Handbook for Local Economic Assessing Package 

Economic Development Research Group 1 

Handbook: 

Assessing Local Economic Development 

Opportunities with ARC-LEAP 

Appalachian Regional Commission 

Local Economic Assessment Package 

prepared for the 

Appalachian Regional Commission 

prepared by 

Economic Development Research Group, Inc. 

Glen Weisbrod 

Teresa Lynch 

Margaret Collins

January, 2004 
Handbook: 

Assessing Local Economic Development 

Opportunities with ARC-LEAP 

Appalachian Regional Commission 

Local Economic Assessment Package 

prepared for the 

Appalachian Regional Commission 

prepared by 

Economic Development Research Group, Inc. 

2 Oliver Street, 9th Floor, Boston, MA 02109 

Telephone 617.338.6775 

Fax 617.338.1174 

e-mail info@edrgroup.com

Website www.edrgroup.com 

January, 2004
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group i 

Table of Contents

1. INTRODUCTION............................................................................................................................ 1 

1.1 Objective and Overview .................................................................................................... 1

1.2 Applicable Economic Development Situations ................................................................. 3 

1.3 Limitations of Analysis...................................................................................................... 4 

1.3 Organization of the Handbook........................................................................................... 6 

2. DEFINE STUDY AREAS................................................................................................................. 7 

2.1 Identify the Study Target Area .......................................................................................... 7 

2.2 Identify Comparison Areas................................................................................................ 8 

3. LOCAL ECONOMIC PERFORMANCE ANALYSIS ............................................................................. 9 

3.1 Employment Data .............................................................................................................. 9 

3.2 Business Mix Analysis..................................................................................................... 10 

3.3 Business Trend Comparison ............................................................................................ 10 

3.4 Interpretation of Economic PerformanceAnalysis........................................................... 11 

4. QUANTITATIVE MEASUREMENT OF AREA CHARACTERISTICS ................................................... 12 

4.1 Cost Factors ..................................................................................................................... 12 

4.2 Demographics: Labor and Customer Markets ................................................................. 13 

4.3 Access: Transportation, Tourism and Telecommunications............................................ 13 

4.4 Interpretation of Cost, Demographic, & Access Factors ................................................. 14 

5. RATING LOCAL FACILITIES AND RESOURCES ............................................................................ 15 

5.1 Business Support Programs (Worksheet 1) ..................................................................... 15 

5.2 Land Inventory (Worksheet 2)......................................................................................... 15 

5.3 Building Inventory (Worksheet 3)................................................................................... 18 

5.4 Labor Force Assessment. (Worksheet 4)........................................................................ 18 

5.5 Tourism Assessment. (Worksheet 5) .............................................................................. 20 

5.6 Interpretation and Use of Worksheet Results .................................................................. 20 

6. EVALUATION OF RESULTS ......................................................................................................... 23 

6.1 Industry Performance Assessment Results ..................................................................... 23 

6.2 Diagnostic Analysis Results ........................................................................................... 24 

6.3 Policy Analysis Results................................................................................................... 25 

7. DEVELOPING A STRATEGIC PLAN .............................................................................................. 26 

7.1 SWOT Review: Where are we now?............................................................................. 26 

7.2 Vision and Goal Formulation: Where are we going? .................................................... 27 

7.3 Strategy Development: How do we get there? ............................................................... 29 

7.4 Monitoring & Evaluation................................................................................................ 31 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 1 

1. INTRODUCTION

1.1 Objective and Overview 

Objective. A central role of economic developers is to help increase job opportunities and 

income levels for area residents, by supporting economic growth – including the retention and 

expansion of existing business, as well as the development and attraction of new business. To 

effectively pursue these objectives, economic developers must focus and target their efforts 

towards those types of business that represent best prospects for local economic growth. By 

assessing the relative competitiveness of local facilities and resources for serving those types 

of business, it is also possible to identify priorities for local improvements that can best help 

to attract and grow these target industries. 

This handbook sets out to define key concepts involved in evaluating an area’s economic 

performance, identifying targets for further economic development, and defining priorities for 

improving local economic competitiveness. It may be of interest to any practitioner or student 

of economic development, as a source of information on factors that are most often 

considered in economic development evaluation and strategy development. However, it 

specifically defines concepts and terms used in a companion software tool called LEAP -- 

“Local Economic Assessment Package.” LEAP was designed and developed by Economic 

Development Research Group, Inc. (www.edrgroup.com) as a tool for economic development 

practitioners, and it carries out all of the various types of analysis described in this handbook. 

ARC-LEAP is a version of this tool developed specifically for the Appalachian Regional 

Commission (ARC) and it’s Local Development Districts (LDDs). Development of this 

handbook and accompanying user guide was funded by ARC as a companion to the ARCLEAP analysis system. 

Overview. The processes defined in this handbook and carried out in the ARC-LEAP 

analysis system serve three related purposes, each aimed at helping practitioners identify 

target industries for economic development. 

(1) Economic Assessment – as an evaluation tool for local practitioners to assess current 

economic conditions and likely future trends. 

(2) Targeting Diagnostics – as a diagnostic tool to aid practitioners in targeting industries 

that can provide the most appropriate basis for economic development. 

(3) Policy Analysis – as an analysis tool for assessing potential economic development 

consequences of future policy initiatives which can affect local costs, labor force skills 

and/or infrastructure characteristics. 

 

The Economic Assessment portion of the analysis system provides baseline economic profiles, 

trends and growth projections for 71 industries. In addition, each of these industries is 

evaluated in terms of the extent to which it currently has an economic performance gap and a 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 2 

further potential for local business attraction. An area is classified as having an economic 

performance gap if either (a) that industry’s share of local employment is significantly lower 

than its corresponding share in a comparable area, or (b) local employment change in that 

industry has lagged behind that industry’s national average performance. This element of the 

economic assessment is sometimes referred to as “economic base analysis.” 

A second element of the Economic Assessment evaluates local business growth/attraction 

potential for each industry through ratings of local area advantages and disadvantages for 

supporting business growth and attraction. Advantages and disadvantages are defined on the 

basis of: (1) costs of labor, materials, utilities, transportation and taxes, and the sensitivity of 

each industry to those cost factors; (2) size and characteristics of the local area’s workforce, 

and the sensitivity of each industry to these labor force qualities; (3) access, times and costs 

for different modes of transportation (i.e., highway, air, rail, and marine), and the sensitivity 

of each industry to these access factors; and (4) quality and supply of local infrastructure and 

facilities to serve economic growth. In other words, the ARC-LEAP model identifies sets of 

industries that are good targets for economic development by matching an area’s labor and 

infrastructure characteristics (e.g., wage rates, education levels, airport access) with operating 

requirements of each industry. 

The Targeting Diagnostics portion of the analysis system includes a set of area diagnostics 

that assess the local area’s competitiveness (relative to a comparison area chosen by the user) 

for each industry. In addition, more detailed diagnostics are presented for each industry for 

which there is a potential for additional business attraction. This set of diagnostics identifies 

“critical” and “important” weaknesses that need to be addressed if the area is to fulfill some of 

the growth potential identified in the local area assessment. The diagnostics presented in 

ARC-LEAP are developed by looking at each industry’s sensitivity to different factors and for 

the factors most important to an industry, the strength of the local area relative to the 

comparison area. Factors assessed in the diagnostic portion of the model include total 

production costs; labor costs; energy costs; tax burdens; availability of labor (i.e., “work 

base”); availability of skilled workers; water transportation; air transportation; rail 

transportation; highway transportation; and availability of broadband. 

The Policy Analysis portion of the analysis system allows users to analyze the effects of 

alternative future policies and investments on the future business attraction potential of a local 

area. Users can estimate the likely business attraction impacts of changes in availability or 

quality of key labor and economic infrastructure factors, such as changes in labor force size 

and skill levels; broadband access; tax policy; availability of commercial land, industrial 

parks, office sites; access to airports, sea ports, and rail; and improvements to highways. 

