IEDC Definitions Flashcards
Amortization
The liquidation of a debt via a specified schedule of payments.
Affordable Housing
House which consumes no more than 30% of household income.
Angel Investor
Investor who provides equity investment to start-up businesses.
Assessed Valuation
Monetary worth of a property for the purposes of taxation. Total assessed valuation denotes the sum of the monetary worth of all taxable properties within a jurisdiction.
Assets
Business property acquired at a measurable cost, the use of which is related to the business operations. (Fixed Assets)
BOTs (Build, Operate & Transfer)
Process in which a private company finances, builds, and operates an infrastructure system for a fixed time, during which the gov’t has a regulatory and oversight role. At the end of the project (usually 15 - 25 years) the system is transferred back to the gov’t.
Bankable
A person who can qualify for a loan at a commercial lending institution.
Base Industry
AKA ‘Export’ or ‘Primary’ Industry. Base Industries sell or export their products and services outside of the community and bring new dollars into the community, increasing the total dollars that circulate within the community and that are spent on non-base industries.
Benchmarking
Quantifiable measures of economic competitiveness and quality of life that can be collected on a regular basis. They are used to measure a region’s economic status and progress against comparable regions.
Bond
A certificate of debt issued by a government or corporation, guaranteeing payment of the original investment, plus interest by a specified future date.
Bond Banks
A bond bank is an independent entity, created by the state, that consolidates local bond issues into a single pool to offer better financing options for state or municipal projects.
Bond Rating
An estimation of the relative credit-worthiness of a corporation or gov’tal unit. Private investment service companies make such estimates, generally designating the most credit-worthy borrowers as ‘Triple A’.
Brownfields
Commercial or industrial sites that are abandoned or underutilizied, and have real or perceived environmental contamination.
Business Assistance Center
A one-stop center for streamlining local permitting, licensing and fee payment processes and facilitating the decision-making process.
Business Climate
Usually referred to as the attitude of a local gov’t toward business, but can also consider attitudes of the labor force and local business networks.
Business Incubator
Entity that nurtures and supports young companies until they become viable, providing them with affordable space, technical and mgmt support, equity and long-term debt financing, and employment. The 3 basic objectives in creating an incubator are 1) to spur technology; 2) to diversify the local economy; and 3) to assist in community revitalization
Business Improvement Districts (BIDs)
Legally defined entities formed by property and business owners, where an assessment or a tax is levied for capital or operating improvements, as a means of supplementing city funding. The district is created by the public law or ordinance, but is administered by an entity responsible to the district’s members, or to the local governing body. Some states authorize non-gov’t, non-profit corportions to admisiter the district. Recent BID programs include economic and social development, transportation, parking mgmt, and conversion of redeveloped commercial bldgs for residential use.
Business Recruitment and Attraction
Traditional approach to economic development to entice companies to relocate or to set up a new branch plant or operation in a state or locality; often referred to ‘smokestack chasing’.
Business Retention
Systematic effort designed to keep local companies content at their present locations, which includes helping companies cope with changing economic conditions and internal company problems.
CBD (Central Business District)
Usually an area with the highest concentration of businesses, including financial institutions, shops, offices, theaters and restaurants.
CDBG (Community Development Block Grants)
Under Title I of the Housing and Community Development Act of 1974, eight former categorical grant and loan programs were replaced by a system of unified block grants under which communities with more than 50K people are entitled to receive funding, while other communities may apply for discretionary funding. Its purpose is to encourage more broadly conceived community development projects and expand housing oppys for low and moderate-income people. The 3 primary goals of CDBG are 1) to serve low & moderate-income people; 2) to eliminate slums and blight; and 3) to address other community development needs that pose a serious threat to the health and welfare of the community.
CDC (Community Development Corporation)
Organizations, typically non-profit 501(c)(3), which can obtain federal and private support. They are governed by local residents, businesses and community leaders through a board of directors that is elected from CDC membership or community. Some CDCs perform only economic development services, but most work only on housing issues. Those active in economic development provide technical assistance and financing and are committed to serving the impoverished people of America.
CDC (Bank CDC)
Bank-sponsored community development corporations are a way for banks to contribute to economic revitalization by investing in local businesses and real estate investment projects that benefit low and moderate income groups. A community can establish a bank CDC by working with one or more local banks, the Federal Reserve, the Comptroller and its respective state financial institutions’ regulators. In the case of consortium bank CDCs. where several banks join together, the investors do not have to be just local banks. Bank CDCs can purchase, construct or rehab property.
CDC (Certified Development Company)
The originating and administrating body for the SBA 504 loans. The program provides long-term, fixed-rate financing to small businesses to acquire real estate, machinery and equipment for the expansion of business or modernization of facilities.
CDFI (Community Development Financial Institution)
A specialized financial institution which works in market niches that have not been adequately served by traditional financial institutions. CDFIs provide a wide range of financial products and services, including mortgage financing, commercial loans, financing for community facilities, and financial services for low income households. Some CDFIs also provide technical assistance. To be certified as CDFI by the CDFI Fund of the Dept. of Treasury, an institution must engage in community development, serve a targeted population, provide financing, have community representatives on its board, and be a non-gov’t organization.
CHAS (Comprehensive Housing Affordability Strategy)
A federally mandated 5-year, low and moderate-income housing plan, describing needs, outlining strategies and listing resources, which is required, with annual updates, for state and local gov’ts to receive federal housing funds.
CHDO (Community Housing Development Organization)
A federally defined type of nonprofit low and moderate-income housing provider eligible to receive 15% of all federal HOME Investment Partnership funds for housing development and 5% of HOME funds for operating costs.
