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Management in Practice

Perspective on Appalachian Ohio: The Federal Agency

What’s the role of the federal government in addressing the challenges facing Appalachian Ohio? Ray Daffner ’86 discusses the work of the Appalachian Regional Commission, a federal agency working across 13 states, and argues for continuing investment in the region.

Factory in Appalachian Ohio

Krayton Polymers in Belpre, Ohio. Photo: Erin Clark.

  • Ray Daffner
    Director, Entrepreneurship Programming, Appalachian Regional Commission

Any toolkit for addressing the challenges and opportunities facing Appalachia will have to include local leadership and priorities. But it will also draw on the support of the federal government in scaling solutions and helping address historic patterns of underinvestment.

The organization charged with leading the federal engagement is the Appalachian Regional Commission. It was formed by an act of Congress in 1965 at a time when nearly one third of Appalachians lived in poverty and the per capita income was 23% lower than the country as a whole. There’s been significant progress in the region since, despite headwinds from wider economic trends.

Ray Daffner ’86 has worked for the ARC for more than 20 years and currently serves as the commission’s director of entrepreneurship programming.

Q: What would it take for Appalachian Ohio to reach its potential?

It’s heading in the right direction. A new generation of leaders, folks who were born there, grew up there, and want to live in these communities, is helping to transform the civic and economic architecture in the region.

There’s vision. There’s energy. There’s hope. There are ideas. There are entrepreneurial leaders, not just in the private sector, but in education and the public and nonprofit sectors. And they are all trying new things.

Is it enough? It’s a start. But we need to continue to invest in these rural communities and the individuals who are making change happen.

Q: Explain what you mean by investing.

Throughout Appalachia, there’s been disinvestment and underinvestment for decades. To understand what that means, it’s instructive to look at the types of investments available and how they are distributed across the country.

For philanthropic investment, foundations invest $12 a person in rural America. In places like New York and San Francisco, they invest $4,000 a person. That’s a huge gap.

If we consider venture capital investment, 85% goes into five metro areas in the entire country. The Appalachian region, which touches 13 states, sees 1.3%.

Rural distressed communities in Appalachia receive bank loans at rates 50% below national levels. Folks might say, well, the federal investment makes up for that, but when you look at all-in federal investment, metro versus non-metro, including farm subsidies and transfer payments, it’s about the same. While the full array of community and regional development investment is three to five times greater in urban areas.

How can we expect communities to really move forward unless there is more equity in the investments coming from all these sources?

Q: What’s the timeframe for regional economic development?

The overnight successes that I’ve seen up close, places like Asheville, North Carolina; Chattanooga, Tennessee; or Bend, Oregon, those overnight successes took decades. Pittsburgh needed 20-plus years and that was with a lot of investment.

The places that have made the transition are not the same as they were before. They are focused on different sectors. They have different core competencies. They’ve rebuilt themselves around new and unique opportunities. That takes a lot of time, a lot of continued investment, and ongoing commitment from the leaders of those communities.

In Appalachian Ohio, we’re seeing the cooperation and interaction among a range of partners that is critical to moving forward. We’re seeing diverse economic development strategies. We’re seeing education tied in strategically. They’re building on existing competencies to develop companies and jobs in a variety of industries including food systems, information technology, and energy. And the diversified approach is building an ecosystem that can really support businesses and communities.

The timeframe, the need for patience from all the investors, that needs to be part of the discourse.

Q: What’s the role of the Appalachian Regional Commission (ARC)?

The ARC is a unique organization. The board of directors is comprised of the governors of the 13 states that the commission serves and a federal chairman who is appointed by the president and confirmed by the Senate. We partner with each state’s economic and community development organization and work very closely with 70-plus regional development districts.

We support the priorities set at the local and state levels. We provide technical guidance. We share best practices—with our broad view we can see what’s worked elsewhere in rural communities within Appalachia and across the country. And we work to bring investment into the region. That happens in partnership with local and state entities, other federal agencies, as well as through philanthropies, nonprofits, and a range of private partners.