Estimates of these presented as estimated new jobs associated with improved business 

attraction potential. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 3 

1.2 Applicable Economic Development Situations 

This handbook can be relevant for cities, counties and multi-county districts that seek to 

critically evaluate their economic performance and develop targeted strategies for stimulating 

further economic development. There are five types of situations in which this type of 

evaluation and strategic targeting may be particularly useful. In each type of situation, the 

nature of the economic performance problem and potential corrective policy actions may 

differ. These situations can be broadly classified as follows: 

• High unemployment and low wages are economic problems that affect local quality of 

life and opportunities for area residents. Such problems may be a result of low skill 

levels, a mature or declining economic base, a narrow economic base which is highly 

dependent on one or a few sectors, poor access to jobs, or competition from other 

regions. Targeted economic development efforts in areas with chronically high 

unemployment may focus on expanding the breadth of the economic base, through 

employment and training programs to increase labor force skills, and/or improvement in 

facilities and services to increase the business viability of the area. 

• Seasonal fluctuations in employment also negatively affect income levels and job 

opportunities. Such fluctuations generally result when an area’s economy is overlydependent on seasonal tourism/ recreation or resource-based (e.g., agriculture) industries 

that experience high demand during some parts of the year and then a significant drop in 

demand in the “off-season”. During the “off-season”, unemployment increases, income 

levels decline, and ripple effects such as declining retail sales are felt throughout the 

local economy. Targeted economic development efforts in an area with seasonally 

fluctuating employment may focus on broadening the area’s business base. 

• Isolation and lack of local opportunities can limit economic growth in areas with a small 

population base and limited access to markets. As limited local options lead residents to 

travel elsewhere for shopping and services, there is an outflow of income. Isolation 

from labor and customer markets can also constrain the area’s ability to retain and grow 

businesses and attract new activities. These factors can become even more problematic 

as changes in technologies and global trade further reduce local employment and access 

to goods and services, over time. Targeted economic development efforts for such areas 

may successfully focus on industries that are not sensitive to existing access constraints, 

or are most responsive to planned future improvements in transportation access. 

• Over-dependence on a particular industry or a few large employers can make even 

economically strong areas at risk of future economic stagnation and decline. In these 

cases, an industry downturn caused by external factors (such as changes in the cost of 

production inputs, changes in technology, changes in consumer tastes or increased 

foreign competition) or by internal factors (such as poor management, or company 

restructuring) can have devastating impacts on a community. For areas that are highly 

dependent on single industry or a few large employers, targeted economic development 

efforts may focus on diversifying the base of business activities. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 4 

• Competition for business locations can be a continual risk and concern, even for areas 

with a strong economy. Frequently, the risk of competition is not identified until after a 

region begins to lose businesses to a competing area. A targeted economic development 

strategy aimed at sustaining a competitive business climate can offset this threat. 

Depending on the specific industries to be targeted, such a strategy could seek to 

improve local business operating costs, labor force training, local infrastructure and 

business support services, and/or transportation access. 

All five types of situations illustrate how economic development efforts must be targeted to 

support specific types of business growth that address particular local problems or concerns. 

These situations also illustrate how business targeting efforts must be coordinated with efforts 

to improve local competitiveness factors. The targeting diagnostics element of ARC-LEAP is 

designed specifically to help match these business targeting and local competitiveness factors. 

1.3 Limitations of Analysis 

The techniques for critical economic assessment 

and targeting diagnostics described in this 

handbook (and contained in the ARC-LEAP 

system) are intended to be used and viewed as 

“tools” for economic development practitioners, 

planners and analysts. They do not replace the need 

for local understanding and professional judgment. 

Any analysis system can be abused, as 

inappropriate inputs can lead to unrealistic results. 

Some of the most critical factors affecting accuracy 

of this analysis system are identified below: 

1. Basis for Comparison. By definition, any 

rating of business performance and area 

competitiveness has a reference basis for 

comparison. As discussed in Chapter 2, the 

basis for comparison may be an adjacent or 

surrounding area, the rest of the state or 

some other defined region that is 

comparable or representative of achievable 

goals. The comparison of areas can yield 

important insights, but care must be taken to 

avoid nonsense results from inappropriate 

comparisons (such as finding that a 

mountain region has a shortfall of seaport 

activity). 

2. Business Classification. All currently-available measures of business concentration 

and trends are based on classification of businesses by industry. Analysis of business 

(1) Economic Assessment –

evaluation tool to rate 

current economic 

performance and trends 

(2) Targeting Diagnostics –

diagnostic tool to target 

prospective industries for 

further growth & attraction 

(3) Policy Analysis – 

analysis tool to assess 

consequences of future 

scenarios & public actions 

Uses of the Local Economic 

Assessment Package
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 

concentration and trends can be very useful to help identify relative strengths and 

weaknesses of a region. However, all industry classification systems share the 

common limitation that they do not distinguish between a manufacturing company’s 

administrative office and its factories. As a result of this limitation, the analysis may 

not recognize some specialized local strengths or weaknesses. 

3. Detail on Area Competitiveness. The analysis relies on empirical data that is readily 

available, to the extent possible. The level of available detail is stronger for some 

economic development factors than for others. (For instance, the level of access to 

transport facilities can be measured in terms of minutes, but the level of access to 

broadband networks is less precisely measured.) As a result, some local advantages 

are better represented and recognized than others. 

4. Differences in Business Sales and Employment Trends. The analysis framework is 

based on the concept of identifying local economic gaps and factors causing them. It 

is possible to define local economic gaps on the basis of either employment trends or 

business output trends. In reality, these two types of trends may diverge for some 

industries in some areas (as in the case of industries undergoing technological change, 

where there can be a decline of local employment while local business output 

expands). However, the analysis framework cannot consider a local industry to be 

both declining and growing at the same time, so it is necessary to choose just one 

measure. The current version of ARC-LEAP relies on employment statistics as the 

basis for measuring business gaps. This is also consistent with the primary focus of 

many economic developers on expanding employment opportunities for local 

residents. 

5. Interpretation of Industry Targets. ARC-LEAP identifies economic development 

target industries and also estimates the magnitude of potential opportunities for 

business growth and attraction. However, it is important to understand the nature of 

these targets. Quite bluntly, if the local area was already sufficiently attractive to 

those industries, then those industries would have already located and/or expanded in 

the area. Viewed in this context, the industry targets should be seen as merely 

indicating likely opportunities for additional economic growth, though even they will 

require additional effort to be attracted to the area. 

All of these types of limitations, discussed above, illustrate how findings on economic 

development analysis and targeting methods must be carefully interpreted to avoid oversimplification. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 6 

1.3 Organization of the Handbook 

This handbook is organized into seven chapters, each representing a distinct element of local 

economic performance analysis. This introduction (Chapter 1) provided an overview of 

analysis system capabilities and limitations. Chapter 2 explains how to define the study area 

and a comparison area. The next three chapters then explain the types of information to be 

collected and considered in local economic performance analysis -- grouped in terms of 

(Chapter 3) business mix and trend statistics, (Chapter 4) quantitative measures of area 

characteristics, and (Chapter 5) qualitative, worksheet-based ratings of area facilities. All 

three types of information are considered together in developing findings on economic 

development opportunities and needs, as explained in Chapter 6. Finally, Chapter 7 discusses 

how to apply the findings in an economic development targeting strategy. 

 Figure 1-1. Flowchart: Logic of Handbook Organization 

Introduction: Define Objectives 

 (Chapter 1) 

Business Mix 

and Trends 

(Chapter 3) 

Measure Area 

Characteristics 

(Chapter 4) 

Rate Facilities and 

Resources 

(Chapter 5) 

Strategy Planning 

(Chapter 7)

Define Study Areas 

(Chapter 2) 

Interpretation of Results: 

Potential Opportunities 

(Chapter 6) 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 7 

2. DEFINE STUDY AREAS

The first step in assessing economic performance and opportunities is to clearly define your 

area of analysis – to ensure that your analysis focuses on the area you care about, and to 

ensure that you collect appropriate data. The second step is to define your basis for 

comparison – so that relevant and meaningful conclusions can be drawn from the analysis. 