CRO (Community Reuse Organization)
Organization which oversees the transition of a US Dept. of Energy facility from gov’t to civilian/commercial use.
Capacity Building
Developing the ability of a community-based neighborhood organization to effectively design economic development strategies through technical assistance, networks, conferences and workshops.
Capital
Consists of property or wealth from which income is derived, expressed in terms of money and which can be used to produce additional property or wealth.
While money itself may be construed as capital, capital is more often associated with cash that is being put to work for productive or investment purposes.
Capital Costs
Cost of investment in major physical improvements, infrastructure and equipment, such as buildings, roads and machinery.
Capital Projects Fund
Money that accounts for the acquisition of capital facilities. This money can be raised through bond issues or grants.
Capitalization Rate
The rate of return that deems investment in a development project reasonable, often referred to as the ‘cap rate’.
Cash Flow
A statement showing total cash receipts and disbursements for a specific period of time.
Clawbacks
Many localities enter into contracts with firms to which they offer incentives that require local commitments. Clawbacks describe the punitive steps taken against firms that break these contracts. For example, a firm may be required to pay fines or assist in finding a new tenant for its property if it chooses to leave a community.
Clawbacks act as insurance policies in the event of fraud or misconduct, poor performance or otherwise breaking commitments made in the contract.
Comparative Advantage
Term used when comparing economies of regions. It is the economic advantage gained by one area over another due to the fact that it can produce a particular product more efficiently. More efficient production of one good means there is a higher oppy cost to produce another. This is the concept that drives trade b/w economies. Interregional and international trade exploits the comparative advantages of economies.
Competitive Niche
A market in which a business or economic region finds itself to perform well.
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (Superfund)
Under this act, sites with the worst environmental damage may be designated National Priority List (NPL) sites. If an owner/operator fails proper remediation, fines can total up to 3X the cost of cleanup. Owners of contaminated sites not on the NPL must complete remediation of their sites before they can be reused, but they do not receive federal assistance or face the same regulatory pressures as Superfund sites.
Consolidated Plan
Aka ‘Con Plan’, combines all of the planning, application, and performance requirement previously required separately under CDBG, HOME, ESG (Emerg. Shelter Grants), HOPWA (Housing Oppys for People with AIDS), and programs such as HOME, that require a Comprehensive Affordability Housing Strategy (CHAS).
Cost-Benefit Analysis
A method for evaluating the profitability of alternative uses of resources.
A systematic process that businesses use to analyze which decisions to make and which to forgo.
Sums the potential rewards expected from a situation or action and then subtracts the total costs associated with taking that action.
Cost Effective Analysis
Compares alternative projects or plans to determine the least costly way to achieve desired goals. Usually, some index or point system is developed to measure the effectiveness of the proposal in meeting the goals / objectives.
Council-Manager
A form of city gov’t which places all administrative authority in the hands of a professional manager who is hired by the elected council to service at its pleasure. The duties of the mayor are usually mainly ceremonial.
i.e. City of Ogallala
Deed Restrictions
Clauses in a deed limiting the future uses of the property. Deed restrictions can take many forms. They may limit the density of buildings, dictate the type of structures that can be erected, prevent buildings from being used for specific purposes or used at all, and limit resale price, etc.
Deferred Loan
A type of loan in which payment is put off until some later date. If all conditions are met at this later date, the loan may be forgiven and reclassified as a grant. The conditions of a 7-year deferred loan, for example, might specify that the property not be sold during this time and that it remains the principal residence of the purchaser.
Depreciation
A decrease in value through age, wear, or deterioration. It’s important for tax assessments. The rate of depreciation can be manipulated to effectively raise or lower tax paid on the value of an asset.
Development Authority
An agency independent of city gov’t that usually possesses special powers beyond those of city gov’t. Such powers could include eminent domain authority to issue special types of bonds, special taxing powers and regulatory powers.
Discount Rate
The rate the Federal Reserve charges member banks for interbank loans. The interest rates that banks charge customers are based on the Discount Rate. This is not to be confused with a discount rate for a development project, which reflects the oppy cost and risk involved in the project.
Easement
The right to use the property of another which may be granted explicitly or earned by implication.
Economic Base
A method of classifying all productive activity into 2 categories: Basic industries which produce and sell goods that bring in new income from outside the area; and service industries which produce and sell good that simply circulate existing income in the area.
Economic Base Analysis
A comprehensive study of a locality’s economy, focusing on the importance of exports. It should include an economic history, data on existing industries, trends and forecasts of growth in wages and employment.
Economic Development Administration (EDA)
Created by the Public Works and Economic Act of 1965 as part of the Commerce Dept. The EDA’s main goals are to 1) alleviate unemployment; 2) diversify the economy; 3) assist urban areas with planning; 4) assist urban areas with emergency public works programs.
Economically Disadvantaged
A person who is a member of a family which either receives cash welfare payments, or has a total annual income in relation to family size which does not exceed the poverty level determined by the Office of Management & Budget (OMB).
Econometric Modeling
A qualitative method for analyzing the impact of a proposed action on the economy. A model permits testing the effects of an anticipated or hypothetical change.
An econometric model is one of the tools economists use to forecast future developments in the economy.
In the simplest terms, it measures past relationships among such variables as consumer spending, household income, tax rates, interest rates, employment, and the like, and then tries to forecast how changes in some variables will affect the future course of others.
Economies of Scale
The phenomenon of production where the average cost of production declines as more of the product is produced.
Edge City
A newly emerged city on the edge of an existing city that serves as a work and shopping center, with a large amount of office and retail space. Aka Exurb
Elasticity
The proportion that represents the impact on one factor by a certain percentage of change in another. For example, price elasticity of demand represents the change in demand per change in a single unit of price.
