Preemption Threatens Economic Development and Innovation

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City leaders work every day to grow local ecosystems in their communities that support entrepreneurs. They do this in many ways – attracting and retaining talent, offering support services, and creating vibrant urban places. This work takes place in the urban sphere because innovation thrives in cities. Cities are central to the progress of our nation and the building blocks of democracy. In recent years, cities have increasingly been challenged by state legislatures that are impeding their success through top-down preemptive tactics that are squelching innovation.

The National League of Cities (NLC) has been awarded a three-year research grant by the Ewing Marion Kauffman Foundation to explore exactly what these effects are on cities. We posit that preemption is negatively affecting the entrepreneurial ecosystems of cities and thereby impeding growth and innovation in city economies. This grant will allow us the opportunity to test this hypothesis through rigorous analysis and quantitative research to provide data on the ultimate impact of these misguided policy dichotomies between state and city.

NLC is part of a group of organizations supported by the Kauffman Foundation that will perform wide-ranging research in order to better inform policymakers and entrepreneurship support organizations seeking to build thriving entrepreneurial ecosystems. This collaboration – built into the “Uncommon Methods & Metrics” portfolio research group – will create opportunities for NLC to learn from and help support the researchers throughout the full group of grantees.

NLC’s grant will result in a variety of new resources for cities including an interactive web platform with city-level preemption data, case studies, policy recommendations and analysis. We will also actively engage city leaders via convenings and peer cohorts to enhance their capacity to support new business creation in constrained policy environments.

This grant comes at a critical time. Our current research – available at www.nlc.org/preemption – shows how states have been taking turning to preemption more and more as political discourse has broken down. Preemption, or the use of state law to nullify a municipal ordinance or authority, has proliferate in recent years, particularly in economic development-related policy areas, including minimum wage, municipal broadband and the sharing economy. In fact, the most common rationale used by preemption proponents is a business case: that preemption is required to minimize a “patchwork of regulations” that impede business growth.

Despite its widespread use as a justification for preemption, little is known about the actual impact of preemption on business development, particularly entrepreneurship. To better understand how new and growing companies drive local economic growth and how this growth is impacted by state preemption, we will be working deeply in this space to seek out answers.

Ultimately, this opportunity allows us to support cities in their efforts to prevent and reverse preemption. As stated by Mayor Ken Shetter, Burleson, Tex. in his 2017 State of the City address, “When someone attacks local control, what they are attacking is our ability to make choices about the direction of our own communities.” Local control of these policy and regulatory areas is critical for new business creation and experimentation within unique local economic settings. Preemption, on the other hand, often does the exact opposite and prevents cities from building stronger economies and promoting innovation.

This new body of work supported by the Kauffman Foundation will be a foundational part of NLC’s new Local Democracy Initiative. This work will ensure that the core values of community members are heard and ultimately reflected in the policies and priorities of government. Cities cannot stand alone, and we must all coalesce together around the need for strong local democracy – city leaders are closest to the people – and city rights are critical for achieving the vision of an engaged democracy.

About the authors: 

Christiana K. McFarland is NLC’s research director. Follow Christy on Twitter at @ckmcfarland.

 


Brooks Rainwater is the senior executive director of the Center for City Solutions at the National League of Cities. Follow Brooks on Twitter @BrooksRainwater.