Economic development at the municipal, regional and state levels commonly has three goals:

• increase the number of jobs;
• increase average income levels; and
• increase the property tax base.

The first goal of creating more jobs is the one most often pursued. When local residents have higher than average unemployment rates, this goal for economic development always rises to the top and has broad community support. Also, the actions which are needed to achieve this goal appear to be easy to define and to undertake. Most often the action traditionally taken is to try to attract new businesses from other places through promotional activities and some real estate development. In recent years implementing this goal has also included (and even focused on) the expansion of businesses already located in the community.

The second goal of increasing average income levels is far more difficult to pursue and the results of any progress are harder to measure. As a result, most communities rely on those actions which implement the first goal to also implement this goal. Unfortunately, since 1990 the cause and effect relationship between these two goals is becoming much weaker and the actions needed to increase average income levels are now distinct from those needed to increase the number of jobs. As will be seen later in this report, an increase in income levels (and job stability) is a higher priority goal for most residents of the greater Ossipee area than is an increase in the number of jobs. Actions which government can take which will lead to higher average incomes are: lower taxes, more efficiently administered regulations, better infrastructure and improved education of the work force. The first action (lower taxes) may make it difficult to provide better infrastructure and work force training.

Municipal elected officials, tax-payer groups, and those who are straining to pay their property taxes most want to achieve the third goal of increasing the property tax base. The belief is that an increase in the tax base will automatically decrease the property tax rate for existing tax payers. Unfortunately, there does not appear to be any basis for this assumption in New Hampshire in recent years. The attraction of a new business does add to the tax base and this business does pay property taxes. However, this new business may also cause new residential development which will lead to added school enrollments and even higher property taxes for everyone than before.

A recent study of the Squam Lakes Area by Ad Hoc Associates found that those cities and towns in New Hampshire which focused only on new job creation, which led to immigration of new residents, led to higher property tax rates. Northern Economic Planners found in its study of the 1,000 acre Garvins Falls property in the City of Concord that commercial development of this property created a property tax rate reduction for the City only if over one-half of the new employees chose to reside outside the City's boundaries.

This situation is particularly true in Carroll County which is statistically the most property-rich county in the state on a per capita basis and therefore receives the lowest amount of state aid for schools and local government on a per student and per resident basis, respectively. The real goal should be to increase the property tax base without increasing school and town government costs. A second goal might be to have the State Legislature change the state aid formulas so not as much weight within the formula is placed on the property tax base and more weight is placed on per capita incomes.

Reserve for map of study area

Two Ways to Improve the Local Economy

There are only two ways in which the economy of an area can be improved

• increase exports; and
• reduce "leakage" or imports.

The first way to improve the local economy, increasing exports, has been the traditional approach used by local, regional and state development officials. The purpose of increasing exports is to bring new money into the area from some place else, money which would not otherwise be there. In the past this meant assistance for farmers, mine operators and manufacturers to make their product locally and then sell it outside the local area, thus bringing in money from elsewhere which can then be used to support local employment.

Government actions commonly used in support of increasing exports included: improvements to transportation facilities (highways, railroads and seaports); new or larger infrastructure facilities in industrial parks; business loan programs targeted only to these industries (by both state and federal agencies); worker training programs in high school vocational programs and colleges targeted at those industries; and international promotional programs. The programs offered by the U.S. Economic Development Administration support all of these actions except labor training programs (which are funded through the U.S. Departments of Education and Labor), and international trade promotion (funded by the U.S. Departments of Commerce and Agriculture).

New Hampshire has long viewed tourism as an export industry, although the recognition of this at the federal government level has been far more recent. Tourism is an export industry even though it does this by importing people and their travel spending. Some states have also realized that the attraction of self-supporting, active retirees on a seasonal or year-round basis is a form of tourism, for new incomes and wealth is drawn into the area from elsewhere and little additional state or local government services are required for these new citizens in exchange.

