Energy Costs Affect Economic Development

Information by State  Print version

“Importing fuel drains millions from local economies. In Nebraska 80 cents of each dollar spent for energy leaves the state; only 34 cents of other consumer spending is exported.”

In 1987 HUD commissioned The Energy Task Force of Public Technology, Inc. (PTI) to prepare reports on how energy expenditures influence community economic development. PTI prepared two volumes entitled The Hidden Link: Energy and Economic Development. Volume one deals with strategic planning and volume two is subtitled Marketing and Financing Strategies for Community Energy Projects, A Guidebook for Local Governments.

The following excerpt from the preface of volume two outlines the problem and approaches taken to deal with it. These strategies, prepared in 1987, are appropriate today for Empowerment Zones and Enterprise Communities: Cities and counties must continue to focus on making homes, businesses, and industries
energy efficient despite the low-to-moderate fuel prices currently prevalent in many areas of the country. The reasoning behind the continued focus may be found at two levels: the impact of increasing energy consumption on the nation as a whole and on most local economies....

On a local level, millions of dollars are being exported out of U.S. cities and counties to pay for energy. This exodus of dollars has very real effects on local economic vitality. City and county leaders across the U.S. often fail to realize that the dollars being spent on energy by their residents, businesses, and industries drain their local economies and would be better spent on public works, consumer goods, industrial site development, and new plants and machinery. These are dollar expenditures that keep an economy strong and vital.…

Some states and local governments, however, have already begun to study the multiplier effect of energy versus non-energy dollars. The Nebraska Energy Office has estimated that for each dollar spent on energy by the residential, commercial, and industrial sectors, $.80 will leave the state; for typical consumer purchases, only $.34 leaves the state economy.…

Once the hidden links between energy and community/economic development become apparent, the question becomes, how can local government officials develop energy programs to halt the drain of energy dollars from their cities and counties? Also, how can local government officials use lowered energy costs as an economic development tool to retain and attract industry and commerce?…

To identify and support similar efforts in other localities, in 1998 HUD and the Department of Energy (DOE) provided financial assistance to PTI for the provision of technical assistance to a group of localities on marketing techniques and establishment of public/private partnerships. The technical assistance was focused on ways to support energy projects related to community and economic development which were being conducted by the localities including Community Development Block Grants.

The work presented in this guidebook combines USHUD’s interest in providing technical assistance to mitigate the impact of energy costs and consumption on community and economic development activities with the Energy Task Force’s interest in supporting innovative approaches for community energy management.

Public Technology, Inc.
1301 Pennsylvania Avenue, NW
Washington, DC 20004
(202) 626–2400

Energy is the single largest expense for the retailer after payroll. . . . Even a one-percent reduction can have a significant impact on a corporation’s bottom line. Every dollar saved on energy is pure profit.

Bill Lyon, Vice President for Energy, Federated Department Stores
E News March/April 1999