Investing in distressed areas: Scott Andes on paths to prosperity for rural America

In the latest episode of the Reimagine Rural podcast, Tony Pipa travels to Skowhegan, Maine, a town evolving from its industrial past to leverage its natural assets for new economic opportunities. In this conversation with Scott Andes—a senior advisor for economic development and professor of practice at Carnegie Mellon University (and former Program Director at the Economic Development Administration (EDA)—they discuss pathways to prosperity for distressed rural places and explore how federal investment can successfully support rural development. Drawing on his experience at the EDA, a division of the Department of Commerce, Andes highlights lessons learned from helping create and oversee two innovative place-based programs. Including the Recompete Pilot Program, for which Skowhegan was a finalist.

This conversation has been lightly edited for clarity and brevity.

Tony Pipa (TP): What is your personal history as it relates to economic development?

Scott Andes (SA): I grew up in Southeast Texas in a real small town called Orange, TX, that is economically distressed but has a lot of oil and gas. I’ve always just been very interested in why some places grow and others don’t. Why is it that I can go 150 miles west of my hometown, and things are going great, but not in East Texas or northwestern Louisiana.

I spent a lot of time at Brookings, the National League of Cities, and the Economic Development Administration focused on regional innovation and how technology can play a role in this. Over the last three or four years, I’ve gotten significantly more interested in distressed areas—what they look like, what works in those places.

There is a widely shared perspective that these places can’t really get better, and therefore our job is to mitigate the cost of poverty. I have a very different view. I think a lot of highly distressed places have pathways to prosperity where they cannot just survive, but thrive. I’m super interested in how we get there.

TP: What is the Economic Development Administration (EDA)?

SA: The Economic Development Administration is a hidden gem in the federal government. Historically, prior to COVID, it was about a $200-300 million a year agency, which is tiny compared to what folks would be accustomed to in the federal bureaucracy. It’s meant to facilitate economic development, primarily in distressed areas around the country.
 
While it is historically small, the EDA is very flexible. They can do lots of creative things, and they’re able to fund new things. So, it is an ideal agency for policy innovation.

TP: You were very involved in creating two major programs at EDA: the Build Back Better Regional Challenge (BBBRC) and the Recompete Pilot program. Can you describe the BBBRC?

SA: In the American Rescue Plan of March 2021, EDA received a one-off lump sum of $3 billion to help with economic recovery writ large.¹ This was a significant increase for the agency. Secretary Raimondo wanted to do something big, something that could solve significant issues in distressed regions around the country.

She decided they were going to put a billion dollars into a competition (the BBBRC) to drive economic development. It’s the largest economic development competition the federal government has ever run. I was hired to lead the program. The goal was to help regions of all shapes and sizes make a transition from potentially low-wage and low-skilled sectors and industries to medium- and high-skilled industries and sectors.

If you look at places that make this transition, it usually takes about 25 years. And one reason it takes so long is that we would traditionally invest in one program at a time—a workforce program, then an infrastructure project, then something else. Our goal with the Build Back Better Regional Challenge was to invest enough money in each place that we could do a generation’s worth of economic development in five years. 

TP: To what extent did rural places participate in the Build Back Better Regional Challenge?

SA: We had 21 winners, and there were rural areas among our finalists. Some were part of what others refer to as the hub and spoke model, where you’ve got sort of an urban core and then a large rural area around it. Others were exclusively rural, such as our nine Native Community Development Financial Institution (CDFI) winners in the Plains states, or the Coalfield Development/ACT NOW Coalition in West Virginia.

They really crossed the spectrum. Our view was to remain true to a key set of questions: How persuasive is your plan, and how good is your coalition? What are the underlying economics? Do we think this is a good return on taxpayer dollars? We purposely had places that represented all of America, from rural areas to highly dense urban areas.

TP: The initiative is regional—beyond a single community. From your experience, how do rural places fit into these efforts? What constraints and opportunities should we keep in mind when they participate?

SA: The first thing that will be familiar to your audience is that there’s often a rural “call-out” (i.e., money set aside specifically to go to rural places within a larger program). I see that as a double-edged sword. On one hand, we get more rural areas in; on the other, they can be the sidecar—added just so an application is more competitive because it has a rural area. We focused on ensuring that if a community was part of the defined region, they were there for good, authentic reasons. I think that’s how to think about rural areas: What’s the genuine contribution and benefit to them being part of the coalition?

The geography should really follow the economics and the genuine civics of a place.

TP: What’s your overall assessment of how well that program has accomplished what it set out to do, even if it’s not yet complete?

SA: From what I’ve gathered across the 21 winners, the results have been quite good thus far. However, you never quite know when it’s something that’s this new.

I’d be remiss if I didn’t say that recent federal actions have put an extraordinary amount of pressure and stress on winners. The government shutdown now is restricting reimbursements. I’ve heard from winners that they may face layoffs. This disproportionately impacts distressed and rural areas because they don’t have cash flow for payroll. So, the longer the government can’t reimburse, the harder these places are hit.

