Recommendation: Pursue regional economic development

Overcoming metropolitan Chicago’s prolonged slow growth and uneven access to opportunity will require a shared vision for the regional economy. Initial success under the CRGC can help demonstrate the benefits of collaboration among the region’s political and economic development leaders. With sustained private sector engagement and institutional support, CRGC can play a critical role in focusing economic development activities and marshaling resources to address issues that cut across the region’s diverse industries and communities. Such initiatives include improving freight movement in the region, integrating data and information systems for rigorous market analysis, and assembling support for prioritized, multijurisdictional infrastructure investments. Regional coordination among economic development organizations (EDOs) should especially emphasize cluster-oriented strategies by convening business leaders and partners like anchor institutions to address shared, sector-specific challenges. This strategy also appears in the Governance chapter, under the recommendation to Use collaborative leadership to address regional challenges.

The majority of economic growth is occurring abroad and opening new market opportunities that can support prosperity at home. Like peer regions, metropolitan Chicago has relied on exports and foreign investment to help sharpen its economic competitiveness since the 2007-09 recession.^{{{Brookings Institution, “The 10 Lessons from Global Trade and Investment Planning in U.S. Metro Areas,” 2015, https://www.brookings.edu/wp-content/uploads/2016/06/TenLessons.pdf}}} The region’s manufacturing exports increased by nearly 37 percent during 2005-16, beating growth rates in New York and Los Angeles.^{{{Chicago Metropolitan Agency for Planning, “Regional Economic Indicators,” 2017, http://www.cmap.illinois.gov/economy/regional-economic-indicators/trends/.}}} Yet many small- and medium-sized businesses here do not currently export their specialized or high-quality products and services. Foreign direct investment can also fortify the region’s connections to global markets. Coordinated efforts have already yielded positive results in expanding, retaining, and attracting such investments, which improve businesses’ access to capital and global markets.^{{{The Chicago Council on Global Affairs, “Foreign Direct Investment: Globalizing Chicago’s Economic Development Plans,” 2012, https://www.thechicagocouncil.org/publication/foreign-direct-investment-globalizing-chicagos-economic-development-plans.}}} In responding to the pressures of global competition, the Chicago region must enhance its credibility and saliency as a center for international business development. Research has found that racial and ethnic diversity and openness to immigrants strongly contribute to regional growth in employment and productivity by broadening the talent pool available to businesses.^{{{Randall Eberts, George Erickcek, and Jack Kleinhenz. “Dashboard Indicators for the Northeast Ohio Economy: Prepared for the Fund for Our Economic Future,” Federal Reserve Bank of Cleveland Working Paper, no. 06-05, 2006}}} Metropolitan Chicago should leverage not only its diverse industry mix and institutions, but also its diverse residents who have formal and informal connections worldwide.

The State of Illinois and metropolitan Chicago can do more to align economic development efforts across units of government, consistent with rigorous market analysis.^{{{Chicago Metropolitan Agency for Planning, “Reorienting State and Regional Economic Development: Challenges and Opportunities for Metropolitan Chicago,” December 2014, https://cmap.illinois.gov/wp-content/uploads/FY15-0023-REORIENTING-STATE-AND-REGIONAL-ECONOMIC-DEV-REPORT.pdf.}}} In 2013, the Illinois General Assembly passed a law requiring the Department of Commerce and Economic Opportunity to develop a statewide, five-year strategic plan for economic development that leverages and enhances existing programs and incentives.^{{{Illinois General Assembly, Public Act 98-0397, 98th General Assembly, 2013.}}} The initial plan was developed with minimal engagement of stakeholders from our region despite its outsized role in the state’s economy. Meaningful engagement of local leaders from across the state could improve future planning processes and implementation. Ongoing strategic planning can identify where stakeholders should focus public investments based on the region’s priorities, unique assets, and complex challenges. Moreover, the plan and subsequent implementation could be strengthened by differentiating supports to the very diverse economies across Illinois. Emerging challenges and opportunities may warrant new or expanded economic development activities. However, the state should work to alleviate and reduce challenges that administrative processes and regulatory actions can address. Examples may include regulatory barriers, fiscal and tax policies, permitting processes, education and workforce development, and physical infrastructure. Activities should be tailored as appropriate to sustain a more stable and reliable environment for business.

At every level, government should support a healthy economy by investing in public goods, ensuring fiscal stability, and avoiding uncertainty for businesses and investors. Yet recurring gridlock in state government demonstrates that Illinois has not yet found political consensus on how to address significant unfunded liabilities or modernize the tax code to maintain current services. Persistent state and local fiscal uncertainty undermines metropolitan Chicago’s business environment. Business investment and development strategies can take several years to implement, and firms desire stable, predictable tax rates and government services that enable them to forecast operational costs. Over time, the State of Illinois’ fiscal condition can erode the advantages of operating in the Chicago region.

State-level fiscal concerns can also negatively affect planning and revenues at the local level. Local governments may not be able to rely on federal and state revenues for future capital investment, economic development, and other activities.^{{{Chicago Metropolitan Agency for Planning, “Revenue trends for transportation funding in the Chicago region,” April 2017, Revenue trends for transportation funding in the Chicago region}}} The State of Illinois should implement fiscally sustainable practices to ensure a stable business environment and guarantee the reliability of state support for local governments, education and training providers, transit agencies, and nonprofit service providers.