Local governments can no longer rely on state or federal aid to fill their budget gaps. If local governments want to enjoy the benefits of a robust economy, each community must become a high-performing, self-reliant economic engine operating on four cylinders: residential, business, public sector, and nonprofit.

Each cylinder represents an indispensable component of the local and regional economy, employing thousands and fueling millions of dollars of activity through wages, the purchase of goods and services, and the payment of taxes.

In Massachusetts, Governor Deval Patrick’s Economic Development Policy and Strategic Plan, Choosing to Compete in the 21st Century, recommends that each local government have a “CEO” and a team to create and implement an economic development plan for job growth. Communities must learn to take advantage of economic development opportunities and tax revenues.

They must understand how to create the optimum number of local jobs and how their local metrics determine their economic well-being. They must know their industry sectors, especially which ones are thriving or struggling, and the decisionmakers at those enterprises who pay taxes and create jobs. In short, each local government must take responsibility for its own economic fate.

Massachusetts localities are forming economic development corporations or committees to encourage new business establishments, developing supportive customer service policies, and providing predictable regulatory processes that are committed to respecting developers and residents. An incubation center for technology and science start-ups, TechSandbox moved to Hopkinton after selectmen voted to waive building permit fees and explore a special tax arrangement.

Marlborough, Massachusetts, formed an economic development corporation that works with local and private investors to create jobs and revitalize the community. The cities of Cambridge and Somerville implemented Buy Local First programs to support sustainable local economies and vibrant communities.

Three Steps

To understand how various components influence local and regional economies, local governments can design and implement this type of three-step process:

Develop an economic profile of your city or county. Include an appropriate set of metrics, and then examine historical performance. Examples of these metrics include payroll data from local employers; the tax base and rates; commercial land available; office and retail vacancies; school budgets and per-pupil expenditures; housing starts and trends; local revenues; cost-of-living measures; number of employers by sector; job statistics; and population trends and demographics.

With this information, a city or county can better understand how the local economy works, including its strengths, weaknesses, and hidden potential.

Develop an economic portrait of your community’s primary industry and small business sectors. This portrait should include nonprofits. In Worcester, Southborough, and Cambridge, for example, nonprofits are major employers, and they have a significant influence on the performance of a community’s economy.

Do not forget to track and support the DBA (doing business as) companies, too. They are potential incubators for larger enterprises, new jobs, and growing your municipality’s economy.

Additional industry possibilities may include manufacturing, software, medical devices, finance, education, health care, information technology, tourism (leisure/hospitality), public sector, construction, legal, retail, and professional and business services. The economic portrait will provide a wealth of information and assist local leaders to answer three questions:

1. How do we support local businesses and nonprofits?
2. What industries should we strive to retain or attract?
3. Are we too dependent on any particular industry? If so, how might that dependence be a problem or strength for encouraging job growth?

Only a diverse business base can help local governments survive economic storms and capitalize on opportunities during prosperous times. Certain metrics can be highlighted within industry sectors that include number of local employees, top employers, income data, products and services made or provided locally, economic outlook for each sector, and contact information for business and nonprofit leaders.

Outreach then becomes possible. Southborough’s Economic Development Committee schedules meetings monthly with business and nonprofit leaders to learn how the town can help them prosper.

The Massachusetts Institute of Technology (MIT) developed a community economic development toolbox, where profiles can be viewed of economic indicators by county and profiles compared to state and national data. At the website mass.gov/lwd/economic-data, click on Municipal Data under Other Resources. State offices of economic development and local tax rolls are also good sources for identifying local businesses.

Create and communicate an action plan to interested parties. Assemble and interpret your local government’s financial data and trends. Assess the strengths and weaknesses for retaining and attracting business; integrate economic profile, portrait information, and economic development action plan into the annual municipal budget process.

A review of this information can be useful in determining the best opportunities and planning next steps for job creation and growth. Armed with data, cities and counties can also explore opportunities to create public-private partnerships to reduce the cost of government and improve the delivery of core services.

Officials committed to job growth and economic well-being must come forward in each community and lead in a way that will help ensure fiscal sustainability and quality of life.