The Build Back Better Challenge and then even more so through the Recompete program—they allowed places to go on the offense and to think about their future. The recent changes at the federal level will without a doubt have a negative influence on how far we can go, but I’m still optimistic that we’re going to see a significant amount of success.

TP: Let’s turn to the Recompete pilot program. Can you briefly describe the program?

SA: The Recompete program’s goal was to provide flexible and large grants to very distressed parts of the country. “Distressed” here was defined by low prime age employment rate, meaning there are far fewer working age adults employed compared to the national average. There are thousands of places that qualified.

There are a couple of elements that are both innovative and important. It was one of the first programs that exclusively focused on distressed areas. We got more applications than any other program in EDA’s history, and I think that is directly related to these places having an opportunity that aligned with their priorities.

TP: On design: you aimed to simplify Recompete. What exactly did you streamline, and how did that help rural applicants?

SA: Internally, we outlined three major values to guide our implementation of the program: high-quality diligence, leaving places better off, and transparency.

On that last front, we saved people a lot of time. Funders—especially in the public sector, but really any funders—often keep applicants in the dark. They do it because they don’t want to show too much. I have a different perspective: tell people what matters.

For example, we weren’t evaluating National Environmental Policy Act (NEPA) standards at this phase, so we could tell applicants, “Don’t spend a ton of time and hundreds of thousands of dollars on these regulations.” Or saying, “we really care about this budget issue, and here’s why.” I felt as long as we were transparent with everyone (about what mattered to our decisionmaking), we could help them understand what parts of the process were important and what weren’t.

Then we tried to limit lengthy forms and similar submission burdens. I wouldn’t say we hit it out of the park—there’s room to improve—but we tried. Another piece I’ll highlight was a two-phase competition. We had approximately 570 applications in phase one. Then, when you get down to 22 finalists for the last six months, you can really get to know these places and provide one-on-one feedback.² We gave them all feedback on their application and connected them with experts and other supports. We tried to provide that kind of assistance along the way as well.

TP: To what extent were rural places involved in applying for Recompete?

SA: Significantly. I wouldn’t be shocked if the portion of rural America represented in Recompete was dramatically higher than our other programs. I would say that’s because rural areas have a lot of economic distress. So, yeah, they were a prominent part of the program.

TP: What evidence tells you there’s a real path to prosperity in these distressed areas?

SA: I’ll give you two brief answers. The first is that I’ve seen it with my own eyes. I’ve worked in communities for the last 15 or 20 years, and I think there is a bias and a belief that a lot of these places can’t turn around. Yet you see competitive platforms all over the place. One of our Recompete winners, the Wind River Reservation, is one of the poorest places in America and also a prime opportunity for growth.

Second, we just finished up doing some research, which hopefully we’ll publish soon, where we looked at places that were very poor in 2000, with high prime-age unemployment and low median incomes, which have gotten significantly above the national average by 2025. We found 180 places, from neighborhoods in cities all the way to large counties. That gives you lots of examples of distressed places that have come back. There’s an economic growth story there that is untold. I am very bullish on the prospects of distressed America.

For policymakers, investing in distressed places is a real win because of their starting position. You can see dramatic gains, just empirically speaking. One of our success stories that we found in the research was Fresno, CA, which in less than a decade went from 41% child poverty to 23%. That kind of significant change only happens in distressed places. It is where we can make the most progress.

TP: Turning to Skowhegan: What’s driving their recent momentum? Which initiatives or assets suggest they’re on a solid path? What lessons does it hold for others?

SA: First, I’m a huge believer in local institutions that are accountable to the economic actors and people they’re representing. Skowhegan is excellent at this. Main Street Skowhegan and the rest of the coalition provide just what you’re looking for: a theory of the case, all the right actors at the table, creative and innovative interventions, and good civic leadership. I personally think we undervalue the role of creativity and thinking about potential solutions outside of traditional economic development models—just figuring out what works for your community, and then testing it, to make sure it’s not wrong. I think the Skowhegan team has it in spades. They had strong institutions, and they got along well, which isn’t always a given.

Second, the strategy and overall approach made a lot of sense. They have a blend of support from small businesses and entrepreneurs along with larger industry players, like New Balance.

And third, regionally, there are some real growth opportunities. Waterville’s got Colby College, and there are other elements and assets available that they are leveraging, such as the outdoor recreation economy. The team has identified these and is building on them.

TP: I want to circle back to your first point on trust. As a federal official assessing communities nationwide, how do you gauge whether a coalition truly trusts each other and is aligned?

SA: First, you need to acknowledge that you won’t know everything. So, over-indexing things that could be faked is something to pay attention to.

There are a few things that we did. We had everyone lay out a governance structure and talk through why it seemed to work. You’d be shocked how often a consultant does all the talking. You think, “What about the folks who are going to be doing this for the next five years? Do they have a view on any of this?” That’s not a great sign.

We did virtual site visits, we spoke to the service providers, the people training the small businesses and childcare, and just asked them about their involvement. We made it very clear in our Notice of Funding Opportunity that we were going to pick up the phone. We talked to former mayors, community members, and nonprofits to suss out if this was the real deal or not.

