AN INDUSTRIAL DEVELOPMENT STRATEGY FOR CENTRAL FALLS, RHODE ISLAND

The City of Central Falls has approximately seventy (70) firms engaged in the manufacture and processing of raw materials into finished products. These firms represent a significant resource to the city in the form of jobs, tax revenues, and potential economic growth. The majority of the city's firms rely on export markets, with 74% of all products manufactured in the city being marketed outside Rhode Island. Therefore, Central Falls' industry brings new money into the Blackstone Valley and contributes to its stability and growth. Recognizing the importance of this sector of the local economy, Mayor Richard B. Bessette enlisted his Division of Planning and Community Development (DPCD) to study the needs and concerns of the manufacturing community. A 1978 Survey of Manufacturers revealed that Central Falls has a diversified economic base due to a large number of small and medium-sized firms. The results of the survey also indicated that a significant portion (44%) of the factories are over fifty (50) years old. Antiquated design and deterioration require that these buildings be renovated to reduce energy consumption, meet modern day shipping and receiving demands, and to solve space problems. Based on these results and other research on the condition of local industry, Central Falls must address the needs of the manufacturing community by identifying vacant and underutilized space in the city, assisting in the rehabilitation of existing industrial buildings, and improving streets, parking facilities, and traffic circulation in its industrial districts. In this report I have outlined an industrial development strategy to accomplish these improvements. The strategy consists of the following elements: technical and financial assistance, organizational development, special projects, and marketing and promotion. Central Falls' Division of Planning and Community Development (DPCD) will play a significant role in the implementation of this strategy. DPCD will provide staff support, coordinate the allocation of public resources, including financing, and represent the city's interests in any negotiations. The strategy recommends the city increase involvement in local economic development through the Special Task Force for Industrial Development, The Blackstone Valley Chamber of Commerce, and the Second Pawtucket Industrial Foundation. In addition to the elements mentioned above, the report recommends both short and long term investment strategies the city can adopt to pursue its economic development goals. Short term strategies include continued work with the Task Force, traffic circulation and parking improvements, educational and promotional efforts, and a feasibility study of a vacant industrial site. For the long term, the city should develop an Industrial Reinvestment Program, plan a development project with the Second Pawtucket Industrial Foundation, examine tax policies, formulate a more aggressive marketing effort, and establish a more formal development mechanism within municipal government. A number of problems will act as constraints on the implementation of this strategy. These include a scarcity of suitable land, a poor image, and local government's inexperience and lack of commitment toward economic development. Given its fiscal problems and the importance of industry to the local economy, Central Falls should adopt a sound and consistent strategy to strengthen local industry. This is a necessary first step toward building a productive partnership with the private sector.

In addition to the elements mentioned above, the report recommends both short and long term investment strategies the city can adopt to pursue its economic development goals.
Short term strategies include con- setting. Yet it remained a part of the Town of Lincoln.
As time passed, the divergent interests between the urban and rural areas became increasingly strained.
In 1895, the question of the incorporation of Central Falls was put before the voters of Lincoln. They responded by voting overwhelmingly in favor of incorporation. 4 This separation was especially difficult. In addition to starting out with a debt, all surrounding undeveloped land was excluded from the new city.
In the long run, this has made it impossible for Central Falls to experience the normal growth and development patterns of other urban areas.
In effect, Central Falls wa_ s born a city full gorwn.
4 Ibid, p. 39 Rather than having an opportunity to expand and provide alternative residential and business developments, the city could only pack more of the same into the existing area.

ECONOMIC DECLINE
During the first twenty-five (25)   Pawtucket). Therefore, the industry in Central Falls relies heavily on local residents for its labor needs. This labor pool offers a distinct locational advantage to industry in Central Falls.  Manufacturers' Survey attempted to assess the type of employment offered by local industry. Results indicated that the ratio of skilled to unskilled is 8:1.
This data is somewhat misleading, however, since the majority of these positions are to operate the equipment in the textiles and fabricated metals industries. While these jobs require six (6) months to a year of training, starting salaries are low ($2.65 -$4.00/hour -1978). 16 Silverson, Donald, Survey of Local Manufacturers, Central Falls, Rhode Island, 1978 1 p. 10 -10-A description of local industry requires some information on the location of industry and the facilities they occupy. Figure3.0 shows that industry in C t 1 F 11 . 1 t d .
•t 17 en ra a s is oca e in six manu ac ur1ng s1 es.
Combined area for the six sites is 230 acres. Table 3 indicates that sites 1, 4, and 6 are totally occupied.
Site 2 has physical characteristics that severe~y limit the industrial development potential of 64% and it is comprised

