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CAN MY COMMUNITY ATTRACT NEW INDUSTRY? | |
| CRD-15, December 1991. Douglas C. Bachtel, formerly Research Associate; Jospeh J. Molnar, Professor, Auburn University Department of Agricultural Economics and Rural Sociology and Alabama Agricultural Experiment Station; and V. Wilson Lee, Extension Economist Emeritus, Community Resource Development, Auburn University | ||
Can my community attract new industry? If you have asked yourself that question, then you either are now or have the potential to become a leader in the community. You have the interest of the community at heart and you have the curiosity and probably the initiative to explore new alterna-tives and create action.
And you already have at least part of the answer to your question, since the existence of local leadership is a key component of the rural industrialization process. There are many other important factors, of course. But a community with strong local leadership is likely to be successful in attracting industry.
You might, however, ask another question: "Should my community attract new industry?" Movement of industrial firms into rural areas has been a steadily increasing trend since 1960--and in most cases industrialization is quite successful. Industrialization is a complicated process, however, and one that raises many issues. It is not for everyone, or for every community. Answering this question requires close knowledge of all the factors involved in the industrialization process, plus a careful and honest inventory of the community's needs, assets, and liabilities.
Beginning in 1974, the Department of Agricultural Economics and Rural Sociology at Auburn University and the Alabama Cooperative Extension System at Auburn have conducted a joint research-extension effort to help rural Alabama communities examine their situations and--where appropriate--launch successful industrialization projects. The program is funded under Title V of the 1972 Rural Development Act. Research and Extension work at Auburn clearly indicate that many rural Alabama counties have potential for economic expansion, and that they are waiting only for local leadership to develop plans and initiate action to start tapping that economic potential.
This publication is designed to help you, the local leader, become more knowledgeable about the industrialization process so that you can do a better job of helping your community find the best path of development. For more information, ask at your county Extension office for the following circulars:
Five major factors account for the trend toward industrialization:
The consequences of industrialization are not only complex, but have long-term effects on the residents of rural communities. Some segments of a community receive few economic benefits from a new manufacturing plant while others benefit greatly. Retail and business activity generally expand, but industrial growth has been found to have no significant impact on families below the poverty level. Industrialization usually does not immediately provide jobs for the low-skilled or hard-core unemployed.
Industrialization usually stimulates population growth, which may give rise to housing shortages, or problems with water supply and waste disposal. Population growth also may cause an increase in the cost of living and additional demands on educational facilities, law enforcement, fire protection, and medical care.
A study conducted by the U.S. Chamber of Commerce in 1984 found that 100 new manufacturing jobs bring into the community:
New manufacturing firms also often produce indirect social and economic impacts. The new workers and residents, for example, may have values, beliefs, and life styles quite different from those of the local residents. The new industry may also cause changes in the wage and occupational structure of the entire area. And industry may cause changes--for good or ill--in the local environment, including air and water quality.
Transportation has played a critical role in rural development. For example, the construction of a network of interstate and four-lane highways has enabled manufacturers to locate at greater distances from metropolitan markets and to transport their inputs and products efficiently and economically. Increased application of transportation improvements--such as new processes and devices for materials handling and the efficient movement of bulk commodities--will greatly expand the range of profitable rural industrial location sites.
Railroads play an important role in transporting agricultural and forest commodities and other bulk goods to and from rural places, and this energy-efficient transportation mode becomes more important each day. Rail service is an important consideration for certain manufacturers, and many rural communities have benefited from their location on a rail line. Some rural communities and industries have also benefited from technological improvements such as modules on multi-car units of special design and light-weight construction that feature automatic loading and unloading. Rural areas serviced by rail lines employing these features stand a better chance of attracting new manufacturing plants.
Motor Freight service has become more important with the creation of the interstate highway system and has also had a profound effect on railway commerce. The growing use by railroads of versatile flexible containerization in the form of "piggyback" rail-truck operations has made a notable contribution to transportation efficiency.
