Quiz 1 Characteristic of Good Visual Design Due May 15th,.docx

Quiz 1: Characteristic of Good Visual Design
Due May 15th, firm deadline
In the textbook of this course, author talks about 10 principles
of good design
shown below. Research those concepts in your own (i.e. through
Internet
sources and then for each concept find two pictures/charts, etc.
One that you
think has the quality and one that is not (For example, One that
you think is
innovative and one that is not). Its all personal perspective,
there is no right and
wrong, that’s fine, just make sure you make your case and
justify.
Innovative to me is like creative, different but effective. Here is
an example, The stock price changes
chart below is innovative
This chart is innovative because while it is simple, yet it can

show many interesting information for many
different companies. In comparison, the chart below is not
innovative, it does not read very well and
looks very complex
Chapter 9
Industrial Recruitment
*
In previous classes, we have introduced some US government
facts as well as some historical and theoretical background of
business-government relations. Starting from this week, we are
going to focus on business-government relations in economic
development, especially in local context.
Today we will cover chapter 9 = industrial recruitment. We
will look a various economic theories, cluster theory, political
context of local economic development, and industrial
recrtuiment.
Economic growth contributes to an increase in consumption
which benefits all sectors of the economic community.
Despite the dynamic in the growth loop, economic growth can
not be indefinite (e.g., land is limited).

*
An economy will reach a natural equilibrium if capital can flow
without restrictionCapital mobility: capital will flow from high
cost areas to low cost areasEquilibrium: overall market and all
areas will reach a state of equal statusNo government
intervention:
opposing government regulations on the movement of firms
attracting capital with community’s resources (e.g., land, labor,
infrastructure, financial incentives, etc.)
*
Location theoryFactors affecting a firm’s location
choiceGovernment should enhance the location with government
performance, policies, and resourcesEconomic base theoryLocal
demands vs. external demands Government should recruit
businesses that have a market beyond the local area and
encourage export-oriented industries.
Location theory, on the other hand, seeks to explain an area’s
competitiveness in terms of firms’ locational orientation—what
factors of an area contribute to a firm’s location choice.
Location theorists assume that firms, in order to maximize their
profits, choose locations that minimize the cost of transporting
goods to the market place. Unlike the neoclassical school,
location theorists generally assert that government should play a

critical role in enhancing the location. A capable, cooperative,
and responsive government can potentially better meet business’
needs for land, infrastructure such as transportation and roads,
education, and other public services.
Economic base theory analyzes growth from the demand side
rather than the supply side. It differentiates the economic
activities of an area into two components—those which meet the
local demands and those which satisfy the demands outside the
community. The former is non-basic, which does not lead to
growth, while the latter is basic, which will generate local
wealth and jobs.
*
Growth pole theoryA dynamic industry with a competitiveness
edge in capital, technology and political influence is a pole of
growth.Government should help expand the core
industry.Central place theoryCritical role of urban
centersGovernment should direct resources to the development
of a central place
Growth pole theory rejects neoclassical theorists’ claim that
growth “should” flow to less costly regions and argues that
indeed the opposite happens unless there is a dynamic industry
with a competiveness edge in capital, technology, and political
influence (Perroux 1983). Such industries are propelled by poles
of growth. A pole or hub is characterized by core industries
around which linked industries develop because of the core
industries’ demand (from suppliers), as well as its provision of
goods and services (to customers). The expansion of a core
industry leads to the expansion of investment, output,
employment, and new technologies, as well as the emergence of
secondary growth poles.

Central place theory focuses on the critical role of urban centers
in regional economic development. According to this theory,
urban centers contain specialized industries (especially retail
stores) that serve a broad area. They are surrounded and
supported by a number of small jurisdictions that provide
resources and markets for the urban centers. Residents of a
small jurisdiction have to go to these central, urban areas for
specialized products and services which are not provided in
their own communities. Therefore, economic development
efforts should direct resources to the development of a
designated central place which will improve the economic well-
being of the whole region (Bradshaw and Blakely 1979).
*
Michael PorterHarvard Business School Professor Dr. Porter
first introduced the idea of cluster in 1990His theory led to a
large body of research on cluster-based economic development
along with hundreds of public-private cluster initiatives
throughout the world.
*
*
*
Clusters are geographic concentrations of interconnected
companies, specialized suppliers, firms in related industries,
and associated institutions (e.g., government, universities, and
trade associations) in a particular field that compete but also
cooperate.
geographic concentrations=physical proximityinterconnected=
there is an important synergy among themcompete but also

