8 Economic Development
Case Scenario: Renovating Happy Paws 229
Introduction 230
Economic Growth and Development 230
Theories of Growth and Economic Development 233
Economic Development Theories 234
Economic Development Strategies 236
Financial Tools for Economic Development 237
Non-Financial Tools for Economic Development 243
Analytical Case: California’s enterprise zone program 249
Practical Skill: Leveraging government resources 250
Summary and Conclusion 252
CHAPTER CONTENTS
CASE 8 SCENARIO
Renovating Happy Paws
Zoey was very grateful for her grandma’s old house to start Happy Paws pet store. She knew that it gave her a boost many others never get. The house is located right off Main Street, where most of the city’s commercial activities take place; more importantly, there is the veterinarian’s office on the corner, Splurge Jewelry, and the U Scream Ice Cream shop nearby, which seem to keep customers walking by. Recently, the city invested substantial funds to pave the streets, renovate the buildings, and install the landscaping, attempting to develop the neighborhood into a pedestrian-friendly epicenter, with the ultimate goal of attracting more tourists and businesses to the city.
Zoey can see how desirable the location is for her business. However, Zoey is not very happy with the current look of the exterior of the house. Zoey’s grandma
had inherited the house decades ago and kept the inside meticulous. Despite the impressive Victorian style and the wonderful big windows for display, the exterior is not in the best shape and doesn’t fit in well with all the sprucing-up the city itself has done in the neighborhood. The roof has some curled shingles and it leaks in Zoey’s upstairs bedroom when it rains. A few pieces of the wood siding are warped. The front porch is sagging a bit and the whole exterior is in need of a paint job. And the list goes on . . . All these items add to her renovation costs, which she cannot afford.
Zoey brought up the renovation issue last evening when Zach and Tyler were helping restock Happy Paws. When Tyler mentioned that his uncle, who had an old restaurant on Main Street, had gotten some government money to renovate his business, Zoey was intrigued. Tyler said that as a historic building, the restaurant had qualified for some historic preservation tax incentives and energy efficiency and conservation grants, which ended up largely covering his renovation costs. Zoey was amazed and eager to know if she and her grandma’s century-old building were eligible for those government programs and where and how she could get such information. She could hardly keep her mind focused and almost forgot to feed the fish before she closed!
Introduction
Both business and government have a shared interest in economic development, which aims at promoting the economic health and standard of living for a designated area. A robust, growing economy not only creates more demand for business products and services and enhances firms’ confidence in their investment, but also provides opportunities to establish new customers, new products, and new markets. For government, economic development can lead to higher incomes, lower unem – ployment, and increased tax revenues, all of which will better enable government to deal with many of its daily challenges, such as eliminating poverty, protecting the environment, enhancing public services, and improving the welfare of people in their jurisdiction. Despite their different emphases, government and business often act in concert when it comes to economic development, an area that often involves intensive business–government interaction.
This chapter introduces many growth and development concepts, theories, and practices in relation to local economic development. Specifically, a variety of financial and non-financial tools that government utilizes to induce economic development are discussed. The chapter will help students obtain a basic under – standing of the rationale behind each of the tools, as well as hone the skills needed to explore government financial resources for business purposes.
Economic Growth and Development
Economic growth is the increase in the amount of goods and services produced by an economy over time. Economic growth is concerned with wealth enhancement—
230 Business–Government Relations in Economic Development
that is, the increase (or loss) in financial value. It is conventionally measured as the percent rate of increase in real gross domestic product (GDP) or gross national product (GNP). Growth is usually calculated in real terms (i.e., inflation-adjusted terms) in order to “net out” the effect of inflation on the price of goods and services produced. The annual percent change of GDP is often used to compare the magnitude of economic growth among countries and regions. For example, with an average 9.4 percent growth rate from 1980 to 2006, 论文帮助/论文写作服务/负担得起我及时提交我最好的质量 – China is one of the fastest- growing economies around the world (see Exhibit 8.1).
The measurement of economic growth as a change of GDP or GNP emphasizes financial values (and neglects all other non-financial values) but has its intrinsic drawbacks. It will be elaborated upon in the following chapter on industrial recruitment.
When economic growth is expressed on a per capita basis, it is normally used to measure the overall economic well-being of a population (i.e., the standard of living of people in a given region), which has been a central focus of economic development. Economic development generally refers to the concerted efforts of government, business, and communities to promote economic growth, as well as the overall economic and social well-being of people in a specific area.
The idea of economic development was conceived during the period of post- WWII reconstruction worldwide. The central focus of development at the time was
Economic Development 231
Rate of real GDP change for the world, the European Union, 论文帮助/论文写作服务/负担得起我及时提交我最好的质量 – China, and the United States, from 1980 to 2006
EXHIBIT 8.1
20.0
15.0
10.0
5.0
0.0
–5.0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
United States
European Union
论文帮助/论文写作服务/负担得起我及时提交我最好的质量 – China
World
Source: IMF, World Economic Outlook Database.
to enhance economic growth. For example, in his 1949 inaugural speech, President
Harry Truman stated that “[g]reater production is the key to prosperity and peace.”
Since then, economic development strategies have been focused on achieving
growth through industrialization, especially planned alteration of production and
employment structures, often at the cost of agriculture and rural development
worldwide. This narrowly defined development focus led to the economic growth
of many development countries in the 1950s and 1960s, but unfortunately did not
bring about the expected improvement in the level of living for large groups of
people. In the 1970s, many economists and policymakers launched attacks on the
rising gap of income distribution and widespread poverty around the world. This
led to an expanded focus of economic development that included the elimination
of unemployment, poverty, and inequality in addition to the acceleration of economic
growth. For example, Nobel laureate Amartya Sen (1983) points out that “eco-
nomic growth is one aspect of the process of economic development.” Development
should be viewed as a multidimensional process which involves the policies and
actions by which a nation or a region improves the economic, political, and social
well-being of its people. Such policies and actions can involve multiple areas,
including development of human capital, public infrastructure, regional competitive –
ness, environmental sustainability, social inclusion, health, safety, literacy, and
other initiatives.
Whereas economic growth is an indicator of market productivity, economic
development is a policy intervention endeavor aimed at improving the eco-
nomic and social well-being of people. Policies and actions of economic
development generally encompass three areas:
• First, governments’ overall policy framework to enhance market stability and
sustainable growth, including monetary and fiscal policies, tax policies, currency
value and exchange rates, regulation of financial institutions, domestic trade
policies, and trade agreements with other countries. This is often the focus of
development at the national and international levels.
