Primer on Economic Development

A Primer on A Primer on Economic Economic DevelopmentDevelopment

Shelby County Economic Development Initiative

Mike Weber, Director

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTBackgroundBackground

Originally the purview of the private sector (Utilities, railroads, banks, and businesses organizations)

Since the late 1970’s it has become a critical function of local government

Often associated with distressed areas

ECONOMIC DEVELOPMENT ECONOMIC DEVELOPMENT BackgroundBackground Economic development programs

typically are concerned with:

Retaining existing business and industry Attracting business (manufacturing, service,

and retail types) Nurturing small and start up businesses Downtown revitalization Can include promotion of residential

development as well (small communities)

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENT Program OriginsProgram Origins

Term “economic development” became popular after the creation of the Economic Development Administration – an agency of the U. S. Department of Commerce

Created in the 1950’s during the Eisenhower administration

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTProgram OriginsProgram Origins

Also has roots in the urban renewal programs that evolved from the Federal Housing Acts of 1949 and 1954

At the Federal level, reached a zenith in 1978 with the Urban Development Action Grant program


Focused heavily on Federal financial assistance to states and cities for:

Infrastructure to build new industrial parks Redevelopment of older industrial and

commercial areas Provided project financing through loans,

grants, and tax-exempt bond financing


By 1982 there was an “alphabet soup” of Federal economic development assistance programs that cities could draw upon

EDA UDAG IRB EZ CDBG

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENT Program ShiftProgram Shift

The Reagan Administration instigated major shift in public policy, partly attributed to Federal deficit and program abuses

Began a 10-year process of “pulling the plug” on nearly all Federal assistance for economic development

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENT Program ShiftProgram Shift

States and cities told to come up with creative local programs to foster economic development

Reagan coined the phrase “public/private partnerships”

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTThe Shift to StatesThe Shift to States

Federal assistance is extremely limited

Focus shifted to State authorized mechanisms for local jurisdictions to raise funds

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTThe Shift to StatesThe Shift to States

States legislatures have enabled some programs

Most programs enable creative use of local tax revenue to spur economic development

Illinois State assistance in the form of tax credits, loans and major employer attraction

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTThe Shift to States and LocalitiesThe Shift to States and Localities

Focus has shifted to enable cities to use future tax revenue created by a project as an incentive

This is sometimes referred to as:“transactional economic development”

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTIllinoisIllinois Programs TodayPrograms Today

Programs can be grouped by method of assistance Tax Abatement Value Added or “Capture” Tax Assessment Tax Credits Loans

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTTax AbatementTax Abatement

Enterprise Zone

Property Tax Abatement (intergovernmental agreement)

Sales Tax Rebate (local only)

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTValue Added or “Capture”Value Added or “Capture”

Tax Increment Financing (TIF)

Sales Tax Rebate

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTTax AssessmentTax Assessment

Special Service Areas (SSA) Hotel/Motel Tax (tourism) Business District Tax (retail & hotel) Home Rule Sales Tax Non-Home Rule Sales Tax (0.5% max)

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTTax CreditsTax Credits

EDGE Tax Credits (when competing against other states)

Investment Tax Credits (EZ) Historic Tax Credits (Federal) New Market Tax Credits (Federal - low

income communities)

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTLoansLoans

Illinois Finance Authority: Tax exempt and taxable financings Industrial revenue bonds ($1.5 M min.) Agri-Industries loan guarantees Participation loan program Local government bond program

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTIllinois Programs TodayIllinois Programs Today

Local responsibility and initiative County or multi-community Local control and flexibility to build on

opportunities Project based Use public/private partnerships to

leverage public dollars and implement redevelopment

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTGetting StartedGetting Started Determine the County/municipalities

roles in a sustainable economic development program County lead Public/Private Group (Shelby Development

Council) Staff/ED consultant/Both Local Initiatives (community based

development corp.)

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTGetting StartedGetting Started Realistic Assessment of Assets and

Liabilities Quality of life factors (schools, low crime,

recreation) Smaller market

Compile the Facts: Inventory of available sites Job skills – local and adjoining counties Peak season market dynamics

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTGetting StartedGetting Started Know Your Existing Businesses Well

Over 80% of new job opportunities come from expansion of small business enterprises

Be prepared to compete with other cities and states

Networking and Knowledge Resources: Illinois Development Council (IDC) Illinois Tax Increment Association (ITIA) National Association of Industrial and Office

Properties (NAIOP)

Sale Street Looking North - Existing

Sale Street Looking North - Restored

ECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTConclusionsConclusions

Economic development doesn’t just happen Local initiatives need to seize the

opportunity or create the opportunity County or region-wide efforts more cost

efficient Public/private collaborative tends to get

better results Get help – staff, consultants or both

Documents

Primer on Economic Development