cooperate=both factors make them better!
What is a cluster?
*
Clusters affect competition in three broad waysBy increasing
the productivity of companies based in the area,By driving the
direction and pace of innovation, which underpins future
productivity growth,By stimulating the formation of new
business, which expands and strengthens the cluster itself.
Productivity. Being part of a cluster allows companies to
operate more productively in sourcing inputs; accessing
information, technology, and needed institutions; coordinating
with related companies; and measuring and motivating
improvement.
Innovation. In addition to enhancing productivity, clusters
facilitate knowledge sharing among companies, provide the
capacity and flexibility to act rapidly (source what it need to
implement innovation quickly), experiment at lower cost
(because suppliers are close).
New business formation. New suppliers proliferate within a
cluster because a concentrated customer base lowers risks and
makes it easier to spot market opportunities. The formation of
new businesses is part of a positive feedback loop. An expanded
cluster amplifies all the benefits and increases the collective

pool of competitive resources.
*
Automobiles, Michigan
Watches, Switzerland
Chocolate, Belgium
Wine, France
*
Theme park entertainment, Orlando
Disney in 1971;
Today also Universal, Cirque de Soleil, and Seaworld
Silicon Valley
Standford leased land to high tech companies in 1971;
Intel-Santa Clara, Apple-Cupertino;
Today over 4,000 IT related companies from SF to San Jose
along Highway 101
Cirque du Soleil (French for "Circus of the Sun", in English
pronounced /sɜrk duː soʊˈleɪ/) is an entertainment empire based
in Montreal, Quebec, Canada and founded in Baie-Saint-Paul in
1984 by two former street performers, Guy Laliberté and Daniel
Gauthier.
SeaWorld is a chain of marine mammal parks in the United
States, with operations in Orlando, Florida, San Diego,
California, San Antonio, Texas, and previously Aurora, Ohio.

*
*
http://www.clustermapping.us/
*
Bring together a pool of resources—workers, suppliers, related
services—that provides depth, security, and choices/diversity
for a cluster.
Locality enhances cooperation, since most cluster participants
are not direct competitors but rather serve different segments of
industries.
Provide local competition that gives fast feedback on
innovations, trends, price and quality.
Ironically, entry into a cluster is initially easier because of
great demand for new workers and new ideas.
Clusters facilitate niche specialization that cannot normally be
sustained outside of clusters.
Bring together sophisticated local customers who know the state
of the art and give tough feedback.
*
1.
2.

3. If you are in a cluster, you can’t sit back on your heels. You
improve both your operational effectiveness as well as your
strategy effectiveness. Easy to be at productivity frontier.
4. Long-term success dependent on hard work, great ideas and
strategy, and luck.
5.
Porter: Companies in cluster can
productivityBetter access to employees and suppliersAccess a
deep and specialized supplier baseAccess to specialized
informationComplementarities: a. products complement one
another in meeting customers’ needs; b. enhancing the
reputation of a location’ buying from a cluster more
attractiveAccess to institutions and public goodsBetter
motivation (local rivals share general circumstances and
perform similar activities) and compare performances
InnovationBetter window on the marketMore visible
opportunities for innovationLower cost to experiment
New Business FormationMore easily perceive gapsNeeded
assets, skills, inputs, and staff often availableLocal financial
institutions and investors may require a lower risk premium on
capitalSignificant local markets
Question: What could be the benefits of cluster to local
economy?
*Stimulate economy with natural diversification. Clusters are
not a single company or industry but a group of organizations
that have a synergy and a related set of products.
Provide renown. Clusters are very good at what they do and get
reputations.
Provide local wealth. With local ownership, more money stays
in the community.
Generally provide more high paying jobs. Because they are the
productivity frontier and doing large volume, clusters generally

can afford to pay for the best.
*
What are the old and emerging clusters in the Inland Empire?
*
*
Housing
Commercial (Victoria Gardens)
Transportation/logistic [State Bros] (Ontario, Norton Airforce
Base)
Wine (Temecula)
Dairy (Chino Hills)
Tourism (Palm Spring >100 golf courts)
*Facilitating cluster development and upgrading,Reinforcing
and building on established and emerging clusters Helping all
firms, not individual firms, Promoting competition and invite
distant/foreign partnersGovernment can: remove obstacles,
relax constraints; support resources such as necessary
infrastructure; support human capital development such as
education and training programs; assist export promotion;
encourage local R & D efforts; sponsor forums to bring cluster
participants together;encourage industrial parks; sponsor
independent testing or certification if it is useful.

*
A major role of government is cluster development (according
to Porter), “facilitating cluster development and upgrading,”
because of the increases in productivity and salary
“Governments should reinforce and build on established and
emerging clusters rather than attempt to create entirely new
ones.”
Government should help all firms generally.
Government must not attempt to set policies that help individual
firms, distorting market
Government should promote competition and invite
distant/foreign partners
Government can:
remove obstacles, relax constraints;
support resources such as necessary infrastructure;
support human capital development such as education and
training programs;
assist export promotion;
encourage local R & D efforts;
sponsor forums to bring cluster participants together;
encourage industrial parks;
sponsor independent testing or certification if it is useful.
*PopulationHuman capital productivity (e.g.,
education)Innovation (e.g., process improvements or
inventions)Land intensification (low yield agricultural to high
yield, or plentiful agricultural to in-demand housing)Resource
availability (e.g., minerals, specialized workforce, or natural
resources such as forests)Transportation (access to roads, rivers,
canals, airports)Climate (suitable climate and suitable

