This document provides an overview of economic development programs and initiatives. It discusses how economic development was originally led by the private sector but became a critical government function in the late 1970s. It outlines common goals of economic development programs around retaining and attracting businesses. The document then traces the history and shift of programs from extensive federal assistance to greater state and local control using tax incentives and public-private partnerships.
1. A Primer on Economic
Development
Shelby County Economic Development
Initiative
Mike Weber, Director
2. ECONOMIC DEVELOPMENT
Background
Originally the purview of the private sector
(Utilities, railroads, banks, and businesses
organizations)
Since the late 1970’s it has become a critical
function of local government
Often associated with distressed areas
3. ECONOMIC DEVELOPMENT
Background
Economic development programs typically
are concerned with:
Retaining existing business and industry
Attracting business (manufacturing, service, and
retail types)
Nurturing small and start up businesses
Downtown revitalization
Can include promotion of residential development
as well (small communities)
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5.
6. ECONOMIC DEVELOPMENT
Program Origins
Term “economic development” became
popular after the creation of the Economic
Development Administration – an agency of
the U. S. Department of Commerce
Created in the 1950’s during the Eisenhower
administration
7. ECONOMIC DEVELOPMENT
Program Origins
Also has roots in the urban renewal programs
that evolved from the Federal Housing Acts
of 1949 and 1954
At the Federal level, reached a zenith in 1978
with the Urban Development Action Grant
program
8. ECONOMIC DEVELOPMENT
Program Origins
Focused heavily on Federal financial
assistance to states and cities for:
Infrastructure to build new industrial parks
Redevelopment of older industrial and commercial
areas
Provided project financing through loans, grants,
and tax-exempt bond financing
9. ECONOMIC DEVELOPMENT
Program Origins
By 1982 there was an “alphabet soup” of
Federal economic development assistance
programs that cities could draw upon
EDA UDAG IRB EZ CDBG
10. ECONOMIC DEVELOPMENT
Program Shift
The Reagan Administration instigated major
shift in public policy, partly attributed to
Federal deficit and program abuses
Began a 10-year process of “pulling the plug”
on nearly all Federal assistance for economic
development
11. ECONOMIC DEVELOPMENT
Program Shift
States and cities told to come up with
creative local programs to foster economic
development
Reagan coined the phrase “public/private
partnerships”
12. ECONOMIC DEVELOPMENT
The Shift to States
Federal assistance is extremely limited
Focus shifted to State authorized
mechanisms for local jurisdictions to raise
funds
13. ECONOMIC DEVELOPMENT
The Shift to States
States legislatures have enabled some
programs
Most programs enable creative use of local
tax revenue to spur economic development
Illinois State assistance in the form of tax
credits, loans and major employer attraction
14. ECONOMIC DEVELOPMENT
The Shift to States and Localities
Focus has shifted to enable cities to use
future tax revenue created by a project as an
incentive
This is sometimes referred to as:
“transactional economic development”
15. ECONOMIC DEVELOPMENT
Illinois Programs Today
Programs can be grouped by method of
assistance
Tax Abatement
Value Added or “Capture”
Tax Assessment
Tax Credits
Loans
22. ECONOMIC DEVELOPMENT
Tax Assessment
Special Service Areas (SSA)
Hotel/Motel Tax (tourism)
Business District Tax (retail & hotel)
Home Rule Sales Tax
Non-Home Rule Sales Tax (0.5% max)
23.
24. ECONOMIC DEVELOPMENT
Tax Credits
EDGE Tax Credits (when competing against
other states)
Investment Tax Credits (EZ)
Historic Tax Credits (Federal)
New Market Tax Credits (Federal - low
income communities)
25. ECONOMIC DEVELOPMENT
Loans
Illinois Finance Authority:
Tax exempt and taxable financings
Industrial revenue bonds ($1.5 M min.)
Agri-Industries loan guarantees
Participation loan program
Local government bond program
26. ECONOMIC DEVELOPMENT
Illinois Programs Today
Local responsibility and initiative
County or multi-community
Local control and flexibility to build on
opportunities
Project based
Use public/private partnerships to leverage
public dollars and implement redevelopment
27. ECONOMIC DEVELOPMENT
Getting Started
Determine the County/municipalities roles in
a sustainable economic development
program
County lead
Public/Private Group (Shelby Development
Council)
Staff/ED consultant/Both
Local Initiatives (community based development
corp.)
28. ECONOMIC DEVELOPMENT
Getting Started
Realistic Assessment of Assets and Liabilities
Quality of life factors (schools, low crime,
recreation)
Smaller market
Compile the Facts:
Inventory of available sites
Job skills – local and adjoining counties
Peak season market dynamics
29. ECONOMIC DEVELOPMENT
Getting Started
Know Your Existing Businesses Well
Over 80% of new job opportunities come from
expansion of small business enterprises
Be prepared to compete with other cities and
states
Networking and Knowledge Resources:
Illinois Development Council (IDC)
Illinois Tax Increment Association (ITIA)
National Association of Industrial and Office
Properties (NAIOP)
34. ECONOMIC DEVELOPMENT
Conclusions
Economic development doesn’t just happen
Local initiatives need to seize the opportunity or
create the opportunity
County or region-wide efforts more cost efficient
Public/private collaborative tends to get better
results
Get help – staff, consultants or both