Seven Strategies for Data-Driven Economic Development

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For cities, effective economic development demands informed, careful leadership from elected officials. Measuring the impact of economic development initiatives and projects can help city leaders determine whether they are meeting the needs of their community and local businesses.

It’s important to point out that in the context of short-term political cycles, it may be tempting to stray from the strategy and only consider economic development in terms of traditional, more tangible successes, such as attracting a new, large employer or the number of jobs added in your community.

However, if this is all that a city is measuring, the result is an incomplete picture. For this reason, it is important for elected officials and staff to agree upon, commit to and accurately measure even incremental economic achievements. This will allow political leaders to demonstrate success — and to champion all the various ways the community is supporting economic activity.

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City staff consistently note that the imperative of city leadership in ensuring the long-term sustainability of performance management and service delivery improvements. Often, performance management has difficulty gaining traction among city staff because it can be viewed as a punitive review exercise instead of an exercise focused on holistic improvement.

Support from the mayor, city manager and city council can help launch performance management programs, change the culture of performance management, and maintain the momentum and commitment to the process.

The advisory group Smart Incentives encourages cities to collect and evaluate metrics that are aligned with community values, and to think beyond simply counting new job creation in order to measure growth towards community goals and economic development objectives, such as increasing tourism or expanding access to workforce training programs.

The cornerstone of performance management is access to data. A detailed outline of how to measure economic development outcomes is also available in IEDC’s guidebook, Making it Count: Metrics for High-Performing EDOs. Below is a list of suggested data points for your city to begin tracking:

  • Economic conditions: New business starts and closures, retail sales, imports and exports, location quotients that compare the size of your industries and sectors to those of typical communities your size, shift-share analysis that shows how industries are growing and declining compared to one another
  • Population characteristics: Population size and growth, age, educational attainment
  • Labor force characteristics: Labor force participation, unemployment, wages, incomes, occupations, skills, commuting trends, productivity
  • Physical conditions: Land use, zoning, land values, condition of buildings, vacancy rates, building activity, parking facilities, condition and capacity of infrastructure, air and water quality
  • Business climate: Community attitudes, labor relations, business taxes and regulations, level and quality of municipal services, workforce training, access to and cost of capital, public and private infrastructure
  • Knowledge-based resources: Federal labs, science and research parks, industry incubators, colleges and universities, technical training schools
  • Quality of life: Housing availability, public services, education system, crime rate, cultural and recreational activities, parks and other natural amenities

Many communities are still exploring how to incorporate data-driven decision-making into the everyday operations of economic development programs. In particular, cities are developing standards for measuring the impact of incentive programs. When a government provides an incentive to an employer or developer, there should be a way to verify and account for the related community benefits.

This guide to economic development metrics is an excerpt from NLC’s 2017 report What You Should Know 2.0: Elected Leaders and Economic Development. For more tools and educational opportunities for elected officials, visit NLC’s Center for City Solutions online.