conditions)Culture and amenities (e.g., desirability of location,
products from a location)Synergy among factors (e.g., cluster
theory)
(more)
Land intensification measures the degree that population,
affluence, and technology interacts with land.
A business cluster is a geographic concentration of
interconnected businesses, suppliers, and associated institutions
in a particular field. Clusters are considered to increase the
productivity with which companies can compete, nationally and
globally.
clusters have the potential to affect competition in three
ways:by increasing the productivity of the companies in the
cluster, by driving innovation in the field by stimulating new
businesses in the field
*
*General government policies (non-business policies affecting
peace and stability, public safety, quality of life,
welfare)Government policies specifically related to business
Regulatory
macro: fiscal and monetary policy, trade policy;
micro: planning, zoning, and inspection for environmental,
safety, and quality of life factorsPromotional policies (e.g.,
corporate subsidies, infrastructure enhancements, risk
protection [insurance], seed money and incubation funds,
etc.)Government contracting
*

A coalition of peopleinterested in the development and re-
development of land, such that unused land is developed for
highest present value
By increasing the overall development or
By intensification of land usegenerally brought together with
government power and financial subsidies.
*
Intensification means converting farm and open space to
residential and commercial, or lower class housing to “high-
class” commercial.
Land intensification: degree of $, people, & technology
interacts with land.
Composition: land developers financiers local governments
interested in greater property and sales taxes residents
interested in increased land values or public flagship
projectsPhilosophical underpinnings: commercial capitalism
(mercantilism, Hamiltonian democracy)
Government is a major economic “player”
Community benefits from increased wealth
Hamiltonian Democracy: strong government
Government plays an active role, a major economic “players”
should drive the economy and the future. Hamilton, on the other
hand, advocated strong, central institutions of government at the
federal level. Only through effective government and the rule of
law, he said, could freedom of the individual be assured.
Commercial capitalism is another word for mercantilism.

Mercantilism suggests that the ruling government should
advance its goals by playing a protectionist role in the economy
and encouraging exports and discouraging imports, notably
through the use of subsidies and tariffs respectively. The
assumption was that trade is a zero sum game.
Jefferson democracy: strong citizenry
was portrayed as an idealist for the small state, where
government takes a low profile in the interests of strong,
confident citizenry.
*
A powerful consensus among key groups who collectively
promote economic growth. A true growth machine includes:
large public entrepreneurs connected to the community, a
generally supportive public, and a strong support base in
government (especially the city council or board of supervisors)
*
A related concept to pro-growth
For example, in a city, the GM is a coalition of local business
and local government. Those players come together to pursue an
agenda of urban growth and intensification of land use.
The GM often dominates city politics because it is able to
establish and maintain a political consensus that growth is good
for all.
A coalition interested in slowing or stopping various types of
development because the effects of fast growth are considered
too negative: Sprawl, Traffic congestion, Environmental
degradationInsufficient infrastructure, Excessive cost shifting to

current tax payers for development projects, Degradation of
existing communities by downgrading current use, and Other
special interests
*Sprawl, Traffic congestion, Environmental degradation
(especially creation of brownfields) Insufficient infrastructure
(e.g., parks, drainage systems), excessive cost shifting to
current tax payers for development projects (i.e. SB stadium,
multiplex theater, enterprise zones), degradation of existing
communities (residential or commercial) by downgrading
current use. Other special interests: historical preservation,
zoning protections (urban growth boundaries and
encouragement of in-fill, appropriate mix of uses, etc.)
Sprawl is “the process in which the spread of development
across the landscape far outpaces population growth” (Ewing
2002)“poorly planned, low-density, auto-oriented development
that spreads out from the center communities” (the National
Trust for Historic Preservation)
Sprawl: the process in which the spread of development across
the landscape far outpaces population growth.
*
Creates sprawl and its negative effects [Ewing, et al.]More
carsLess public transitMore traffic fatalitiesPoor air
qualityAesthetic ugliness of sameness, and strip
mallsDuplication of infrastructure which leads to lack of
sustainability [Wiewal et al.]Decline and abandonment of the
central city, as well as inner suburbsEnvironmental degradation
and creation of brownfieldsCost shifting of development to

current taxpayers
*
Start: So let’s look more at the quality of economic
development
Three urban density functions with Ewing views of compact
development and of sprawl. The first, G & R's compact pattern,
is European in its very high central densities, high average
densities, and abrupt urban-rural boundary. This is a straw man
par excellence, since it is as yet unseen in the United States.
The second pattern, my version of sprawl, has few significant
centers, low average density, and wide gaps in the urban fabric
due to leapfrogging. This is no straw man. It is a common urban
form, and many planners and policy makers object to it. The
third ---a clear indication of how much our concepts of sprawl
differ. This pattern is multicentered, has moderate average
densities, and is continuous except for permanent open spaces,
or vacant lands to be developed within the standard planning
time frame.
Higher rates of driving and vehicle ownership
Increased levels of ozone pollution
Greater risk of fatal crashes
Depressed rates of walking and alternative transport use
No significant differences in congestion delays
Residential density: A population that is widely dispersed in
low density developmentNeighborhood mix of homes, jobs, and
services:Rigidly separated homes, shops, and
workplacesStrength of activity centers and downtown
(centeredness): A lack of well-defined, thriving activity
centersAccessibility of the street network: A network of roads
marked by huge blocks and poor access