These decisions will affect the rest of the analysis, and can also determine the kinds of local 

and regional experts and stakeholders to be involved. This chapter describes factors to 

consider in making these study area decisions. 

2.1 Identify the Study Target Area 

The target area is the area for which you will be analyzing economic performance and 

competitiveness, and identifying potential future business targeting opportunities. The first 

step is to define the study target area. There are four factors to consider in the selection of the 

study target area: 

(1) The area of your agency focus. It makes sense to assess economic strengths and 

opportunities for the area in which your agency has direct interest and/or jurisdiction 

for taking action. If your agency is focused on local economic development, then this 

focus area may be just the city or else the city plus the rest of the surrounding county. 

If your agency is a regional agency, then the focus area may be a county or 

aggregation of multiple counties. 

 

(2) The economic market area. Businesses make some location and expansion decisions 

by considering characteristics of the labor market, shopper market and/or business 

market. These market areas are usually county or multi-county areas. For this reason, 

it can be misleading to evaluate the business performance and target opportunities of 

one town isolated from the larger market context. Thus, it is usually preferable to 

identify the study area as a county or multi-county area. 

(3) The area of most appropriate data availability. Another consideration in defining 

your study area is data availability and accuracy. More detailed and accurate 

economic data is often available at the county level than at the town or neighborhood 

level of geography. Also, the larger the area you choose for analysis, the more 

economic development resources may be available to aid in data collection and 

evaluation. However, unique aspects of local business mix and growth patterns and 

other business competitiveness factors can be diluted if too large of a multi-county 

area is selected for analysis. 

(4) Project or policy impact area. If you intend to use ARC-LEAP to assess the impact of 

proposed infrastructure or policy actions on economic development opportunities, then 

it may also be appropriate to consider the area directly affected by that proposed 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 8 

action. For instance, if you are interested in assessing how a new highway connection 

or tax incentive may affect business targeting opportunities, then it is important to 

ensure that your definition of your study area and comparison area will serve to 

highlight and not obscure the impact. At a minimum, care must be taken to ensure 

that projects and policies to be assessed will be those that affect the study area but not 

the surrounding or adjacent comparison area. Care must also be taken in interpreting 

findings for different size study areas. For instance, it could also be inappropriate to 

make judgments about the overall magnitude of impact from a proposed future action 

if the selected study area is much smaller than the area actually affected by that action. 

 

Normally, the study area will be a county or multiple-county region. ARC-LEAP requires 

that users make a single name for this study area and then provide all input data about area 

characteristics (defined in Chapters 3, 4 and 5) for this aggregate study area. 

2.2 Identify Comparison Areas

To draw findings on a study area’s business performance and competitiveness characteristics, 

it is necessary to relate those area characteristics to appropriate comparison areas. There are 

two kinds of appropriate comparison areas: 

(1) Local Comparison Area. The first kind of comparison area is the reference against which 

to compare local business mix, business cost and other business competitiveness factors. The 

local comparison base is usually an adjacent or other nearby area that can be construed as 

competing to attract and expand many of the same types of industries. This could be: 

• an area next to the study area 

• a region totally surrounding the study area 

• one or more similarly-sized urban regions, elsewhere in the state 

• one or more similarly-sized rural regions, elsewhere in the state 

In general, the comparison area should be of a similar urban/rural density and share similar 

natural resources (such as terrain, coastal/lake/river accessibility, etc.) The advantage of 

selecting an adjacent or other nearby area is that this increases the likelihood of having similar 

terrain and natural resources, avoiding obviously bogus findings (such as the lack of mining in 

a maritime region or the lack of water transportation is a flat farming region). 

(2) Industry Trend Comparison Area. The other kind of comparison area represents the 

reference against which to compare local business trends. The trend comparison area is most 

often the nation, continent or world. The reasoning behind this is that, regardless of why a 

given industry may be over- or under-represented in a local area, once there we can expect its 

local expansion or contraction trend over time to vary over time in a manner reflecting 

national or global growth or decline trends for that industry. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 9 

3. LOCAL ECONOMIC PERFORMANCE 

ANALYSIS

The first data collection and analysis element of the ARC-LEAP model evaluates the mix and 

performance of industries in your study area by comparing your area with other local areas 

and with national averages. This is used to identify which are potential sources of future 

economic growth in the study area. This process can form the basis for identifying target 

industries for recruitment to the study area. 

3.1 Employment Data 

The ARC-LEAP model uses shift-share and location quotient techniques to help you analyze 

the performance of industries in your area compared with similar areas and with national 

averages. Data on the number of jobs in fifty-seven 2-digit SIC industries are used to measure 

the mix and trends within local industries in the study area. Employment data are used 

because job creation is the principal objective of local economic development policy. 

Because they are collected annually, they are some of the most current economic data 

available. 

There are a limited number of national sources that report employment data by SIC. One 

source is the US Department of Census’ County Business Patterns, which can be found online at a number of sites, including one maintained by the Department of Census and one by 

the University of Virginia. Both sites include SIC employment data for each county and state 

in the US, as well as national totals. Data on the Department of Census’ site goes back to 

1988; data on the University of Virginia’s site go back to 1977. On both sites, the last year 

for which SIC-based employment data is available is 1997. After 1997, County Business 

Pattern data are reported by NAICS code. These are not comparable to the pre-1998 SIC 

classes. 

The most current data for historic trend analysis is published by the Minnesota IMPLAN 

Group, Inc (MIG). MIG collects employment data for 528 detailed sectors, for each county 

and state in the US and converts them to SIC data. The latest data currently available is for 

2000. The Appalachian Regional Commission (ARC) has licensed the use of MIG data by 

counties within the ARC region. Because it has current data by SIC code to compare with 

historic data, it is the recommended source of employment data for the ARC-LEAP model. 

Unfortunately, in some rural or sparsely-populated industries with relatively few businesses, 

employment data are sometimes suppressed for confidentiality purposes. In cases where data 

are suppressed, a letter is usually provided that gives an indication of the range of jobs. If the 

user is using CBP data and encounters suppressed data, the user should replace the letter with 

the midpoint of the range (as detailed in the User Manual for the model). 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 10 

Some individual state and local agencies also compile employment data by county and SIC. 

State and local data should only be used if the available data sets include data for both the 

study and the comparison areas. Under no circumstances should different sources be used for 

employment data for the study and the comparison areas. Mixing of data sources creates 

unreliable results, as the comparisons between areas will be skewed by the techniques used to 

gather and report data in each of the sources. 

3.2 Business Mix Analysis 

The ARC-LEAP model contrasts the performance of current and historic data of your study 

area’s employment structure with that of your comparison area. Ideally, the comparison area 

will be one with a more highly-evolved economic structure that provides an illustration of 

where the study area would like to be in five to ten years. Based on what has been achieved 

in the comparison area, the potential for new jobs is assessed by detailed 2-digit SIC industry. 

The model first calculates the ratio of the concentration of each industry in the study area’s 

economy to the concentration of the same industry in your comparison area’s economy. For 

example, if 10% of employment in your local area is in food products and 30% of 

employment in the comparison area is food products, then the ratio of local to comparison 

area concentrations would be 10/30 or 0.33. This means that your area has one-third the 

concentration of jobs in food products that exist in the comparison area. This ratio is 

sometimes referred to as the Location Quotient (LQ), but we call it a “mix ratio”. 

To simplify the findings based on Location Quotients, a value of 1 to 3 is assigned to each 

industry, with 1 representing a low concentration and 3 being assigned to industries with a 

high concentration. The lower the value assigned to the industry, the greater it’s potential for 

future job growth. 

ARC-LEAP Mix Analysis estimates an “expected number” of jobs that would occur in your 

study area if it had an industry mix identical with that of your comparison area. The model 

uses this to estimate the potential number of jobs achievable in the study areas if it were to 

mirror the performance of the comparison area. Expected jobs are compared with actual jobs 

and a shortfall is calculated. This represents the potential jobs that could be achievable in the 

study area under the right conditions for growth of any given industry. 