Economists use price elasticity to understand how supply and demand for a product change when its price changes.
Price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in its price.
Eminent Domain
The authority to ‘take’ private property for a public purpose upon paying a fair price for the property and relocating the tenants. The most frequent use of this authority is the act of ‘condemnation’.
Empowerment Zones / Enterprise Communities (EZ/EC) Initiative
Established in 1994 and administered by the HUD and Dept. of Ag. The program creates incentives for localities to develop their own approaches to alleviate poverty.
All federally designated zones are areas of pervasive poverty, unemployment and general distress.
Each designated city receives a mix of grants and tax-exempt bonding, while employers in the EZ/EC receive tax credits for new hires and accelerated depreciation credits.
Federal EZ/EC tools include not only business tax incentives but also transportation to work or school, drug and alcohol rehab and other local priorities.
Enterprise Zones
State Enterprise Zones are designated geographic areas that are eligible for special treatment and incentives to attract private investment. State guidelines define the size of a zone and the minimum level of economic distress to qualify as an enterprise zone. States can also limit the number and type of enterprise zone. These restrictions are generally set out in the state enterprise zone program.
Entitlement Community
An entitlement community is eligible to receive annual CDBG funds that it can use to revitalize neighborhoods, expand affordable housing and economic oppys, and/or improve community facilities and services, principally to benefit low and moderate-income persons. Eligible grantees include local gov’ts with 50K or more residents, other local gov’ts designated as central cities of metropolitan areas and urban counties with populations with at least 200K (excluding the population if entitled cities). The State CDBG Program offers funds to the states, which they then allocate among localities that do not qualify as entitlement communities,
Entrepreneurial Training
Programs that provide guidance and instruction on business basics such as accounting and financing, to ensure that new businesses improve their chances of success. The most common training methods include classroom training, workshops, speakers, peer groups and 1:1 counseling, lectures, internships, as well as self-study and home-study.
Externality
A side effect of production or consumption that is not paid for. Pollution is a negative externality of oil refining, which the building of roads has a positive externality for later generations who use it.
Fair Market Value
The estimated worth of a property made by a certified appraiser, which reflects the price at which the property could be immediately sold in a competitive market.
Fiscal Impacts
The direct and indirect costs incurred and revenues received by local gov’ts resulting from land use and other types of decisions.
501(c)(3)
Approval given by the IRS granting exemption from federal income tax to a nonprofit organization, under Section 501(c)(3) of the Internal Revenue Code. Donations to such organizations are tax deductible. The organizations described in 501(c)(3) are commonly referred to under the general heading of ‘charitable organizations’.
501(c)(6)
Approval given by the IRS granting exemption from tne federal income tax to a business league, under Section 501(c)(6) of the Internal Revenue Code. Trade associations and professional associations are considered to be business leagues. The business league must be devoted to the improvement of business conditions of one or more lines of business, as distinguished from the performance of particular services for individual persons. No part of its net earnings may inure to the benefit of any private shareholder or individual and it may not be organized for profit or organized to engage in an activity ordinarily carried on for profit.
Flex Space
(Flexible Use Space) Space that can be used for one or a combination of different types of production (i.e. manufacturing, office, service or distribution).
Front-End Costs
Capital required at the early stages of a development project, such as cost of land, plans and working drawings, construction materials and labor.
Gap Financing
A loan required by a developer to bridge the gap, i.e. to make up a deficiency b/w the amount of mortgage loan due on project completion and the expenses incurred during construction (financing that covers the difference b/w what a project can support and the cost of development or purchase).
General Fund
The portion of a municipal budget devoted to basic administrative functions. It includes funds that are not otherwise earmarked for specific uses.
General Obligation (GO) Bonds
Limited Tax GO Bonds - Tax exempt bonds secured by the revenue from the application of a fixed rate against taxable property. Not all states permit limited tax GOs but in those that do, such bond issuance does not require voter approval.
Unlimited Tax GO Bonds - Tax-exempt bonds secured through taxes that are levied w/o rate or amount limitations, in order to repay the principal and interest of the bond. They are typically used to finance public works infrastructure and land acquisition for blight elimination.
General Partner
The co-owner(s) of a venture who is liable for all debts and other obligations of that venture as well as for the management and operation of the partnership. The general partner can have control of the business and can take actions which are binding on the other partners.
Gentrification
The migration of middle-class residents into a deteriorating area. This migration may help revitalize an area, but it also tends to ‘squeeze out’ lower-income families by inflating property values.
Geographic Information Systems (GIS)
Computer programs that integrate social, economic and demographic information and mapping. GIS is particularly useful for market studies, transportation analysis, crime studies and housing impact studies.
HOME Investment Partnership Program
The HOME program was created under the National Affordable Housing Act of 1990. HOME provides grants to states, local gov’ts and Indian tribes to implement local housing strategies. HOME is intended to increase home-ownership and affordable housing for low and very low-income households. It was also designed to stimulate creative partnerships with nonprofit community-based development organizations.
HUD (US Dept. of Housing & Urban Development)
HUD was established as a cabinet department in 1965 as part of Pres. Johnson’s ‘War on Poverty’. The dept is responsible for national policy and programs that 1) address America’s housing needs, 2) improve and develop the Nation’s communities and 3) enforce fair housing laws. Major programs include Community Development Block Grants (CDBG) to assist communities with economic development, job oppys and housing rehab; fair housing education and enforcement; Section 8 subsidized housing; homeless assistance; HOME Investment Partnership Act to develop and support low income housing; and mortgage & loan insurance through the Federal Housing Administration.