Airline Service may also contribute to the overall attractiveness of rural areas as industrial location sites. However, scheduled airline service is usually only a minor consideration and rural communities with small airports are at no disadvantage.
Water Transportation is one of the cheapest modes of transporting goods on a cost per ton-mile basis. Water transport is therefore especially suited to the movement of bulk commodities and heavy equipment. Inland water carriers are meeting increased railroad competition with larger barge tows and more containerization.
Transportation innovations do more than simply decrease the time and distance between rural and urban areas. Transportation improvements play a major role in the economics of rural communities and contribute to the modernization of rural living. This, in turn, helps create a social environment that is more attractive to industrial growth.
Regional planning for industrial development is advantageous because the social and economic impact of a new manufacturing plant is felt not only within the community in which a company is located, but throughout the surrounding area as well. Effective regional planning also enhances the attractiveness of individual communities to firms considering sites for new plants.
Two major types of industrial planning efforts are used by rural communities. The first type aims for general improvement of a community, including steps that make it more attractive for the kind of industrial expansion the community desires. Particularly important in this sort of planning are public utilities and services such as fire and police protection, and medical, educational, and recreational facilities.
The second type involves specific industrial location incentives, including favorable tax rates. low-interest loans, and construction of facilities. Long-range planning for overall improvement, including industrial expansion, will usually produce the greatest long-range benefits to a community. Successful planning programs usually include the following considerations:
Communities can and should prepare for new industry. Information packets can promote the area as an advantageous location for industry. Local government can assist in site development, facilitate plant construction, and even offer financial incentives to attract industry. The responsibilities of civic leaders also should extend to considering the relationship of the industry to the community at large, particularly to those who will not be employed by or otherwise directly benefit from the industry.
Manufacturing Firm Characteristics
Manufacturing firms that can operate for a profit in rural areas have the following characteristics:
Communities desiring industrial development should possess at least some of the following characteristics:
Private industrial location planning decisions flow from a two-stage process. The first stage involves the selection of a geographic region where profitable production is feasible primarily from the standpoint of direct production factors. Direct production factors include the following:
Local community efforts usually are not effective until industrial decision-makers have already selected a region and probably narrowed it to a specific sub-region for location. Often, by that time, a location frequently has little input concerning direct factors (proximity to markets, adequacy of transportation, general labor quality, etc.) affecting industrial location.
Local communities can do something about the indirect or secondary factors. Upgrading local services, public utilities, plant sites, and industrial parks, plus strong local leadership and involvement are all important considerations that can be addressed through local community action.
An industrial park is a designated area where legal questions involving the industrial use of the property have been resolved; water, sewage, and utility connections made; and adequate road access provided. Industrial sites are expensive to build, but research has shown that the longer a site has been established the greater the return to the community in terms of jobs and income.
Community leaders should realize that industrial park ventures do not have a guaranteed immediate return on their investment. Many rural communities may not be able to construct large, expensive sites at the onset, but most firms do not need or require an extensively developed site or park. Industrial parks can be constructed in stages as the companies grow, eliminating the need for large amounts of development capital before industrial prospects are committed to the area.
The presence of developed industrial parks is one factor that industrial decision-makers often rate above other secondary factors. The presence of such a site generally reflects organized local leadership and a favorable industrial growth climate. Firms that visit a community to look over a developed site often locate somewhere in the community even if the site does not meet their needs.
Plant Site Characteristics
Industrial location decision-makers often look for the following plant site characteristics:
Generally, rural areas have remained relatively free of the air, noise, and water pollution problems associated with urban areas. The continued attractiveness of rural areas as sites for resource-oriented industries undoubtedly will be influenced by pollution standards set by the U.S. Congress. The recognition of the greater environmental carrying-capacity of less densely settled areas will continue to affect many industrial location decisions.
