Saturday, February 9, 2008

Economic Development by Act of Congress

Back in the late 1980s, say between 1987 and 1989, Ohio Business magazine published a cover story on Wright Patterson/

Entitled “Does Wright Patterson Need a Boost”, it was an in-depth look at activities on base and the local economic impact.

The article quotes the commander of the old Air Force Logistics Command, Gen. Hansen, on the growth in IT work at the base:

The greatest potential for new jobs is in the computer arena, particularly in software
development and engineering. "Our Logistics Management Systems modernization
program has already provided a strong boost to the local economy," says Hansen,
because contractors are required to locate a facility within 20 miles of the base.

Logistics system modernization contracts have totaled more than $333 million since
1985. About 50 contractors are working on the AFLC's modernization program,
employing about 4,000, and generating about $80 million annually in payrolls for the
Miami Valley.

Note the remark about the 20 mile radius. I recall this wasn’t policy, but statutory, mandated via an act of Congress. This law drove a growth in defense contractors in the area. Some probably maintained smallish storefront operations, with most work done outside the region, but others perhaps required a larger workforce in the area.

The cumulative effect was great, as noted by Gen. Hanson, and he was just talking about his unit, not the R&D mission. At a large base like Wright-Patterson, with a mix of different units, the 20 mile rule could really lead to a local boom in defense contracting.

Unlike the T2 example below, there were spin-off situations. Separated civilian and retired military techies could set up consultancies, picking up subcontracting work, or working directly with the base.

The same could happen with contractor staff, which could go out on their own, forming their own consultancies and firms. And new locally-based entrants could go after the defense work.

Also, policy shifts within the military toward private sector models of corporate structure led to more outsourcing, which increased work available for contract.

The net result was the formation of a defense tech cluster, a mix of outside and local contractors. But all this business formation and clustering would still be dependent on (and limited by) the defense budget, assuming that the contractor community didn’t try for substantial amounts of work in the civilian sector.

Is this cluster moving beyond defense work, competing in the private sector?

That is the big economic development question.


Admin said...

Is it just a coincidence that your graphic shows all the contractors south and east of the base? There sure aren't many Wright-Pat contractors located in Dayton or Trotwood or Huber Heights (north and west).

Jefferey said...

I work left to right, because thats how I read, but there might be something subconcious, too, as you note.

I posteted a longer look at that east side development, as I think thats a good wrap-up for all this defense contractor stuff.

Anonymous said...

No Income Tax in Beavercreek, I repeat No Income Tax in Beavercreek. That same City happens to be south and east of WPAFB. Get my drift Bruce?

Jefferey said...

Well, there is "Fairborn", too. just south of the base. But I notice one of the defense contractors in Fairborn recently jumped the freeway to locate in Pentagon Park (Beavercreek).

The no income tax thing is actually an issue if one is relocating from a place like California. Working and living in Beavercreek means tax avoidance (same with Washington & Miami Twp, also popular business locations)

Admin said...

Yes the income tax thing is especially amplified by the higher wage earners. And to compare one needs to examine both city and school district income taxes.

I've always felt local income taxes are Ohio's big unequalizer. And they can be a trap to the communities that use them. Typically cities invoke them when property tax revenues are not keeping pace. The higher wage earners are typically the first ones to run which tends to level off average home values and causing more property tax revenue lag. The city/school trying to keep up with inflation must cut spending or raise new revenue with one or the other. Either solution causes problems.
We should do away with local income taxes and devise a new mechanism collected and distributed by the state to equal the playing field.
Local income taxes also help fuel sprawl.

PS to Jeffery - Please consider adding a recent comments directory to your site.