Hard Costs
Bricks and mortar costs of development, including contractor’s fee and overhead.
Holding Costs
A term used by economic developers denoting the costs of owning land or property during the pre-development stages of a project.
Housing Development Corporation (HDC)
A private, multifamily housing corporation established to serve a specific geographic area (neighborhood, city, state, region). An HDC provides technical assistance, lends seed money and directly sponsors housing developments. Generally, community residents, local businessmen and gov’t officials have representation on its board of directors.
Housing Finance Agency (HFA)
State agencies which are responsible for the financing of housing and the administration of subsidized housing programs. State HFAs also allocate Low-Income Housing Tax Credits and tax-exempt bond authority in each state.
Impact Fees
Fees required to covers costs of improving and/or building infrastructure needed as a result of the expected impact of a development project on those facilities. Often required by localities for the approval of development projects.
Incentives
Benefits offered to firms as part of an industrial attraction, retention or expansion strategy. A few incentives are tax abatements and credits, low interest loans, infrastructure improvements, job training and land grants.
Industrial Development Bonds
These bonds are issued by a gov’t agency and used to finance acquisition, construction, expansion or renovation of mfg faciliites and the purchase of machinery and equipment depending upon state law for private companies. IDB financing is subject to state and local laws, and federal income tax laws and regulations, if the interest on the bonds is expected to be exempt from federal income taxation.
Industrial Park
A specified area of land zoned for industrial use which has specified covenants and restrictions to be followed by all occupants.
Industrial Revenue Bonds
Bonds issued by a gov’t agency on behalf of a private sector company that provides lower-cost financing for real property improvements, or the purchase or construction of buildings, facilities or equipment.
IRBs raise capital to fund the development of a manufacturing facility or equipment that will benefit the community at large; bondholders are repaid by the revenue the project generates.
Industry Clusters
Geographic concentrations of related businesses that are complementary or competing. Regions identify clusters as targeted businesses for planning and marketing efforts. There are 2 types: 1) buyer-supplier clusters (vertical); and 2) shared resources clusters (horizontal).
Infrastructure Banks
Public-targeted lending facilities, financed through a combination of bond issues, gov’t funds and external donor support. They mobilize domestic funds and create an attractive vehicle for donor funding.
Infrastructure banks use initial seed capital to lend money for infrastructure projects and then recycle the repayments in a revolving loan fund to finance future projects.
They are used within local governments to leverage local funding dollars for more flexibility when seeking matching funds or quickly delivering public works projects.
Investor Networks
Investor Networks match up potential investors (either anonymous angel investors or known investors) with start-up firms needing capital.
Land Banking
A program that preserves industrial space for a city. A city or local development authority acquires and holds land until a developer steps forward with a proposal for its use as an industrial site.
The practice of aggregating parcels of land for future sale or development.
Local Development District
A multi-jurisdictional organization that is designated by the Appalachian Regional Commission and serves a variety of functions for its member organizations.
Local Reuse Authorities
Agencies that oversee the transition of UP Dept. of Defense facilities from military to civilian/commercial use.
Location Quotient
The % of total local employment in a particular industry compared to the percentage of total national employment in that same industry.
Localization Economies
The condition where costs decrease for firms in a particular industry as total industry output increases. The lower costs come as a result of the firms in an industry locating close to each other.
Increased productivity that occurs when the same type of industries locate in close proximity to each other.
Advantages arising from the localization together of a number of firms in the same type of industry.
Low-Income
A definition based on family income as a percentage of an area’s median income. Different programs may set different percentages According to Section 8 of the US Housing Act of 1937, a household whose annual income adjusted for family size is at or below 80% of the median income in a particular metropolitan area, as determined by HUD, is considered to be low-income.
Low-Income Housing Tax Credit
A tax credit allowed for investors as an incentive for the development and preservation of multifamily rental housing that is affordable to low and very low income households.
Low-Income Neighborhood
A neighborhood that has at least 51% of its households at or below 80% of median income for the area.
Matching Grant
A grant for the same amount that the grantee expends on a project. This effectively subsidizes the project, which giving the grantee incentive to spend more on the project.
Mayor-Council
A system of city gov’t which separates legislative and executive power. Mayor council forms of gov’t range along a continuum from extremely strong to very weak. The strong mayor often has executive powers, which the weak mayor sees power dispersed among separate agencies.
Microenterprise
A business that is ‘smaller-than-small’. Operated by a person on a full- or part-time basis, usually out of a home (i.e. carpenters, day-care providers, crafts persons and caterers).
Microloans
Very small, short-term unsecured loans given to people w/o credit history and/or the collateral necessary to obtain a conventional loan. These are available from either local lenders or the SBAs 7(m) Microloan Program.
Minority Business Development Agency (MBDA)
An agency within the US Dept. of Commerce, MBDA was established in 1969 by executive order as the Office of Minority Business Enterprise, to offer financial and technical assistance to minority entrepreneurs. The MBDA provides assistance to socially or economically disadvantaged individuals who own or want to start a business. MBDA provides funding for Minority Business Development Centers (MBDC), Native American Business Development Centers (NABDC), Business Resource Centers (RBC) and Minority Business Opportunity Committees (MBOC).
Moderate Income
A definition based on family income as a percentage of an area’s median income. Different programs may set different percentages. According to HUD’s Comprehensive Housing Affordability Strategy guidelines, households whose incomes are b/w 81% & 95% of an area’s median income with adjustments for family size, are considered to be moderate income.
