Economic Development

Question 1

What is a “Business Improvement District” (BID)?

Answer 1

Business Improvement District (BID): Defined area where businesses pay an additional tax or fee to fund projects within the BID boundaries.

Question 2

What are “Business Incubators”?

Answer 2

Business Incubators: Support program for start-ups with an end goal of freestanding companies (and associated jobs, revitalized neighborhoods, etc.)

Question 3

What is “Tax Increment Financing” (TIF)?

Answer 3

Tax Increment Financing (TIF) is a financing technique that allows a local government or redevelopment authority to target a group of contiguous properties for improvement (i.e. a TIF District), and earmark any future growth in property tax revenues in the district to pay for initial and ongoing improvements there. The growth in tax revenue is the “tax increment” between a base value and a higher value once development is complete.

Question 4

What are “Capital Improvement Programs” (CIP)?

Answer 4

Capital Improvement Program (CIP) is a 5 to 6 year schedule of capital projects. The first year of the CIP is the capital budget, which the local government formally adopts and implements, along with the operating budget.

The CIP is one of the most powerful tools for implementing a local comprehensive plan.

Question 5

What are capital improvements?

Answer 5

Capital improvements are projects that involve major, nonrecurring expenditures. They include acquisition or lease of land; projects requiring significant public borrowing for equipment, building, and facilities; studies whose costs exceed a state dollar amount; and related major equipment, furnishings, and improvements that exceed a stated dollar amount.

Question 6

What are some examples of capital improvements?

Answer 6

City Halls; Courthouses, Fire and Police Stations; Libraries; Park Land and Development; Streets, roads, and sidewalks; Schools; Sewer and Water Mains; Airports, Tennis Courts, etc.

Question 7

What are the 8 major steps in establishing a capital facilities program?

Answer 7

(1) Identifying the needs for facilities and the timing, costs, and means of financing for each project.
(2) Presenting the relationship of the CIP to the comprehensive plan.
(3) Preparing a financial analysis of the jurisdiction’s capacity to pay for new facilities.
(4) Setting priorities among the proposals.
(5) Seeking review and comment by the public on the recommended projects and priorities.
(6) Preparing a final capital facilities program showing projects, priorities, schedule of completion, and methods of funding each project.
(7) Adopting the capital facilities program by the governing body and adopting first-year projects as a capital budget as part of the annual budget.
(8) Reviewing the capital improvements program annually.

Question 8

Capital Improvement Program (CIP) Procedures?

Answer 8

• Appoint a Coordinator and Other Participants, and Define Responsibilities
• Inform Citizens
• Set Rules/Policies: (1) Define Capital Improvement (2) Determine Length of Plan
• Develop a priority system
• Prepare Inventory List: Include age, condition, replacement dates; include improvements underway and current status
• Prepare a Project Request List in Priority Order: include in-depth information on each (such as justification, future operation and maintenance costs, relationship to other projects).
• Review Projects and Develop Project Summary Lists
• The Financial Picture: (1) Revenue Trends/Projections (2) Expenditure Trends/Projections
• Alternative Financing Mechanisms
• Final Report, Adoption, and Implementation

Question 9

When were The Empowerment Zone/Enterprise Community (EZ/EC) programs established and under what legislative authorization?

Answer 9

The Empowerment Zone/Enterprise Community (EZ/EC) program was established in 1993 under the Federal Omnibus Budget Reconcilliation Act and reauthorized by the Tax Relief Act of 1997 and the Community Renewal Tax Relief Act of 2000.

Question 10

What is the purpose of The Empowerment Zone/Enterprise Community (EZ/EC) program?

Answer 10

The purpose of the program is to target revitalization efforts in specially designated economically distressed urban and rural areas. The U.S. Department of Housing and Urban Development (HUD) receives applications for urban areas, and the U.S. Department of Agriculture (USDA) receives applications for rural areas.

Question 11

As of 2006, how many empowerment Zones and Enterprise Communities had been designated?

Answer 11

As of 2006 (and three rounds of awards), there have been 41 Empowerment Zones and 155 Enterprise Communities designated.

Question 12

What are the EZ/EC program principles?