• Second, governments’ policies and practices to enhance employment, increase
the tax base, and improve people’s level of living through business retention
and expansion, business finance, marketing and development, neighbor-
hood devel op ment, workforce development, technology transfer, and real
estate development. This policy area is a primary focus of local economic
develop ment.
• Third, governments’ programs and projects that provide critical infrastructure
and services such as the transportation system, utilities, parks, affordable
housing, public safety, disaster protection, and education. This can be the focus
of governments at all levels.
Part III of this book will focus on economic development policies and practices at
the local (or domestic) level, whereas Part IV will discuss many of the theories and
polices at the international level.
232 Business–Government Relations in Economic Development
Theories of Growth and Economic Development
Growth theory is the part of economic theory that seeks to explain (and hopes to predict) the rate at which a country or regional economy will grow over time. Economists distinguish between short-run economic changes in production and long- run economic growth. A short-run variation in economic growth is called the business cycle, which is made up of increases and drops in production that occur over a period of months or years. Generally, economists attribute the ups and downs in the business cycle to expected fluctuations in aggregate demand. In contrast, the topic of economic growth is concerned with the long-run trends in production. Due to the prevailing assumption that GDP per capita is directly correlated to standard of living, it is generally taken for granted that growth in economic production is desirable. Research into the causes of growth has been motivated by the interest in maintaining long-term growth in production, and of moderating the effects of recessions.
Classic Growth Theory
The modern concept of economic growth began with the critique of mercantilism (see Chapter 1), led by the Scottish philosopher and economist, Adam Smith. Mercantilism, which was based on trade, suggests a nation can gain wealth by maintaining a positive balance of trade with other nations. Governments would attempt to foster growth by discouraging imports (money leaving the country) and encouraging exports (goods leaving the country). Imports were discouraged by imposing tariffs. Exports were encouraged by granting monopolies intended to make favored merchants more competitive in foreign markets. This enabled monopoly- holders like the Dutch East India Company and the Hudson’s Bay Company to manipulate prices in hopes of eliminating competition from other countries. Once a company’s monopoly became international, it could raise prices and reap profits from its original investment.
Given its emphasis on production of goods for export and on price manipulation, the mercantilist system did not favor the working population. Local consumption was not a factor in economic prosperity, with the consequence that laborers and farmers generally lived on a level of bare subsistence. The people primarily responsible for economic growth received few of its benefits. The main beneficiaries of mercantilism were the trading companies and the governments that supported their operations.
In critiquing mercantilism, Smith recognized that three factors contribute to production: land, labor, and capital. Considering these three factors, his production function may be expressed as:
Y = f (K, L, T)
where,
Y is the output of an economy, K represents the capital, L denotes labor force, and T stands for land.
Economic Development 233
In Smith’s theory, the combination of the inputs is expected to increase returns to scale through the production process. In the production function, output increases proportionally more than the simple increase in all inputs. This is because increased output expands the market and leads to both internal and external economies of scale, which will eventually lower the cost of production. This process is made possible by improvement in production techniques and a greater degree of division of labor. Division of labor increases labor productivity and increased productivity leads to higher wages, which enables more people to enjoy the products instead of just small elites. Higher labor income promotes the consumer market and creates more demand for products. This demand is then met with further increases in productivity as a result of a more efficient division of labor, and so forth. Working together, this set of dynamics constitutes a positive growth loop. For Adam Smith, economic growth contributes to an increase in consumption which benefits all sectors of the economic community.
However, it should be noted that despite the dynamic in the growth loop, Smith’s theory never suggests that economic growth can be indefinite. Given the fact that land is a major production factor and that land is limited, Smith’s growth model is ultimately constrained by environmental factors.
Economic Development Theories
Eighteenth- and nineteenth-century classic growth theory provided the base for further development and expansion of theories on economic development. Among them, neoclassical economic theory is the most widely practiced.
Neoclassical economic theory focuses on development and expansion of an economy. In alignment with Smith’s free market ideal, it asserts that an economy will reach a natural equilibrium if capital can flow without restriction. The mobility of capital in a free market implies that capital will naturally flow from high labor and production cost areas to low labor and production cost areas, as the latter provide a higher return on investment. Therefore, poor regions would attract capital as prices for labor and property are lower in the overall market, and all areas would eventually reach a state of equal status if the market worked perfectly. Neoclassical economic theorists, as led by Milton Friedman, emphasize the negative role of government in development and oppose government regulations on the movement of firms from one area to another, as well as any restrictions that could make such movement undesirable to firms.
Several useful ideas have been derived from neoclassical theorists. Following the free market principles, communities should attract capital with their resources, such as land, labor, infrastructure, financial incentives, etc. Disadvantaged com – munities should strive to gain the necessary resources to compete against other areas in their market environment. Furthermore, government “red tape” (or excessive regulations) or other barriers are undesirable to economic development. Overall, government’s role in economic development should be very limited, intervening as little as possible. It should also be relatively passive, and not aggressively seek economic development, but rather strategically use available resources to attract business for development purposes. The rationale has also underscored the recent
234 Business–Government Relations in Economic Development
upsurge in privatization, especially regarding the deregulation of transporta- tion, energy, banking, and other industries in the United States and abroad (see Chapter 11).
Neoclassical economic theory, along with the policies and practices it can spawn, has been criticized by many local economic development advocates. Whereas neoclassical theorists claim that, in theory, the market will eventually reach a natural equilibrium and that all areas will have an equal economic status, their opponents point out that in reality, market imperfections, many of which are structural, always lead to unbalanced growth and development among regions, as well as unequal distribution of benefits from growth among groups. The interplay of market forces as a result enlarges the gap between areas and diverges the regional income (Myrdal 1957). The model is also blamed for its tolerance of excessive social inequality and its tendency to overshadow communities for the sake of corporate interest. Furthermore, the theory shines little insight on why some areas remain competitive despite relatively high production costs.
Location theory, on the other hand, seeks to explain an area’s competitiveness in terms of firms’ locational orientation—what factors of an area contribute to a firm’s location choice. Location theorists assume that firms, in order to maximize their profits, choose locations that minimize the cost of transporting goods to the market place. The costs of transportation, and subsequently the logistics and activities for storing and distributing goods and services, affect a firm’s location. Other factors such as the costs of labor and energy, the accessibility to suppliers, the availability of infrastructure, and the climate, culture, education and training programs, and government performance also affect the quality of a location. Therefore, communities should manipulate these factors to their best possible advan tage in order to attract businesses. Unlike the neoclassical school, location theorists generally assert that government should play a critical role in enhancing the location. A capable, cooperative, and responsive government can potentially better meet business’s needs for land, infrastructure such as transportation and roads, education, and other public services. Various government policies, micro or macro, economic or non-economic, potentially affect many of the critical factors that deter mine the desirability of a location. For example, government public safety policies affect the crime rate of an area, which has an enormous effect on its economic viability and its overall success.