MARKET AREA FOR PRODUCTS
Economic base theory asserts that there are two kinds of industries: One group exports its products and services outside its region; these are returned to the region in the form of money. The money brought into the region by the export (basic) industries contributes to the growth of industries (non-basic) which produce for local consumption. As a region's boundaries are extended, either through actual growth or arbitrary selection, export sales for the original industries tend to decrease and more sales occur within the region.
Of course, any theory has its flaws, and economic base theory is not an exception. Review of the survey results indicates that few industrial establishments produce exclusively for out of region or for local markets.  The large number of smaller firms are generally more susceptible to fluctuations in the economy than larger firms with better developed markets and deeper capital reserves.
The lack of growth potential in the city's industrial mix is reflected in Table 5. New construction for manufacturers totaled just 59,000 square feet of floor space for the years 1970 through 1978.

General background information
(2) Satisfaction with existing sites and buildings (3) Needs and problems (4) Plans for expansion and relocation (5) Suggestions for city support Some of the descriptive data has already been cited to introduce the reader to Central Falls industry, Beyond this, the survey gave local officials some insight into the issues and problems confronting local manufacturers. The survey indicated that 40% of all firms have expansion plans, either at the present site or at an additional plant.
Another 15% indicated dissatisfaction with their existing site and plan to relocate .
Top priority needs of those firms surveye d were: --Improved shipping and receiving facilities --More floor space --More efficient heating system and building improvements to reduce energy consumption These same firms cited inadequate parking and poor access as major problems.
To address the needs, the manufacturers suggested that the city assist in the identification of available industrial sites and buildings. They also requested assistance in making contact with local, state, and federal funding sources.
Further, technical assistance for meeting government regulations was requested. (1) Act as a conduit for a pool of federal grant programs, such as SBA's 502 and 503 loans, EDA's Revolving Loan Fund, OMBE's business development programs, etc.
(2) Provide technical expertise for business packaging to firms desiring expansion loans.
(3) Provide venture capital for smaller commercial and industrial firms.
(4) Establish a local industrial job development program.
Specifically, the city will work with OSBDA to provide long term, low-interest financing to local industry. This is accomplished through the sale of debentures that are guaranteed by the Federal Government under SBA's 503 program. (2) In cases where industrial use of a mill building is no longer economically viable, explore the potential of converting mills to commercial and residential uses.
These recommendations will be returned to in later chapters.

Another proposed program that deserves mention is
The Urban Jobs and Enterprise Zone Act of 1980. Under the Act, cities and other local governments could obtain approval from EDA for one or more jobs and enterprise zones within their jurisdictions. Once a jobs and enterprise zone is designated by EDA, the tax incentives would include the following. 7 (1) The affected local government would be required to reduce property taxes within any zone by five (5) percent a year for four (4) consecutive years.
(2) Social Security taxes on both employees and employers within a zone would be reduced.
(3) The capital gains tax rate would be cut 50 percent on investments in a zone business which employs at least half its workers with an enterprise zone.
(4) The income tax rate would be cut by 15 percent for enterprises where at least half of the employees are zone residents.
(5) Greatly accelerated depreciation of business investments within the zone would be allowed to encourage increased investment in jobcreating enterprises.
The reduction on property taxes would provide a direct reduction in the cost of maintaining a business or home within a zone. The reduction in Social Security taxes would lead to job expansion within zones and increase takehome wages. These incentives represent a significant departure from past federal approaches consisting of massive subsidies. The theory here is that federal policies have been aimed at the symptoms of urban decline and have not significantly altered the costs of locating in urban areas.
The Kemp-Chafee bill passes on the benefits directly to the business and the employer. With respect to foregone revenues, the rationale is that revenues are not lost on people who are already unemployed nor on buildings that are already abandoned.
The Urban Jobs and Enterprise Zone Program would be difficult for Central Falls to implement, primarily because of the tax cut required. Over the past ten (10) years, the costs of operating local government have risen dramatically.
At the same time, the city's tax base has remained static, causing property taxes to increase each year. To reduce property taxes would force Central Falls to do two things: (1) Cut-back on local services (2) Rely more heavily on state and federal funding services. Therefore, efforts to increase their employability will not only benefit local industry, but will also prevent this segment of the population from becoming a tax burden on the community.