Mortgage Revenue Bonds
A bond issued to finance permanent mortgages on housing, the lien of which is conveyed to the bondholders by a deed of trust. Those bonds issued by a unit of state or local gov’t are first mortgage bonds secured by specific real property and generally not the full faith and credit of the municipality authorizing the bond issuance. Most states issue MRBs through their state housing finance agency.
Multiplier
A quantitative estimate of the impact of a project (in dollars, jobs created, demand).
Multiplier Effect
Describes the process of dollar or job generation as a result of a new or migrating business or project, or of a local business expanding production (to exports). The multiplier effect accounts for additional local income generated by local spending of money that came form outside the community,
Neighborhood Development Organization (NDO)
A community-based organization accountable in some way to the residents of its target area and whose purpose is to initiate and sustain neighborhood economic development.
NIMBY (Not in My Back Yard)
Term used to describe local (residential) opposition to development projects.
Neighborhood
A geographic location designated in comprehensive plans, ordinances or other local documents as a neighborhood, village, or similar geographical designation that is within the boundary, but does not encompass the entire area of a unit of general local gov’t. If the general local gov’t has a population under 25K, the neighborhood may encompass the entire local gov’t area.
Net Operating Income
Revenue less operating expenses. Also called operating cash flow.
Net Present Value
Value today of total discounted future income stream of a development project. It determines the property value considering its income potential.
It’s a method of calculating your return on investment, or ROI, for a project or expenditure & considers the time value of money. By looking at all of the money you expect to make from the investment and translating those returns into today’s dollars, you can decide whether the project is worthwhile.
If the NPV of a project or investment is positive, it means that the discounted present value of all future cash flows related to that project or investment will be positive, and therefore attractive.
North American Development Bank (NADB)
Founded under the auspices of the North American Free Trade Agreement (NAFTA), NADB is a bilaterally funded, international organization, in which Mexico and the US participate as equal partners. Its purpose is to finance environmental infrastructure projects. All NADB-financed environmental projects must be certified by the Border Environment Cooperation Commission (BECC), be related to potable water supply, wastewater treatment or municipal solid waste mgmt and be located within the border region.
North American Industry Classification System (NAICS)
The industrial classification code system used for categorizing industrial establishments. Beginning in 1997, NAICS replaced the Standard Industrial Classification (SIC) as the system for classifying firms in the United States, Canada and Mexico.
One-Stop Business Service Centers
One-stop business service centers focus on reforming, licensing and permitting regulations, and are facilities where business persons can go to obtain the licenses and permits needed to start-up, operate and expand their facilities. These centers improve the local business environment while reducing the number of separate agencies and offices a business must apply to for various licenses and permits, saving public and private time and financial resources.
Opportunity Cost
The revenue forgone by choosing one use of money and resources over another. The oppy cost of investing in the stock market is the interest that the money could have earned while sitting in the bank.
Overall Economic Development Plan (OEDP)
A plan developed at the city, county, or EDD level, as required by EDA, to identify the subject area’s problems and opportunities for economic development, to define goals and objectives which will be pursued, and listing infrastructure, and other projects needed to achieve those goals and objectives.
Penturb
An independent, smaller metro area that lies at quite a distance from a major metropolitan area.
Product Cycle Theory
Theory that describes the production of particular product over time. Products are developed by small firms in a particular region, then the product becomes standardized and produced on a mass production scale, by larger companies.
Public Infrastructure Extension
Local gov’t provides public infrastructure extension to meet the infrastructure needs of new, expanding or relocating firms whose facilities need better water, sewage, telephone or road infrastructure.
Public Works Trust Funds
Used by states to provide loans instead of grants for infrastructure projects. These trust funds support project self-sufficiency, comprehensive planning and allocation of funds based on mgmt and ability to repay the loans rather than severity of need.
Recoverable Grant
A no-interest loan that has to be repaid to the lender making the grant.
Resource Audit
A process for inventorying potential community resources anticipated to be available in a region during the planning period. Used in selecting strategies and strategic initiatives that are achievable.
Revolving Loan Fund (RLF)
A pool of public and private sector funds in which the money is recycled to make successive loans to businesses. Loans made by an RLF are repaid with interest and the payments are returned to replenish the lending pool so new loans can be made. The funds are thus recycled and the RLF grows as each generation of borrowers adds to the pool.
Risk Management
Strategically protecting against losses (financial) for any venture that has an uncertain outcome.
Seed Capital
Equity money supplied to help a company get off the ground. The money is almost always supplied by an entrepreneur and his/her family, friend, relatives. Used to help attract (leverage) other investment.
Secondary Financing
A loan secured by a second mortgage on a property, sometimes used to refer to any financing techniques other than equity and first-mortgage debt.
Section 7(a) Loan Program
Categorized as SBA’s general business loan program, SBA 7(a) Small Business Loans guarantee b/w 70% and 90% of a loan, up to a max of $750K for almost any legitimate business purpose.
Section 8
A general rent subsidy program that provides monthly rental assistance to low-income individuals living in privately owned units. The rents must be w/in HUD limits and the units must meet HUD Housing Quality Standards. Section 8 can be used in cooperatives to help lower-income households pay their monthly carrying charges.
Section 108 Loan Guarantees
Provide front-end financing for large-scale physical development projects to city agencies that are eligible for and receiving CDBG funds. Eligible communities can borrow against their CDBGs to finance economic development projects.
Section 504 Loan Program
Provides long-term, fixed-rate financing to small businesses to acquire real estate, machinery and equipment for the expansion of business or modernization of facilities. The loans must originate and be administered by a certified development company and cannot be used for working capital purposes or to finance existing debt and are not made to non-profits. Loans are approached like ‘projects’ where funds are provided by a conventional lender, an SBA guarantee, the borrowing business, or in rare cases the certified development company.
