This document provides an overview of economic development programs and initiatives. It discusses how economic development was originally led by the private sector but became a critical government function in the late 1970s. It outlines common goals of economic development programs around retaining and attracting businesses. The document then traces the history and shift of programs from extensive federal assistance to greater state and local control using tax incentives and public-private partnerships.

1. A Primer on Economic
Development
Shelby County Economic Development
Initiative
Mike Weber, Director

2. ECONOMIC DEVELOPMENT
Background
 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

3. ECONOMIC DEVELOPMENT
Background
 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)

6. ECONOMIC DEVELOPMENT
Program 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

7. ECONOMIC DEVELOPMENT
Program 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

8. ECONOMIC DEVELOPMENT
Program Origins
 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

9. ECONOMIC DEVELOPMENT
Program Origins
 By 1982 there was an “alphabet soup” of
Federal economic development assistance
programs that cities could draw upon
EDA UDAG IRB EZ CDBG

10. ECONOMIC DEVELOPMENT
Program 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

11. ECONOMIC DEVELOPMENT
Program Shift
 States and cities told to come up with
creative local programs to foster economic
development
 Reagan coined the phrase “public/private
partnerships”

12. ECONOMIC DEVELOPMENT
The Shift to States
 Federal assistance is extremely limited
 Focus shifted to State authorized
mechanisms for local jurisdictions to raise
funds

13. ECONOMIC DEVELOPMENT
The 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

14. ECONOMIC DEVELOPMENT
The 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”

15. ECONOMIC DEVELOPMENT
Illinois Programs Today
 Programs can be grouped by method of
assistance
 Tax Abatement
 Value Added or “Capture”
 Tax Assessment
 Tax Credits
 Loans

16. ECONOMIC DEVELOPMENT
Tax Abatement
 Enterprise Zone
 Property Tax Abatement (intergovernmental
agreement)
 Sales Tax Rebate (local only)

19. ECONOMIC DEVELOPMENT
Value Added or “Capture”
 Tax Increment Financing (TIF)
 Sales Tax Rebate

22. ECONOMIC DEVELOPMENT
Tax 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)

24. ECONOMIC DEVELOPMENT
Tax 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)

25. ECONOMIC DEVELOPMENT
Loans
 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

26. ECONOMIC DEVELOPMENT
Illinois 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

27. ECONOMIC DEVELOPMENT
Getting 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.)

28. ECONOMIC DEVELOPMENT
Getting 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

29. ECONOMIC DEVELOPMENT
Getting 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)

32. Sale Street Looking North - Existing
Sale Street Looking North - Restored

34. ECONOMIC DEVELOPMENT
Conclusions
 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