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Unique challenges of economic development in small-town governments

Updated: Mar 8, 2023

One of the key fault lines in the urban-rural divide is the ability to attract new businesses to your community. For example, in a CivicPulse nationwide survey of local government officials from Fall 2021, we found stark differences between communities of different population sizes in terms of whether or not they were offering incentives to businesses. While larger governments tend to use tax breaks and other financial incentives to attract businesses to their communities, the smallest local governments—like those serving populations less than 5,000—are far less likely to do so (see below).

To better understand why economic development practices vary so much by population size, we asked respondents to indicate some specific barriers they may face in effectively engaging in economic development. Smaller local governments were especially likely to bring up two barriers, (1) staff capacity and (2) broadband access. As stated by one respondent representing a smaller local government in Illinois, “Right now, we're limited by staff size and manpower to attract [economic development].” Another respondent from a small community in Montana said the biggest barrier their jurisdiction faced was “Lack of an Executive Director and a floundering Economic Development entity.”

The second common barrier that was brought up especially by small local governments was a lack of broadband access. As stated by one respondent representing a population of less than 2500 in Michigan, the biggest obstacle to economic development in their community was simply “Broadband, lack of.” Our past research has shown this is a key area of investment for local governments making use of federal stimulus funding.

Nonetheless, small local governments around the country are trying to revitalize their economies by harnessing unique characteristics of their communities. For example, the Recreation Economy for Rural Communities program has partnered with smaller towns like Glenwood Springs, Colorado and Jasper, Alabama to build their outdoor recreation-based economy. More generally, local governments might look to external funding opportunities for assistance, as the American Rescue Plan and the federal infrastructure bill offer millions of dollars of funds to be used for planning and capacity building for economic development.

Survey Background

The research underlying this blog was built on data from two national random-sample surveys of 651 local policymakers and 322 finance officers, fielded from October 2021 to November 2021. The sample frame draws on Power Almanac’s continuously updated contact list of government officials from counties, municipalities, and townships with populations of 1,000 or more. The results reported in this blog are calculated using the unweighted survey responses. The survey was constructed and managed jointly by CivicPulse and Nathan Jensen. Below is the survey question used to craft the figure:

In the past five years, has your community used any form of economic development incentive for companies including tax breaks, grants, or tax increment financing (TIFs)?

Answer Choices: Yes, No, Don’t Know

Media Contact

Nathan Lee, PhD

Managing Director of CivicPulse

(618) 319-3404


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