State and federal activities regarding tourism have been primarily promotion oriented and have not expanded to focus on the infrastructure needs and labor training needs of businesses in that industry. The University of New Hampshire System is one of only a few publicly supported systems of higher education which has long had tourism-related training programs. At the national level most tourism related programs are at private colleges and universities.

In the past twenty years the concept of export industries has been broadened substantially to include other service sector industries besides tourism. Important (non-tourist) export services industries include: insurance, financial services, engineering design, business consulting services, higher education, selected medical services, and construction services. State and federal programs are only starting to address the needs of these industries as exporters.

The export industries, or economic base, for the six town greater Ossipee area will be addressed in more detail in Chapter Two of this report. Specific actions which can be taken by local government and the private sector to increase exports by local businesses is a key focus of this entire report. Manufacturing, mining, tourism, construction and other selected services are all important export industries for the greater Ossipee area.

The second way to improve the local economy is to reduce "leakage" or imports. The purpose of this is to have the money already in the area circulate more times before it leaves the area. This also increases local employment and can help raise average incomes. As will be shown in the next chapter, the greater Ossipee area has a significant amount of leakage of resident household spending to other retail trade and service centers. This leakage can be reduced by encouraging residents of the area to shop locally. The second part of this effort is to also encourage area businesses to buy from local vendors as well. The New Hampshire Office of Business and Industrial Development has set up a computerized vendor matching program at the state level within the past five years as part of its efforts to reduce imports and Ossipee area businesses can use this program to identify local vendors.

The "Three Waves" of Local Economic Development

Doug Ross and Robert Friedman discuss the three waves of local economic development in their article, "The Emerging Third Wave: New Economic Development Strategies," in the book, Local Economic Development: Strategies for a Changing Economy, edited by Scott Fosler and published by the International City Managers Association in 1991. This concept of three waves grows out of book, The Third Wave, by Alvin Toffler which describes the totally new kinds of businesses evolving in the world and their methods of operation and situational requirements. Ross and Friedman describe the three waves used by local economic development organizations as follows:

• promotion;
• financing and development packages; and
• growth from within.

Since the initial organization of a state development office during the Great Depression, the State of New Hampshire has undertaken promotional activities, largely to promote tourism. However, only within the past twenty years has the Office of Business and Industrial Development undertaken paid advertising to attract businesses to the state, and most of this activity has been since 1990. The largest cities in the state, often with assistance from their chambers of commerce, have been undertaking promotional activities since the 1950's. Sub-state regional efforts in Northern New Hampshire (including Carroll County) began in the 1970's, with Sullivan County starting its effort during the recession of 1982 (which hit Claremont very hard) and Belknap County starting its efforts in 1991 (as the most recent recession hit Laconia very hard). With the exception of programs in Manchester, Concord, and the White Mountains, all of the other local economic development efforts in the state focused exclusively on promotional activities before 1992. Promotional activities are still the largest single effort for almost all of the economic development organizations in the state. The reason for this is that promotional activities are seen most easily achieving the first goal outlined above, increasing employment, and will also achieve the first of the two ways to improve the local economy, increase exports.

The second wave of local economic development activities is to provide financing and development packages. The New Hampshire Industrial Development Authority was set up in the 1950's to make loan guarantees to manufacturers only. In the 1970's federal funds were used to establish business lending programs in the White Mountains, Concord, and Manchester.

These programs were extended to Sullivan County and a few other communities in the 1980's. In 1990 the New Hampshire Business Finance Authority was established and replaced the Industrial Development Authority with new lending programs to local development corporations and to small businesses. The Office of State Planning has adopted policies which encourage all local cities and towns to become members of regional financing programs. Thus, most New Hampshire municipalities are about to become part of the second wave, at a time when many other communities in the United States are ready to move on to the third wave.

The third wave is to undertake those development activities which promote and support growth from within. Professor Michael E. Porter of the Harvard Business School wrote The Competitive Advantage of Massachusetts at the request of Governor Weld as an adaptation of Porter's book, The Competitive Advantage of Nations. The Massachusetts book is the best example of a third wave state level economic development strategy and the key ideas in it have been adopted by the New Hampshire Office of Business and Industrial Development for use in this state.

