British Columbia

March 5, 2010

Rob MarquseeDirector, Rural Economic

Development712.279.6609

rob@marqusee.comwww.woodburyorganics.com

“Economic development … includes the process

and policies by which a nation improves the

economic, political, and social well-being of its

people.” – O’Sullivan, Arthur, Steven M. Sheffrin (2003): Economics: Principles in Action

I submit that local Economic Development is all

about achieving a high Quality of Life for the

regional population as a whole.

When we measure economic development

solely in terms of ‘Gross Domestic Product’ at

a national level, we forfeit a knowledge of our

land, destroy the middle class, hinder

entrepreneurship, and cause the demise of

our rural communities.

The Irony Of It All

Local Food Production has a much higher return

per acre than the highly specialized industrial

food system based upon large economies of

scale.

Scenario #1

Locally growing fruits and vegetables in a rural 10

county area for one growing season results in the

following increase over industrial corn/soybean

farming:

• 902 acres of new fruit and vegetable production required to replace imports

• The farm-gate value of that production would be $2.42 million in sales

• Potential retail value of that produce would be $5.2 million

• Yields a total of $928,373 in labor incomes and nearly 16 more jobs for the

region

Source: David Swenson, The Economic Impact of Fruit and Vegetable Production in Southwest Iowa

Considering Local and Nearby Metropolitan Markets, January 2010

Scenario #2

Locally growing fruits and vegetables for service to

‘Urban Customer Centers’, for one growing season,

results in the following increase over industrial

corn/soybean farming:

• 2,107 acres of new fruit and vegetable production required to replace imports

• The farm-gate value of that production would be $4.62M

• Potential Retail Value of that produce would be $11.41M

• Yields a total $1.75 million in labor incomes and nearly 29 more jobs for the

region

Source: David Swenson, The Economic Impact of Fruit and Vegetable Production in Southwest Iowa

Considering Local and Nearby Metropolitan Markets, January 2010

Additional Benefits

• The study does not consider local meat or dairy production

that could replace imports

• The study does not include additional off-farm jobs that

would necessarily be created for a local food system

• The study does not consider development to secure off-

season production

• The study does not include consideration of other benefits:

increased knowledge of land, health, community spending,

water treatment, etc.

Educated Guess

For local food system sustainability, you can

assume a 10% broker markup.

Thus, for every $1M in retail sales, $100K could

be used for off-farm food system services.

Traditional Economic Development

“No official tally of business subsidies exists, but inseparate studies Peter S. Fisher of the University of Iowaand Kenneth F. Thomas of the University of Missouriestimated that state and local subsidies aimed at creatingjobs total about $50 billion annually.

More subtle subsidies … are not counted in those figuresand may be even larger.”

Assisting the Good Life 6/15/07

Tools of Economic Development

The general tools of traditional economic developers are:

• Tax Credits

• Tax Abatement

• Sales Tax Refunds

• Direct Cash Payments

• Tax Increment Financing (TIF)

• Low Interest Loan Programs

• Loan Guarantee Programs

• Private Capital Investment Funds

• Bonds (General Obligation, Revenue)

Traditional Development

Priorities, Focus, & Criteria for Incentives

Economic Development Programs Are Based On:

Priority: Urban Projects (i.e., Industrial, Commercial, Residential)

Focus: Outside Prospects – Attracting Business From Outside (Including Chains)

Criteria: Wage/Benefits Criteria

Criteria: Number of Jobs Created

Criteria: Capital Expenditures for a New or Renovated Facility

Rural Economic Development Programs Are Based On:

Focus: Transforming Rural Communities Into Another Purpose (Service Centers)

Criteria: Rural Programs Subject To Grant Writing Process (a disadvantage)

Excluded:Small Farm Production Not A Business/Object of Business Retention

Examples of Current Economic

Development Strategies & Impacts

Billions of Taxpayer Dollars (“…without a peep”)•Biodiesel Project: IDED Gives $535K to Major Corp: 4-9 Jobs

•Ethanol Supports: Five Subsidies ($4M): Sioux City Example

•Regulations Favor Large Processing Houses/Seed Patents

•Ethanol: 70¢ / per Gallon : $70M on 100M Gal. Facility (Mostly Non-Local)

•Farm Subsidies: $275B / 10 yrs Average

With Stated Impact on Local Economies•Primary Beneficiary: Non-Local Owners/Processing

•Environment is Severely Compromised: Water/Top Soil

•Less “Local” Control

•National Health/Obesity Crises

There is no proof that funds offered for

traditional economic development projects

yield an overall net positive impact.

However, this is proof that current economic

development practices cause substantial harm.

