Small cities in the Southeast act as nerve centers connecting the regional economy. In the South, more than 100 small metro areas are home to 25 million—or 20 percent—of the region’s total population. In Georgia, these are cities like Dalton, Rome, Valdosta, and Gainesville. Small metros are the hearts of their respective regions, where military bases, colleges, hospitals, industries, and local governments anchor the economy. In many cases, they are hubs for education, employment, health care, and retail services for people living in surrounding rural areas. At the same time, conditions of economic distress such as unemployment, poverty, blighted property, and crumbling infrastructure remain prominent challenges confronting municipal leadership in smaller cities. The economic trajectory of our state’s small cities is complex and varied.
To support local leaders working on community and economic development in smaller cities, our team at the Federal Reserve Bank of Atlanta created the Small City Economic Dynamism Index. We were motivated to do so by the lack of consistent data on community investment potential in smaller cities. Community investment seeks to deliver social benefits to economically distressed places and people while also generating a financial return. It includes philanthropy, public debt, bank loans, bonds, and other forms of debt and equity aimed at improving communities’ socioeconomic outcomes. Economic dynamism is a partial proxy for the potential of a place to attract community investment. We presume that many but not all small cities have unrealized community investment potential. Our national index ranks 245 small cities across 14 indicators of economic dynamism in four categories: demographics, economics, human capital, and infrastructure. It includes all U.S. small cities in metropolitan statistical areas with populations less than 500,000.
In Georgia, 12 small cities are home to 22 percent of the state’s population. Savannah and Columbus are the largest with metro-level populations of 380,000 and 313,000, respectively, while Hinesville and Rome are the smallest with 80,000 and 96,000 residents, respectively. From 2005 to 2014, population grew in all but one of Georgia’s small city metros; growth rates ranged from more than 15 percent in Hinesville to a slight loss of population (0.1 percent) in Albany. In all but one small city, population growth at the metro level has been accompanied by increased population density at the local (county) level, suggesting that trends associated with reurbanization and downtown revitalization are not limited to large urban markets.
The percentage of residents with some college education in all of Georgia’s 12 small city metros has risen in recent years. Job and labor force changes have presented more mixed results, with about half on an upswing and half trending down, with losses in both the aggregate number of jobs and workers in the labor force. Three-quarters of the state’s small cities are attracting an increasing number of commuters during the day, suggesting that most of these cities remain important economic engines for their respective regions.
There has been clear, steady forward progress on a number of important measures in Georgia’s small cities, but persistent challenges remain. Declining median household incomes, increasing poverty rates, and rising income inequality are evident in each of our state’s small cities. These challenges are not unique to Georgia, nor are they necessarily unique to small cities. But even the most economically dynamic small cities struggle to attract community investment because, in many cases, they are overlooked for initiatives located in larger urban areas where banks, foundations, insurance companies, and other investors have offices, staff, and preexisting networks.
So then the question becomes, how to increase the volume and effectiveness of community investment in smaller cities. What are the keys to unlocking local as well as extra-local sources of community investment aimed at addressing persistent socioeconomic deficiencies? An emerging body of research from Robin Hacke of the Kresge Foundation and David Wood of Harvard focuses on the “capital absorption capacity of places.” Capital absorption capacity is the ability of a place to attract and deploy community investment. Through dozens of interviews and workshops in cities across the United States, the researchers have identified five critical functions for increasing the capital absorption capacity of cities of all sizes. These include:
- Shared priorities: Articulation of a clearly defined set of the community’s strategic priorities
- Pipeline: Development of a pipeline of feasible investment opportunities that will help achieve the priorities
- Enabling environment: Creation of an enabling environment of policies, processes, practices, and platforms that support the development of socially useful investments
- Managing and monitoring: Oversight that keeps investments on track to meet financial and social goals
- Learning and adaptation: Build platforms for collaboration and process improvement and to identify emerging needs
With conscious and deliberate efforts to organize the demand for community investment in our state’s smaller cities, local officials can attract new resources and address persistent challenges. Proactive cross-sector leadership in cities can unlock the potential for more investment into affordable housing, small businesses, health care, charter schools, and infrastructure to support economic revitalization.