*
Residential density: most recognized; amount of land used per
person
Mix: segregation of land uses which requires more car travel,
especially home vs. job
Centeredness: is the degree to which residential development is
located close to the central business district of the area (also,
supports multi-purpose trips for shopping and services)
Accessibility of street network: disconnected network; few
extremely busy arterials must carry all traffic; few alternate
routes
Similar but not identical to Wolman et al. who have five
dimensions:
Density—average # of residential unit/square mile of
developable land in an area
Concentration—degree to which housing units are located
disproportionately in a relatively few square miles of an area
Centrality—degree to which residential development is located
close to the central business district of an area
Nuclearity—the extent to which the built environment of an
area is characterized by a single, highly dense node pattern of
development
Proximity—degree to which across area observations of a
particular land use or pair of land uses are close to each other,
relative to the distribution of all land comprising the study area.
Riverside:
few areas serve as town center—66% pop lives over ten miles
from a central business district
Little neighborhood mixing of home with other uses: only 28%
residents live within ½ block of any business or institution
Residential density is low: less than 1% pop lives in
communities with enough density to be served by transit
Street network is poorly connected: 70% of its blocks are larger
than traditional urban size. (SR91, Bedroom community)

Impact feesCharges imposed on developersGrowth
managementConstraints on the intensity of developmentDesign
and capacity standards for lots and buildingsRequirement of
adequate public facilities or imposition of impact
feesReductions in the supply of land open for development
Regional governance (e.g., SANBAG, SCAG, CVAG)Reducing
regional disparity by joining them in one governmental body
Redevelopment of older areas
shifting to other taxpayers (to cover cost of roads, utilities,
sidewalks, wastewater, public cemeteries, solid waste facilities,
new public buildings such as police precinct stations and fire
comprehensive plans; even better is regional zoning but very
hard to accomplish in American model
Ewing:
Reinvest in neglected communities and provide more housing
opportunities
Rehabilitate abandoned properties
Encouraged new development or redevelopment in already built
up areas
Create and nurture thriving, mixed-use centers of activity
Support growth management strategies
Craft transportation policies that complement smarter growth
http://www.sanbag.ca.gov/about/index.html San Bernardino
http://www.scag.ca.gov/index.htm Regional COG: Southern
CA
http://www.wrcog.cog.ca.us/ Western Riverside COG
http://www.cvag.org/ Coachella Valley Association of
Governments

Composition:Residents, who fear that their area will be
neglected, degraded, or are offended by the “ugliness factor,”
excessive arterial strip commercial development; Commercial
interest groups, who feel that the new growth will unfairly
compete with local businessesEnvironmentalists, who fear the
loss of farmland, open spaces, wildlife preserves, natural
ecosystems, and land-air-water degradation by profligate
useTaxpayers, who feel that excessive or inefficient subsidies
are being used to support development, or that public entities
will bear excessive costs over timeLocal governments, whose
land is all largely in use and whose values are relatively high
*
Composition: residents who fear that their area will be
neglected (siphoning off of resources), degraded (e.g., inner
city neighborhoods with a nearby flagship project or wealthy
communities by apartments), or are offended by the “ugliness
factor,” excessive arterial strip commercial development;
commercial interests who feel that the new growth will unfairly
compete with local businesses (e.g., WalMart, a new mall, etc.);
environmentalists who fear the loss of farmland, open spaces,
wildlife preserves, natural ecosystems, and land-air-water
degradation by profligate use (e.g., low-density residential
development); taxpayers who feel that excessive or inefficient
subsidies are being used to support development, or that public
entities will bear excessive costs over time; local governments
whose land is all largely in use and whose values are relatively
high
No Growth: Emphasizes that an area has reached saturation and
only gentrification should occur; Has extremely strong
preservation emphasis

*
An urban advocate represents a poor neighborhood that needs
jobs and wants to encourage businesses to relocate downtown.
(pro-growth) The advocate learns of a stadium project that
would demolish part of the neighborhood, sporadically increase
congestion, and bring few jobs. He becomes vehemently slow-
growth.
A wealthy developer spends an enormous amount of money and
time getting land rezoned from open space to residential, and
getting zoning variances to allow high rises and commercial
exemptions downtown. When a high-rise condominium complex
is proposed in extremely affluent residential community, the
developer becomes outraged and personally appears at the
planning board meeting to oppose the measure.
*
Question: based on your city’s current economic status and your
own interest, are you in favor of pro-growth, or slow growth,
why?
*
LA and Southern CA founded on pro-growthLast unrestrained
push (of business/government collaboration): under Bradley
(mayor) from 1974-85Declining after Bradley Administration

