Lesson 12 - Economic Development Planning Flashcards
What is economic development?
Economic development is about supporting the economy of a community, region, state or nation. This includes:
Job Creation Private Business Expansion Tax Base Expansion Wealth Creation Quality of Life Standard of Living
How does it work?
Economic development works by using government inducements and assistance to increase private investment. This private investment is expected to create new jobs, reduce unemployment and increase incomes, thus increasing demand for goods and services. This then cycles back through driving further private investment.
Multiplier effect
The concept is the multiplier effect that certain types of jobs then drive demand for other jobs.
Multipliers, which measure the interdependence or linkage between industry sectors within a region, provide an estimate of the “ripple effect” due to a local change in economic activity. There are the direct jobs created by a new business opening, such as a semiconductor plant - which say creates 10 new jobs. Then there are an additional 15 jobs that are indirectly created as a result of suppliers and other related businesses creating jobs. Then there are the 12 induced jobs those that are created as a result of demand, such as hair dressers and grocers. This means that the 10 jobs created by the semiconductor plant resulted in a net total of 37 new jobs in the region.
Government role
The role of local government is to provide incentives to businesses to locate or expand, to create a positive business environment, and provide quality city services.
Businesses looking to locate in a community want to have available development sites and/or buildings, access to labor, access to financial capital, access to transportation and utilities, a high quality of life, and a supportive regulatory environment as examples.
Enterprise zones
There are a number of economic development tools available. For example, an Enterprise Zone is an area in which policies to encourage economic growth and development are in place. This could include tax incentives, infrastructure incentives and/or reduced regulations to attract investment. Enterprise zones are specified geographic areas.
Fundamentals of ED
1) Community support
2) The ability to create partnerships.
3) Timing.
Jobs and Investment Tax Incentives
Tying incentives to job creation or capital investment enables states to tailor incentive programs to tangible goals. These credit types are available in virtually every state.2 The credits reward companies that either add new jobs or can verify that they retained jobs they otherwise would have cut. Some states use jobs as the unit of measurement; others use payroll. For example, Delaware’s job creation tax credit is $500 for each qualified new job, and Mississippi’s credit is equal to 2.5 percent of new payroll.
Other states have a stand-alone investment tax credit. These credits apply to a specific investment, usually expansion of facilities or purchase of new equipment. For example, Florida’s Capital Investment Tax Credit allows an investment credit of 5 percent annually for 20 years of eligible capital costs.3
Tax Incentives Targeted at Specific Industries
Agriculture, Technology, Manufacturing Incentives, Film Incentives
Geographically Targeted Tax Incentives
Enterprise Zones -
The most common zones are enterprise zones (also sometimes called empowerment zones). The federal, state, and local governments offer various incentives targeted at these zones to encourage economic activity in areas of high unemployment or declining property values. The US Department of Housing and Urban Development, for example, administered a grant program for states to establish empowerment zones with federal incentives for development, but authorization ended in 2014.5 The federal role has been sporadic, and many states have set up stand-alone programs. Colorado, for example, provides a variety of tax credits for investment and job creation in enterprise zones (Colorado Office of Economic Development and International Trade 2015).
Critics argue that companies that relocate into enterprise zones to take advantage of the incentives reduce their investment elsewhere (Papke 1993) and that the incentives are too small to drive location decisions (Peters and Fisher 2002).
Tax Increment Finance Districts -
In these districts, often administered at the local level, the area’s tax revenue (or the increase in property tax revenues due to higher value) does not go into the general fund but rather remains with the district to pay off redevelopment costs or to pay for more investments. In most cases, local property taxes are diverted to the TIF district, but a few states, including New Mexico and Kentucky, have also allowed state sales taxes to be diverted.6
Livability for all
AARP Network of Age-Friendly Communities Tool Kit (tinyurl.com/pzbkahk) and the Livability Index: Great Neighborhoods for All Ages (tinyurl.com/lak7hob).
The chief aim of the AARP Network of Age-Friendly Communities program is helping communities become more livable for all residents, regardless of age, by addressing their needs through a deliberate planning process that results in features such as better housing and transportation options, access to key services, and opportunities for residents to participate in community activities. Since its inception in 2012, 65 communities have participated in the program.
The AARP Network of Age-Friendly Communities framework can be adapted as needed by AARP state offices, municipal and local governments, nonprofit organizations, community partners, and volunteers. The tool kit’s framework explains the milestones for initiating and achieving membership in the network; provides examples for developing plans that are unique to a community’s circumstances and environments; offers guidance for how to develop a framework that links back to an action plan; and identifies the necessary indicators and data sources that support the evaluation phases.
Improving the built environment and supporting multimodal transportation alternatives also makes a community more attractive to businesses who might want to locate there, which, in turn, boosts local job opportunities.
The AARP Livability Index, launched earlier this year, helps communities measure how well they are meeting the needs of residents in the areas that impact quality of life. The Livability Index scores communities on a broad range of community features and characteristics within seven categories: housing, transportation, neighborhood, environment, health, engagement, and opportunity.
The index (see Research You Can Use, July 2015) measures 40 metrics and 20 policies in every neighborhood and community across the country. The metrics tell a community’s story, giving a snapshot of current conditions, while policies show a community’s potential to improve its livability.