Several variants of location theory provide insights on economic development from different perspectives. Economic base theory analyzes growth from the demand side rather than the supply side. It differentiates the economic activities of an area into two components—those which meet the local demands and those which satisfy the demands outside the community. The former is non-basic, which does not lead to growth, while the latter is basic, which will generate local wealth and jobs. The theory asserts that the means of strengthening and growing the local economy is to develop and enhance the basic sector, which is the “engine” of the local economy. Communities should recruit businesses that have a market beyond the local area, devote their local labor and material resources to the success of those businesses, and strive to reduce any barriers that may hinder the development of those export- oriented industries.
Economic Development 235
Growth pole theory rejects neoclassical theorists’ claim that growth “should” flow to less costly regions and argues that indeed the opposite happens unless there is a dynamic industry with a competitive edge in capital, technology, and political influence (Perroux 1983). Such industries are propelled by poles of growth. A pole or hub is characterized by core industries around which linked industries develop because of the core industries’ demand (from suppliers), as well as its provision of goods and services (to customers). The expansion of a core industry leads to the expansion of investment, output, employment, and new technologies, as well as the emergence of secondary growth poles.
Central place theory focuses on the critical role of urban centers in regional economic development. According to this theory, urban centers contain specialized industries (especially retail stores) that serve a broad area. They are surrounded and supported by a number of small jurisdictions that provide resources and markets for the urban centers. Residents of a small jurisdiction have to go to these central, urban areas for specialized products and services that are not provided in their own communities. Therefore, economic development efforts should direct resources to the development of a designated central place that will improve the economic well- being of the whole region (Bradshaw and Blakely 1979).
In analyzing the competitive advantage of places, Michael Porter (1990) integrates these concepts into his cluster theory. Clusters are geographic con – centrations of interconnected firms in related industries, specialized suppliers, and associated institutions, such as government, universities, and trade associations, in a particular field. Since most cluster participants are not direct competitors but rather serve different segments of industries, they not only compete but also cooperate, which make them better. The synergy among them produces growth. According to Porter, a major role of government is to facilitate or upgrade cluster development.
Economic Development Strategies
Economic development theories have influenced practices, especially government’s strategies to enhance development. Generally speaking, government, and in partic – ular states and localities, use three strategies to stimulate economic development:
• Industrial recruitment is primarily a locational approach by which governments subsidize businesses to lure more investment into their jurisdictions or to prevent indigenous firms from leaving. Despite the political controversies about—and the legal challenges to—the use of government incentives, industrial recruitment still plays a significant role in local economic development. Chapter 9 will elaborate upon recruitment practices and their implications in the United States.
• Entrepreneurial strategies for economic development refers to the approach that governments use when adopting policies that promise to increase public revenue
by focusing primarily on the creation of new firms and technology development.
In recent years, entrepreneurial strategy has frequently emphasized engaging
local governments, private business and development firms, and local non-profit
236 Business–Government Relations in Economic Development
organizations to create new opportunities for investment in declining or stagnant
communities. The discussion of entrepreneurial strategy will be included in
Chapter 10. Thus, the neoclassical concept of innovation is harnessed in the
context of location theory in this strategy.
• Privatization is the delegation of public duties to the private sector. It is deeply rooted in the market-oriented economic ideal, and thus neoclassical economic
theory. Privatization, unlike the other two strategies, seeks to reduce government
intervention in an economy. For example, deregulation, a strategy wherein
government removes, reduces, or simplifies restrictions on business to encourage
(in theory) the efficient operation of markets, has been pursued in the past to
encourage the development of market-oriented economy. In recent years,
privatization, in the form of public–private partnerships, has been increasingly
used for local economic development due to practical reasons. Chapter 10
introduces other forms of privatization, which are pursued by government
because of either practical or ideological reasons beyond economic development,
and which, as a side effect, create opportunities for the private sector to do
business with government.
Financial Tools for Economic Development
To pursue the different strategies for economic development, state and local
governments in the US have created and implemented a variety of instruments and
techniques for raising or allocating funds. This section introduces the most common
financial tools used by states and local jurisdictions to fund their economic
development purposes.
Tax Reductions (Aka Tax Breaks)
Tax reductions, or tax breaks, that are provided by states and local governments to
assist economic development include various kinds of abatements, credits, and
exemptions.
Tax abatement is a full or partial reduction of the tax liability of a given piece of real estate for a specified number of years. It is often granted to new or
rehabilitated industrial or commercial property in blighted conditions or areas. The
use of commercial property tax abatement in the United States can be traced back
to 1640 when the state of Connecticut granted tax reductions for the production of
manufacturing items, such as flax seed oil, iron and steel, and malt liquor (Alyea
1967). In 2004, 35 of the 50 states offered stand-alone property tax abatements,
which constitute an integral component of their economic development programs
(Dalehite, Mikesell, and Zorn 2005). Some states also allow localities to offer tax
reductions on their property taxes in conjunction with their economic development
programs (Wassmer 2007). For example, in the state of New Jersey, municipalities
grant tax abatements to businesses and developers to enhance employment oppor –
tunities, attract residents, and lure commercial establishments, while developing
vacant or underutilized properties. In view of the comparatively high property tax
Economic Development 237
rates in New Jersey, abatement can be a valuable incentive for developers and investors; yet a recent study found that such tax abatements also resulted in significant foregone revenue and introduced tax inequalities (State of New Jersey 2010).
Tax exemption is the freedom from an obligation to pay a particular tax. It generally refers to a statutory exception to a general rule rather than the mere absence of taxation or a deduction of taxable items. Many states offer tax exemptions to business for purchases, investments, and activities other than real estate development. Such exemptions are commonly granted for the purchase of raw materials, machinery, and equipment. In the US, most states and localities exempt any goods from sales or use taxes that are used directly in the production of other goods (i.e., raw materials) as well as the purchase of new equipment (e.g., equipment for research and development); also generally exempt from inventory taxes are goods in transit, to promote employment in warehousing, shipping, and transportation. For example, California Revenue and Taxation Code Section 129 specifies that “business inventories” that are eligible for exemption include “all tangible personal property, whether raw materials, work in process or finished goods, which will become a part of or are themselves items of personally held for sale or lease in the ordinary course of business.”1
Tax credit is a reduction in the tax bill, commonly used to encourage job creation, investment, and research and development activities. Credits may be offered to individuals as well as entities against income or property taxes, and are generally non-refundable to the extent they exceed taxes otherwise due. Most state enterprise zone programs offer employers a tax credit for each new job or each new employee who lives in the zone. Some states offer credits for investment in depreciable capital stock. Approximately 43 states provide various tax credit programs, such as brownfield credits, pollution control credits, renewable energy credits, and historical preservation credits, among others.