*
Mark Purcell: The Decline of the Political Consensus for Urban
Growth: Evidence from Los Angeles
Thesis: Growth interests in LA have been lacking the political
coordination to effectively accomplish their projects in recent
decades. The reason is not that growth machine has collapsed,
just that it has ceased to be a juggernaut or unstoppable force
that it was during its heyday.
Possible factors leading to deterioration: The fall of the
Bradley regime: 1. Prop 13; 2. federal grant cut; 3. development
spread outward to other areas of the citybroad ethnic alliance
with federal subsidies with pro-growth to “pay” for benefits to
many groups; as funding became tighter (prop 13 and fewer fed
$), the coalition faltered Globalization: assertion that most
growth machines need strong local economic interests because
otherwise global interests may be seen as profiting from local
good; fewer local benefitsBranch operations: businesses in a
given locality are branch operations of large firms rather than
entirely indigenous firms. They have fewer multiplier effects:
employment is often recruited outside the local area, raw
materials are more often purchased in other places, and
employees are more likely to be replaced by technological
advances that large firms can afford. They bring fewer real
economic benefits to the place in which they locate.Resistance
to growth: residential and environmental interests; profit not
the only or even primary reason for growthGeographical
fragmentation of local growth elite: regional interests serve as
an umbrella under which a wide array of smaller groups
operateareas within the city compete with one another (San
Fernando Valley with other areas similar to squabbles among
citiesCity government as a failing partner in the growth
machine: 1. secession 2. legitimacy crisis (low voter turnout) 3.
fiscal crisis (Prop 13) 4. council of strong ward structure (15
wards)ascension of slow-growth council people; reemergence of

strong ward system with strong local interests and
competitiveness; allows for sniping (short fire from concealed
place)
Local concern for open space, residential amenities, and
planned growth; underlying preference to keep Redlands the
same
Friends of Redlands (1978)The Redlands Association (1986)a
grass-roots group advocating for slow-growth
http://www.ci.redlands.ca.us/community/plan.html
Best Old Town to Walk and Shop
*
Passed a series of very strong slow-growth
ordinances:Proposition R (1978):
Redlands' first growth management initiative
intended to limit the pace of residential growth to 450 new
housing units per yearMeasure N (1987):
limited 400 new dwellings a year
each permit highly scrutinized,
very high development feesMeasure H (1995):
would have further limited development; narrowly
defeatedMeasure U (1997):
establishing principles of managed development;
encouraged low density housing and maintenance of citrus
The Redlands: Slow-growth case
Proposition R (initially successful until about 1983 when
planning board was granting too many exceptions); prop N
tightened up a lot!!Proposition N (1987): limited 400 new
dwellings a year, nearly impossible to convert agricultural land,

each permit highly scrutinized, very high development
fees1995: Measure H would have further limited development;
narrowly defeated1997: Measure U passed; establishing
principles of managed development; encouraged low density
housing and maintenance of citrus
*
Definition: “an urban planning and transportation theory that
concentrates growth in the center of a city to avoid urban
sprawl; and advocates compact, transit-oriented, walkable,
bicycle-friendly land use, including mixed-use development
with a range of housing choices.”Goals of Smart Growth:To
focus on long-range, regional considerations of
sustainability;To achieve a unique sense of community and
place; To expand the range of transportation, employment, and
housing choices;To equitably distribute the costs and benefits of
development; To preserve and enhance natural and cultural
resources; and To promote public health.
Source: Wikipedia
Mixed-use: mix use of jobs, homes, and stores (working,
residential, commercial)
*
Overarching principles: balance public/private interests and
ensure sustainability
Recommended practices: high density, mixed land use,strong
use of planning with clustered development and protection of
agricultural and open space,integration of affordable housing
and social equity concerns, traffic grids allowing for alternate
routes, more emphasis on non-automotive means including
pedestrian walkways and bike paths, narrower streets, full

costing and implementation of infrastructure at beginning of
construction
*
Private: profit
Public: amenities, aesthetics, affordability, equity, safety,
community (social capital)
Private&Public--sustainability
*
We have now looked at the strengths of economic growth and
the successes of economic development, but we have also
looked at the challenges and problems too!
Question: so what do you think could be the groups of people
for and against growth?
Now let’s look at the politics and ideology of growth and
economic development, especially the ideological disparities
between the pro-growth and the slow or no-growth.
*
In previous class, we covered the four intellectual models of
government business relations, government’s role in economic

