Expanding Rural Horizons

Jason E. Kaplan

Business Oregon director Chris Harder on bridging the economic urban-rural divide. 

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Chris Harder, director of Business Oregon, joined the state’s economic development agency in 2016 from the Portland Development Commission, where he was also director. The agency, which manages an $832 million budget (2017-2019), invests in a variety of programs around the state, including a business finance division, which provides loan guarantees and direct lending to small and mid-sized companies.

In this interview, Harder talks about the agency’s renewed focus on bridging the economic urban-rural divide and why he wants to put more lending staff in rural communities. 

(Excerpts have been edited for length and clarity.)

What are your lending priorities for 2019?

We have a strategic plan that has agency priorities over a five-year period. A couple in particular are renewing a focus on innovation and entrepreneurship. Broader access to capital is important in that portion of our economy. We have priority around rural economic stability, meeting the needs of our rural communities and underrepresented or underserved communities: women and people of color; native, tribal and immigrant populations. Those types of priorities influence how we target many of our programs, including lending.

Has anything changed about your lending strategy?

Certainly there is a heightened focus on rural and underrepresented communities. We are spending quite a bit of time understanding those gaps and how we can meet the need from a public-sector perspective. We had done work in that space, but it has been heightened and reprioritized. On the rural side, we are recognizing a unique role for the state economic development agency. Portland, Bend and the Willamette Valley have strong local economic development we try to complement. But in some of our rural communities, our role becomes more important from a resource perspective.

Do you plan to do more direct lending to business than in the past?

Yes. Access to capital and how we foster long-term wealth creation is really important. We are constantly looking at how we fill those gaps. Part of that calculation are the resources we have available to us to do direct lending. Our lending side is also heavily influenced by the state of the economy. We tend to do more direct lending to small businesses in a down economy or in a different interest-rate environment, because that capital becomes more scarce or limited. We are anticipating a downturn in the economy. We do have some requests in the Legislature; one is to recapitalize the Oregon Growth Fund.

Which sectors can benefit the most from agency lending?

We are geared toward small and medium-size businesses. We do have target sectors. Advanced manufacturing is one, primarily precision metals; also machinery, aerospace, food and beverage, forestry and wood products, software and technology, outdoor gear and apparel. That being said, that is a lens for us, not a hard-and-fast rule.

JEK 6124Photo: Jason E. Kaplan

In what areas of rural Oregon do you see a strong role for your lending?

When you think broadly about economic development, we are not going to attract the big employers with lots of jobs to rural Oregon. In general, small-business lending in these areas becomes increasingly important. We have seen a consolidation of community-focused banks. You have these banks that were once centered around a small town or rural community; they may not have that targeted focus now as they consolidate. We are looking at how we can fill that gap. To do that, we have started to staff some of our direct-lending teams in rural Oregon. Traditionally, they were centered in the Portland and Salem areas. We now have two of our lenders in Central Oregon. As we have positions become available, we will look at Eastern Oregon as well.

There is a lot of talk about the need to expand broadband in rural areas to boost local economies. How much of a priority is it to you to expand rural broadband infrastructure?

It is a great example of an area where we as a state and agency would need additional resources. It has been a policy priority of ours. The governor just did an executive order to establish a broadband office in the agency. We staffed the Oregon Broadband Advisory Council. They do an annual study on the state of broadband in Oregon. One of the big findings, no surprise, is that the digital divide maps closely to the rural-urban divide. There is parallel legislation at the Capitol to create a fund to do broadband infrastructure work. That is critical to larger economic-development needs.

How much of a priority is investing in transportation systems, such as increasing freight infrastructure?

We care about it because we are a trade-dependent state. Some of our top exports come from rural Oregon — whether that is agriculture, forest and wood products, and food and beverage processing. Those are all internationally oriented. If we want to be competitive, we need to get those products out of the state. So, yes, transportation infrastructure becomes vitally important. So is the health of our ports.

What have you learned about what works and what doesn’t work in lending?

Lending is very relationship focused. We learned we have a better understanding of community gaps and needs when we are in those communities. We also understand the businesses better that way. There is always a risk factor to lending. Certain things show up on paper, but there are also other intangible aspects that drive lending. We have also learned we need strong relationships with lending institutions and that we make sure our services are complementary and can fill gaps.

We have learned that if we have goals and objectives around meeting key gaps in underrepresented populations, we need to invest first in building relationships with those communities for our tools to become impactful. The better relationships we have with people and business and industry, the more effective we will be in tailoring our products and services.

What investments do you plan to make in tribal communities?

We have done a fair amount of brownfields and infrastructure work in those communities. One of the communities we are working with is Warm Springs. We have a project there to create an incubator space. One thing we launched this year is a tribal engagement strategy. One of our team members is a tribal member. We are partnering with her to improve our relationships with tribal communities, and from those conversations, we hope to hone in on what a tribal economic-development strategy could look like.

What is your insight into the potential for an economic downturn to happen soon, and how could it compare to previous downturns?

When we came out of the Great Recession, things just changed. It felt like there was a shift: Economic-development agencies started to look more at the disparities in who is benefiting from a growing economy. Some of those gaps became more clear to those of us in economic development. We certainly have made it more of an intentional priority to look at them. We also know most of our job growth comes from small businesses. That has influenced our priorities, particularly around innovation and entrepreneurship.

What hampers economic development in rural communities the most?

The No. 1 factor in a company decision is talent. Attracting the right skilled talent is really important. That is when you start thinking about what strategies you have to attract people to rural communities. It also really highlights the importance of investments in education and workforce development. Certain rural communities do this well in Oregon; others are struggling, particularly those that were traditionally natural-resource based. They are struggling more than, say, the Columbia River Basin, which has a booming agricultural industry.

Venture capital is becoming a bigger part of the overall lending landscape. What impact will that have on Oregon’s economy?

I think it is particularly impactful when that capital comes from funds within Oregon. The wealth creation ideally stays in the state. The Oregon Growth Fund is particularly focused on how we grow our investment in Oregon companies. Not that national VC is bad, but as those investors make money, that wealth doesn’t necessarily get realized in Oregon.

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