Public Borrowing
State and local governments may also borrow from the public through issuing bonds to fund economic development. This function is often assumed by special authorities, such as an industrial development authority, economic develop- ment authority, redevelopment authority, and so on, rather than being assumed by municipalities themselves. Those financial authorities lend money to private businesses, often at a below-market rate in an effort to induce investment. The industrial revenue bond (IRB) and tax increment financing (TIF) are two commonly used methods of public borrowing.
IRBs, industrial development revenue bonds (also sometimes called IDRs or IDBs), are often issued by state and local government public authorities. Subsequent loans are either at favorable rates (partially by means of federal tax exemption) and/or guaranteed. Rather than from a tax, a revenue bond guarantees repay- ment, and that guarantee is solely based from monies generated by a specified revenue-generating entity associated with the purpose of the bond (i.e., economic
238 Business–Government Relations in Economic Development
development). Such a bond is not backed by the full faith and credit of the
issuing government; nor does it require voter approval. Taxpayers are not implicated
in the bond issuing. While enjoying the low interest rate, the private beneficiary
bears full liability for repayment or default. The proceeds of the bond issue are
often used to finance private industrial facilities or equipment. For example,
ColorGraphics, one of the largest printers in the western United States, used an
IRB issued by the Industrial Development Authority of the City of Los Angeles to
purchase a new $8.6 million printer, which helped create new jobs and retain
employees, because the advanced printing technology better met customer
demand.2
The use of IRBs began during the Great Depression and became universal in the
1970s. As foregone federal revenues increased (because of tax-exempted govern –
ment bonds), Congress became concerned about the costs of such practices. A series
of Acts were passed to limit the use of IRBs, such as the Revenue Adjustment Act
of 1968. Since 1988, the federal government has authorized what is referred to as
a Volume Cap, which is the maximum annual amount of tax-exempt private activity
bonds that can be issued in each state. Annually, each state receives an allocation
of Volume Cap, or the so-called “state ceiling,” based upon an IRS Inflation
Adjustment (which was $95 per capita for 2013) and IRS Calendar Year Resident
Population Estimates.
With the decline of IRB use, another public borrowing mechanism—TIF, or tax
increment financing—has become a more important development tool at the disposal
of local governments. TIF is a municipal bond issue based on the expected increase
in property taxes that are collected by an economic development agency. It is often
used for redevelopment, which is a special type of economic development that
focuses on attacking problems in blighted areas (Chapter 9 will discuss this topic
in detail). TIF is a financial mechanism to leverage anticipated future gains in taxes
to subsidize current improvements, which are themselves projected to create the
conditions for the expected gains. The completion of a redevelopment project often
results in an increase in the value of the surrounding real estate, which leads to
additional tax revenue (see Exhibit 8.1). Such a “tax increment” within a specifically
defined development area is dedicated to finance the debt that is issued to pay for
the project.
As TIF creates funding for development projects by borrowing against future
increments in property-tax revenues, there are several intrinsic problems with
the financial tool. It is possible that the new development within the project area
may fail to generate sufficient revenues to retire the bonds, especially during a
real estate recession. In that case, the government will have to assume the responsi –
bility of servicing the debt from the general fund. In addition, TIF excludes other
overlying jurisdictions (e.g., school districts) from the benefits of development
until the TIF bonds are retired. Due to these reasons, TIF was discontinued in Cali –
fornia, a state which began their use in 1952. Despite the problems, every other
state except Arizona and Wyoming still embraces TIF for economic development
purposes.
Economic Development 239
240 Business–Government Relations in Economic Development
Special Taxes (Earmarked for Development)
Local governments and special authorities are increasingly using specifically established taxes, often as surcharges designed to shift the burden of development from residents to visitors, for a particular economic development purpose. Such financial tools range from sales and hotel taxes, to sin or nuisance taxes.
Special sales taxes, often levied as a specifically designated percentage on top of the state sales tax, have been increasingly used for funding economic develop – ment. For example, all cities in Texas can impose a local economic development sales tax rate of not more than 2 percent through a development corporation. The State of Missouri allows citizens to authorize a supplemental sales tax of not more than 0.5 percent dedicated exclusively for certain economic development initiatives in their home municipality.
Given that tourism is a driving factor in economic development, a local Hotel Occupancy Tax (HOT) or Transient Occupancy Tax (TOT) is considered a legitimate way to fund programs that encourage tourism or economic development. A city or a county can impose a HOT by passage of an ordinance or by adopting an order or resolution, but they are subject to legislative caps. For example, cities in Texas with populations of less than 35,000 can impose a HOT in their extra – territorial jurisdiction, but the combined city, county, and state hotel tax rate cannot exceed 15 percent. In California, HOTs generally range from 7 to 14 percent, and are largely used to advance tourism and economic development.
To finance public or quasi-public works such as sports stadiums, art museums, or municipal auditoriums, which often are taken as anchor projects to stimulate
Tax increment financing
EXHIBIT 8.2
Tax Increment
Captured Property
Taxable Value to Pay
Project Costs
Post-Project Property Assessed
Value
Project TerminationProject Creation Time
A ss
e ss
e d
V a
lu e
Inc rea
sed As
ses sed
Va lue
fro m
De vel
op me
nt
Baseline Property Assessed Value (Assessed Value of All Other Properties in Project Area
consumption and employment, local governments may impose sin or nuisance taxes in various forms. For example, the City of Cleveland in Ohio used sin taxes on alcohol and tobacco to fund the construction and renovation of three sports venues, which have generated both substantial revenues and jobs.
Other Financial Devices
In addition to all other financial resources, the local government general fund (other than tax breaks, which are reductions from the general fund) can be an important funding source for economic development. General funds provide the resources necessary to sustain day-to-day activities and thus pay for all administrative and operating expenses of government. The general funds of local governments are similar to a firm’s general ledger account, which records all assets and liabilities of the entity that are not assigned to a special purpose.
Besides funding the administrative and operating costs of local economic development agencies, a general fund may serve as the ultimate guarantor of investments to reduce the risk of, and therefore get better rates for, municipal bonds. It may also provide insurance programs, such as flood insurance in coastal areas. A general fund can also provide improvements and services that promote development, such as new roads and other infrastructure, or special programs such as training and education, which can assist business. Seed money, one-time grants for development, revolving funds, or the loan of property for charitable purposes can all be financial devices accessed by means of a general fund. However, in recent decades, as entrenched fiscal stress became epidemic, governments have become more reluctant to use monies in their general fund for economic development.