TECHNICAL ASSISTANCE
In addition to the above mentioned financial incentive  In addition to the above multiple benefits, government efforts in economic development also serve to strengthen the tax base and in turn reduce the tax burden on the city's residents.
An underlying theme in this chapter is the develop- In the next chapter, I will begin to incorporate previously discussed public resources into the development of a sound industrial development program. These programs and services, together with the active participation of the private sector, will form the basis for a planned effort to foster growth in local industry.
In an article appearing in Nation's Cities on economic development strategies, the author makes an effective case for the preservation of older industrial neighborhoods.  The kind of programs that will be acceptable to the community require a more delicate touch, fitting industry into the existing fabric. This kind of development is likely to be more costly and demands a higher level of public sector involvement and support.
-40-  (800) acres cannot afford to lose acreage from its tax base.
6. Promote the improvement of city traffic circulation to enhance truck access. Specifically, widen the railroad underpasses which act as barriers to the northeast industrial area.
7. Promote low-cost and efficient mass transit service to metropolitan employment centers (Providence, suburban industrial parks, etc.).
-41-Employment and Training 8. Develop and promote programs to diversif.y the skills of the local labor force.
9. Develop and promote meaningful employment and training programs, particularly programs which emphasize onthe-job training; incorporate language instruction in training programs to meet the needs of the non-English speaking residents.
Energy 10. Encourage and promote the development of alternative energy sources, e.g. solar and hydroelectric power, by industrial users.
11. Encourage and promote energy conservation by industrial users; provide financial and technical assistance to local industry to stimulate investment in conservation measures.
Fiscal 12. Lobby for additional state support to compensate for decreasing revenues from the Rhode Island Manufacturing Equipment and Machinery Tax.
13. Promote alternatives to the property tax structure that will generate additional revenues to meet the increasing costs of municipal services.
14. Utilize federal and state funds to leverage private investment in industrial plant and equipment; utilize the same funds to subsidize new investment in the industrial base.
Organizational 15. Encourage and promote regional industrial development efforts in the Blackstone Valley.
16. Organize representatives from the financial and business communities to work with local government to formulate an industrial development policy and to ident~fy specific projects.
17. Educate local government officials in the importance of industry to the local economy; identify ways in which municipal services and regulations can better accommodate the needs of the manufacturing sector.
18. Solicit the assistance of the State Department of Economic Development in promoting older, industrial areas.

ELEMENTS OF THE PROGRAM
To achieve results in each one of these policy areas, a concentrated effort must be undertaken. A partnership must be built between the public and private sectors. Inf ormation must be generated and shared. Technical and financial resources must be identified and allocated. Specific programs must be developed and implemented to solve problems which have been identified. These tasks will be part of a comprehensive industrial development program. This program should consist of the following elements: organizational, technical, operational, financial, and promotional.
These elements outline the scope of the Central Falls Industrial Development Strategy. Activities will be organized and programs developed around each element to f acilitate the achievement of the aforementioned goals. These elements also establish the order of activities which will lead to the successful implementation of the strategy.