Shift-Share Analysis
A method used to examine a local area’s basic industries in terms of their growth and decline, relative to national or regional trends.
Shift share is an economic indicator that tells you which industries (or occupations) are competitive in your region. How?
Shift share shows you the national growth (in terms of jobs) of a particular industry. Based on this national growth, it then calculates how much the industry is likely to grow in your region, and compares this estimation with how much the industry actually grew.
If the industry grew roughly the same in your region as it did nationally, it might not be particularly competitive, because it stands to reason that it’s growing in your region simply because it is growing everywhere. But if it grew more than it did across the nation, this means the industry is probably growing due to your region’s particular strengths, and indicates that it is a competitive industry for your region
Site Location Assistance
Local gov’s provide new, expanding and relocating businesses with assistance for locating the sites that fit their facility’s needs. These services include providing information on sites and organizing visitation programs.
Small Business Administration (SBA)
Founded in 1953, SBA’s mission is to aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns. Its charter also mandates that the SBA ensure small businesses a fair proportion of gov’t contracts and sales of surplus property. Since its inception, the SBA has delivered more than 13 million loans, loan guarantees, contracts and other forms of assistance to small businesses.
Small Business Investment Company (SBIC)
Privately owned and managed for-profit investment firms that use their own capital, plus funds borrowed at favorable rates with an SBA guarantee, to make venture capital investments in small business.
Smart Growth
The efficient use of all available assets. According to the American Planning Association, smart growth involves efficient land use; full use of urban services; mixed use; mass transportation options; and detailed, human-scaled design.
Soft Costs
Development costs for various services, including architecture and engineering fees, construction interest, loan fees, insurance fees, legal and accounting fees and permit fees.
Soft Debt
Capital provided in the form of a loan for which payment is contingent on available cash flow. This debt is typically provided by a public sector entity and usually structured with very liberal terms regarding principal repayment, interest rate and maturity.
Soft debt refers to loans made by government agencies or other lenders that require payments only when the project has sufficient cash flow or only at maturity.
A loan given with next-to-no or no interest with extended grace periods, offering more leniency than traditional loans.
Offered to many developing nations that need funds but cannot afford to borrow at market rates.
In the case of government lenders, soft loans may be used to forge ties between the lending and borrowing countries.
Special Assessment Districts
Areas designated by a taxing authority to be assessed for tax purposes on a scale that differs from the rest of the taxed jurisdiction. Property in these districts may be taxed differently all together. They may be required to pay ‘special’ taxes more reflective of the greater benefit earned by some public expenditure in the district.
Special Assessment Fund
Costs of a project that benefits a special group of properties may be assessed to those individuals and accounted for in the special assessment fund.
Special Improvement District
Mechanisms where local businesses and/or residents agree to voluntarily pay an additional tax, so local gov’t can finance and implement improvements within a specific and limited area. (Similar to Business Improvement Districts)
Special Revenue Funds
Funding from sources that specify that money goes to a certain use, for example revenue from a special tax district created to fund infrastructure improvements in that district.
Subsidy
Funds provided generally by gov’t in the form of a grant, which reduces the costs of development or supports ongoing operations.
Suburb
Communities that lie outside of the city borders, yet either depend on, or maintain a direct link to the the central city.
Sustainable Development
Development which does not destroy or eventually deplete a location’s natural resources. Sustainable development helps ensure a better, healthier living environment, which contributes to the quality of life in an area, one of the main goals of economic development.
SWOT Analysis
A tool used in the economic development planning process to assess a community’s Strengths and Weaknesses (factors from w/in a community that can be changed), as well as its Opportunities and Threats (factors from outside the community that cannot be changed).
Tax Abatement
Exemption or reduction of local taxes of a project for a specific period of time.
Tax Incentives
The use of various tax relief measures such as tax exemptions, tax credits or tax abatements to recruit and attract businesses to a community, or to help local businesses expand.
Tax Increment Financing (TIF)
Funding for redevelopment of an area by using the increases in taxes generated by the redevelopment. It must have state and local enabling legislation.
Technical Assistance
Includes aid with preparing grant applications, training staff, applying for loans and marketing the product. It may also include assisting a small business to improve the design of its product or manufacturing process. Technical assistance is generally aimed at providing specific services that a small business typically cannot afford, or general business planning. Technical assistance can also be provided to organizations such as EDOs, community organizations or neighborhood organizations.
Transitional Housing
Shelter for homeless individuals and families for periods of 6 mths up to 2 years in an environment of security and support designed to help residents progress toward self-sufficiency. A middle point b/w emergency shelter and permanent housing.
Underemployed
Includes all persons whose skills, education or training qualified them for a higher skilled or better-paying job than they presently hold. It also includes persons only able to find part-time rather than full-time work in their fields.
Umbrella Bond
Low-cost financing with lower interest rates for projects too small to qualify for normal revenue bond programs. Bond proceed are used as loans for acquisition of land, building, machinery and equipment. The umbrella is a pool of small bonds of $1M or less packaged into larger bond and issued by the state or local economic development agency.
Unemployed
As defined by the US Dept. of Labor, the term includes all civilians who were not employed, but were available and actively seeking work w/in the past 4 weeks, were waiting to be called back to a job from which they had been laid off, or were waiting to report to a new job scheduled to begin w/in 30 days.
Venture Capital
An investment made where there is a possibility of very substantial returns on the investment, as much as 40%, within a short period. It is usually invested in dynamic, growing, and developing enterprises, not in start-ups. The capital is subject to considerable risk and uncertainty.