Global and national economic development trends have created challenges for both governments and businesses. In recognition of the limitations of traditional economic development efforts, governments have been aggressively and inno – vatively seeking new mechanisms. Since the 1980s, governments at all levels have increased their usage of public–private partnerships (PPP or P3) to introduce private investment to economic development, especially in public infrastructure and facility projects. PPPs, sometimes referred to as public–private venture, are contractual arrangements between public- and private-sector entities, typically involving a government agency contracting with a business or non-profit entity to renovate, construct, operate, maintain, and/or manage a facility or system, in whole or in part, that provides a public service. In such a contractual arrangement, the private-sector partner usually makes a substantial cash, at-risk, equity investment in the project, while the public-sector partner gains access to a new revenue stream or service delivery capacity without having to make substantial capital investment. The private partner obtains a steady return on investment from tolls, user charges, performance-based fees, related real estate development, or other revenues. It is typical under such an arrangement for the government agency to retain ownership of the public facility or system while each party shares in income resulting from the partnership. PPPs have increasingly been used in both developed and developing countries worldwide to encourage economic development, especially to build and manage critical public transportation projects, ports, railways, airports, utility
Economic Development 241
infrastructures, schools, hospitals, and other facilities and services. Chapter 10 will offer more discussion about this financial tool.
In addition to seeking private investment, other new mechanisms have also been explored. For example, beginning in the 1980s, the State of Oregon has earmarked lottery revenues for economic development. As of today, 25 percent of Oregon’s lottery funds are allocated for job creation and economic development, providing assistance for a variety of Oregon’s industries such as manufacturing, high-tech, agriculture, fisheries, solar, medical, tourism, and small businesses. Other states have tapped their public employee pension funds to offer small public venture capital programs, either with private venture capital firms or through direct venture investments. For example, the State of Massachusetts allows public pension funds to be invested in any opportunities that will benefit the economic climate of the Commonwealth as a whole. In 2013, the State of Wisconsin had a heated debate about whether or not to use the state pension fund to pay for economic development initiatives.
Federal Resources
Despite the fact that federal funding for economic development has declined from its peak in the late 1970s, a broad range of federal agencies operate grant pro- grams in support of local development. These agencies include the Department of Commerce, the Small Business Administration (SBA), the Department of the Treasury, the Department of Labor (DOL), the Department of Agriculture (USDA), the Department of Health and Human Services, and the Internal Revenue Service (IRS). The agencies typically operate economic development programs indirectly via the provision of grants and other funding to state and local governments and non-profit entities, which, in turn, provide economic development for businesses through direct financial and advisory support, or through the improvement of infrastructure. This section discusses several current major funding sources for states and localities.
One of the oldest federal economic development programs, the Community Development Block Grant (CDBG), passed in 1974 and designated to the Depart – ment of Housing and Urban Development (HUD), has remained consistent for a long period of time. It provides annual grants to states and local governments (usually economic development agencies) to develop decent housing and suitable living environments, and to expand economic opportunities, primarily for low- or moderate-income families. Local communities can borrow against future CDBG grants through Section 108 (a loan guarantee program from HUD) for economic development, housing rehabilitation, public facilities, and large-scale development projects.
Established in 1994, the Community Development Financial Institutions Fund (the CDFI Fund) is a program within the Department of the Treasury. The CDFI Fund seeks to channel investment dollars into distressed communities by provid- ing federal funds in the form of equity, loans, grants, and deposits to community devel op ment corporations, banks, and credit unions. These organizations, known as CDFIs, all have a common mission of both working toward revitalizing
242 Business–Government Relations in Economic Development
economically depressed communities or communities underserved by mainstream financial institutions, and of improving the quality of life for those who live and work in these communities.
Under the Department of Commerce’s National Institute for Standards and Tech – nology, the Technology Innovation Program (TIP) is a grant program that encour – ages government and business partners to cost share the early-stage development of innovative but high-risk technologies. The Manufacturing Extension Partnership (MEP) program was established to meet a critical national need, namely, to assist small and mid-sized manufacturers create and retain jobs, and enhance productivity and competitiveness through process improvements and innovation.
To improve the social and economic well-being of people, the Department of Health & Human Services (HHS) offers a number of programs. The Compassion Capital Fund (CCF), provided by the Administration for Children and Families, is designed to support charitable organizations who serve disadvantaged social groups such as the homeless, elders in need, at-risk youth, previous addicts or prisoners, families in transition from welfare to work, and those in need of skills and knowledge to form and sustain healthy marriages. Designed to introduce faith-based initiatives to the federal funding process, CCF also extends its services to include job training, counseling, economic development, and entrepreneurialism. The Job Opportunities for Low-Income Individuals (JOLI) by the Office of Community Services provides grants to non-profit organizations that address the economic needs of low-income individuals and families through the creation of sustainable business development and employment opportunities.
Non-Financial Tools for Economic Development
In addition to financial tools, local governments also use a variety of non-financial mechanisms for economic development.
Planning
Planning is the management process of thinking about and organizing resources and activities in order to achieve a desired outcome. Many of the desired outcomes for local economic development include more and better jobs, increased investment and income, increased social welfare, and so on. The planning process attempts to involve the critical stakeholders of the local community to establish the vision for development, to engage in public discussions, and to reach consensus on goals to be achieved as well as plans in general.
The process often affects the entire environment of the community and involves a multitude of actors. Local governments, commonly represented by the economic development planning committee, may charge an economic development corpora – tion or a similar organization with the job of helping develop city, county, or regional plans. Local economic development agencies also frequently play a critical role in organizing the process. Other institutions such as chambers of commerce, business associations, citizen or community groups, workforce development agencies, and labor organizations often participate in the process.
Economic Development 243
The planning process may start with targeting the program’s geographic scope and gathering relevant information about the area, such as its economic base, current employment structure, existing problems, and so on. With comprehensive analysis, planning organizations may select a broad strategy to resolve the issues as well as specific projects that implement the strategy. Once the projects are determined, planners start to build action plans to implement the projects, specify project details, establish monitoring or evaluation mechanisms, and eventually launch the project. The planning for economic development in local communities can be carried out independently, yet more often than not it is integrated with other public planning, such as environmental, land use, transportation, regional, or urban and spatial planning.