3.3 Business Trend Comparison 

The business trend comparison uses Shift/Share Analysis techniques to compare the 

performance of industries within a local study area with national trends in the performance in 

the same sectors. This provides a way to identify the types of businesses that are particularly 

thriving or declining in your area and to compare their performance with the national average. 

Those local industries lagging in growth behind national averages may be seen as weaknesses, 

but they also represent potential future growth opportunities. 

The ARC-LEAP model calculates the percent change in the number of employees in each 

sector for your local area and for the U.S. over the past five years. It then computes the ratio 

of these percentages, which tells you whether the local industry is growing or declining faster 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 11 

or slower than the national industry, or if it is moving in an opposite direction from the 

national industry (e.g., declining while the national industry is growing or vice versa). This 

is sometimes referred to as the "Shift Share Ratio," though we call it the “trend ratio. 

 

To simplify in interpreting trend ratios, the model assigns each sector into a trend category 

(from 1 to 6) depending on the relative growth rate of the local area to that of the industry 

nationwide. The following categories are used: 

1. Industry growing “faster” locally than nationally* 

2. Industry declining locally while growing nationally 

3. Industry growing locally while declining nationally 

4. Industry declining locally “slower” than nationally* 

5. Industry growing locally “slower” than nationally * 

6. Industry declining locally “faster” than nationally* 

7. Industry growing or declining locally at a rate “similar” to national trend* 

 (Or industry not present locally) 

* Note: “Faster” denotes local growth or decline trend that is more than 20% greater than 

the national trend. “Slower” denotes local growth or decline trend that is more than 20% 

less than the national trend. “Similar rate” denotes trends that are less than 20% different. 

3.4 Interpretation of Economic Performance Analysis 

The table below is provided to help in interpretation of the Mix and Trend Ratios generated 

by the ARC-LEAP model. 

Mix 

Ratio 

Trend 

Ratio 

Interpretation 

3 1,7 Local industry is strong 

3 2,5 Local industry is threatened locally, may need attention 

3 3,4,6 Local industry is in national decline, should diversify 

2 1,7 Local strength, should be supported 

2 2,5 Possible opportunity for more growth 

2 3,4,6 Unstable industry, focus efforts elsewhere 

1 1,7 New emerging local industry, should be nurtured 

1 2,5 Weak local sector, should be investigated as possible growth opportunity 

1 3,4,6 Weak local sector in national decline, focus efforts elsewhere 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 12 

4. QUANTITATIVE MEASUREMENT OF AREA 

CHARACTERISTICS

Key factors affecting the location of business include costs of doing business, size of labor 

and customer markets, and access to air, sea, railroad and highway facilities as well as 

broadband telecom networks. These are factors that can be quantified, using readily-available 

data sources. There are additional business location factors that are also important but require 

local field assessment. This latter group includes availability of appropriate land and 

buildings, education and skill training, business support climate and tourism attractions. We 

discuss the quantitatively measured factors in this chapter and the qualitatively assessed 

factors in the next chapter. 

The ARC-LEAP model uses quantitative factors to evaluate the study area’s strengths, 

weaknesses and potential for growth in each of 71 industries. Moreover, the model identifies 

the changes that are needed to overcome weaknesses in order to realize this growth potential. 

4.1 Cost Factors 

An important consideration in business location decisions is costs. When all other things are 

equal, businesses tend to locate where they can minimize costs. Costs of labor, housing, 

electric power and taxes are foremost in this locational calculus. Data regarding these factors 

are entered into the ARC-LEAP model, which both identifies the types of businesses that are 

most sensitive to each cost factor and estimates the employment impact of building on 

strengths and addressing weaknesses with new policy initiatives. 

The ARC-LEAP model evaluates where an area’s total production costs are advantageous or 

disadvantageous for each of 71 detailed industries based on the following detailed cost data 

for the study area: 

• Labor costs. The average manufacturing wage per hour can be the number one factor 

for labor-intensive industries evaluating locations for new production facilities. 

• Electricity costs vary widely by region. Power costs can be paramount in determining 

the location for heavy industries, such as primary metals, which use a lot of power. 

Costs of other utilities (e.g., natural gas) are also important for some industries. 

• State and local taxes. Taxes appear to be minor elements of total business cost, 

though they can still be an important consideration for businesses seeking to minimize 

total costs, and they can also be an indicator of the business climate of the area. While 

the importance of state and local taxes is reduced by their deductibility from federal 

taxes, taxes are still an important factor influencing some investment decisions. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 13 

• Housing costs. Costs of both owning and renting residences is a cost factor that most 

businesses look at before finalizing decisions about new locations. Housing costs are 

particularly important for businesses that relocate staff and pick up the tab for 

excessive housing costs incurred by transferees into a new, higher cost area. 

Most importantly, the importance of each of these cost factors differs systematically by type 

of industry. The ARC-LEAP model makes use of this information to identify how these local 

factors can provide advantages or disadvantages for growing various industries. 

4.2 Demographics: Labor and Customer Markets 

The availability of suitable labor in any given area is a crucial consideration for both 

manufacturing and service industries. The model considers the availability of skilled labor as 

well as the unemployment rate, as key measures of appropriate labor availability. Given a 

sufficient base of skilled labor, areas with a higher unemployment rate may be more 

attractive to some businesses. 

The model also considers size of the labor market as a factor affecting the ability of a 

business to sustain growth. It considers the population within 60 and 180 minutes drive time 

of the middle of the study area. The population base residing within a maximum 60 minutes 

of the study area is an indicator of the relative labor market catchment area. On the other 

hand, the population base residing within a 180 minutes of the study area is a rough indicator 

of the relative amount of residential and business customer base that can be served within a 

one-day (round trip) drive from the study area. 

4.3 Access: Transportation, Tourism and Telecommunications 

Business efficiency is highly dependent on the transportation accessibility of a local area. 

Transportation conditions and improvements to them have the potential to significantly affect 

business access to customer markets and suppliers. We can measure external transportation 

access in terms of the average travel time to airports, marine ports, and rail facilities 

(including both passenger and truck/rail intermodal terminals. We can also measure internal 

transportation access in terms of average speed of highway congestion levels. 

The type of transportation access that is important to businesses differs systematically, 

depending on the industry. For instance: 

• Highway Access. Retailers and personal service businesses often seek strong highway 

access for customer visits, while and wholesale and distribution activities usually seek 

strong highway access for truck deliveries to their customer markets. Road congestion 

can serve to effectively reduce market access for some businesses. 

• Rail. Industries producing commodity products (e.g., grains, coal, minerals) often 

seek rail access for shipping raw materials. Other industries that process those 

commodities (e.g. metal fabrication, food processing and electric power plants) often 

seek rail access for obtaining raw materials. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 14 

• Air. Industries with high value products and broad markets (e.g., electronic and 

medical products) often seek good airport access for rapid shipment of products to 

distant customer markets. 

• Marine ports. Some industries that rely on natural resources (such as wood and 

grains) depend on access to access to inland river and lake ports as well as seaports, 

while other industries that ship overseas depend on access to seaports. 

• Inter-Modalism. Intermodal facilities can allow seamless transfers among modes of 

air, sea, river, and ground transportation like rail, bus, taxi, and auto. For freight 

operations, inter-modal facilities link between trucking and rail, air and sea shipping, 

and can result in cost-saving time reductions in shipping cargos. 

Tourism is another important source of economic growth for some areas. That is directly 

affected by both the strength of local attractions and the availability of access to them via 

highway, rail and/or air travel. 

Finally, it is important to note that the availability of broadband data packet networks and 

services differs among areas, but can also affect business location decisions for an increasing 

number of industries. Bandwidth, redundancy, access prices and availability of integrated 

business data services can all be factors for various industries. 

4.4 Interpretation of Cost, Demographic, & Access Factors 

The impact of cost, demographic, and access issues are different for different types of 

businesses. The ARC-LEAP model considers the sensitivity of each of 71 industries to these 

factors, using a variety of sources1. The ARC-LEAP model compares data on these critical 

factors in the study area with the same data set for a comparison area. This provides a basis 

for identifying how current access conditions serve to affect existing business mix and growth 

All of these transportation and broadband network access factors can also be improved by 

public policy initiatives and by private investment. The model evaluates scenarios related to 

the improvement of trends the transportation and broadband network access and then 

estimates the employment impact of proposed improvements for all 71 different industries. 