Very-Low-Income
A definition based on family income as a % of an area’s median income. Different programs may set different percentages. According to Section 8 of the US Housing Act of 1937, a household that earns 50% or less of the median income for a family of the same size in that metropolitan area, as determined by HUD guidelines.
Voucher
A gov’t payment to, or on behalf of a household, to be used solely to pay a portion of the household’s housing costs.
Workforce Investment Act
Workforce Investment Act of 1998 is the federal gov’ts effort to adapt workforce training system to current economic conditions. The economic development impact of WIA includes: 1) decentralizing decision-making to the local level; 2) allowing local businesses to determine skill needs; 3) adapting training to local growth patterns; 4) promoting inclusion of economic development principles in plans; and 5) requiring states to submit economic development plans with the WIA implementation plan.
Worst Case Housing Problems
Unsubsidized, very-low-income renter households with severe housing problems. HUD is required to submit an annual report to Congress on worst case housing problems.
Zoning
Geographic designation of land by categories of use; residential, heavy and/or light manufacturing, commercial agricultural, institutional, etc.
Zoning Ordinance
Legislation that maps and designates the various zones and their respective land uses. The regulation of land use by local zoning must be enabled by state legislation.
Accounts Payable
Represents the claims of suppliers related to goods or services they have furnished to an entity but for which they have not yet been paid. It’s part of the current liabilities of an entity.
Accounts Receivable
Money owed to the entity by its customers. It’s part of the current assets of an entity.
Accruals
Money owned to providers of goods or services for which typically no bill exists or is ever sent. This includes wages, payroll taxes, interest due on loans, and rent.
Amoritization
The spreading or repayments of a debt or obligation over a set period of time.
Appreciation
The increase in value of an asset or investment that results from inflation or direct investments that enhances the value or growth.
Asset
The economic resources owned by an entity that have commercial or market value.
Balance Sheet
A financial statement that summarizes the financial position of an entity by outlining its assets and liabilities and equity. Assets must equal liabilities and equity.
Balloon Payment
The last payment on a loan that is substantially larger than subsequent payments.
Book Value
The historic price paid for an asset less total accumulated depreciation to date. This is compared to market value.
Callable
An option held by the issuing entity of a bond to redeem the bond before the maturity date.
Capital Gains (Loss)
The difference b/w the price an investor paid for an investment and the proceeds received from the sale of that investment.
Capital Gap
The difference b/w the supply of private sector financial capital and the demand for that capital.
Capitalize
To supply with capital of investment funds
Capitalization
The total funding of an entity consisting of debt, stock and retained earnings used to finance operations and meet debt obligations.
Cash
Often in finance, cash has a broader definition that includes actual cash (money) and highly liquid short-term investments such as money market funds and Treasury bills.
Cash Flow
A financial statement showing all actual cash receipts and disbursements of an entity for a specified period of time.
Collateral
Assets of a borrower pledged to secure a debt against default.
Commericial Bank
A private, for profit financial institution that specializes in short and medium-term business, personal and real estate loans.
Compensating Balances
A demand deposit usually required by a commericial bank as a condition for extending a line of credit or bank loan.
Competitive Grant
A grant that require applicants to compete against one another in terms of need or appropriateness for the funding.
Cost of Goods Sold
Direct costs incurred in the production of goods sold by an entity.
Credit Risk
The chance that the return on an investment will be less than expected or that the borrower will not meet the terms of the loan or investment and that secondary repayment resources such as collateral will be insufficient to cover the losses.
Counter cyclical
Any event or factor that counterbalances the peaks and troughs of the business cycle.
Current Assets
Cash and other assets often called cash equivalent (such as inventory, accts receivable and pre-paid expenses) that are reasonably expected to be realized in cash or sold or consumed within 12 months.
Current Liabilities
Obligations of a company that are expected to be satisfied (paid) either by the use of the current assets or by the creation of other current liabilities within 12 months. This includes accts payable and current portion of long-term debt.
Debenture
A bond backed by the general credit or reputation of a business rather than a specific lien on assets.
They are unsecured debt not backed by any collateral.
Debt Capital
Funds obtained from borrowing.
Debt Limit
A constitutional or legislative restriction on the amount of funds that a state or municipal gov’t can borrow, usually expressed as a specific sum of money or a fixed percent of the assessed value of all taxable property within the gov’t jurisdiction.
Debt Service
The cash required in a given period, usually one year, for payment of interest and the current payments of loan principal on outstanding debt. Also, the borrower’s ability to meet debt and interest obligations.
Default
Failure to pay financial obligations
Direct Financing
The provision of own funds by a lender to a borrower w/o going through another organization, typically used in terms of gov’t foundations and non-profits.
Discount Rate
A weighted rate that accounts for inflation and other risks associated with an investment.
A discount rate is the rate of return used to discount future cash flows back to their present value.
Taking into account the time value of money, the discount rate describes the interest percentage that an investment may yield over its lifetime.
Dividend
The share of profits of an entity distributed to its shareholders. Dividends may be paid in cash, stock or other security.
Due Diligence
Evaluation of an entity’s financial statements or portfolio of loans to determine its credit worthiness and other risk factors.
Empowerment Zone
A type of enterprise zone. It’s a designated area, either urban or rural, that suffers from blight or economic distress where special benefits are offered to businesses located in the area to encourage economic development. Benefits include employment credits, tax credits and tax exempt financing. The program was created under the Omnibus Budget Reconciliation Act of 1993.
Enterprise Zone
A generic term for designated geographical areas w/in urban communities or rural areas on which various tax incentives and grants are targeted to encourage investment by businesses and the creation and retention of jobs.
Equity Capital
Funds that the owners have personally invested in an entity, as distinguished from debt capital, as well as residual value of an entity after deducting liabilities from assets and paying dividends.
