Abstract
Economic development activities often have an impact on fiscal sustainability. This chapter, in its discussion of local economic development, emphasises this impact. It discusses why economic development activities should occur, identifies two key economic development strategies, and the relationship between economic development activities and debt (leading to some overlap with Chapter 5). It then identifies the governance component to economic development activities; including a discussion of three components: the approval process, the dynamic capabilities of the decision-makers, and the role of public–private partnerships. It then identifies several economic development analytic techniques but cautions that they are often ignored by economic development decision-makers. It finally identifies some initiatives that local government can use to attract economic development, and under the enabling incentive identifies two examples: special district financing and tax increment financing. It finally identifies political and equity concerns of economic development (Because the chapters can be read independently, parts of this chapter are deliberately redundant to parts of Chapter 5).
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Notes
- 1.
As in previous chapters, not every complexity issue, as indicated in Fig. 6.1, will be discussed in the text.
- 2.
See Fig. 3.1 for the next step in the analysis.
- 3.
It is crucial to recognize that economic development impacts far more than the local budget. There are demographic impacts, locational impacts, sociological impacts, equity impacts, and lifestyle impacts. These may be far more important than the budgetary impacts.
- 4.
This is closely tied to the capital improvement budget, discussed in Chapter 5.
- 5.
There is likely to be an element of delusional optimism in the evaluation of specific economic incentives.
- 6.
There are far more than three variables. These are just examples.
- 7.
Rodrik and Sabel (2020) argue that public–private collaboration is at the heart of building a good jobs economy, subject to this collaboration being built on good design principles.
- 8.
For more detail on these techniques see Blakely and Bradshaw (2002). It should be noted that in this excellent book, there is no mention of the local budget. This is another sign of why complexity analysis of the budget is useful.
- 9.
See, for example, Texas Comptroller (2019).
- 10.
It is rare that their effects on tax revenues that can be generated from this growth are prominently mentioned in the academic literature.
- 11.
See Chapter 4 for more information on these districts.
- 12.
- 13.
Although in many cases, the redevelopment agency is made up of the city council.
- 14.
This scenario is partially responsible for California ending tax increment financing. The state was responsible for backfilling school district lost revenue because of tax increment financing. Over time, this backfilling became extremely expensive, so the state got out of this predicament by stopping the program.
- 15.
Institutional effects on economic development have long been studied at the national level (e.g., Putnam, 1993). Recently, there has been some interest in examining local government institutions apart from governance issues as they effect economic development (Gomez et al., 2016). However, for the purpose of this monograph, governance and institutions will be in the same typology.
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Chapman, J. (2022). Economic Development. In: The Local Budget as a Complex System. Palgrave Studies in Public Debt, Spending, and Revenue. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-94903-7_6
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