What makes a good local economy?

When deciding where to locate, companies seek quality of life

| May 3, 2010

It is not uncommon to see Boulder featured on yet another “best of” list. Our city usually ranks high in livability, outdoor pursuits, educational attainment and quality of life. Some of these lists should be taken with a very big grain of salt but others can prove useful in understanding Boulder’s assets and liabilities.

One of the most recent lists is indeed worth considering. A study by ZoomProspector.com, a business location research firm, rated Boulder as the top city in the country for business start-ups. The study was featured in the April 26 issue of Bloomberg Business Week magazine and certainly was great publicity for Boulder.

According to the article, ZoomProspector.com measured 11 factors to determine ratings for American cities, including the number of startups, workforce quality, community resources, availability of venture capital, the number of patents issued, educational levels and the presence of universities. Another more subjective measurement was the number of creative professionals living in the city, such as artists, writers, designers and researchers.

As one might expect, most of the other cities in the top ten were adjacent to, or suburbs of, larger metropolitan areas, such as Denver in Boulder’s case. Others were close to Boston, Los Angeles, San Francisco, Seattle and Washington. Surprisingly, three of the nation’s largest high-tech centers, Austin, Raleigh-Durham and San Jose, were not mentioned.

The study made particularly interesting reading for me since I have been doing research for corporate relocations nationally. Often economic-development people sing the praises of their low costs of doing business, low taxes, limited regulations and availability of cheap land and inexpensive office or industrial space. In reality, that only works for companies on the low end of the spectrum. If you’re Anniston, Alabama or East Aardvark, Arkansas, that may seem an appropriate strategy, but not for Boulder or the peer cities that attract start-ups of the types measured in the ZoomProspector.com study.

Comapnies seek quality-of-life

The types of businesses we want to retain and attract for Boulder seek quality. For them the greatest factors are those that will allow them to recruit top talent. Quality of life issues are high on their list, including the local environment, arts scene, education, effective local government, a welcoming attitude towards new people and acceptance of minorities. Boulder certainly meets those criteria, therefore earning its position on this top ten list.

One of the least effective measures Boulder can use is corporate incentives and subsidies. These types of corporate welfare programs are widespread in the economic development field, especially in places that desperately need to attract new employers. My experience is that the places with the greatest levels of incentives are generally the places that had spent far too little on basic community services. States, cities and towns with poor funding for education, inadequate pubic facilities and a “hands off” attitude towards government services have little to offer to the types of businesses we want in Boulder.

In addition to all of Boulder’s evident attractions, it is important to have readily available good information on community demographics and economic trends and the availability of land and buildings. The City of Boulder has an incentives program that uses tax funds to subsidize corporations to come here or to stay. Much to the City’s credit, the program is targeted and limited and not the form of blatant corporate welfare one sees in some cities and states, including, unfortunately, Colorado.

Let’s not throw incentives at companies

In reality, the money allocated by the City of Boulder for business incentives would better be spent maintaining the level of basic government services, such as libraries, parks and police and fire protection, that benefit all residents of the city. After all, having a good business climate is not an end but a means. Boulder’s penultimate goal should be to provide a safe, healthy, attractive and friendly community for all, not just business owners and entrepreneurs.

By capitalizing on its strengths Boulder will likely continue to find a place on meaningful “best of” lists, including those measuring the city’s economic strengths. 

Columnist and investigative reporter Eric Karnes is a Boulder-based commercial real estate research consultant who advises several national clients. He is a long-time participant in local debates about planning issues.