 

 

1

 This data on industry sensitivity was derived from the technology matrix of the US Dept. of Commerce inputoutput tables, US Satellite Accounts for transportation and tourism activities, IRS data on business investment, 

US DOT’s Freight Analysis Framework and Commodity Flow Surveys, US Dept. of Labor occupational 

statistics, propriety surveys on broadband activity uses, proprietary studies of just-in-time production processes 

and International Trade Administration data on export modes and ports. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 15 

5. RATING LOCAL FACILITIES AND 

RESOURCES

The previous chapter showed how local conditions relating to costs, worker skills, and access 

can be represented by quantitative data, and then used to assess their impact on the potential 

for economic growth in the study area. Other important factors affecting the study area’s 

prospects for economic development include the conditions of industrial sites and buildings, 

availability of business support programs, and level of local labor force skills and education 

training. This second set of factors are discussed separately in this chapter because they need 

to be measured though a worksheet assessment process that relies on local field observations 

(rather than downloading available public data). 

A series of six worksheets is used to assess additional business facilities and supporting 

resources that affect the study area’s attractiveness for business. These worksheets serve to 

identify and assess the study area’s strengths and weaknesses in terms of business support 

programs, industrial land and buildings, labor force, and other key considerations. These 

worksheets provide criteria for developing ratings that are entered into the ARC-LEAP model. 

The Software Instructions for the model have directions for assigning ratings. . 

5.1 Business Support Programs (Worksheet 1) 

It is important to know what economic development programs exist in your area. Worksheet 

1 lists various categories of business support programs by program type and services offered. 

For each type of program, list the names of specific programs related to economic 

development along with information about eligibility and levels of financial support available. 

You should then rate the quality and coverage of your business development programs on a 

scale of one to ten for input into the ARC-LEAP model. 

5.2 Land Inventory (Worksheet 2) 

A prerequisite for economic development is maintenance of a suitable inventory of sites for 

incoming and expanding industries. Worksheet 2 rates industrial and commercial (office, and 

retail) sites available for new businesses locating or expanding in your study area. Good 

sources for this information are real estate brokers, industrial property developers, and utility 

economic development staff. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 16 

Worksheet 1. Economic Development Program Inventory 

Program Type Check if 

it Exists 

Name of Program Eligibility Rules / 

Target 

Potential Fundin

to Applicant ($) 

Support for Existing Businesses  Counseling  Financing X State loan programs Manufacturing only $10-100 million Support for New Start-Up Businesses  Counseling X Small Business Center counseling program NA  Financing X Revolving Loan Fund business <$1m 

revenue, 

$-5 million 

 Incubator Space X Tech College 

Incubator 

startups only, 2 years $10 – 100k 

Investment Incentive Programs  Land X brownfields program existing buildings variable  Buildings  Equipment Promotion & Marketing of the Area  Tourism X State Tourism Office not applicable NA  Industrial  Downtown/Center Training Programs  Vocation Education  College X entrepreneurship program start-ups NA 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 17 

Worksheet 2 Land Inventory 

Names & locations of 

Major Development Sites 

Best 

Reuse Deficiencies Adv

County Wood Products Industrial Park 

Industrial Access roads not paved, no sewer, no 

high speed telecom available 

20 acres available, elec2.5 miles from interstat

Olsen Glass Factory Retail Brownfield site, contamination 

unknown 

400 acres .025 mi from 

McAlister Farm Office Needs water & sewer 300 acre greenfield site

Steps and Criteria for Completing the Industrial & Commercial Land Inventory (Worksheet 5-2) Step 1: Identify industrial land parcels in your area. A supply of vacant land zoned for industrial and commercial develattracting new businesses into your community. Maintaining a detailed, current inventory of available development sites fundamental for successful economic development. Therefore, it is necessary to identify and record parcels suitable for 

name and location of industrially zoned parcels in Column 1. Step 2: Assess the best reuse prospects for the site. In tandem with other economic developers and real estate sources, mfor each site in column 2 – categorizing it as industrial, retail, office, hotel, institutional, or other. Step 3. In column 3, identify site deficiencies, in terms of failure to meet the most common requirements for business u- Poor Access - Brownfield or contaminated status - Lack of utilities - Distance from interstate highways - Low visibility - wetlands, floodplain, or other environmental designations limiting development - Existence of outmoded buildings with no viable reuse potential 

Step 3: In column 4, identify site advantages, in terms of features above and beyond the basic requirements such as: - Access to an active rail line with a siding - Within 5 minutes drive time to an interstate h- Within 40 minutes from airport with scheduled passenger service. - Vacant building or shell structures already co- In-place sewer, septic, natural gas and/or fiber optic cabling. - Potential for reuse as an incubator for small - Greenfield or cleaned 21E condition - Three or more acres zoned for industrial uses- Space for at least three industrial buildings of 20,000 sq. ft. each. - At least one vacant lot or building. - Paved roads into the park and to sites within the park - Access to electricity, telephone, water, sewer
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 18 

5.3 Building Inventory (Worksheet 3) 

Having available development sites for industry is crucial, but having the right building for a 

given business looking to locate in the area can seal the deal immediately. Worksheet 3 rates 

vacant and available buildings for industrial and commercial uses in you community. In 

today’s fast-paced economy, many businesses do not have the time or commitment to build 

their own buildings. Businesses interested in renting or buying buildings look for areas with a 

choice of competitively priced vacant properties. It is necessary to conduct a thorough 

inventory of all major available buildings offering reuse prospects for new and expanding 

businesses in the study area. 

The building inventory should cover all vacant rental and sale properties with good potential 

for commercial reuse. They can contain a mix of industrial, office, retail, or warehousing 

space. All major available commercial buildings in your area should be listed. Note any 

advantages they offer in size, condition, location, or price in Column 2. Note any drawbacks 

under deficiencies in Column 3. Some key criteria are: 

 10,000+ sq. ft. in one unit  elevators if multi-floor 

 loading docks  basic utility services 

 divisible into incubator units for small 

businesses, with shared services 

 single-story building 

 adequate loading bays 

 15+ foot ceilings  sprinkler systems 

 easy access to a 4-lane highway  fiber optic wiring 

 municipal sewer  construction or renovation in last decade 

5.4 Labor Force Assessment. (Worksheet 4) 

One of the key reasons why many businesses choose to move into a new community is 

because there is a good supply of workers with the right skills for their industry. Worksheet 4 

will help you to assess the perceived strengths and weaknesses of your local labor force. The 

main sources of information for this are likely to be major employers and the local offices of 

the state departments of employment and training. Key criteria to be evaluated are: 

 Worker Skills – Are the skills of the labor force appropriate for new businesses coming into 

the community? Be specific about types of skills and industries utilizing them. 

 Educational Levels– Are there [enough] workers with high school diplomas, 2- and 4-year 

college degrees, and technical training? 

 Education System – Are there programs available to train workers for new jobs brought into 

the community? If so, for what kind of training? 

 Availability of Workers- Although high unemployment is counter to your economic 

development objectives, it does indicate that there is a good supply of workers available. 

Most businesses will be discouraged from opening new locations in an area with tight labor 

markets. 

 Wage rates – Are wages in the local area competitive with other similar places? 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 19 Worksheet 3. Industrial & Commercial Buildings Inventory Please complete this sheet for all major vacant industrial and commercial buildings in the study area. 

Names & Locations of 

Major Buildings Best Reuse Deficiencies Ad

American Twine Building Office Slow elevators, insufficient parking high ceilings, loading dockTech incubator Incubator limited space available, no rail access close to interstate highwa

based shared services 

Moldavian Mills Mixed use 

retail & apts. 

Contamination issues, Good architectural fea

parking, established 

Worksheet 4. Labor Force Assessment 

Factor Strengths We

Worker Skills precision machine service skills (from closed plant), good work ethic Education Levels 85% of the workforce are high school graduates. 