Studies of economic development have shown that less than ten percent of all businesses relocate per year into a different community and that most of the businesses which do relocate have fewer than 25 employees. Furthermore, businesses which relocate into a place cause only ten to 15 percent of all new job growth in that community. An economic development organization in the third wave continues to undertake first and second wave activities, but with a new orientation and purpose. This new approach is part of the sustainable development process which Ad Hoc Associates has recommended to the Squam Lakes Association and which is also being recommended for the Greater Ossipee Area Chamber of Commerce in this report.

Under the third wave, first wave promotional activities continue in order to attract businesses and tourists to the community (i.e., increasing exports), but even more effort is undertaken to reduce leakage and imports by encouraging people to shop and buy services locally and by connecting local businesses to local suppliers. Under the third wave, second wave financing and development activities consider any small or large business for a loan whether they are already in the community or want to move into the community. Most federal loan programs prohibit their loans from companies which are relocating to another community.

It is important that the Ossipee area communities not set a goal to become the lenders themselves, but instead to become part of a regional lending organization or rely on the state and/or banking community for these services. The primary role of the Chamber and other community organizations should be to provide information as to where these financing packages are available. The reorganization of the Industrial Development Authority into the Business Finance Authority at the state level in 1990 recognized this shift from a second to a third wave orientation for financing and development packages.

The remaining third wave activities are to focus on new kinds of infrastructure needed by today's businesses (access to air transportation and up-to-date telecommunications facilities), a well-trained work force and the maintenance of a superior quality of life for current and prospective residents including access to medical care, good schools, recreational activities, good housing and good schools. Access to air transportation in an area without a commercial airport means good bus and automobile access to airports in Manchester, Portland and Boston. It also means late in the day pick-ups and early morning deliveries by overnight air express companies. Up-to-date telecommunications facilities means that high speed digital switching services are available to most (or all) businesses and households in the six town area and not at just a few locations.

One of the greatest challenges facing employers and workers in the greater Ossipee area is to continually up-grade the skills of the local work force. Most of the traditional manufacturing industries in the area are faced with much higher levels of international competition for the products which they make. This increased competition is caused by new international trade treaties; new methods of purchasing and just-in-time receipt of product by the customers; the relocation of many large customers out of the northeastern United States to the South and abroad; and higher skills in foreign workers who will work at lower wages. The only way for local manufacturers to compete besides improved transportation and communication is to also increase worker productivity. This happens by both improving the equipment that they work on and also by training them to more effectively use this equipment and to make decisions.

The reason that worker training will be a challenge is that Carroll County is one of the most under-served areas of the state by either state funded or private college technical training programs. Also, Carroll County's manufacturers are more likely to be affected by new international competition than manufacturers located in many other areas of the state because they are located further from their markets and are more natural resource oriented. However, successful worker training programs will go a long way to achieving higher incomes (the second development goal) and employment stability in the area.

The quality of life continually ranks as the most important reason as to why businesses relocate to, and remain in, New Hampshire. The "bottom line" for most small businesses is not only the total profit or take-home salary of the owner after all of the expenses are paid. The "bottom line" also includes an evaluation of their quality of life versus living in another place. Such small businesses make up almost all employers in the six town greater Ossipee area. The quality of life includes such things as: cost of housing relative to income, recreational opportunities, quality of schools, quality medical care, availability of services, physical safety, environmental quality, cultural/social activities, sense of community, and scenic beauty. These factors, and others, will have varying importance for different people, but all are important.

The Chamber of Commerce, local government and other organizations must pay attention to these quality of life issues if the area is to thrive economically and be an even better place to live. Places that are a good place to live are places where people will want to expand or relocate their business to. Such places also attract tourists and retirees. It is the best form of promotion and costs far less money. Activities include reasonable and clear (predictable) local zoning and land use regulatory ordinances which protect and enhance property values for all, promote public health and safety, protect the environment and maintain and enhance scenic beauty. Activities also include community-oriented events and festivals, improving school programs and facilities and providing opportunities for day care and recreational services for local residents.