development, and how government funds economic
development. Today we will cover how government interact
with business.
Industrial recruitmentGovernments subsidize businesses to lure
more investment in their jurisdictions.Entrepreneurial
strategyGovernments adopt policies that promise to increase
public revenue, focusing on new firm and technology
development. Privatization (especially
deregulation)Governments delegate businesses its public duties.
Last week we introduced the concept of economic growth. We
define ED as a government activity to “encourage private
investment in a particular jurisdiction for the purpose of
generating or retaining jobs, expanding the tax base, and
increasing the general level of economic well-being.”
We also talked about the methods government used to finance
ED. Government may subsidize firms through grants, loans, and
various forms of interest subsidy. Government may also give
business tax breaks, provide infrastructure, offer information or
technical assistance. In addition, government also involve
business in PPP to induce ED.
Today we are going to study what are the strategies government
used to induce economic growth.
*
A locational approach by which governments subsidize
businesses to lure more investment into their jurisdictions or to
prevent indigenous firms from leaving.Lowering private firm’s
production factor costsExpecting growth to offset the
expendituresA case-by-case approachGovernment negotiating
with individual firms about the incentive programs

*
*It is often understood as a product of competitive federalism,
which assumes that the diversity of services offered by state and
local governments creates a market for public goods.
*
“Concerned with the potential exit of firms and desiring to
create more economic activity, governments subsidize
businesses in the hope that new jobs will stimulate related
enterprise.”
It is characterized by government policies attempt to reduce
costs to business but in a nontargeted and passive manner.
Government often offers incentives to lure business from other
jurisdictions or to prevent indigenous firms from leaving. It
always result in competition among state and local government.
*Pros“democratic” open to public scrutinyCapitalistic principle:
competitionGovernments can be selective
ConsErodes the tax baseCan lead to economic powerhouses
manipulating governmentExacerbates inequities among
jurisdictions (winners and losers)
*
Fedex in Memphis, the city built a road in front of the head
quarter complex

*
"Economic development projects are negotiations between
companies or organizations looking for the best place to set up
shop and the communities in which they are looking. As with
any business negotiation, certain information is shared between
the two parties so that each can better understand the options
and determine the best scenario for both parties.“
- Cullen Larson, executive director, Georgia Economic
Developers Association, November 2005
Peddle, 2008
*
Government reasonstax dollars, jobs, high paying jobspublic
relations. [also, jobs for blighted areas, sometimes specialty
companies to complement existing businesses, and to redevelop
areas.]
Business reasonstax breaks, zoning variances, land assembly
assistance, infrastructure improvements, and Cash outlays (e.g.,
grant, loan guarantees, subsidies)
*

*
Public Interest
Corporate Interest
Market Conditions
Political Conditions
Planning System
*
*Issue: what are the factors that affect bargaining between
business and local government?Three major factors affect
bargaining relationship
market conditions
circumstances or forces that make cities more or less appealing
to private investors
political conditions
the political process through which public sector decisions can
affect economic development
Planning system
relationships and methods used by government to regulate the
marketplace
*

Historical hotel built in 1903. After original owner Frank
Miller’s death, it was declining, and sold by the family. Great
depression The city purchased in 1976 (student housing).1985
worked with a developer but failed.Finally sold to Duane
Roberts in 1990s, who had a passion for saving the landmark
that he revered from his childhood.1992 reopen to public, great
success. (weak market condition: competition from Las Vegas
and Palm Springs(planning system: the city could make
whatever variances the business owner needed, even historical
landmark waivers)
Major effort to redevelop the property starting 1985Developer 1
with city: $30 million was not enough!Developer 2 and 3:
failed attemptsDeveloper 4: Duane Roberts and success;
reopened in 1992
Mission Inn in Riverside, CAA win-win bargaining
*
These are just a few of the ways in which economic
development helps communities:
Increased Tax Base...the additional revenue provided by
economic development supports, maintains, and improves local
infrastructure, such as roads, parks, libraries, and emergency
medical services.
Job Development...economic development provides better

wages, benefits, and opportunities for advancement.
Business Retention...businesses feel appreciated by the
community and, in turn, are more likely to stay in town,
contributing to the economy.
Economic Diversification...a diversified economic base helps
expand the local economy and reduces a community's
vulnerability to a single business sector.
Self-sufficiency...a stronger economic base means public
services are less dependent on intergovernmental influences and
alliances, which can change with each election.
Productive Use of Property...property used for its "highest and
best use" maximizes the value of that property.
Quality of Life...more local tax dollars and jobs raise the
economic tide for the entire community, including the overall
standard of living of the residents.
Recognition of Local Products...successful economic
development often occurs when locally produced goods are
consumed in the local market to a greater degree
Government Business Relations
PA 315
Chapter 8