Two-thirds of workers have some college 

Only 20% of workers are 

Education System & Skills Training Programs 

Training program at community college for basic office skills and computer / electronics; Community college has a new, proactive director who wants to work closely with businesses 

no four-year college in the No employer-based trainin

Availability of Workers 

High unemployment, available workforce for 1000 job plant Signif. skilled manual workers due to major plant closures 

Most of the unemployed a

Wage Rates 20% less than state average, attractive to businesses 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 20 

5.5 Tourism Assessment. (Worksheet 5) 

Tourism can be a factor in economic development if your area has special attractions that 

draw a significant number of visitors coming from outside of the region and bringing their 

spending to the region. The ability to develop jobs and income from tourism can be affected 

by three types of actions: (1) improvements in transportation access, as rated in the prior 

chapter, (2) improvements in promotional activities and (3) improvements in the quality of 

visitor experience. The first step, though is to assess existing and potential tourist attractions 

in terms of their attraction and capacity to bring in more tourism, using Worksheet 6. This 

involves three steps 

Step 1: List visitor attractions. Visitor attractions include cultural and historic buildings and 

landmarks, birthplaces of famous local people, museums, and memorials. Scenic or natural 

resource attractions include parks and trails, visitor and interpretive centers, and destination 

recreational sites. Other tourist attractions include sports facilities, theaters or amusement 

parks. List these historic, scenic and special attractions in your area on Part A, Column 1. 

Step 2: Obtain basic descriptors of the visitor attractions. For each of the major visitor 

attractions, obtain information about their primary market draw (local, regional, statewide, 

multi-state, or national). Also obtain information about the volume of visitors to each 

attraction and their “strengths” (opportunities for growth in visitors) or “weaknesses” (factors 

limiting their appeal). Enter this information in part B, Columns 2 – 6. 

Step 3: Assess your area's capacity for supporting more visitors. Obtain information on the 

number of hotels/motels, campgrounds and restaurants, and their capacity. Enter this 

information in to the worksheet. 

5.6 Interpretation and Use of Worksheet Results 

Rating of Advantage/Disadvantage. Based on these worksheets, you can rate your area’s 

resources for economic development in terms of business support programs, land, buildings, 

labor skills, and capacity for tourism. The rating for each of these factors should be rolled up 

into a single rating on a scale of 1 to 10, where 5 is average or similar to comparison areas), 

above 5 is a relative advantage and below 5 is a relative disadvantage. The results should be 

input to the ARC-LEAP model. 

The ARC-LEAP model has information on the relative sensitivity of each industry to each of 

these factors, and combines that information with your ratings to assess the whether your area 

is in a position of strength or weakness for attracting or growing various types of businesses. 

These results can be of particular interest because they can help to explain your area’s 

economic performance; particularly why some industries have been attracted to the area and 

have grown more than others. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 5 - 21 Worksheet 5. Tourism Resources A. Attractions

Visitor 

Attractions 

Market 

Area 

Visitors 

per Yr 

Strengths Weaknesses 

 Historic Attractionsbirthplace of famous country music star National 30,000 national name no good access road, 

limited promotion 

Scenic Attractions federally-designated “Wild & Scenic Rover”, with nearby Crystal Lake 

State 20,000 beauty, recognized by 

Audubon Society 

no signage for boat ramp or parking 

Other Visitor Attractions general store and antique center Regional not available seasonal opening only County historical museum Local B. Facilities for Visitors

Local Services for Visitors 

Number of 

Establishments 

Total 

Capacity 

Strengths Weaknesses 

 Hotels/Motels 2 80 Clean, good facilities seasonal operation  Campgrounds 1 36 near national forest, 

hookups and showers 

seasonal operation 

 Restaurants 3 60 two are lunch only  Other 1 15 Historic Bed & 

Breakfast 

Low visibility 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 22 

Use of Ratings Analysis Results. The information in the worksheets can be used to identify 

competitive disadvantages that are currently holding back your area’s economic growth, and 

that might be addressed as part of a future economic development strategy. You can also use 

the analysis results to identify target industries that are good prospects for future economic 

development, given your area’s current constraints. 

The nature of future strategy actions will depend on the potential business targets which the 

model’s outputs will help you to identify. For instance, if the model identifies a possible 

opportunity for financial services, then it may be particularly useful for you to consider the 

availability of first class office space with broad band or fiber optic telecommunications 

access. If the model pinpoints an opportunity for machinery assembly plants, then availability 

of industrial park tracts with space for large, one-story buildings may need to be evaluated. If 

the model indicates opportunities for electronics manufacturing, then the appropriate labor 

force skills might be the paramount consideration. 

Policy Actions. Critical weaknesses in your economic development resource base should be 

addressed by policy initiatives. Some deficiencies can be remedied more quickly and 

comprehensively by public policy changes than others. Problems that might be addressed 

within a couple of years might include expansion of job training programs, upgrading of 

broadband telecommunications facilities, and/or improving access to intermodal freight 

facilities. On the other hand, problems that may be more difficult to address in the short run 

may include cost of electricity, distance of existing industrial parks to an interstate highway, 

shortages of skilled labor, and limited airline service. 

You can also use the ARC-LEAP model to evaluate potential future policy scenarios. The 

model has a section that allows comparison of current conditions against future scenarios in 

which rating levels have changed. For instance, you might take actions to address current 

constraints by improving labor skills training, quality of available sites and buildings, tourism 

capacity and/or business support programs. In that case, the local ratings for one of more of 

these factors can be changed from deficient to average or better. The ARC-LEAP will then 

identify how changes in these ratings would change the magnitude and mix of business 

targeting opportunities. Through side-by-side comparison of targeting opportunities 

associated with current conditions and a future scenario, you can identify which types of 

policy actions can be most effective in increasing your overall business attraction 

opportunities or your competitiveness for attracting growth in certain key, desired industries. 

These applications are discussed further in the next chapter. 

 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 23 

6. EVALUATION OF RESULTS

This chapter describes the different types of findings that emerge from analyzing information 

assembled in the preceding chapters, and it also discusses their interpretation. 

6.1 Industry Performance Assessment Results 

The starting basis for the ARC-LEAP model is known as the industry performance 

assessment, and it builds upon a technique known as “Economic Base Analysis.” The 

economic base analysis compares the relative mix and growth/decline trends in study area 

economic activity against comparison areas, in terms of 71 industries. The portion of this 

analysis that compares differences in employment mix is known as “location quotient” 

analysis. The ARC-LEAP model location quotients to identify where the local area appears to 

have a shortfall in its representation of certain industries. The other portion of the analysis 

compares differences in employment growth trends and is known as “shift share” analysis. 

The ARC-LEAP model uses two different bases for comparison. It applies business mix 

(location quotient) analysis to compare study area business mix against a nearby comparison 

area that has been chosen because of rough similarities in locational and natural resource 

characteristics. It applies business trend (shift-share) analysis to compares study area business 

growth for each industry against national average growth in that same industry to identify 

industries that are outperforming or underperforming against their counterparts elsewhere in 

the nation. All differences in mix and trend are measured in terms of jobs, because jobs are a 

constant that is not affected by inflation in the valuation of products over time. In addition, 

local economic developers tend to be particularly interested in pursuing economic 

development that leads to further job creation. 

The analysis process has three steps: 

1. By analyzing differences in business mix and trends against regional patterns and 

national trends, the ARC-LEAP classifies local business performance in terms of mix 

and growth trends. For local development personnel who are interested in developing 

employment growth policies, ARC-LEAP provides an “Industrial Trend Rating” to 

identify the types of businesses that are particularly thriving or faltering in the local 

area, compared to performance elsewhere. (The definition of these mix and trend 

categories was defined in Sections 3.4, 3.5 and 3.6.) 