Statistical Impact of Policies

Woodbury County Ag - Rural Statistics

Sales of Livestock & Livestock Products

1969: $358M vs. 2003: $80M78 percent decline over 35 years

Sales of Crops & Livestock

1998-2003: $145M loss from crops & livestock

Farms & Average Farm Sizes (Farms/Acreage)

1975: 1,930/268 vs. 2004: 1,140/38778% Increase in Number of Farms 1000 Acres+

Woodbury County Losses & Subsidies

Annual Loss: $24M Annual Subsidy: $23MDifference of $1M Made Up By Additional Jobs(Statistics Provided By: Ken, Meter, Crossroads Resource Center, 2005 & U.S. Census)

Woodbury County

Population Breakdown

Loss In Population: Unincorporated Areas: 11.2%/Rural Cities: 9.7%

1970-2000 However: 20%+ Decline Outside of Corridor

Forecast: Accelerated Decline After 2000 (DM Reg)

Iowa Ag Stats & Forecast

Iowa Ag Statistics

50%+ Of Farmland To Transfer in 10 Yrs

25% Farmland Belong to Those >75 Age

Average Farmer Age 55+ (Woodbury: 60+)

Iowa Forecast

Fewer Owners of Land

Faster Decline in Rural Population

Less Income in Rural Areas

More Strain on Environment

(Des Moines Register: July 17 & July 24, 2005)

Non-Localized Food SystemMoney Flowing Out of Local Area

Federal Government

Farmers

Non-LocalCorporate Ag Processing

Consumers

Money Flows From Federal Government to Farmers to Grow CropsAt A Loss (Cost of Production > Price Paid)

Ag Interests Buys At Low Price = Makes Lion’s Share of Profit on Food ProductsIn Effect: Federal Government Provides Indirect Subsidy of Large Corporate Ag

Interests

Non-Local“Inputs” Manufacturers

$

$

A Better Economic Development

Option

Woodbury County Approach

Policies & Programs

Woodbury Policies

Organics Conversion Policy: 6.28.05

100% Tax Rebate on Ag Land Converted to Organic

Sustainability, Environmental, Diversification

Smaller Farms, More Labor, Higher Income

Woodbury Health Initiative: 8.2.05 (Sen. Harkin)

Local Foods/Mobile Farmers Market Rural County

School Wellness Food Programs & Attack Obesity

Local Food Purchase Policy: 1.10.06

Mandatory Purchase of Locally Grown Organic

Supports Local Farmer, Local Broker & Markets

Regional Food Systems

Farmers Markets

Requirements of Vendors, Listing of

Vendors & Production

Schools, Institutions, Nutrition

Rules, Policy, How to Get Sales Info

Mid Tier Value Chain

Processing,

Distribution, Coops

Consumer/Producer Education

Website, Funding, Marketing, Training

Policy

Local, State, & National Policies,

Incentives, Purchasing

Woodbury’s Tax Rebate Policy

Details

• 100% Real Property Tax Rebate - 5 Years

• Application Process

• Land Owner Must Reside in County

• County: $50K p/yr Total Potential Investment

• Certification Required After Third Year

• Refund Penalty: If Fails to Comply With Program

• Source of Funds: Option Sales Tax/Gen. Funds

Woodbury’s Tax Rebate Policy

Sale to County

• Zero Up Front Cost to County

• Size of Potential Food Market in Area

• Increase Number of Farmers

• County Markets Local Products (Brand)

• Marketing of County

Woodbury’s Mandatory

Local Food Purchase Policy

• ‘Mandatory’ for County Government Facilities• Creates Immediate ‘Market’ for Products• Creates Need for Local Foods Broker (POC)• Negotiations With Food Service Contractor(s)• Local = 100 mile radius/beyond if no production• Pricing & Reporting Provisions

Anatomy of Woodbury

LFPP Policy

• Create First Market: Immediate $300K Market• Lead By Example - Schools/Hospitals• Multiplier Effect to General Economy: 1.5%• Insure Policy Cost Does Not Exceed Benefit• Instill Discipline in Broker• Opening Up Markets for Producers

Obstacles: Woodbury

Tax LFPP Policy

• Practical Barrier: Working With Food Services(general industrial food system barriers)

• Learning the Food Business• “Processing & Presentation” Issues• Supply Dependability Issues• Menu Obstacles to Use More Local• Practical Barrier: Qualified People• Practical Barrier: Demand - Then Supply

The Big Hurdle: Where are the Farmers?

• Grocer Tax Credits to Provide Secure Markets

• Micro-Loans to Support a New Generation of Farmer

• Treat New Farmers As a Traditional Business

• Local Incentives to Buy Locally Grown Organic Food

• Real Property Tax Rebates/Abatements to Incentivize Local

Objectives

• Local Government Support for Farmers Market Managers

• Initial Support for Establishing a Local Broker

What Came First?

Markets or the Farmer

Programs In Action

&

Accolades

Partnership Between Woodbury County, City of Sioux City, and Siouxland Chamber of Commerce

www.woodburyorganics.com

NACo Award Winner

Testimony Before

U.S. House of Representatives

Organic Farming Is Economic Development!

What we are doing, as a community, is supporting our farmers and giving them a fair opportunity to

serve our citizens and provide food at fair, competitive prices and making a decent living in

the process.

We are in the business of value development!