Answer 12

• Economic Opportunity: creating jobs, expanding residents’ access to jobs outside the designated area, attracting private investment, and promoting self-sufficiency of area residents
• Sustainable community development: balancing economic revitalization with environmental protection, as well as making neighborhoods safer and move livable through sound urban design.
• Community-based partnerships: fostering grassroots involvement of those directly affected by the designation, encouraging intergovernmental cooperation, and building links with private sector.
• Strategic vision for change: plans should present a vision of the community, including how existing assets will be incorporated into the plan.

Question 13

What is the average length of a TIF District in most states?

Answer 13

In most states, the lifetime of a TIF district is around 20 years, although in some states, there is no limits on how long a TIF district can be in existence.

Question 14

What are eligible uses for TIF funds?

Answer 14

State enabling legislation will spell out the eligible uses for TIF funds. These typically include the cost of demolition, parcel assembly, remediation, and land preparation, historic rehabilitation, and other facade improvements, planning studies, and occasionally, workforce development and training.

Question 15

What is a mechanism for ensuring that TIF districts do not cause displacement of existing residents?

Answer 15

Property tax deferral programs for elderly homeowners in a TIF district are one way of ensuring that TIF does not cause displacement of existing residents.

Question 16

What are Planned Manufacturing Districts (PMDs)?

Answer 16

A PMD is an additional layer of zoning that is applied to areas already designated for manufacturing. The PMD takes precedent over all existing zoning regulations and serves to unify a fairly large area into a single zoning designation. Intended to disallow piecemeal or “spot zoning” and to protect manufacturing from nuisance suits as well as protecting manufacturers from encroachment and rising business costs.

Question 17

What are two models to develop economic projections?

Answer 17

Economic base projections and econometric models.

Question 18

What is an Economic Base Analysis?

Answer 18

Economic base analysis can be used as a technique to project local or regional employment by relating it to national or state employment projections, which are often prepared by state agencies and private forecasting firms.

Question 19

What are the assumptions of Economic Base Analysis?

Answer 19

Economic base analysis assumes that the local economy can be divided into two sectors: the basic (or nonlocal) sector and the non-basic (or local) sector. It assumes the basic sector is the prime mover of the local economy; that is, the local economy will grow and prosper primarily because the basic sector exports goods and brings in additional money.

Question 20

What is the multiplier effect?

Answer 20

The multiplier effect is the term for the idea that money added to the local economy through the basic sector remains in the local economy, increasing the demand for goods and services provided by the nonbasic (or local) sector. That money then stimulates both nonbasic and additional basic economic activity as it cycles through the economy.

Question 21

What are input-output models? What do they estimate?

Answer 21

Input-output models estimate sector-specific multipliers in the economy.

Question 22

What is meant by “basic sector”?

Answer 22

A basic sector supports the local economy by exporting goods whose purchase brings new money into the local economy.

Manufacturing, agriculture, and mining were traditionally assumed to be the primary basic sectors. Current thinking includes any sector that brings money into the local economy as basic, which could include tourism and federal and state government activities.

Question 23

What is meant by “nonbasic sector”?

Answer 23

The nonbasic sector consists of activities such as retail trade, services, and local government expenditures that provide goods and services primarily to local residents and which are therefore largely dependent on local economic conditions.

Retail trade can function as an export-oriented or basic industry if it brings in people from a large area (e.g. a retail outlet mall); however, retail trade typically falls within the nonbasic category.

Question 24

What is a Location Quotient?

Answer 24

The first step in an economic base study is identifying the basic and nonbasic sectors. A simple way to do this is to use location quotients, which is the “ratio of ratios” that compares an industry’s share of the local employment to its share of national employment.

Question 25

How is a Location Quotient calculated?

Answer 25

The numerator of the LQ formula is the industry’s share of the total regional employment; it is the portion of the local employment that is attributable to that industry.

The denominator is the industry’s share of the national employment; it is the portion of the national employment that is attributable to industry.

Question 26

What does the value of a Location Quotient mean?

Answer 26

If the LQ is greater than 1, the industry’s local employment share is greater than its national employment share. The inference from a location quotient greater than 1 is that the regional has more employment industry than is needed to support the local economy and creates a surplus for export, which means the industry is a basic industry.

Conversely, if the location quotient is less than 1, the local employment share is less than its national employment share, and it is assumed to be a nonbasic industry.

Question 27

What are economic base projections? How are they calculated?

Answer 27

This projection technique involves multiplying the projected total basic-sector employment by a base multiplier, computed from historical data. The procedure assumes that the various sectors of the local economy will grow by the projected national or state growth rate.