RESEARCH
The first step in any economic development program should be to understand the community's competitive economic position. A strategist must understand the dynamics of the local and regional economy and determine its assets and liabilities. There are several methods in which this under--43standing can be developed. The first method is to review local economic data such as regional business patterns, census information, Department of Labor publications, and other aggregated sources. The major thrust of this effort is to define the structure of the economy, its major industries, and areas of industrial specialization. This information should also reveal major trends within the local economy. Problems may be anticipated if a major area of specialization is no longer growing. The high percentage of workers employed in the textile industry in Central Falls certainly limits the city's potential for growth as textiles is a declining industry with low-paying jobs.
Finally, unemployment and income data should be reviewed in order to identify the dependent populations. This will provide an understanding of the relationship of economic development to social problems.
The second method to obtain a better understanding of the local economy is to talk with the local business community.
Such discussions should focus on the strengths and weaknesses of the local economy from their perspective. Business :~~9ple can often identify major areas that require action. (1) The manufacturing community has a continued commitment to the local economy.
(2) The needs and problems expressed by local manufacturers require a more aggressive and comprehensive approach by the city.
These findings have prompted Mayor Bessette to appoint a special task force of representatives from the business community to work with local government to develop an economic development policy and identify specific projects that could be undertaken jointly by the city and the private sector. The Task Force will be composed of twelve (12) members and will work with the city's Division of Planning and the Blackstone Valley Chamber of Commerce.
The Task Force will undertake investigation in a number of areas, including energy conservation, expansion opportunities, financial mechanisms, municipal services, employment and training needs, education needs of the manufacturing community, and special projects.
Utilizing staff from the Chamber and the Planning Division, the Task Force will utilize the findings of their investigation to set objectives for the city in each of these areas. They will also make recommendations to the city on specific programs to achieve these objectives. The Task Force will be chaired by Mayor Bessette and membership will be comprised of representatives of major manufacturing groups in Central Falls, the financial community, the Blackstone Valley Chamber of Commerce, and local government. After convening, the Task Force will outline its work plan and establish a time line.
The proposed plan calls for the Task Force to divide into committees to research and analyze specific issues and problems. These committees, with staff support from the Division of Planning and the Chamber of Commerce, will report back to the larger group on a monthly basis.
Periodic reports and press releases will be used to document the group's progress. The Task Force will submit its findings to the Mayor in five to six (5 -6) months.
The report should include an analysis of the issues that have been identified and recommendations for programmatic solutions to these problems. The report should also in-   The decision process of a manufacturer seeking a new plan involves, first identifying those regions that offer economical access to raw materials, markets, labor, and energy. These production and marketing costs, along with taxes, usually make up most of the total cost. Regional differences in construction, energy, and labor costs are generally too large to be outweighed by any potential tax and fiscal differences (See Tables 6, 7 City than it would to build a similar structure in Charlotte, N th C 1 . 13 or aro ina. Thirdly, regional differences in energy costs are considerable and represent a significant factor in commercial and industrial development. In 1975, the cost of electric power varied among regions by a factor of more than 2:1 14 (Table 8) .
Once having decided on a particular region of the country, the manufacturer must then select the state or area that offers the greatest potential profit.     priority projects can be selected. Some of these will be public improvements such as streetwork, utilities, and promotional programs. Others will require private investment.
In this chapter, I will consider the latter, for private investment must follow any public economic development effort if the city's goals are to be met.
To assist the private sector in development projects, the city's economic development officials must understand the development process. By being familiar with its many stages, economic planners can identify ways they can be of assistance, reduce the development costs, and, therefore, increase a project's feasibility.
Given reductions in federal funds for the economic development, city officials can also use this knowledge for the more prudent allocation of public funds. -78- The city must continually work to leverage its limited resources to create employment and tax revenues. This point will be addressed further in the discussion of • project evaluation. steps; The development process has eight (8) identifiable 1 (1)

Market Analysis
(2) Project Identification Site Acquisition (4) Negotiation (5) Planning, Design, Engineering   (1978). Specifically, assembling large tracts of land for development in a dense urban area is costly and tedious. Delays often aggravate the already high costs of construction.
Also, financial incentives (tax concessions, interest subsidies) are insignificant in comparison to other costs (labor, energy, raw materials) and only influence location decisions in the final phases. -83-

SITE ACQUISITION
Site assembly generally is accomplished in four basic ways: (1) Agents for the developer acquire the necessary parcels as quietly and as quickly as possible to hold down price speculation among current owners.
(2) Real estate speculators slowly acquire properties as they become available until the resulting assemblage is suitable for new development.  In general, the private sector is particularly sensitive to the political and regulatory environment and any steps local government can take to make that environment more accommodating will assist in promoting  Number of job varies from ten to fifty (10 -50) per acre, with distribution activities at low end and labor intensive industries at high end. Important considerations are skill levels and wages; also new jobs created versus those displaced.
Industrial jobs foster one to two times more jobs of other kinds. Thus, potential economic benefits are great.

