Downtown Spokane March 2017

How to Attract Tech Firms to Spokane

Spokane is on the cusp of tapping into deep pools of investment driven primarily by the tech sector and all its tributaries. Based primarily on our proximity to the coast’s big metro tech hubs (Vancouver, Seattle, Portland, San Francisco), our affordable real estate, and our quality of life, the feeling is Spokane is poised to accept a wave of tech investments as well as all those tech refugees that come with them.

Trouble is no one from Spokane’s public sector is actively engaged and working to attract all that money and talent restlessly sitting over on the coast. It’s time we get in the game. Good news is, it’s simpler than you think.

Here’s how we can attract tech investments to Spokane:

 

Hire a Professional Economic Development Director

All cities have economic development directors, except Spokane, for some strange reason. Thus, as we sit, we’re at a significant disadvantage because nobody at Spokane City Hall gets out of bed every day with the sole purpose of attracting new investment to our city. It’s amazing how much action one person can stimulate if given the opportunity and the tools to achieve results.

What’s the best way to pay the $100,000-plus annual salary required to employ a new economic development director? A good start is to stop paying Greater Spokane, Inc (GSI), roughly $90,000 per year and redirect those funds toward someone who specifically works to attract investment within city limits and answers directly to the Mayor and City Council. After all, it’s those two bodies of governance that have the authority to deploy the legislative tools necessary to close transactions and stimulate new investment. The City of Spokane can and should speak for itself.

 

Forget about Regionalism

Collaborating with our regional partners is a great approach if we’re talking transportation planning, social services, or public safety initiatives. Regionalism does not work, however, when it comes to economic development. Don’t be fooled by puffy language about regional collaboration, the City of Spokane competes with Spokane Valley, Liberty Lake, north Idaho, Airway Heights, and other jurisdictions in the game of attracting investment, and those same jurisdictions compete right back with us.

Spokane is a municipal corporation. Our shareholders are residents of the community, and our revenue streams are primarily driven by utility fees, sales tax, and property tax. We are doing a disservice to our residents if we cede new investment to our neighbors. Generally speaking, within the economic development game, it’s every municipality for themselves. The first jurisdiction that aggressively works to attract investments is the first jurisdiction that will receive new investments.

 

Provide Incentives to Entice Investment

Firms are not going to relocate to Spokane simply because we ask them to. A sales pitch to tech executives that hinges on affordability, proximity to big markets, and quality of life is nice but the real beef – the key motivator that closes deals – is the size and scope of incentive packages we can offer to them. If we walk into an executive’s office with nothing more than “we’re cheap and we have a good quality of life,” we’re liable to get laughed out of the room.

 

Leverage Creative Incentives

Because every project is different, every incentive package is different. Attempting to apply a one-size-fits-all approach toward building incentive packages creates an environment of inflexibility and sucks the potential for creativity out of the air. There’s any number of incentives that may be provided to entice tech investments to the City of Spokane. Demonstrating a willingness toward creativity and innovation while negotiating potential incentive packages with tech firms implicitly demonstrates the City of Spokane is creative and innovative – two key traits the tech industry tends to appreciate.

In a traditional incentive environment, the purpose of incentives is to off-set the cost of required public improvements associated with development of the real estate project – like locating a new tech firm to Spokane – which equates to cost savings for the developer. There are ways, however, to structure transactions to provide more direct incentives into any given deal structure. New Market Tax Credits, for instance, don’t directly work for cities because municipalities are not subject to federal taxes. There is nothing that stops a city, however, from creating dummy non-profit corporations, community development financial institutions, or any number of mechanisms to get into the tax credit game. Best part is, because it’s private money, the developer can realize a direct infusion of cash whether or not proceeds are applied toward public improvements.

 

Establish a Foreign Trade Zone

Tech firms that actively engage in international markets and build things like hardware, consumer products, or require large warehouse facilities will benefit from the competitive advantage foreign trade zones (FTZs) provide. FTZs defer tariff payments on international exporting and importing, as well as provide an opportunity to reduce the total tariff burden by simplifying its calculation method. For instance, if a tech firm imports numerous component parts from various international markets to construct their final product domestically, each one of those component units is subject to an individual tariff at varying rates. FTZs, however, allow the owner to chose between paying all of those individual rates or the final product may be taxed at one single rate. Often, a cost savings is realized by choosing the latter option; moreover, it sure is nice having the flexibility to choose the most affordable tariff rate – a handy incentive that we can provide to the industry.

 

Act Like We Know What We’re Doing

One would think that, on this point, it goes without saying. Not in Spokane, though. We have a tortured history of blundered public/private partnerships, fumbling around seeking permission to do projects from entities that don’t have the authority to give it, and leaning on an antiquated, self-serving, and ineffective economic development delivery system. The only people that should be at the negotiating table are those that have the authority to close transactions. Meaningless middle-men add no value to the process.

 

Don’t Self-Impose Bureaucracy

To engage with the market also means we have to generally keep up with it. We don’t need more meetings to plan for meetings. We don’t need any more committees, no more advisory groups, no more retreats, and let’s dispense with establishing some sort of silly and bureaucratic criteria that creates arbitrary rules and boundaries for the game. The rules and boundaries for the game are self-established by the market and real estate development practices. The Mayor and City Council get to make values-based judgments on whether a deal should move forward – exactly what they are elected to do.

 

The Architecture to Get Started is Already in Place

The vision of Spokane’s future is already largely established. Downtown, U-District, Kendall Yards, Perry, Garland, Hillyard are all ripe for 21st century investments. Reams of plans have been developed and are collecting dust on lonely shelves in City Hall and other local organizations. There are several active Public Development Authorities already established and operating within the city, local developers and property owners are hungry for more activity, and big money tech firms are growing so fast they’re spilling over into new markets.

The time for action is now.

 

 

This blog is written by Mike Tedesco, officially a candidate for Mayor of Spokane, 2019. Check out his other totally awesome website at votetedesco.com.