The Role of Public Institutions in Building Local Economic Resilience
Across the globe, the role of public institutions in supporting local economic resilience is quickly evolving. Public institutions such as hospitals, municipal governments, and universities hold two unique positions in this realm.
Firstly, they are permanent features in local communities. They are considerably more difficult to shut down or relocate than privately owned businesses and the public expect these in situations to exist. Secondly, they are the largest single purchasers of goods and services in any jurisdiction. Knowing this, imagine what the impact would be if public institutions were directed to use their large procurement dollars to buy locally.
Buying locally enhances the local velocity of money by allowing it to circulate within the local economy. The New Economics Foundation found that when you buy groceries from the local farmers market, compared to a supermarket, twice the amount of money stays in the community. Local spending also increases the demand for local goods and services — as demand grows, local residents creat e new enterprises and already established businesses create new jobs to keep up with rising demand.
With these emerging realizations, cities such as Cleveland, Toronto, Los Angeles, Vancouver, Milwaukee, Baltimore, and Miami are taking steps to encourage their institutions to buy locally in an effort to build local economic resilience . They are achieving this through two policy initiatives: anchor institution mission building and community benefit agreements.
Anchor institution mission building (AIMB ) encourages local institutions to support local economies through a variety of strategies. These mission — building strategies include increasing procurement from local vendors, hiring locally, providing local workforce training, incubating new businesses, and providing venture capital. A criticism of AIMB s is that it drives up costs for institutions as local goods and services may not have competitive prices.
To counter this, many argue that the local benefits of job creation and training outweigh the cost. Due to local benefits, cities such as Sao Paulo are giving local procurement bid s preferential treatment if it’s within a 10 per cent threshold of non — local bids. In Pennsylvania, an innovative partnership strategy that involved no preferential treatment was used to increase local purchasing from $3.4 million ( 1991) to over $96 million (2012).
Community benefit agreements (CBA s) are known as a way for real estate developers to improve the communities they’re developing in. The developers pay for improving local amenities or mitigations arising from the development in exchange for support for the project.
CBAs are now being used in a similar manner to partner with governments on infrastructure projects. These agreements ensure that local needs are supported through infrastructure spending. CBAs can ensure government commitments to local purchasing, job training, and local hiring. A study by Anthony Pringle, from the University of British Columbia’s Sauder School of Business, found that when a local company receives a million dollar contract, it creates 80 per cent to 100 per cent more jobs when compared to a multinational company receiving the same contract.
Whether it’s the Southwest Calgary Ring Road, the Green Line for the C -Train, or flood mitigation, CBAs can help Calgarians get the most out of infrastructure spending. In Toronto, a CBA on the new Crosstown light rail line ensured that the province would commit to hiring locally, provide apprenticeship opportunities, and local purchasing.
A significant benefit of AIMBs and CBAs to local economies is that they can also serve as a process to identify gaps in the local marketplace. They can assist in identify ing the goods, services, and skills that are needed by institutions and government, but have yet to be sufficiently provided locally.
When these gaps are identified, action can be taken to provide the training, such as apprenticeship programs on infrastructure projects, and sup p ort necessary to ensure that the essential goods, services, and skills can be provided locally in the future — creating greater long — term resiliency for the local economy. In Cleveland, market gaps were identified to create jobs in renewable energy, clea ning services, and fresh food provision.
In Bridgeland, there’s a diner that places a focus on local procurement called Blue Star. Each time I visit, I can’t help but notice a message on their wall: “We’re in this together.” In this time of great economic uncertainty, no message rings more true. In an era of limited economic resources, AIMBs and CBAs allow us to live this message by fostering an environment that supports cross sector partnerships an d collaboration.
They empower our public institutions to serve an even greater role in our economic recovery and assist in maintaining long — term economic resilience. AIMB’s and CBA’s will challenge our preconceived notions of the role of our institutions, but we should not allow them to deter us from embracing these innovative policy instruments. In a time where the Government of Canada and the Bank of Canada are taking significant steps to spur growth, it may be time to seriously consider AIMB s and CBAs as part of a long-term solution to local economic resiliency .
Authour’s note: It’s important to note that this is not an anti-globalization article. My position is that global trade agreements need to be more flexible in their ability to allow for local purchasing, in an effort to build more resilient local economies. This is, in turn, critical to create a more resilient global economy.