Face Value
The principal of a bond or preferred stock.
Fixed Costs
Costs that are independent of the level or production (i.e. rent or mortgage); the opposite of variable costs.
Full Faith and Credit
Federal Gov’t clause involving loan guarantees that allow the gov’t to guarantee loans by promising to use its taxing powers.
Grants-in-aid
A direct transfer of funds from a higher level of gov’t to a lower level of gov’t or business.
Income Statement
A financial statement that derives the net income of an entity by summarizing the sources of current revenue and the costs associated with obtaining that revenue.
Indirect Financing
The provision of funds from a lender to a borrower through another entity, process or incentives. Examples of indirect financing include guarantees of loans, linked deposits and tax breaks and credits.
Inflation
An overall general rise in prices.
Insolvency
The inability to pay ones’ debt when they come due.
Leverage
1) The relation of debt to equity; the use of borrowed funds by an entity; use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable
2) The use of incentives to induce private sector lenders, individuals or businesses to invest capital in a designated area, project or business.
Letter of Credit
A document usually issued by a commercial bank verifying that the client has credit for a specified amount, against which drafts can be drawn.
Liability
Financial obligation to an outside party to be satisfied in the future.
Lien
A claim or legal right against assets that are typically used as collateral to satisfy a debt.
Linked Deposits
The practice of tying the deposit of public money in a commercial bank to conditions regarding the bank’s lending and investment practices.
Liquidity
The ability to convert assets to cash quickly w/o loss of market value. It also refers to the ability of an entity to meet its current obligations.
Liquidity Risk
The uncertainty that an entity may not be able to liquidate its assets to meet demands for cash withdrawals, requiring the entity to sell its assets at a loss.
Loan
A sum of borrowed money that must be repaid with or w/o an established amount of interest.
Loan Guarantee
A promise by a 3rd party to cover a loan in case of default.
Loan Packaging
Help a business structure on an overall financial plan and prepare the application package to apply for financing.
Market Value
Also fair market value: The estimated worth of an asset if sold on the market.
Maturity
The amount of time before an investment or debt comes due.
Net Income
An income statement identity. The amount remaining after all costs, expenses, and allowances for depreciation have been deducted from total receipts of an entity.
Net Worth
The amount by which total assets (typically measured by their fair market value) exceed total liabilities.
Notes
A written promise to pay a debt, similar to bonds.
Operating Cycle
The process of producing a product or service, getting it to market and collecting the proceeds from its sale. It is also defined as the flow of cash through the normal operations of a company.
Opportunity Cost
The benefit foregone by making an investment or incurring a liability.
Options
An agreement that permits the purchase or sale of something within a specified period of time according to specified terms.
Par Value
The principal of a bond or preferred stock (also Face Value).
Pooling
(Risk Pooling) A method of spreading the risk burden. Individual investors purchase small shares of several investments. If a particular investment fails, the investor only loses his share of that investment rather than the whole investment.
Present Value
The value today of a future payment or stream of payments.
Principal
The amount of debt, exclusive of accrued interest.
Pro Forma
Projected financial statements.
Rate of Return
How much money an investor will make on an investment compared to their original investment. Return on an investment is either interest payments on debt investment, dividends on equity investments and any capital gain (the increase in value of an investment over the initial investment).
Redlining
The practice of financial institutions of designating certain areas of a city or certain groups as too risky for lending.
Retained Earnings
Net income that is not distributed as dividends to investors.
Return on Investment (ROI)
Net income divided by dollars invested.
Revolving Loan Fund (RLF)
A pool of funds that are lent out, whereby the loan repayments and income are recycled or plowed back into the pool which increases funds available for lending.
Risk
The degree of uncertainty that an investment will be lost.
Secondary Market
Markets where ownership of an investment is transferred from the one owner, usually the original, to another.
Security
The pledging of assets to cover a liability in case of default.
Security Risk
The chance that the value of the pledged collateral on an investment is less than that value of the investment.
Seed Capital
Equity money supplied to help a venture launch its operations.
Sinking Fund
A fund to which contributions are made, periodically for the purpose of ultimately paying debt or replacing assets.
Small Business Investment Company (SBIC)
A venture capital firm licensed and monitored by the Small Business Association (SBA). The SBIC can be capitalized with SBA funds.
Solvency
The entity’s ability to meet interest expenses and obligations associated with long-term debt.
Subordinate Position
A claim on a property, asset or repayment of a debt that is inferior to the interest of another party. Subordinate position can apply to all debt instruments.
Trade Credit
Short-term credit or loan provided by a goods or services supplier to its customers; that is, the supplier does not demand advance or simultaneous payment for its sales.
Tax Abatement
The lowering rates on specific taxes, normally taxes owed on real or other property, below the rate commonly levied within the community.
Term Loans
Debt capital repayable according to a specific schedule. It includes medium and long-term loans.
Underwriting
The process of evaluating a potential borrower in terms of his/her creditworthiness, risks involved and performance potential.
Variable Costs
Item costs that change directly and proportionally with changes in the production volume (i.e. utility bills); the opposite of fixed costs.
Variable Interest Rates
Interest rates that are tied to a money-market indicator, normally a US Treasury bill, and moves up and down with that market indicator. Also called floating rates or adjustable rates.
Venture Capital
Investment capital subject to considerable risk, generally associated with capitalizing new or unproven businesses.
Warrant
An agreement that gives the owner the option w/in a specified period of time to purchase equity capital.
Working Capital
Current assets of an entity including cash, marketable securities, accounts receivables, inventory and prepaid expenses. Net working capital is current assets less current liabilities.
