What do you think of when you see a vacant commercial building in a middle-class neighborhood?
Do you say to yourself, “I could start my own business there if I had the capital,” or “a Whole Foods should open here and bring new jobs”?
Have you ever asked yourself how enterprises such as Whole Foods, Toyota, Jamba Juice, or Amazon.com select cities to plant their seeds to grow and the impact that decision has on local communities?
You can thank your powerful local economic development agents and their collaborative partners for the harvest in fast-growing cities throughout North Texas.
Since the establishment of economic development corporations (EDCs) by legislatures over 30 years ago, city-level EDCs in Texas have grown in popularity and use by Texas cities to create jobs, promote innovation, improve the quality of life and increase the tax base.
Economic development can be defined as concerted efforts of municipal leaders, economic development agents, visitor bureaus, politicians and financial institutions collaborating to improve the economic well-being and quality of life for a community by creating and/or retaining jobs and supporting or growing incomes and the tax base.
Large enterprises, albeit vital to economic capacity building in some instances, are not the sole engine that drives longer-term growth. Longer-term growth relies on local innovation, local entrepreneurship, and local labor. Access to capital is the fuel that ignites this powerful ecosystem.
According to a report shared by the Texas Economic Development Council, a nonprofit trade association, more than 558 Texas cities levy an Economic Development Sales Tax and collectively bring in more than $376 million in tax revenues annually and is dispersed to local economic development corporations.
Historically, economic development agents direct considerable capital investment and incentives into the recruitment and development of large enterprises versus local small businesses. Capital investment and technical assistance for microbusinesses are left to community-based organizations and colleges.
However, in September 2015, House Bill 1629 was passed in an effort to level the playing field and redirect investment into local small businesses from local folks. House Bill 1629 was authored by Dallas Representative Eric Johnson [D], Rep. Tan Parker [R], Rep. Jason Isaac [R], Rep. Rafael Anchia [D], and sponsored by Senator Royce West [D]. The new law puts the power of local economic capacity building into the hands of the people.
HB 1629 gives Texas EDCs, chambers of commerce, small business development centers, nonprofit organizations and the Texas Veterans Commission the ability to allow small businesses in their service areas to raise capital online via equity crowdfunding. Equity crowdfunding is a way for local Texas residents or investors to buy equity stakes in local small businesses online.
Economic development agents and their collaborative partners can now launch equity crowdfunding portals to help local small businesses raise capital to fill the access to capital gap or provide advisory services to help entrepreneurs develop fundraising strategies to fuel job growth and business development in local communities.
This new powerful shift in direction for economic development agents is expected to change the value proposition chambers of commerce, EDCs, community development corporations and community development financial institutions (CDFIs) could offer to small businesses in their service areas.
Each year, millions of dollars in tax revenue filter into local economic development corporations and powerful leaders work to bring big businesses to Texas.
Just think what could happen to vacant real estate and the unemployment numbers in underserved middle- and low-income communities for those agents who choose to use this new law. Could longer term growth be expected if a percentage of that tax revenue was redirected into helping local small businesses acquire much needed capital using financial technologies? Could economic development corporations and chambers of commerce enhance their unique value proposition when it comes to creating new and viable small businesses, creating new jobs and increasing the income levels and tax base in North Texas cities?
The groundwork has been done to create a fertile environment for planting seeds of change in Dallas-Fort Worth and across the state of Texas.
To Hear Cynthia Nevels
On Oct. 4, from noon to 1 p.m., Cynthia Nevels will be the featured speaker on Comerica Bank, DCCCD 10,000 Small Businesses, ThinkCrowdFund.com and Computershare’s crowdfunding web series. The partners will host a discussion on “Crowdfunding for Economic Development.” Nevels will share her advice with economic development agents, share her vision for crowdfunding education, and answer questions about leveraging crowdfunding for economic capacity building in local communities while promoting her theory on Economic Development 3.0. To register, go here.