2. The model then identifies industries that appear to be locally under-represented in 

terms of mix and/or locally under-performing in terms of trend, and identifies them as 

possible candidates for improvement. (Note: an under-performing industry is one that 

is growing slower than nationally, declining faster than nationally, or locally declining 

while growing nationally.) For each, there is a measure of the potential for additional 

job growth over a ten year period. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 24

3. Among the candidates for improvement, the model isolates the subset that are in 

industries expected to be growing in the future, and labels then as “strong candidates 

for future growth” through targeted economic development efforts. These are sectors 

that meet two criteria: there is positive additional growth potential in the study area 

and national employment in the sector is expected to grow over the next decade. (The 

model also identifies industries that appear to be already strong in local concentration 

and growth, and identifies them as industries that are already performing well without 

need for further economic development intervention.) 

The findings from this local industry performance assessment are but a first start in the 

analysis process. In the next section, ARC-LEAP evaluates local strengths and weaknesses in 

terms of factors affecting business site location and investment decisions. That information 

is then used to further hone in on best prospects for economic development, and the types of 

efforts needed to best pursue them. 

6.2 Diagnostic Analysis Results 

The diagnostic portion of ARC-LEAP includes a broad set of area diagnostics about business 

advantages and disadvantages for each industry in which there is a potential for further 

business growth and attraction, as identified in the assessment portion of the model. This set 

of diagnostics identifies “critical” and “important” weaknesses that need to be addressed if the 

area is to fulfill some of the growth potential identified in the local area assessment. The 

diagnostics presented in ARC-LEAP are developed by looking at each industry’s sensitivity 

to different factors and for those factors most important to an industry, their relative 

competitiveness in the local area. Factors assessed in the diagnostic portion of the model 

include total production costs; labor costs; land/office costs, energy costs; taxes; availability 

of labor (i.e., “work base”); availability of skilled workers; water transportation; air 

transportation; rail transportation; highway transportation; and availability of broadband 

telecommunications access. 

In other words, the ARC-LEAP model identifies sets of industries that are good targets for 

economic development by matching an area’s labor and infrastructure characteristics (e.g., 

wage rates, education levels, airport access) with operating requirements of each industry. 

For those industries that are currently lagging locally but could offer future growth 

opportunities, it identifies the nature of current disadvantages that need to be overcome in 

order to effectively promote more local business activity. 

Two types of disadvantages are identified: “critical” and “important” local disadvantages. 

• A factor is categorized as causing a “critical” local disadvantage if that factor is very 

important to the competitiveness of a specific industry (e.g., labor costs in laborintensive industries) and the study area’s disadvantage is very large relative to the 

comparison area. 

• A factor is categorized as causing a “important” local disadvantage if: 1) that factor is 

very important to the competitiveness of a specific industry (e.g., labor costs in labor-
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 25

intensive industries) and 2) the Study Area’s disadvantage is significant but not huge 

relative to the Comparison Area; or if: 1) that factor is relatively important to the 

competitiveness of a specific industry (e.g., labor costs in labor-intensive industries) 

and 2) the Study Area’s disadvantage is significant or even large relative to the 

Comparison Area. 

For each business factor, ARC-LEAP identifies industries that are critically or importantly 

disadvantaged by the current quality or cost of infrastructure. In addition, it estimates the 

number of jobs that could be created if the impediment were removed (i.e., if the quality and 

cost of the factor were the same in the study area as in the comparison area). 

6.3 Policy Analysis Results 

Direct Impacts. The policy portion of ARC-LEAP allows users to analyze the effects of 

future economic development policies and actions on the business growth and attraction 

potential of a local area. Users can estimate the likely business growth and attraction impacts 

of changes in availability or quality of key inputs (labor and economic infrastructure), 

including labor force size and skill levels; broadband access; tax policy; availability of 

commercial land, industrial parks, office sites; access to airports, sea ports, and rail; and 

improvements to highways. Estimates of these presented as estimated new jobs directly 

associated with improved business attraction potential. 

Complementary Industries and Cluster Development. It is important to also consider 

opportunities for building upon inter-industry linkages – in other words, sets of industries that 

build on common needs and buyer-supplier relationships. Complementary industries are types 

of business which are not primary target industries, but which may nevertheless represent 

growth opportunities because they are suppliers of goods and services to the primary target 

industries or otherwise interact with them. In this case, any direct opportunities for business 

growth may also indirectly create opportunities for growth in complementary industries that 

do not directly depend on highway access. 

Making Future Scenarios Occur. None of these potentials, either the direct ones or the 

indirect ones, will automatically come to your area. Rather, a strategy plan is necessary to 

address remaining needs and to actively entice such business growth and attraction. The next 

chapter discusses ways to identify what you need to do to facilitate and encourage the 

potential growth to occur, and how to develop an action plan and strategy to make that 

happen. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 26 

7. DEVELOPING A STRATEGIC PLAN

In the previous three chapters, we have discussed how to gather data to assess your area’s 

economic performance, identify potential opportunities for targeting future business growth 

and attraction, and evaluate policy options to enhance local economic development. In this 

final chapter, we lay out a general process for you to work with other area agencies and 

leaders in forging a strategy plan for pursuing greater economic growth. 

The strategic planning process consists of three basic steps: 

• Part 1: SWOT Review: Where are we now? Discuss the area’s Strengths, 

Weaknesses, Opportunities and Threats (SWOT) with other interested parties. You 

can do this through a review of findings from the analyses described in previous 

chapters -- local economic performance, quantitative competitiveness analysis, and 

qualitative facility/resource assessment. 

• Part 2: Mission Statement: Where are we going? Discuss how the SWOT findings 

and your community values combine to determine a vision of feasible and desirable 

future directions for the area. This serves as a foundation for developing long-term 

goals and objectives. Finally, stakeholders should agree on measurable milestones and 

specific targets for economic development. 

• Part 3: Strategic Plan Development: How do we get there? Develop a program of 

action steps to work toward achievement of the vision and goals. You must agree on 

organizational, staffing and financing plans to pursue the goals, as well as some form 

of monitoring and evaluation to assure their effectiveness. 

7.1 SWOT Review: Where are we now? 

A fundamental step in assessing where your area now stands for encouraging economic 

growth and development is the identification of strengths, weaknesses, opportunities, and 

threats (SWOT) facing your area. The strategy and program that you develop will build upon 

your area's strengths, pursue opportunities, and consider how to improve upon areas that are 

currently weaknesses or threats. You will not be able to “fix” all weaknesses. Those that 

cannot be fixed should nevertheless be noted, as they will influence your decisions about the 

types of businesses your strategy will pursue. 

Preliminary Summary of Findings. The first step in the SWOT Review is to draw together 

the information gathered in the previous chapters: 

 

• summarize findings on the business mix and performance trends (Chapter 3); 

• summarize findings on local competitiveness factors (Chapter 4); 

• summarize findings on the facilities and resources (Chapter 5); and 

• summarize findings on current opportunities and policy alternatives (Chapter 6). 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 27

SWOT Analysis Strategy Meeting. The second step is to convene a strategy meeting of 

stakeholders to develop a common understanding of your area’s economic situation, prospects 

and needs. The group should use the summary of information to: (1) identify the types of 

business that are currently the largest sources of jobs in the area, and the types of business that 

offer the largest potential for future job growth in the area; (2) rate their relative importance 

as either sources of current jobs or potential sources of future jobs; and (3) assess strengths 

and weaknesses of the area’s internal resources (e.g., facilities, programs and labor force) for 

promoting those types of business. The group should also discuss: (4) opportunities and 

threats posed by external factors (e.g., technology change, global economic change or 

government regulations) affecting the area’s prospects for those types of business. Put this 

information into a concise statement such as the SWOT form that is shown in Table 7-1. 

7.2 Vision and Goal Formulation: Where are we going? 

Once you have assessed your strengths, weaknesses, opportunities, and threats, a separate 

series of meetings of key stakeholders in the community should be conducted to achieve 

agreement on: (1) a strategic focus and mission; (2) overall goals for economic development; 

and (3) measurable milestones and targets along the way. 