1
Agenda
Economic growth
Economic development
Government methods for economic development
Financial methods
Non-financial methods
2
Government Methods for Economic Development
3
3
4
Definitions of Economic Growth
Common sense definition:
Economic growth is concerned with wealth enhancement, that is

increases in financial value (or loss).
Classical definition
Economic growth is the increase in the value of goods and
services produced by an economy.
It is conventionally measured as the percent rate of increase in
real gross domestic product, or GDP.
4
Economic Growth & Quality of Life
Economic growth is a very important factor relate to quality of
life in society, but it is not the sole important factor.
Other important factors:
Democracy equality
Equality under the law
Equal opportunity (e.g., for education, employment, etc.)
The environment,
Quality of public spaces, and so on.
5

Economic Development
Economic development refers to the concerted efforts of
government, business, and communities to promote economic
growth, as well as the overall economic and social well-being of
people in a specific area.
6
Government and Economic Development
Government policies and actions of economic development
Overall policy framework to enhance market stability and
sustainable growth (e.g., tax policies)
Economic policies and practices to enhance employment,
increase the tax base, and improve people’s level of living (e.g.,
business retention practices)
Programs and projects that provide critical infrastructure and
services (e.g., affordable housing programs)
7
How Does Government Help Pay for Economic Development?

8
Tax reduction (aka tax break):

Financing Methods
Abatement
A partial reduction of the property tax liability of a given piece
of real estate for a specified number of years
For new or rehabilitated industrial or commercial property,
blighted property
Exemption
Freedom from the obligation to pay a particular tax
For purchases, investments, and activities other than real estate
development, e.g. raw materials, machinery, equipment
Manufacturing and R&D Partial Sales and Use Tax Exemption –
partial exemption from state3 sales (3.9%):
Engaged in research and development All manufacturers and
businesses – physical, engineering, and life sciences
Still subject to local sales tax
California caps exemption to $200 million
Credit
A reduction in the tax bill
For job creation or research and development expenses
9
9
Financing Methods
Public borrowing (based on future income from the potential
property tax)
IRB (industrial revenue bond): sponsored by a state or local

government entity but the proceeds are directed to a private for
profit business.
Bonds are issues on behalf of a private sector business and not
government.
For specific projects - finance business’ expansion, construction
or acquisition of manufacturing facilities and equipment.
Federal tax exempt status on the bonds, which provides a lower
interest rate.
Most of the time, a property tax exemption on the collateral
Max $10m
10
10
Hesperia and Riverside
http://www.cityofhesperia.us/261/State-of-California-Industrial-
Developme
https://www.rivcoeda.org/Economic-Development/Business-
Services/Industrial-Development-Bonds
11

Municipal Bonds
What is a municipal bond?
12
12
Financing Methods
Public borrowing (based on future income from property tax) –
TIF (tax increment financing):using municipal bond issued
based on the expected increase in property taxes that are
collected by an economic development agency.
Project will be paid with potential future property taxes from
the project in question
History of TIF – California 1950’s – federal government was
offering substantial urban renewal grants to communities that
could come up with matching funds. The assist cities in
redeveloping their blighted areas.
Principle behind TIF – if money is infused into a specific area,
this will cause assessed property values to increase more rapidly
through development and property sales, which triggers a
reassessment of their value and generates more money.
13
13

Financing Methods
Special taxes (earmarked for development), e.g.,
Hotel tax (Transient Occupancy Tax or Hotel Occupancy Tax) –
California 7%-14%
Sin tax - is a tax levied to correct the negative externalities of a
market activity –
Ex. Tax on producers who pollute to reduce pollution
Special sales tax – not common in California. Texas allows for
up to 2% for local economic development
14
14
Financing Methods
General fund (other than tax breaks which are reductions from
the general fund)
especially as the ultimate guarantor of investments
e.g., getting better rates through municipal bonds, less risk
providing insurance programs
e.g., flood insurance in coastal areas
improvements/services that promote development
e.g., new roads and other infrastructure, special programs to
assist business such as training and education, etc.
seed money (one-time grants)
e.g., development revolving funds, loan of property for
charitable purpose
15

15
Financing Methods
Public-private partnerships (joint ownership which enables
larger projects, public land assembly powers, and/or public
backing)
public pays part of the expenses for its portion of large projects
through a variety of the above mechanisms
16
16
Why public private partnerships in California?
Need to move people and goods efficiently and safely
85% of the interstate freeways are congested
overdue repairs to our transportation system
Roads, bridges and trains are strained as 40% of the nation’s
imports move through California to final destinations.
Cannot finance, manage and build transportation projects
Need for flexibility and entrepreneurial ideas in light of new
accountability and oversight rules the Legislature has imposed
to protect taxpayer funding
One approach with a track record of success in California is
through public-private partnerships.

