Economic Development, Base and Projections Flashcards
(39 cards)
supports local economy by exporting goods whose purchase brings new money into the local economy
* traditionally, this was manufacturing, agriculture adn mining, currently includes any industry bringing in money from non residents (tourism and grant activities)
Basic Sector
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
Nonbasic Sector
Economic Base Analysis Assumptions
** basic sector is primary mover of local economy** (local economy will grow because basic sector is bringing in additional money); some of this money remains in local economy, increasing the demand for goods and services provided by nonbasic sector
Equation and goal of location quotient
to identify the basic and nonbasic sectors; “ratio of ratios” that compares an industry’s share of local employment to its share of national employment
(Regional employment in industry / Total regionalal employment) *divided by *
(National employment in industry/Total national employment)
Location Quotient Greater than 1?
- inferring that region has more employment in this industry than is needed to support local economy and creates a surplus for export
- industry is basic
Location Quotient Less than 1?
local employement share is less than its national employment share and is non basic
determines what portions of regional economic growth or decline can be attributed to national, economic industry, and regional factors. The analysis helps identify industries where a regional economy has competitive advantages over the larger economy.
Shift share economic base projection
the industry or occupation in the region has the same share of employment as the national average
location quotient assumed to be 1
How do you caluclate the base multiplier, and what is it’s purpose?
- the ratio between total employment in a particular year and the basic sector employment of that year.
- It measures how many non-basic-sector jobs are created for each basic-sector job.
Three Core Activities of Economic Development
(1) Business recruitment and attraction
Conduct a Business Location Profile: identify which types of industries are expanding and what are they looking for (type of labor force, educational needs, land needs, complementary industries in area, housing,etc.)
Identify and promote what your community has to offer in relationship to those needs
(2) Business retention and expansion
Prevent companies from leaving by identifying problems and helping to resolve
(EX: Industrial Revenue Bonds, assist in creation of new markets, facilitating move to new locations, help obtain government approvals, land for expansion of landlocked businesses)
(3) Enterprise and small business development
Business Incubtator Programs, SBA, microloans (small, short term focused on purchase of supplies, fixtures, machinery)
the amount of revenue needed NOW to have adequate money in the future
Present Value
government loan to company to build or buy facility, land, or equipment
- Local government issues bonds - investors purchase bonds, funds used to make up the loan; interest on bond repayment generally tax free to investor
- Company repays the bond, city retains ownership of land/facility during repayment period, company pays minimal taxes
- At end of repayment period, ownership transfers to company
Industrial Revenue Bonds
** State and local** program for economically distressed areas targeted for improvement; business who locate or expand in zone and create jobs can receive tax exemptions and credits (sales taxes, utility taxes)
* Businesses get the money
* created under the Clinton administration to help distressed areas be more competitive with more prosperous areas;
* Possible incentives: hiring tax credits, property tax abatement, net interest deduction for lenders (those making loans to businesses in these zones), sale stax exemptions, income tax credits, faster permitting
* State programs have been around since the 70s
* Only for urban areas
sought to reduce unemployment and generate economic growth through the designation of Federal tax incentives and award of grants to distressed communities. The monies for the first round of —— have been criticized for undertaking more community development activities in areas such as education, housing, and infrastructure than they did economic opportunity activities such as job training and assistance to businesses.
Enterprise (Community) Zone
Clinton Administration Program: Empowerment Zones, Enterprise Communities
2017 Tax Cut and Jobs Act to encourage investment in struggling neighborhoods by offering tax breaks
Lets investors reduce their taxes by putting money into projects that aim to create jobs and improve these areas
* Most projects have been market-rate multifamily housing
* Investors get the money
* Public-private partnerships, expedited permitting process, grants or other abatements
* Three Separate Tax Incentives
1. Temporary deferral on previously earned capital gains
2. Exclusion of taxable income on new gains
3. Basis step-up of previously learned capital gains invested in Opportunity Funds
* Eligibility requirements are not as robust as those of other federal programs, such as Low Income Tax Credits
Opportunity zone - Federal Government
Used to revitalize traditional commercial districts within the context of historical preservation
Connection to historic preservation; Developed by National Main Street Center of the National Trust for Historic Preservation in Chicago!