Formulate a Strategy Focus and Mission Statement. It is important to discuss the major 

trends (opportunities and threats) facing the area, and the values of area residents and 

businesses relative to economic change and quality of life. From that discussion, there should 

be some general agreement on how the community or area wants to see economic growth 

evolve over the next five to ten years. This represents the strategy direction. The mission 

statement should include: a statement of the strategy direction and its reasons, as well as a 

specific time frame, target area and focus on target industries to be pursued. 

In completing this step, it is often helpful for the group to develop: (1) a probable future 

scenario for the area based on no intervention; and (2) a preferred scenario based on 

intervention to pursue economic development targets. The preferred scenario will serve 

as a basis for the vision statement. This can be agreed upon before the end of the meeting or 

it can be drafted afterwards and circulated among participants for comment and refinement. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 28 Table 7-1. Sample Form for SWOT Review Type of Business Coal mining Automotive parts suppliers Current Importance in your Area 

Largest employer Small but growing 

Competitive Position of your Area 

Weak, relative to surrounding areas 

Previously weak, made stronger due to highway connection 

Area Strengths (Supporting Growth) 

Labor force is well skilled Well positioned location relative 

to two auto assembly plants 

Area Weaknesses (Threatening or Constraining) 

None Limited labor force skills, no 

suitable industrial park properties 

Potential Opportunities for Growth 

None Could double in our county due 

to expansion of nearby auto plants 

Potential Threats to Retention or Growth 

The industry is shrinking nationally 

Strong competition from adjacent surrounding counties, uncertainty about the auto industry 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 29 

It is also important to achieve consensus among stakeholders about priorities for the types of 

economic development intervention to be considered. These can include some or all of the 

four major types of economic development: (1) retention of existing industries that are 

threatening to leave your area; (2) promoting expansion of existing industries already in your 

area; (3) attraction of new industries and recruiting new businesses to relocate to your area; 

and (4) promoting startups of new business within your area. 

Formulate Goals. In a subsequent meeting, the vision statement should then be translated 

into one or more specific goals. Goals provide initial direction to the economic development 

strategy and they also provide a yardstick against which to measure progress. The goals may 

include economic, physical or organizational changes, such as:

 

 Retain or increase employment in the area (reducing unemployment) 

 Retain or increase the area’s population base (reducing the outflow of young people) 

 Increase average income levels (reducing poverty) 

 Improve the quality of jobs (reducing under-employment) 

 Diversify the area’s economic base 

 Stabilize or augment the local tax base 

 Improve local infrastructure, assets, and facilities 

 Improve the capacity of local organizations for promoting economic development 

 Increase funding mechanisms to promote economic development 

Designate Measurable Milestones and Specific Targets. General goals for the strategy 

should be translated into specific targets in terms of the types of businesses to be recruited, 

retained, supported, or encouraged. Targets should be types of business that represent local 

strengths, as well as those presenting new opportunities for growth in your area. They should 

be screened from the list of potential targets in the technical analysis (analysis in Chapters 3 - 

6), based on your community’s ability to support them by offering the relevant access to 

markets and suppliers, labor pool, infrastructure, and growth support programs. Secondary 

screening criteria might also include community values regarding environmental 

considerations, quality of jobs, and nature of required land development. 

7.3 Strategy Development: How do we get there? 

The next phase of strategic planning is to determine the way that the community's goals will 

be achieved. There are six basic elements in the implementation of a typical economic 

development strategy aimed at business growth and attraction: 

1. Community Information: Create and distribute a package of basic information about 

the area and what it offers to businesses. This is often known as a “fact book”. 

2. Sales Representation: Meet with other allies, such as state economic development 

agencies. 

3. Business Visitation: Work with existing businesses in the area to assure them that they 

are wanted and appreciated. Help them to stay and grow in the community. 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 30 

4. Ambassadors: Establish a point of contact for firms interested in starting up, 

expanding or moving to communities in the area. 

5. Business Support: Implement supportive programs to help meet business needs for 

location and expansion in the area (such as financing, job training, and infrastructure 

development). 

6. Ongoing Effort: Maintain your program of effort (items 1 – 5, above) over time. 

Who to Involve. Discussions with politicians, other local stakeholders and other allied 

organizations are needed to fund and implement such a strategy. No economic development 

program can work without political support. By building consensus among political leaders, 

you will facilitate the allocation of sufficient public resources and the approval of local 

regulations that help rather than hinder economic growth (such as business zoning and tax 

rates). Politicians, like other stakeholders, need to be involved in the strategic planning 

process from the start. It is particularly helpful if the political leadership can initiate the 

planning process. Involvement of both the private and public sectors in planning usually 

improves the ability to successfully implement an economic development strategy. 

Turning a General Strategy into an Action Plan. Your strategy should be translated into 

specific annual goals and milestones for the next three to five years. Table 7-2 shows an 

example of an action plan for regional economic development that is implemented by a new 

voluntary partnership with no full time staff or real funding sources. Table 7-3 shows an 

example of a funding plan with potential revenue sources and fundraising goals. 

Table 7-2: Sample Action Plan for a New Regional Economic Development Partnership 

Strategy Element Year One Year Two Year Three 

Business 

Attraction 

Research target industry 

needs 

Step up downtown 

renewal 

New training 

programs for target 

industries 

Develop regional 

brochure 

Develop internet web 

site materials 

Identify related cluster 

industries 

Business 

Retention 

Form business 

networking groups 

Launch business 

opportunity initiative 

Launch regional 

image-building 

campaign 

Annual postcard survey 

of business 

Develop incubators & 

managed workshops 

Promote private 

industrial development

Training Work with local college 

to offer computer 

training 

Begin school-to-work 

programs 

Tailored training to 

meet new businesses’ 

needs 

Financing Sponsor business 

banking fair 

Small business tax & 

accounting seminars 

Revolving loan fund 

for business startups 

Business accounting 

course offered by 

community college 

Promote SBA loan 

programs 

Work with Chamber 

to identify future 

needs 

Table 7-3: Sample Economic Development Funding Plan 
Handbook: Assessing Local Economic Development Opportunities with ARC-LEAP 

Economic Development Research Group 31 

Source Year 1 Year 2 Year 3 

Existing Funding

 State Office of Economic Development $ xx,xxx $ xx,xxx $ xx,xxx 

 Community Development Block Grant Funds $ xx,xxx $ xx,xxx $ xx,xxx 

 Working Capital (Bank Donations) $ xx,xxx $ xx,xxx $ xx,xxx 

New Sources of Funds 

 Federal Welfare-to-Work Grant $ xx,xxx $ xx,xxx $ xx,xxx 

 City Planning Funds $ xx,xxx $ xx,xxx $ xx,xxx 

 Sponsoring Business Memberships/Donations $ xx,xxx $ xx,xxx $ xx,xxx 

 State Dislocated Worker Program $ xx,xxx $ xx,xxx $ xx,xxx 

 Private Foundations $ xx,xxx $ xx,xxx $ xx,xxx 

Total Funds in Place $ xx,xxx $ xx,xxx $ xx,xxx 

Total Fundraising Goal $ xx,xxx $ xx,xxx $ xx,xxx 

7.4 Monitoring & Evaluation 

Once the action plan is in operation, periodic monitoring and evaluation of the program is 

critical to keep it on target while maintaining enough flexibility to respond to new challenges. 

The monitoring and evaluation process should assess the extent to which immediate action 

items (as discussed in Section 7.4) have been implemented, and it should also assess the 

extent to which there is movement towards achieving longer-term goals (as discussed in 

Section 7.2). 

There are three main purposes for monitoring and evaluating on-going programs. First, 

evaluation serves as an internal feedback system that identifies how efficiently and effectively 

a program is achieving its goals. Secondly, it serves as an external tool of accountability and 

justification. The evaluation process provides useful information to community residents and 

leaders who want evidence that the program is accomplishing its goals. Use of a periodic 

summary of accomplishments is helpful in maintaining support. Finally, evaluations can help 

increase the effectiveness of the plan, by showing when adjustments should to be made as 

new opportunities and circumstances arise. 
 

2 Oliver Street, 9th Floor, Boston, MA 02109 

Telephone 617.338.6775 

Fax 617.338.1174 

e-mail info@edrgroup.com

Website www.edrgroup.com