Tax Base Benefits
New industrial development costs $200,000 to $600,000 plus equipment per acre, • depending on floor area to land ratio, type of building, and type of industrial activity, e.g. warehouse space is inexpensive compared to research and development space.
These benefits and considerations must then be compared with the costs the city incurs for the project.

16
Briefly, these are as follows: (1) The amount of the subsidy which the city must provide to implement the project.
(2) Any increased cost the city might incur in providing public services to the project. To these must be added the opportunity cost, that is the cost of foregoing opportunities that might be possible now or in the future.
Assuming there are more desirable projects than the city's Community Development funds allow it to implement, the city must consider whether investment in a given project represents the best investment that could be made with the funds available.
In summary, Central Falls, through its Division of Planning and Community Development has the ability and resources to assist in the implementation of projects to benefit the local industrial base. However, the resources are limited. Therefore, the city should adopt a philosophy to guide its investment of public funds . This philosophy should attempt to do the following: (1) Minimize public dollar investment as a portion of development cost in any given project.
(2) Minimize the time period of its involvement in a given project. The shorter the period of time over which Community Development funds are involved in a project, the sooner its funds will be free to invest in other projects.
(3) Give the highest priority to projects that generate an on-going investment in tfte community without further involvement by the city. For example, assist new or existing firms that have growth potential and will make continued investment in plant and equipment. Such a study would cost less than $20,000, a small sum given the great potential benefits from a thirteen (13) acre industrial park. people to be high-precision metal workers, and presently employs over fifty (50) people. Their wage rate is above the national median for production workers, and is almost two ($2.00) dollars above the average hourly earnings of a -100production worker in the apparel and textile industries.

Reconstruction of Railroad Bridges
Whittet-Higgins has a national market for its products and is presently in a position to expand.
In   (Providence, 1950(Providence, , 1972(Providence, , 1980   6 Ibid, Article references in Chapter III (Cornia, 1978) argues against this point. Cornia states that cost considerations (labor, energy, construction, transportation) and market factors are far more important than tax and fiscal incentives in influencing location decisions. However, fiscal incentives can influence a firm once it has decided to locate within a region or metropolitan area.
At this phase of the decision process, Central Falls can attract firms with appropriate public investments. and short-term strategies should be based on the partnership approach that links the government business, financial, and labor interests together as a team to serve mutual needs.
Translating these ideas into action for industrial development is not a rigid process, but requires a certain -114flexibility to satisfy the many interests involved. Some recommendations are needed to initiate the process and guide the involvement of local government.

Short-Term Strategies
(1) Continue to work with the Special Task Force for Industrial Development; concentrate on issues and problems that can be addressed and which will result in immediate benefits.
Strong mayor and council leadership must be enlisted.
(2) Develop a traffic and parking plan for the Roosevelt Avenue industrial neighborhood; focus on solutions which require limited resources and can be easily implemented. to address these problems.
-115- (6) Circulate newsletter to business community documenting local industrial development efforts and programs at all levels of government.

Long-Term Strategies
(1) Develop Industrial Reinvestment Program; utilize existing data on needed building improvements to organize investment activity, utilize federal resources (UDAG, CDBG) to subsidize investment.
( will be able to support the commercial district, and supply the investment to preserve the city's housing stock.
The adoption of a sound and consistent strategy to strengthen local industry is the first step toward building a productive partnership with the private sector.
Central Falls must stop asking companies to stay within its boundaries and start making it in their best interest to do so.
15. We would like your suggestions as to how the city can offer support for your business operation. Please number in order of importance those activities listed below which you would like to see the city undertake: (1 -Most important, 6 -Least important) ~~~ Assist you in making contacts with local, state, and federal funding sources.
~~~ Identify available sites and buildings for possible relocation and expansion.
Work with appropriate agencies to organize ~~~ promotional activities.
Analyze traffic circulation problems and ~~~ recommend improvements.
Provide technical assistance in meeting federal, ~~~ state, and local r egulations.
Other (Please specify)

~~~ ~~~~~~~~~~~~~~~
To help make the results of this survey more meaningful, any additional comments you wish to make on the back of this page will be most welcome. Please use the enclosed stamped, addressed envelope to return the questionnaire. Thank you. -136-