Strategic Plan to create walkable urbanism
Character, housing (moderate and high density), retail (entertainment, boutique, regional retail, lifestyle, book stores) in walkable districts, culture (arena, museums), public infrastructure, community involvement, employment, marketing (rebranding), involving non-profit organizations, social values (housing affordability, “equity”)
Main Street Programs
4 Key Areas of Main Street Programs
- Organization: building consensus and cooperation among public/private groups and identifying sources of funding for revitalization activities
- Design: enhancing district’s physical appearance through rehab, compatible new construction, public improvements
- Promotion: marketing the commercial district through events and advertising to attract customers, potential investors, new businesses, residents,and visitors
- Economic restructuring: strengthening the districts economic base and creating new opps through analysis and appropriate mixed-used development
PAS 590 tip:
=Design is often the first thing! (with strategic placemaking starting a piece-meal approach to downtown revitilization for small and medium sized communities)
- sum of corporate stock, long-term debt, and retained earnings; overcapitalization occurs when a company has issued more debt and equity than its assets are worth
- Market value of the company is less than the total capitalized value of the company; overcapitalized company may be paying more in interest and dividend payments than it has the ability to sustain long term
Capitalization
- contractual clause where money already paid to grantees for guaranteed economic dev outcomes must be paid back under certain conditions when those guarantees are not met; used in certain governmental economic dev contracts
- EX: Scripps biotec in Palm Beach County; if you haven’t created 550 med high tech jobs by said date, we will take back $1B that we’ve given you
Clawback
refers to the spillover effect the presence of a particular type of job has on additional local economic activity. Example: If there is one new high tech job which creates three total supporting jobs in the community, then there is a multiplier of three for every new high tech job created.
Multiplier Effect
Similar to base multiplier
Minimum number of people necessary before a good,service, or infrastructure can be provided in an area
EX: putting in central sewer extension, water service
Used in Walter Cristaller’s Central Place Theory
Threshold Population
Economically distressed rural & urban zones designated by USDA & HUD* Businesses in zone can avail themselves of Federal grants and federal tax incentives* Businesses get credits for hiring people within the zone.
- Economically distressed rural & urban zones designated by USDA & HUD
- Businesses in zone can avail themselves of Federal grants and federal tax incentives
- Businesses get credits for hiring people within the zone
- Includes substantial training funds & social services funds
- Requires community participation/input into the plans
Empowerment zones
Opportunity Zones (2017) emphasize private investment and offer tax benefits to investors, while Empowerment Zones (1993) emphasized community-led initiatives and tax credits for businesses, Enterprise Zones (1993) offer tax reliefs to business that are actually located in the disinvetsed community
- Agency of Federal government that assists and protects interests of small business
- Loan programs - guarantees laosn amde by private lenders
- funds can be used for start up and working capital, acquisition of land and buildings, machinery and equipment, etc.
Small Business Administration
provides development funds to states to assist physically and economically distressed cities and urban counties addressing the amount of private investment stimulated, the number of permanent jobs created or retained, and the degree to which the grantees’ tax bases were expanded.
“Leverage” occurs when the investment generates a greater amount of private investment, and, therefore, economic growth. Analysis of the levered private investment should take into account all public funds that are in evidence and applicable to the project.
program was effectively ended in 1988. While it initially aimed to stimulate economic development in distressed cities by providing grants for private development projects, the program faced challenges, including funding cuts and a perception that it was not the most effective way to revitalize cities
Urban Development Action Grant
- Spin-off created by a different types of economic activity
- Reflects the full economic impact of spending a dollar showing that the impacts extend beyond the original expenditure
- You buy groceries for $50; grocer pays wages & supplies; your spending may result in $100 or more being spent in the community
Multiplier (Ripple) Effect
