Primer on Economic Development


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Primer on Economic Development

  1. 1. A Primer on Economic Development Shelby County Economic Development Initiative Mike Weber, Director
  2. 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. 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)
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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”
  10. 10. ECONOMIC DEVELOPMENT The Shift to States  Federal assistance is extremely limited  Focus shifted to State authorized mechanisms for local jurisdictions to raise funds
  11. 11. 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
  12. 12. 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”
  13. 13. ECONOMIC DEVELOPMENT Illinois Programs Today  Programs can be grouped by method of assistance  Tax Abatement  Value Added or “Capture”  Tax Assessment  Tax Credits  Loans
  14. 14. ECONOMIC DEVELOPMENT Tax Abatement  Enterprise Zone  Property Tax Abatement (intergovernmental agreement)  Sales Tax Rebate (local only)
  15. 15. ECONOMIC DEVELOPMENT Value Added or “Capture”  Tax Increment Financing (TIF)  Sales Tax Rebate
  16. 16. 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)
  17. 17. 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)
  18. 18. 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
  19. 19. 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
  20. 20. 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.)
  21. 21. 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
  22. 22. 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)
  23. 23. Sale Street Looking North - Existing Sale Street Looking North - Restored
  24. 24. 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