As an example, access to capital is improving but it’s an ongoing issue, so we have worked extensively with community development financial institutions (CDFIs). We helped form Appalachian Community Capital, a regional wholesale bank. We’ve worked with private investors to develop tax-credit investment funds to bring tax-enhanced investors into Appalachia.

Q: What are the institutions that anchor these communities?

The institution can take different forms depending on the community, but having some leading institution is so important to economic development work. In rural communities, it can be a critical gap. In urban areas there tend to be more entities that can play the role.

In some part of Appalachian Ohio, CDFIs are that leading organization. CDFIs provide capital and financial acumen to structure transactions that otherwise might not be undertaken in rural areas. Sometimes they also become the anchor institution that provides vision, leadership, and the connectivity that’s crucial for development.

Ohio University has also been a critical institution in leading development efforts and providing vision. They offer direct technical assistance for business ventures, but they also work collaboratively and help develop strategies to bring new resources to the table.

One of the great things that’s happened in Appalachian Ohio is the collaboration and cooperation. Ohio University has become a hub by investing in programs and partnering extensively with nonprofit organizations, local government, regional organizations, and the philanthropic sector. They’re fostering the region’s economic transition with support for entrepreneurial activities, downtown development programs, and healthcare initiatives.

They have helped turn the folks that are working to move the region forward into this great network of entrepreneurial leaders who are thinking about solving problems in innovative ways.

Q: What does development look like at a community level?

When I was recently in Athens, Ohio, I talked with an entrepreneur in his early 30s who spent the last six years in the Bay Area as a software engineer working for some of the larger tech companies. When he decided to start his own company, he returned home. He has a distributed network of software engineers around the country, but he wants to be in rural southern Ohio. Not everyone wants to overpay for a house and be stuck in traffic two hours a day to live in a big city. There are a lot of people who want a great quality of life, really interesting work, and the potential to go for a hike in the woods, go fishing, or go hunting. Rural Appalachian communities can provide that.

“There’s vision. There’s energy. There’s hope. There are ideas. There are entrepreneurial leaders, not just in the private sector, but in education and the public and nonprofit sectors. And they are all trying new things.”

When communities make the kind of investments that are needed to turn themselves around, we see huge demographic changes, particularly a growth in well-educated 25- to 35-year-olds.

A lot of this comes down to an intentional development strategy of creating a vibrant place where people want be. It’s done through networks of business, community, education, nonprofits, arts and culture. We’re seeing it’s a strategy that can be very effective. And we’re seeing people are still leaving communities that don’t have a strategy.

Q: What about the opioid crisis?

Everyone we work with has been touched by this, whether it’s someone in their own family or someone they know. There are a lot of forces pushing to move things in the right direction now, but it’s very, very serious. I think communities understand the impact. The overdose rates of people of prime working age are hard to fathom.

It didn’t happen overnight, and it’s not going to be resolved overnight. But you can see small steps as people grapple to address it. States and communities are coming up with programs on the treatment side and through drug courts, through limiting prescription opportunities, through education.

It’s also been going on long enough that kids have been dealing with it in their families, neighborhoods, and communities. There’s a generation saying, not me.

Q: Cleary there are reasons to be hopeful, but, at the same time, many people and communities in Appalachia are still struggling. Why?

When the ARC was created in 1965, there were a sizeable number of counties that we consider to be distressed, that is, in the bottom decile nationally on metrics such as poverty, unemployment, and per capita income. The number of distressed counties has shrunk by about two thirds. We’ve made significant progress.

Why are there still counties facing persistent poverty? A lot of it gets back to what we talked about initially, that there are disparities of investment. How can we expect communities to move forward unless there is more equity? The ARC is currently spending $150 million a year in targeted areas. That’s a critical part of the solution, but we need to think broadly about what types of investment need to be made in communities that are facing persistent poverty, no matter where they are. How do we turn around places facing long-term economic challenges? That’s a national issue.

Interview conducted and edited by Ted O’Callahan.