Zoning
Zoning refers to the system of land-use regulation (see Chapter 3), which involves the practice of designating permitted use of land based on mapped zones separating one set of land uses from another. Zoning may include regulation of the kinds of activities acceptable on particular lots (such as open space, residential, agricultural, commercial, or industrial), the densities at which those activities can be performed (from low-density housing such as single-family homes to high-density such as high-rise apartment buildings), the height of buildings, the amount of space structures may occupy, the location of a building on the lot (setbacks), the proport – ions of the types of space on a lot (for example, how much landscaped space and how much paved space), and how much parking must be provided. Zoning policy is often implemented to promote economic development. Through zoning, govern – ment can set aside a sufficient amount of land for industrial or commercial use. Government can also promote development by allowing flexible zones and rules in the zoning code. For example, incentive zoning is often used to circumvent strict site regulations to provide a reward-based system to encourage development that leads to desirable outcomes. Typically, the method establishes a base level of limitations and a reward scale to obtain public benefits in exchange for certain land uses and project features.
Eminent Domain
Eminent domain refers to the inherent power of government to seize a private property or an individual’s rights to property with due monetary compensation, but without the owner’s consent. In the United States, the Fifth Amendment of the Constitution provides that “private property shall not be taken for public use without just compensation.” This power was given to the states through the 14th Amend – ment, and in turn the states, through their own constitutions and legislation may delegate this privilege to local governments. Therefore, governments at all levels have the right to seize private property without the owner’s consent, but they must justify that their taking is for public use as required by the Fifth Amendment.
The private property is taken either for government use or by delegation to third parties who will devote it to public use or, in many cases, economic development.
244 Business–Government Relations in Economic Development
Economic Development 245
Governments often need to assemble land in their jurisdictions for economic development purposes. For assembling large, contiguous lots of land for large-scale economic development projects, governments have to rely to a large degree on the power of eminent domain to acquire the necessary properties, which can be then redeveloped in a way consistent with the project requirements.
Eminent domain is a very controversial tool for economic development, as shown in the Disney theme park development at Anaheim (see Exhibit 8.5). As local governments aggressively compete against each other to attract new businesses, the use of eminent domain to assemble land for development purposes is becoming more prevalent. Local governments often view those public takings as an opportunity to attract new businesses, create jobs, eliminate blight, and increase the tax base and renown of their jurisdiction. However, many citizens view eminent domain as state infringement of private rights. It is especially contested when property is taken from one private owner and transferred to another for private gain.
Marketing
Marketing is not just for businesses selling their products and services, but also for government to promote their jurisdictions as prime locations for business. Government marketing includes websites, special events, corporate executive visits, trade shows, national advertisements, letters to companies, and political and administrative “junkets.” Official websites of government entities, such as an
A zoning map, City of Inkster, Michigan
EXHIBIT 8.3
ZONING MAP
City of Inkster, Michigan
Districts
R-1A One Family Residential District
R-1B One Family Residential District
R-1C One Family Residential District
RM Restricted Multiple Dwelling District (Low Rise)
RM-1 Multiple Family Residential District (Low Rise)
O-1 Office District
B-1 Local Business District
B-2 Thoroughfare Mixed-Use District
B-3 General Business District
M-1 Light Industrial District
TCD Town Center District
Planned Unit Development (PUD)
Parks and Open Space
Rouge River Parkway
B-2
O-1 RM-1
RM-1 B-2
R-1A
B-2
B-1 B-2
R-1B
R-1A
B-2 RM
B-2
R-1B
R-1B RM
B-3 RM-1
RM
M-1
R-1B
R-1B
R-1B
B-1 RM B-2
R-1B
R-1C
R-1A RM
B-2
R-1B
R-1C
R-1A
RM-1 B-2
R-1A
R-1B
B-2
B-1
TCD
R-1B
RM
M-1
M-1C B-2
RM-1
B-3
B-3
R-1B RM-1
R-1A
RM-1
R-1B
R-1A
RM
R-1C
B-3
B-2
RM
L o w e r
R o u g
e P a
r k w
a y
Source: http://www.cityofinkster.com/images/Map-ZoningwithHotspots.jpg.
http://www.cityofi�nkster.com/images/Map-ZoningwithHotspots.jpg
246 Business–Government Relations in Economic Development
economic development agency, chamber of commerce, or community association, are common venues to advertise economic development opportunities. For example, the City of Tacoma, WA website (http://www.cityoftacoma.org/business) publishes a wide range of development programs and services information for business, which include choosing a location, available properties, starting a business in Tacoma, business incentives, business loan program, neighborhood business district program, etc. At the federal level, SelectUSA (http://selectusa.commerce.gov/) was created to showcase the United States as the world’s premier business location and to provide easy access to federal-level programs and services related to business investment.
Many communities also engage in strategic marketing planning, which involves systematically assessing the opportunities and barriers and setting marketing goals and priorities for local economic development. To make them the top of the list for visitors, new residents, and new business and industry, local communities realize that they need to stand out from their competition. When a locality is able to differentiate itself, showcase its local assets and strengths, and present unique opportunities, businesses and consumers are more likely to be attracted to and invest in the community. A good community “brand” can also help to diversify the local
Eminent domain: A holdout
EXHIBIT 8.4
Source: en.wikipedia.org.
http://www.en.wikipedia.org
http://selectusa.commerce.gov/
http://www.cityoftacoma.org/business
Economic Development 247
EXHIBIT 8.5
Disney theme park in Anaheim
In January 1990, the Disney Company announced its plan to build a new theme park in either the City of Anaheim or the City of Long Beach. In the late 1980s, the US—and especially the state of California—was experiencing a big drop in employment. At the beginning of the 1990s, the economy started to pick up. However, Orange County, among other counties, was lagging behind. Given the economic climate, the local government could not afford to lose any opportunities for development. This project would bring both jobs and income into a county that was desperately in need of an economic upswing.
On December 12, 1991, Disney declared that as a result of environmental legal challenges to their proposed park in Long Beach, they would not pursue the Long Beach project, and would instead concentrate on the Anaheim project.
Anaheim and Disney sealed a deal for “Westcot,” a theme park projected to cost $3 billion. Westcot was projected to include a 5,000-seat amphitheater, shopping district, hotels inside and outside the park, and two of the nation’s largest parking garages. Additionally, the theme park was expected to have an international theme wherein visitors would travel through miniature versions of
Source: en.wikipedia.org.
http://www.en.wikipedia.org
248 Business–Government Relations in Economic Development
economy and enhance the quality of day-to-day life for the entire region. For instance, in recognition of the city’s large concentration of pure, fresh water, the City of Milwaukee, WI aggressively marketed itself as the “Freshwater Hub of the World” to attract freshwater research and water-technology companies that focus on water energy, agriculture, and other technologies.
