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Sunday, 17 February 2013 22:00

Grant to local nonprofit puzzles some economic developers, chamber execs

Written by  Mike Brennan and Joe Boomgaard
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GRAND RAPIDS — When the Michigan Economic Development Corp. awarded a $450,000  “economic gardening” grant to Grand Rapids-based Local First of West Michigan in January, the move raised more than a few eyebrows among local economic developers and chamber executives.

The grant to fund a two-year pilot program is “intended to build a stronger local and regional economy” and to “increase awareness of the importance of supporting local businesses,” according to a joint announcement by the MEDC and Local First.

The announcement left some local chamber and economic development execs a bit flummoxed, in part because they believe they’re already providing some of the services covered by the nearly half-million dollar grant. Their reactions ranged from angry to quizzical.

“In large part, it’s a public relations campaign supporting locally owned and Michigan-based businesses,” said Elissa Hillary, executive director of Local First. “We’re reaching out to a core group of businesses in the community.”

The pilot program will also gather data that could lead to potentially new or improved programs that can support small businesses.

Its success will be measured by increasing customer awareness for local businesses in the targeted communities, as well as by customers shifting where they’re spending their dollars, Hillary said. The businesses will know the program is working when more people start talking about it in their shops and when they see more customers come through the doors, she said.

New members would be expected to buy a Local First membership, which ranges from $165 to $550, depending on the size of the organization. Requiring members to pay during the pilot program was an intentional move so that the new recruits “have some skin in the game,” Hillary said.

She said the organization plans to partner with like-minded groups to help support local businesses in the target communities. The pilot project runs through 2014.

Local First describes itself a West Michigan-based economic and community development group whose goal is to build a sustainable local economy. The organization was founded in 2003 and has a membership of nearly 600 independent businesses and community organizations in West Michigan.

At $225,000 per year, the grant nearly equals the nonprofit’s 2010 total revenue of $269,000, according the most recent IRS Form 990 documents available. The group also operates the Local First Educational Foundation, a 501(c)3 organization that is funded by government fees, contributions and grants.

Hillary said the organization is “still figuring out the exact details” about what the public relations campaign will look like, but it’s likely to include elements such as billboard, TV and radio advertising and event-based promotions targeted to eating local foods around the fall harvest time or promoting shopping with local retailers around the holiday season.

Officials at several West Michigan chambers and economic development groups privately voiced concern that the MEDC money would duplicate services they already provide. Worse yet, they contend awarding the money to Local First is tantamount to the government picking winners in what remains a private business function.

“We actually have a concern, at a higher level than this particular grant,” said Rick Baker, president of the Grand Rapids Area Chamber of Commerce. “Had there been engagement with others in the community that have been around and working in business growth? How is it the MEDC is making decisions on awarding grants without touching bases with these players?”

Baker said he and his staff had a conversation with MEDC officials after the grant was announced, not before.

“I’m not taking anything away from Local First,” he said. “They do nice work in our community. We are more concerned with the MEDC and how they make those decisions. Our concern now is moving forward into the future. We want them to use the chamber and other business development groups in our community when the MEDC receives a request from our region to make sure the funding is not a duplication of services. We want to make sure it is in line with the larger agenda for our region.”

The grant will expand Local First’s efforts beyond greater Grand Rapids to work with businesses and organizations in Grand Haven, Holland and Portland. Local First has already hired the equivalent of 1.5 full-time employees to perform outreach in those new communities. The home office in Grand Rapids will serve as the base of operations, and the new staffers will maintain a frequent presence in the new territories.

MEDC COO Steve Hilfinger said a study done in 2008 by Civic Economics for Local First showed if people allocate 10 percent of purchases to local companies it would create 1,600 additional jobs. Creating jobs via local economies is part of Gov. Snyder’s “economic gardening” philosophy, he said.

“We’d like to create more and better jobs at the local level,” Hilfinger said. “That’s why we entered into this contract.”

Hilfinger also said the Local First proposal was discussed with West Michigan organizations before the state made the award and before the pilot program was announced. He was unable to provide names of people with whom MEDC officials spoke.

“We had some communications in the fall and earlier in 2013 before Local First issued the press release,” he said. “We think we made good efforts to communicate.”

Local First’s Hillary said her organization began meeting in October of last year with leaders in the communities, including members of city government and other business organizations. Local First’s involvement in the pilot project stemmed from “ongoing discussions” with the state about how the organization might work with the MEDC to support the governor’s economic gardening initiatives by supporting Michigan-based businesses.

The organization also found a familiar face at the MEDC, Katharine Czarnecki, the Community Assistance Team Manager who administered the grant. Before Czarnecki was hired by the MEDC, she was employed by the Lansing Regional Chamber of Commerce where she worked to develop a Lansing-based version of the Local First program. Czarnecki never had any economic relationship with Local First, Hilfinger said.

Joy Gaasch, president of the Grand Haven, Spring Lake and Ferrysburg Chamber of Commerce, said she was “guardedly optimistic” about the Local First pilot program and what it would mean for the business community in Grand Haven.

“Obviously, Local First has been around for a long time, and they have members in our community. Any promotion of local business is a good thing,” Gaasch said. “Chambers have long been in the business of doing that. … Locally owned businesses invest in the community in different ways, and we also recognize major corporations and organizations also contribute. … There’s a much broader approach to what our organization does. With that organization [Local First], they have a specific focus.”

Gaasch said the majority of businesses in downtown Grand Haven are locally owned businesses, many of them chamber members, and she’s “interested in how this grant will benefit our members beyond the members of Local First.”

Gaasch said the Grand Haven Chamber has met with representatives from Local First a couple of times about how the two organizations might collaborate.

“I’m not sure how it will fit,” Gaasch told MiBiz. “We’re one of the pilot communities, and it would seem that the benefit (from the investment) ought to come back to our businesses, but I’m not sure how.”

The impact that more marketing efforts could have on the downtown business districts is anyone’s guess, Gaasch said, noting that both Grand Haven and Holland already have very low vacancy rates and both communities are home to host of other programs that support local business and entrepreneurship.

“We’re kind of like best practices already,” Gaasch said. The impact of Local First making a concerted effort in the community “remains to be seen,” she said. “We are always willing to collaborate, but we’re hopeful there will be a return for our community.”

Jane Clark, president of the West Coast Chamber, formerly the Holland Chamber of Commerce, said she and her staff met the first week in February with Local First to see how the two groups might collaborate.

“Our priority would be to enhance the existing organizations in our community that do a top-notch job,” she said. “I share their enthusiasm for local business. We’ll work collaboratively to find ways to enhance our local businesses.”

She said if part of the pilot project’s goal is to improve the downtown occupancy rates, that would be difficult in Holland where she can think of only one storefront on 8th Street that is currently unoccupied.

The Right Place Inc. COO Twayne Howard, whose economic development group covers the same footprint as the grant under Local First of West Michigan, said he did not have much to say about the pilot project.

“Based on our two mission statements, there probably is very little overlap,” said Tim Mroz, vice president of marketing and communications at The Right Place.

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