17
Rialto, California
The private partner on that project closed its debt and equity
financing for $176 million in late-November 2012.
Aging water and wastewater systems and treatment facilities
Under the P3 agreement for Rialto’s water and wastewater
systems and treatment facilities, the Public Utility Authority’s
existing debt of $27.4 million was extinguished and Rialto
received an upfront payment of $30 million from the private
partner.
The private partner is paid by Rialto through a combination of
monthly capital charges and operating payments. Rialto finances
these payments through water and wastewater user fees and
various non-rate revenues.
18
Financing Methods
Federal sources (programs funded by federal taxpayers), e.g.,
Community Development Block Grant (CDBG)
Housing rehabilitation, public works, and planning
Community Development Financial Institution
Helps distressed communities by providing federal $$
Technology Innovation Program (TIP)
Encourages government and business partners to cost share the
early stages of innovation

Manufacturing Extension Partnership (MEP)
Assists in the creation of jobs, enhances productivity, and
encourages competiveness through improvements and
innovation
Compassion Capital Fund (CCF)
Supports local charities – job training, counseling, economic
development
Job Opportunities for Low –Income Individuals (JOLI)
Supports local charities – low income individuals and families
through the creation of business development and employment
opportunities
19
19
Non-financial Methods to encourage economic development
20
Planning

The management process of thinking about and organizing the
resources and activities in order achieve a desired outcome.
involve the critical stakeholders of the local community to
establish the vision for development,
engage in public discussions,
reach consensus on goals to be achieved as well as plans in
general.
21
Planning
For example:
The city of Pasadena
City of Los Angeles Consolidated Planning Community Meeting
22
Zoning
The system of land-use regulation, which involves the practice
of designating permitted use of land based on mapped zones
separating one set of land uses from another.
Zoning regulations: e.g., acceptable activities, densities (low
for single family housing and high for high rise apartments),
building height, parking, etc.
Zoning for industrial or commercial use
Government also can allow for flexible zones and rules
Example – Redlands housing

23
24
Zoning for the city of Redlands
25
Marketing
Government promoting their jurisdictions as prime locations for
business
Websites
Special events (e.g., Los Angeles County Fair, Riverside County
Fair, San Bernardino County Fair)
Corporate executive visits
Trade shows (e.g., Expo 2015)
National advertisements
Letters to companies
Economic Development Directors – Cruz Esparza

26
Ombudsman Service
Service that assist firms to navigate the various government
regulations, programs, and services
Resolving problems and complaints
Investigating commercial opportunities
Helping to identify and evaluate options
Recommending changes in policies or procedures
27
Eminent Domain
The inherent power of government to seize a private property or
an individual’s rights to property with due monetary
compensation, but without the owner's consent
28
What types of property are most vulnerable to eminent domain?
Almost any property can be taken for public projects – parks,
schools, flood control channels, courthouses, bicycle paths, etc.
Most common are projects that include construction of new, and
expansion of existing highways, major thoroughfares and light

rail lines; erection of high voltage power line towers, or
installation of interstate pipelines across wide swaths of rural
land; expansion of city limits and related infrastructure;
airports; and in some cases, public projects placed in blighted
areas.
29
Who has the power of eminent domain?
States, counties, cities, transportation authorities, railroads,
electric utilities; gas companies, water, school districts, housing
authorities, certain non profit hospitals, and cemetery
authorities
How does the process work?
First contact by letter by the condemning agency indicating
their interest in your property
Pre-condemnation testing - conduct tests and studies to
determine suitability for project
A written offer of just compensation along with an appraisal or
summary of the value of the property. The offer cannot be
lower than the amount of the appraisal and is based on fair
market value of your property
Resolution of necessity establishes the public use and necessity
of the project and how your property is needed
If you oppose or are not satisfied, a lawsuit can be filed
Pre judgment possession would allow at least 120 for the
property to be taken
Final offers and demands are considered before the case goes to

trial – settlement
Trial
Ellen Disparte vs. Redlands Unified School District
2005 – 83 year old Ellen Disparte was living on her 100 year
old farm with roughly 200 animals
Redlands Unified School District wanted to build their 3rd high
school in Redlands
Disparte’s farm sits in the middle of the planned campus
RUSD purchased all the surrounding properties
She refused to sell and fought back with the support of the
community in Redlands
Offered 2.07 million through eminent domain
RUSD PR problem - Proposed location of future Citrus Valley
High School would push Ellen Disparte off her century-old farm
in Redlands.
Solution
: Relocate Citrus Valley High School to nearby east Highland
area
a.) Decreases current transportation dangers for Highland
students
b.) Preserves quality of life for Mrs. Disparte
c.) Maintains Redlands? quality reputation

Ellen Disparte
She was given an opportunity to take her case to trial July 2006
October 2006 – Ellen and RUSD reached a settlement regarding
the property
Agreement “effectively satisfies the needs and interests of both
the Redlands Unified School District and Mrs. Ellen Disparte”
(Heiss, 2006, p. 1).
She was allowed to remain in her home a the surrounding two
acres and RUSD acquired the rest.
Superintendent stated, “We may be the only comprehensive high
school in California with a feisty grandma living on a farm in
the parking lot.” (Heiss, 2006, p. 1)
“Character, not circumstances, makes the man.”
~ Booker T. Washington

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