Ombudsman
A business ombudsman is another service, often provided by government agencies, for helping firms to navigate the various government regulations, programs, and services. The ombudsman’s services may also include resolving problems and com – plaints for businesses, investigating commercial opportunities, helping to identify and evaluate options, and recommending changes in policies or procedures for a positive effect. The Department of Commerce provides ombudsman services to firms or economic development organizations on a case-by-case basis to address issues or questions involving federal regulations, programs, or activities related to exist- ing, pending, and potential investments. Many localities offer their economic
the Americas, Europe, Africa, and Asia. The park would also implant a vision of the future to explore the marvels of science and nature.
A year after Disney’s formal announcement that it intended to pursue the Anaheim Westcot project, the city released its Environmental Impact Report (EIR) of the project. The intended project area would affect several school districts and many privately owned properties. The EIR projected increases in traffic, pollution, noise, and classroom crowding. After six months of considering the EIR, the Anaheim City Council announced it would nonetheless approve the new Disney resort and would implement eminent domain despite potential objections.
Following the city’s approval of the Westcot project, five school districts and two groups of private individuals filed suits against the City of Anaheim. The suits alleged that the city did not adequately consider the EIR and that the city’s proposed use of its eminent domain power to obtain property for Disney was improper. By September 15, 1993, Disney had settled with the five school districts with tutoring programs, a junior press corporation, a junior orchestra, medical vans for immunizations and health screenings, and a scholastic honors society. Disney also settled with both of the private groups so that it could proceed with park development. However, by that time it had been decided to change the theme of the new resort from an international one (and thus the cancellation of Westcot) to a California-based theme, eventually called Disney’s California Adventure.
Source: The case was revised based on Baker, T. D. (1994). Public Use, Private Taking and Economic Growth or Disney’s Latest E(minent Domain)-Ticket. Western State University Law Review, 21:547–561.
development staff to assist new businesses and developers by serving as a project partner during all phases of due diligence and development.
The scope of economic development encompasses a wide spectrum of govern – ment policies and actions including the overall national policy framework to enhance market stability and suitable growth, the provision of infrastructure and services, and policies and practices to enhance employment, increase tax base, and improve people’s level of living. Local economic development practices have been influenced by a variety of growth and development theories upon which government has developed and utilized a wide range of strategies and techniques to attract business investment and encourage and sustain economic growth. These strategies and tools well illustrate government’s influence on business. Smart business practitioners should be well informed about these tactics and tools and strategically explore them to achieve a solid business purpose. Yet, ethical and responsible business persons should also be aware of the economic and political implications embedded in each of the tools, as well as their potential impact to stakeholders.
ANALYTICAL CASE: CALIFORNIA’S ENTERPRISE ZONE PROGRAM
Enterprise zones are areas established by government in which special policies are implemented to encourage economic growth and development. Enterprise zone policies generally offer tax concessions, infrastructure incentives, and reduced regulations to attract investments and private companies into the zones. The philosophy of the enterprise zone is associated with the theory of supply-side economics and the assumption that investors and employers will respond positively to tax incentives and reduced government regulation.
In the United States, enterprise zones are often proposed to stimulate economic activity in distressed areas. As compared to other places, these areas have higher unemployment rates, lower income levels, lower employment opportunities, vacant land, and decayed buildings and infrastructure. Enterprise zone programs provide the incentives to businesses to overcome economic obstacles that hinder economic growth.
Until recently, the State of California had four types of Geographically Targeted Economic Development Areas. These areas were:
• Enterprise Zone (EZ). Forty-two EZs had been authorized by the state legislature, targeting economically distressed areas throughout California since the 1980s.
• Local Agency Military Base Recovery Area (LAMBRA). LAMBRAs were developed to attract reinvestment and create re-employment opportunities on certain former military bases in California.
• Manufacturing Enhancement Area (MEA). The program focused on stimulating job creation in the border region.
• Targeted Tax Area (TTA). TTA offered incentives that were only available to companies located in the area and engaged in a special trade or business, such as food processing, trucking and warehousing, air transportation, etc.
Economic Development 249
Each of these areas had related tax incentive benefits as well as a variety of locally provided incentives and benefits. The purpose of these tax incentives was to stimulate business investment and job creation for qualified disadvantaged individuals in state-designated economically distressed areas. The enterprise zone areas in California were generally fast-growing areas with foreign-born populations and high rates of unemployment. Zone residents had lower incomes and more welfare dependency.
Despite the incentives and benefits, the existing zone programs were found to have produced very modest economic benefits in California. Zone and program area incentives and resources provided little job creation and business investment. Part of the problem was the severe lack of resources to support enterprise zone and program activities. The net effect of various credits was modest and did not overcome myriad other more important influences on business investment and location decisions, including the advantages of location, the costs of land and appropriately skilled labor, the costs and availability of financing, and the costs of compliance with federal, state, and local permitting and regulatory requirements. California’s zone programs simply did not offset the many negative economic factors (real and perceived) affecting zone and program area businesses. In addition to the modest benefits, zone programs were also found to have grown over time to include some of the state’s wealthiest places, with much of the tax benefit going to firms in San Francisco.
To correct the issue, the state legislature approved Governor Brown’s proposal to end the state’s tax breaks in zone areas, which cost California nearly $700 million in 2010 (Vara 2013). The Governor instead proposed a new statewide business incentive program designed to benefit those businesses in depressed areas that pay workers relatively high wages (Sola and Ha 2013). Program credits were also proposed to focus more on neighborhoods and cities with especially high unemploy – ment and poverty rates, though businesses in the current enterprise zones could still benefit from them. Businesses in manufacturing, biotech, and some other industries would qualify for tax breaks for buying machinery.
Questions for Homework help – Discussion and Analysis
1. What are the factors that led to the modest economic impact of California’s former enterprise zone programs?
2. Do you agree with Governor Brown’s reform of the program? Why or why not?
250 Business–Government Relations in Economic Development
PRACTICAL SKILL
Leveraging government resources
Governments, including federal, state, and local governments, are major grantors to business. Each year, billions of dollars in grant funds are
Economic Development 251
distributed to those who know how to find them and submit well-written grant proposals. Your road map to creating your own success story starts with learning the facts about government grants. Government grants are neither personal/business loans, nor are they financial aid of any kind. They are not intended for personal benefit, nor are they required to be paid back. Most grants are awarded to universities, researchers, cities, states, counties, and non-profit organizations, but many businesses (especially small businesses with certain industry standards) may also qualify. Such grants give small business owners the opportunity to start and expand a business and create new technologies and services that help them compete in the global market.
Find a Grant
To receive a government grant, you must apply as an individual or organization with the intent of generating benefit to the public.
A useful website is www.grants.gov, which is managed by the Department of Health and Human Services. The website posts most government grant opportunities and provides access to grants from other endowments and foundations. You can search for grants by keyword, category, or agency.
