No ROI Without Investment

By Steve Laurent

Our local economy is 97% LANL-related.  While an amazing statistic, it’s certainly not surprising, and it makes achieving a more economically self-sufficient community a very tall order.  Increasing retail opportunities and improving our economic diversity requires new investment, both private and public. 

Let’s begin with the private investment problem.  Since most of us stayed in school much longer than most and chose to work in the private sector, let’s assume risk aversion is a given.   Therefore, we’ll look at private investment through a role play in which you can invest in a retail opportunity in one of two locations.

Opportunity A, in a city of over 200,000, is in a new strip development containing a Walmart and several chain businesses.  The mall serves not only the growing neighborhoods nearby, but also traffic from the freeway.  Its advantages are many, including a brand new building on cheap land with lots of guaranteed customers.  Its risks are few. 

Opportunity B is in a smaller town of 20,000, located on an island a short ferry ride from Opportunity A.  Most residents work in commercial fishing, the island’s only industry, but the industry pays well and the residents are by no means poor.  The islanders are a captive audience, with cash, who are craving retail opportunities. 

While the potential rewards of investing in the island are great, the risks are equally high: you will be gambling on the long-term health of a one-industry town; your business must break the cycle of islanders traveling to the mainland for goods and services; the only available site on the island is a tired old building with less than ideal parking or storefront; and rents are higher on the island because land is scarce. 

So which opportunity do you choose?  Surely most would choose A as the safer bet for your money to grow.  But if you’d rather place your money on B, then congratulations - you’ve joined the ranks of our successful local retailers.  It may be time for you to open a shop on the Hill!

Like it or not, Opportunity B is how many entrepreneurs view Los Alamos – a risky investment.  If we are to increase retail opportunities and diversify our economy, we must overcome both the real and perceived hurdles that arise from our being an “island” on the Pajarito Plateau.
The playing field must be leveled if Los Alamos is to compete for new business.  This is where the public aspect of local investment comes in. 

If you think that you don’t have to deal with our economic diversity dilemma because you’re not investing in Los Alamos, then you’d better think again.  We are all investors in our community because we spend (at least some of) our money here.  We all invest indirectly through our local government which collects tax dollars.  And again, like it or not, our County government has an important role to play in making our community a more attractive business investment.

In traditional communities (i.e., everywhere except Los Alamos), the primary role of government is to act as service provider and health/safety regulator, and private capital runs the engine of business.  Not so here.  Our transition from a government town to private community has burdened government with many traditionally non-governmental tasks, not the least of which is catalyst for creating a self-sustaining community – townbuilding if you will.

Because private capital is reluctant to invest in Los Alamos, our local government must incentivize growth and diversification through the application of any number of strategies (e.g., tax breaks, infrastructure improvements, low interest loans) that are worthy of a separate editorial’s worth of discussion.  As the County implements such strategies, regardless of our ideologies we as taxpayer investors have essentially only one question to ask: Will the government program provide a good return on our investment?  In the business world, ROI is the acronym for return on investment.  “Roi” also means “king” in French, and ROI should be king here in Los Alamos as we look to create a more diverse economic future.   

Our duties as residents and investor-taxpayers are twofold: (1) to support new and established local businesses; and (2) to support government efforts to attract new business.  This will require some investment of local tax dollars.  While the expenditure of tax dollars as economic incentive may be unpalatable for some, knee-jerk reactions against such investment can be short-sighted and costly to our long-term future.  Let’s make sure that ROI becomes a standard part of all of the conversation moving forward, recognizing that the short-term investment of tax dollars can sometimes bring a great long-term return.

In the year to come, in which many difficult decisions will be made about our County’s economic future, let’s commit to remain open to diverse and new ideas, and keep ROI at the forefront of our dialogue.