Amendments to the National Clean Air Act specify that individual states can designate air quality control regions, divided into various non-attainment, attainment, or unclassified portions. in areas where the national standards are not attained, procedures must be developed to insure compliance at a specified future date. Generally, no major new construction is allowed in a non-attainment area. The result is that metropolitan areas are more likely to be classified as non-attainment areas than rural areas, creating further incentives for rural industrial growth.
Strong local leadership is a key component of rural community development. Communities with active leadership are more often successful in obtaining federal grants, improving community services, building industrial sites, and attracting new industries. Community leaders often have unique access to local economic and human resources, as well as the capacity to mobilize them for industrial development.
In many rural areas, the ability to attract and keep manufacturing plants depends, for the most part, on the community's ability to maintain a competitive position as a place in which to live and work compared to urban areas and other rural locations. Private interests often find a reliable, responsive local government and an active, organized leader group to be distinct assets in location decisions. Such an area is more likely to provide a relatively stable and predictable environment for operation of a new plant or facility.
Larger communities with abundant economic and human resources have the distinct advantage of having more trained personnel and funds at their disposal to help implement and achieve their development goals. In addition, larger communities may even be able to hire and appoint individuals to specifically direct and implement their development objectives.
Smaller communities, on the other hand, often do not have the economic resources or personnel to commit to full-time development action. These tasks are often borne by leaders on a part-time basis while they maintain their regular jobs as merchants, farmers, bankers, etc. Smaller communities also may rely on county-wide efforts to promote development.
In general, the attitudes of rural leaders, residents, and recent immigrants from urban areas toward industrial growth in their communities have been shown to be quite favorable, even though the distribution of benefits and costs are never equal among the people in the affected areas. In places that have little or no industrial base, leaders and both old and new residents look favorably on industrialization as the primary means of solving their socioeconomic development problems. Positive attitudes also have been shown to exist before and after industrialization. In one study, however, a lower percentage of respondents believed they had benefited economically from industrialization than had anticipated benefits before the plant began operations. In another study, more plant workers living in town than non-workers living in open-country believed their chances of getting ahead had increased. This is because the town-workers saw more employment opportunities and payrolls than the open-country non-workers.
Research generally indicates that--despite the broad range of possible negative impacts--a majority of rural leaders and residents believe that their communities benefit from industrial development. This prevailing favorable attitude is found both in areas anticipating and those experiencing industrialization.
In Alabama, industrial development is coordinated at the state level by the Alabama Development Office. These officials often act as intermediaries between industrial firms and local communities, cataloging available industrial sites in the state by the requirements of the interested industry. They conduct a "prepared cities" and a "prepared counties" program assisting local areas in the development of facilities, services, and technical requisites for plant construction and location.
Regional Planning Commissions also assist in the industrialization process largely through the provision of technical services. They are familiar with federal programs and funding sources for improving municipal infrastructures, as well as the informative resources for determining the appropriateness of the site development strategies and land-use plans. The Regional Planning districts in Alabama also serve as Economic Development Districts (EDDs) for Housing and Urban Development programs.
The Alabama Cooperative Extension System plays an important role in assisting the organizational process on the county and community level. Community Resource Development (CRD) Committees are county-based groups organized by the Extension System with the assistance of various other county-level agencies. The CRD Committees provide a forum to identify and discuss problems, determine local needs and establish goals, and coordinate local development efforts. They are concerned with the broad range of social and economic problems facing their communities. These committees are not formally affiliated with any local, regional, state, or federal agency, and they do not all have the same organization or structure.
Active resource development committees in almost every rural county give major emphasis to industrial development through site acquisition, service development, and contact with representatives of prospective firms. Extension personnel on the county and state levels are available to provide expertise in the area of community resource development.
Other groups active on the state level in industrial development in Alabama include the Alabama Development Office; the CSX and the Norfolk-Southern railroads; the Alabama Power Company, which has an industrial development office; rural electric cooperatives; other utility companies; and many financial institutions. All are prepared to serve as intermediaries in the site selection process. The extent of each group's involvement generally varies with the need, orientation, and preferences of the firms and communities involved.