The All American Grant Guide (http://www.allamericangrantguide.com) is another very useful website for learning about and finding a grant. The website also offers a step-by-step guided process for grant application.
State and municipal grant applications are available by going to your state website and searching under grants. For example, the state of California lists various grant opportunities at http://www.ca.gov/grants.html. Similarly, you can also search for local government resources. As an example, the City of Los Angeles creates an incentive finder for local businesses (http://www.losangelesworks.org/businessServices/incentive- finder.cfm), as well as a website for seeking government loan assistance (http://ida.lacity.org/).
Meet the Research Topics – Criteria
In order to win the grant, your business or project needs to adhere to the grant’s specific requirements. Eligibility will differ based on the type of grant you pursue. Read the specific requirements insisted on by the grant provider, who needs to know that you can deliver on your commitment as the grant’s recipient.
Apply
The application process can be complex and lengthy. Thanks to the WWW, nowadays most government grants can be applied for at their funder’s
http://www.losangelesworks.org/businessServices/incentivefi�nder.cfm
http://www.losangelesworks.org/businessServices/incentivefi�nder.cfm
http://www.ca.gov/grants.html
http://ida.lacity.org/
http://www.allamericangrantguide.com
http://www.grants.gov
SUMMARY AND CONCLUSION
1. Both government and business are interested in economic growth and development. While economic growth is the increase in the amount of the goods and services produced by an economy over time, economic development refers to the concerted efforts of government, business, and communities to promote economic growth, as well as the overall economic and social well-being of people in a specific area.
2. Classic economic growth theory provided the basis for the development of many theories on economic development. In alignment with free market economics, neoclassical economic theory opposes government intervention and views devel opment as a natural expansion of an economy. A variety of location- based theories seek to explain an area’s competitiveness in terms of a firm’s locational orientation as well as factors that produce local economic growth.
3. Theories provide guidance to practice. Government generally uses three strat – egies, namely industrial recruitment, entrepreneurial strategy, and privatization, to encourage economic development.
4. To pursue their economic development strategies, governments have imple – mented a variety of financial methods which include tax reduction, public borrowing, special taxes, and resources from the federal government, general funds, and public–private partnerships.
252 Business–Government Relations in Economic Development
website. Each funder has its own requirements and criteria that should be followed carefully. Be sure to complete the entire grant application and attach supporting documentation requested by the funder. Most grant applications can be submitted electronically. Some funders require both an electronic copy and a hard copy be mailed to them. It is a good idea to apply for multiple grant opportunities. Since there is no guarantee that you are going to get a grant—and no limit to the number for which you can apply—the more you apply for, the better your chances of getting funding for your small business.
Skill Exercise: Apply for incentive programs
Suppose Happy Paws is located in your area and Zoey is asking for your help. Based on what you have learned in this class, try to search various federal, state, and local government sources for potential grant, loan, or tax incentives that Zoey’s business may be qualified to receive. Develop a list of such opportunities and their requirements and advise Zoey how to proceed.
Economic Development 253
5. Non-financial tools for economic development include planning, zoning, eminent domain, marketing, and ombudsman services. Each of these tools and methods has its own economic and political implications that demand ethical and responsible consideration.
6. Business students should learn to explore government resources to advance their business goals.
Central place theory Cluster theory Economic base theory Economic development Economic growth Eminent domain Entrepreneurial
strategies
Growth pole theory Industrial recruitment Industrial revenue
bond Location theory Neoclassical economic
theory Privatization
Tax abatement Tax credit Tax exemption Tax increment
financing Zoning
KEY TERMS
STUDY QUESTIONS
1. What are the differences between economic growth and economic development? How are these two concepts connected?
2. What are the major economic development theories? What insights does each of them offer to the practices of economic development?
3. If you are a retail business owner, what are the factors that will affect your business location choice?
4. What are the different financial and non-financial methods government uses for economic development?
5. What is eminent domain? What are the implications of using eminent domain for economic development?
Notes
1 State of California Board of Equalization, Property Tax Rules, Rule 133. Business Inventory
Exemption, pp1. URL: http://www.boe.ca.gov/proptaxes/pdf/rule133.pdf, accessed August 21,
2013.
2 More information about the IDA bond for ColorGraphics can be found at http://ida.lacity.
org/.
http://ida.lacity.org/
http://ida.lacity.org/
http://www.boe.ca.gov/proptaxes/pdf/rule133.pdf
References
Alyea, Paul E. (1967). Property tax inducements to attract industry, in Richard W. Lindholm (ed.)
Property Taxation USA. Madison, WI: The University of Wisconsin Press. Bradshaw, Ted. K., and Blakely, Edward J. (1979). Rural Communities in Advanced Industrial Society.
New York: Praeger.
Dalehite, Esteban G., Mikesell, John L., and Zorn, C. Kurt (2005). Variations in Property Tax
Abatement Programs among States. Economic Development Quarterly, 19:157–173. Myrdal, Gunnar (1957). Economic Theory and Underdeveloped Regions. London: Duckworth. Perroux, François (1983). A New Concept of Development. Paris: UNESCO/Université du Paris IX. Porter, M. E. (1990). The Competitive Advantage of Nations. New York: The Free Press. Sen, A. (1983). Development: Which Way Now? Economic Journal, 93(372):745–762. Sola, M., and Ha, Y. (2013). California Eliminating “Wasteful” Enterprise Zones. San Francisco
Public Press, July 1. URL: http://sfpublicpress.org/news/2013-07/california-eliminating-wasteful- enterprise-zones, accessed July 5, 2013.
State of New Jersey (2010). A Programmatic Examination of Municipal Tax Abatements. Office of the State Comptroller. URL: http://www.nj.gov/comptroller/news/docs/tax_abatement_report.pdf,
accessed August 21, 2013.
Vara, V. (2013). Governor Rethinks Enterprise Zones. Wall Street Journal, June 30. URL: http:// online.wsj.com/article/SB10001424127887323998604578565673282015746.html, accessed July
5, 2013.
Wassmer, R. W. (2007). The Increasing Use of Property Tax Abatement as a Means of Promoting
Sub-national Economic Activity in the United States. Social Science Research Network. URL:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088482, accessed August 21, 2013.
254 Business–Government Relations in Economic Development
http://online.wsj.com/article/SB10001424127887323998604578565673282015746.html
http://online.wsj.com/article/SB10001424127887323998604578565673282015746.html
http://sfpublicpress.org/news/2013-07/california-eliminating-wasteful-enterprise-zones
http://sfpublicpress.org/news/2013-07/california-eliminating-wasteful-enterprise-zones
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088482
http://www.nj.gov/comptroller/news/docs/tax_abatement_report.pdf