TP: Many rural places lead with quality-of-life investments—housing, childcare, amenities—treating placemaking as the foundation, not the outcome, of economic development. How effective is that approach?

SA: I’ve changed my view on this. I entered the realm of placemaking through a very urban lens—“we’ll put a park in Manhattan, and that’s going to create jobs”—so my entry wasn’t positive. But in the last five or six years, I’ve totally changed my views, particularly in rural places.

We know a variety of economic engines don’t actually work well for humans in that place. You can have an economic engine to create jobs, but nobody wants to live there. The inverse is also true in that some places won’t have massive growth opportunities, yet you can still have incredibly high-quality places where people love to live. Intrinsically, that creates a lot of value, regardless of economic outcomes, which economists and economic developers should take more seriously.

Instrumentally, there are economic benefits and outcomes from these quality-of-life investments. You see this in rural areas where they catch a little fire, because they’re great places, and they match what people want. At the same time, we can’t assume placemaking will automatically lead to certain economic outcomes. We’ve seen a lot of false positives, like the creative class environments that invested a lot because they thought it would lead to start-up generation, and those haven’t worked out. What I want more than anything is for places to have a viewpoint based on their community’s values and assets. It can be all sorts of amenities that lead to economic growth, so long as it makes sense. Saying “we’re going to build and be a ‘start-up capital’ in five years” is a tough sell for me. Many other strategies have intrinsic value distinctive to the place and often work from an economic perspective.

TP: Many rural places use asset-based community development. Skowhegan’s examples—Maine Grains as an anchor and the river as an outdoor-recreation asset—show this in practice. How should communities identify their assets and turn them into investable projects and durable economic drivers?

SA: I remember reading their phase one application and thinking, “these folks are trying stuff under an umbrella of believing a very high-quality place where people want to be and feel connected,” as a pathway to economic prosperity. And I buy that.

What I like about the Skowhegan model is its contrast with the “one big bet” approach. It’s one thing to spend 25 years on a $100 million project, and it’s another to say we’re going to try this trail network, redevelopment of the riverside, small business development, and other activities. More places need to adopt a “let’s try it” mindset. Then you have to see if it works, try more of it, and keep a quick cycle time that rural places are great at.

There’s tenacity in trying things, getting some wins, course-correcting, and staying centered on your theory—in this case, connectivity and quality of life. You “two-steps-forward, one-step-back” your way to progress. From an economic development standpoint (and in life), that’s better than grand societal engineering—doing one thing over 30 years and being in big trouble if it doesn’t work, which is how we do economic development in a lot of places.

TP: How can these programs be structured to unlock untapped potential—especially in rural areas—and make participation easier?

SA: First, we have to de-professionalize grant applications, particularly large, flexible awards. If you need to hire McKinsey to be successful, then the agency that ran this process failed. Their people should pick up the phone, talk to human beings, and not just read the application. If the barrier to entry is having $500,000 for some consultant, then we’ve failed, particularly in distressed areas.

Next, I think these two-stage processes can go a lot further. Stage one can be a light-touch theory of the case, so places don’t need to spend nine months working on it and developing their proposal. Then narrow it down to a finite number where everyone has a real shot and the ROI is better.

We can also increase the value to places. One way is to provide high-quality feedback. After evaluations and awards, we picked up the phone and had an hour-long conversation—brutal as they are—with every single non-select. If you’ve got valuable feedback, give it to them. Treat them with respect and tell the truth. We often know more about a place than the consultants do—so share it.

I also think we should structure competitions so they’re useful. Ask: Is this a master plan a coalition can use regardless of outcome? Design it so it isn’t a huge waste of time.

Next, agencies need to absorb a little risk. We debated how many environmental studies somebody needed to do as a finalist. That’s hard and expensive for applicants to do. On the other hand, if the agency puts resources toward this award, and it doesn’t pass (the environmental study), we’re in trouble. So, manage the amount of risk the agency is willing to take and be honest about what both sides are willing to do.

Lastly—and most important to me—the number one way to make programs more equitable and accessible for distressed places, and get higher ROI for taxpayers, is to go beyond the application. The further you investigate places, the more it benefits distressed places, and the better the outcomes.

TP: Some argue it isn’t Washington’s job to fund local economic development—that’s for states or cities. What’s your perspective on that?

SA: I‘d say as soon as the job gets done by state and local governments, I’ll take a backseat. Until that point, I think the federal government has a role to play.

As a national funder, we have the advantage of having a country-wide view. We can find the Skowhegans and other places that you might not see if you’re only looking in, say, Ohio. There’s a real advantage to seeing the entire country as an investable area.

Also, the federal government has a lot more combined resources than these distressed places. If you’re relying on states and localities, you may have a high distress, high opportunity place that may simply lack the capital. That balkanizes economic development based on which jurisdictions happen to have cash at any given moment. It’s more efficient to ask where the best return on taxpayer money is. And the only place where you can do that is on a national scale.