ANALYSIS OF RESULTS
Question 1: Major products of your firm The results to this question indicate that 32% of the firms in Central Falls manufacture fabricated metals and machinery. The second largest manufacturing group is the textile industry, consisting of 22% of the city's firms.
The third highest percentage of firms is involved in the manufacture of food products (16%). The remaining 30% of the city's firms shows great diversity in terms of the type of products they manufacture, as is clearly seen in Table 10.
While the highest percentage of firms manufacture metals and machinery, the textile and apparel industries employ the most people, a total of over 1 1 500 workers. It is recommended that these results be followed-up to determine those manufacturing groups that do the highest sales volume and which products bring the highest rate of return.
-139- Economic base theory asserts that there are two kinds of industries. One group exports its products and services outside its region; these are returned to the region in the form of money. The money brought into the region by the export (basic) industries contributes to the growth of industries (non-basic) which produce for local consumption. As a region's boundaries are extended either through actual growth or arbitrary selection, export sales for the original industries tend to decrease and more sales occur within the region.
Of course, any theory has its flaws, and economic base theory is not without exception. Review of the survey results indicates that few industrial establishments produce exclusively for out-of-region or for local markets.
-140-Therefore, to place industries in either basic or nonbasic categories is an oversimplification which is not supported by actual market behavior.  The responses to this question were also analyzed according to the type of manufacturer.
(See Table 13) 40% of the "small firms" manufacture fabricated me tal s and machinery. This figure represents 80% of the metals and machinery manufacturers in Central Falls. Most of the food processors in the city (75%) can also be counted in this category. The textile industry in Central Falls has almost an equal number of small and medium-sized firms.
-143-   A clear majority of firms in Central Falls have a substantial investment in the city.
The costs of moving to the suburbs are high, some of which are as follows: --moving machinery, files, furniture, etc., --non-salvable equipment must be junked --new supplies and subcontractors found --new employees hired --separation costs to long-service employees Therefore, it is likely that most of them will remain in Central Falls and continue to represent a signif icant resource to the community in the form of employment, tax revenues, and potential economic growth. It is clear then, that their needs and problems must be addressed for any successful effort to revitalize the economy in Central Falls.
As mentioned previously in this report, the manufacturing community represents an important resource to Central Falls, and therefore the needs and problems of this element of the economy must be addressed. Questions 12 -148through 15 were included in the survey to provide the city's manufacturers with the opportunity to describe their needs and problems, to indicate whether they had any plans for relocation and/or expansion, and to offer some suggestions for municipal economic development activities.
Question 12: Needed Building Improvements but also lack the loading capacity to support the heavy machinery of modern industry. This problem is significant when considering the marketability of the space in many of the old mill buildings in the city.
*This data is contained in memo submitted to the Planning Director in July, 1978.
-150-  TABLE 19 Rank of Needed Building Improvements The feasibility of eliminating on-street parking in manufacturing areas of the city should be examined, along with the possibility of organizing cooperative efforts to provide parking for employees.
In the meantime, greater cooperation is required from the police department to regulate parking violations. The following table (Table 20) -153provides a description of the frequency and distribution of responses to Question 13.   Table 21. Industries. Despite this diversification, a good portion of the gains in manufacturing employment was in the city's textile and apparel firms.
-163-5. Over 75% of Central Falls' manufacturing employment is in industries whose average hourly earnings on a U.S. scale fall below the median for all industry groups.
(See Table 26 for 1977 U.S. industry wage rates) 6. As illustrated above, Central Falls is heavily reliant on the manufacturing of non-durable goods a a major element of its industrial base. Textiles and Apparel have been the mainstay of the community throughout its history and still plays an extremely important role.
Realistically, the city cannot continue to solely rely on this industrial mix if its to meet its goals of improving the economic conditions of its people and reindustrialization of its industrial base.     1950, 1972, and 1980 1950 1972 1980 Food & Kindred Products

2.
The city should encourage the location of smaller, "incubator" type firms which are likely to experience a greater rate of growth than the general economy. Dependence on these smaller firms will allow the city to withstand cyclical . fluctuations in the economy better than its reliance on a small number of firms with large employment rolls.
In addition, existing industrial space in the city is better-suited and probably more affordable for these smaller firms.
3. Examples of the types of industries the city should attempt to attract are listed below. These have been compiled specifically for the State of Rhode Island by an independent consulting firm who considered such factors as growth potential, production requirements, labor requirements, and physical plant needs.