Economic development overhaul gives Mayor’s Office more control

Officials say a planned overhaul of the city’s economic development apparatus could give Indianapolis a better shot at landing high-value companies and high-paying jobs by giving the Mayor’s Office more control over potential deals and negotiations.

The plan, which will transfer the city’s job-creation work from the Indy Chamber to a new stand-alone nonprofit, is meant to streamline discussions among the city, existing businesses and companies considering Indianapolis for expansion or relocation by creating a one-stop shop for groups seeking incentives, permitting and other city functions.

“We feel like now is the time for us to step up and make this a more robust organization,” Deputy Mayor Dan Parker told IBJ.

In October, city officials announced the creation of Indianapolis Economic Development Inc., which next year will take over economic development responsibilities from Develop Indy, a division of the chamber that has contracted with the city for the work of landing new businesses and enticing existing companies to remain.

The agency will be a nonprofit rather than a city agency, but Mayor Joe Hogsett, a Democrat in his third term, will have a direct line to its operations. The mayor is chair of the nonprofit’s board and will appoint its CEO. Under the old system, Indy Chamber hired and staffed Develop Indy.

Hogsett plans to appoint former Indiana Secretary of Commerce James Schellinger to the role as soon as the nonprofit’s organization is finalized. Schellinger will report directly to the mayor, replacing the position of deputy mayor of economic development.

Matt Kavgian, executive director of the Indiana Economic Development Association, a trade group that lobbies for development agencies across the state, said the new model could make Indianapolis more appealing to major companies.

The group will be incorporated as a 501(c)6—a federal tax designation specifically for business organizations—with a separate foundation that will be permitted to raise money for trade trips and other ancillary expenses. Both organizations are expected to be officially formed this month, with city-hired attorneys set to finalize bylaws for the organizations soon.

The city now pays Develop Indy about $1 million annually for economic development services through contracts with the Department of Metropolitan Development and the Department of Business and Neighborhood Services.

The new organization will also have a contract with the Metropolitan Development Commission and the City-County Council and will bring proposed project incentives to those bodies for approval.

The new organization’s budget is expected to be $3 million to $4 million in 2025. The city will fund up to half of that; the rest will come from private contributions and grants.

Hogsett said he is confident that having a new structure will significantly improve city functionality and streamline decision-making for economic development projects.

“This new independent organization that we’re seeking to create will be that one-stop shop for businesses, whether they be businesses that we want to help grow in Indianapolis or businesses that we’re trying to encourage to locate in Indianapolis,” he said.

“Why can’t we create an [agency] just like the state has the Indiana Economic Development Corp., which has been a very successful organization … at promoting, exclusively, economic development involving any aspect of the state of Indiana?” Hogsett added.

Zero-sum game?

But not everyone is so confident the Indianapolis Economic Development Inc.—which city officials plan to call Indy Economic Development—will be more impactful than Develop Indy has been.

Doug Noonan is a professor of public policy at Indiana University Indianapolis. He said he has reservations about the city’s plan, in large part because he’s skeptical that aggressive economic development policies and programs are effective at any level of government.

“Those [groups] doing the least are the ones who are doing the right and the best strategy,” Noonan said. “I don’t think there’s generally much evidence, and even less theory, that would suggest that this kind of stuff is actually, in the long run and on net, good for actual economic development in a region.”

Noonan said he considers the traditional municipal approach to economic development—providing incentives and tax abatements for job creation—to be a way for cities to “subsidize really rich people and big, wealthy businesses at the taxpayers’ expense.”

“Most of the local and regional efforts are essentially playing this sort of zero-sum game. It’s an arms race to try to compete with each other to land the next automobile plant or something,” he said. “And on net, it doesn’t actually help the overall economy. It generally worsens it, so cities that are playing the game the least, they’re probably the ones that are doing the best.”

Noonan said while he sees value in streamlining the city’s toolkit for development, including bolstering staff and creating an agency that can serve a multitude of business needs, the most important move would be developing a pipeline of workers that are ready to move into new jobs. “So when you get beyond the finance and the land pieces they need, I think that’s something Indy could look at: to tailor programs to either guarantee or help bolster that pipeline,” he said.

More city control

Hogsett said less than 30% of the city’s economic development leads are generated by Develop Indy, with most coming from the IEDC or the Indy Partnership, a regional economic development group.

“Success of this new organization is going to be [measured] in terms of landing job deals” for Indianapolis, the mayor said. The new agency will continue to work with those groups for new jobs, but Indianapolis can be more independent in its business dealings, he said.

Kavgian, with the state development association, said he’s not surprised that such a large portion of the city’s economic development leads comes from outside Develop Indy. He added that the city could certainly increase its share of self-generated leads for new business, but he expects it will continue working with the state for major projects.

“Many cities around the country rely on state-level resources and networks to attract attention from national and international companies,” he said. “While Indianapolis can build upon its own lead-generation capacity over time, it should also continue to leverage the collaboration and resources available through state partnerships.”

Erin Sweitzer, deputy chief of staff and vice president of external affairs for the IEDC, said the state is interested in helping the city with its transition to a new structure.

“We look forward to working with the city of Indianapolis as they develop a new economic development organization and will partner with them as we do all regional and local economic development groups statewide,” she said in a statement.

More than 30 business executives have been involved in the effort to consider options for the future of Develop Indy since last year. The Hogsett administration hired Katie Culp, CEO of Indianapolis-based advisory firm KSM Location Advisors, to hone the plan for the city’s economic development structure. Indianapolis officials looked at Columbus and Cincinnati in Ohio; Kansas City, Missouri; Austin, Texas; and Nashville, Tennessee, as cities after which they could model the new organization.

(IBJ Media owner Nate Feltman, who is also IBJ’s publisher and a former state secretary of commerce, served on the Indianapolis Economic Development Task Force that researched and recommended the change.)

A business perspective

Parker said Schellinger brings to the role something many of the task force members considered important: business experience.

Schellinger has been involved in the Indianapolis business community since 1987, when he joined Indianapolis-based CSO Architects, eventually becoming president, then CEO and chair. He also ran for governor in 2008 but lost to Jill Long Thompson in the Democratic primary.

He was appointed IEDC president by then-Gov. Mike Pence in 2015, then named secretary of commerce in 2017, remaining in the role until March 2021.

During Schellinger’s time at the state, the IEDC secured at least $32 billion in planned capital investment. That included agreements between the agency and the city of Indianapolis for a new Elanco Animal Health Inc. headquarters at the former General Motors stamping plant and a campus for technology consulting company Infosys Ltd. near Indianapolis International Airport, a project that has struggled to get off the ground after being deterred by the pandemic.

“I’ve been around quite a while, but where we’re at as a city is pretty cool; it’s probably the best I’ve ever seen,” Schellinger told IBJ in October. “We always have to improve, but … I go around the world sometimes and come home and kiss the ground I walk on because this is a pretty good country, Indiana is a pretty good state, and Indianapolis is the center. We take that for granted too much.”

Noonan, with IU Indianapolis, said he is hopeful—but not optimistic—that the new agency’s structure will mean more than “landing big fish.” He said he’d like to see the new entity focus on small and medium-size businesses, including growing mom-and-pop shops and startups.•