By Roberta Gubbins
Legal News
"My view of economic development is based on two presumptions," said Susan M. C. Pigg, opening her remarks at the Ingham County Bar Association Luncheon Lecture held at the Michael Franck Building in Lansing on March 9th. "Economic development is the creation of jobs and income. Economic developers are people that help or facilitate the attraction and creation of jobs and income."
"Economic development incentives are any kind of offering that helps a business decide to locate or expand their business in your community. This includes a monetary or regulatory type of enticement."
Incentives are:
* Deal closing tools--a way to bring an end to the negotiations
* Win-win opportunities--both community and business benefit
* Negotiating tools--to be used carefully to get a company to comply with land use plans, contribute to the community or benefit its employees
Incentives are not:
* Deal openers--not an enticement in and of themselves up front, factors considered first are the cost of doing business, market access, quality of life and then incentives
* Give away--tax increment revenues can't be given until gotten = earned, the same with tax credits.
* Entitlements--they should be tailored to the company's needs and negotiated to the community's benefit
"Who does economic development," she asked. "The public sector has economic development staff in the form of community development staff, downtown development authority (DDA) and certified industrial parks to name a few. The private sector includes chambers of commerce, business associations, large corporations, small firms or non-profits. And there are some public-private partnerships, which are the wave of the future. For example a municipality works with developer. In Lansing, we have the Lansing Area Economic Partnership, a non-profit membership based organization, that is involved in business attraction."
"Community development tools include making the community a place that employees and employers want to be in, which includes parks, walk-able pathways, transit services, art galleries, cool places to visit at night, clean environment, etc. Michigan Avenue stadium area is an example."
"Business development tools include economic gardening, which are strategies and programs that help entrepreneurs establish or locate their new business or product to your community. The focus is on working with the businesses already in the community. They also include business incubation or helping businesses get a good footing."
Because there is no one attraction or 'silver bullet' that does everything, business attraction and retention tools include:
* Targeted advertising for compatible businesses and promotions such as Old Town festivals in Lansing
* Clustering: supply chain extensions
* Field of Dreams--if you build it, they will come
* Talent scout--workforce development and attraction and retention
* Relationship management--retention visits to find out what they need and help them
Business assistance incentives such as reducing regulatory roadblocks by cutting red tape, simplifying licenses and permits; improve supply chain services by linking buyers and sellers and help the business improve with training programs such as Lansing Community College, which offers training as well as testing of employees."
A business needs employees some of whom come with the new business. "Employee incentives include community presentations, housing, transportation, child care, discounted furnishings, spousal employment, week-end school programs. For example a Japanese firm interested in Battle Creek area was concerned that the children of employees would lose their culture living in the United States. Once a week-end Japanese language school was established, the deal went through."
"Tax Increment Financing Areas (TIFA's) capture the increased tax revenues created by the development and reinvest the money back in the area to support further development. In essence public dollars go to public benefit. DDA's, Corridor Improvement areas, Brownfield Redevelopment Authority areas are all examples or TIFA. All your doing is capturing revenue that is re-distributed. You are not excusing a tax payer from paying taxes and not charging anyone more."
"Financing Incentives include Industrial Revenue Bonds that are tax exempt, can provide financing for fixed assets and the funds come from the Investor market, not the community itself. There are also Local Revolving Loan Funds, Micro loans, angel investor networks and government guaranteed loans through the Small Business Administration."
"Incentive to lower operating costs includes tax abatements which are a sort of 'discount' on the taxes that a business must pay. For example, under PA198 manufacturing firms and some others can pay up to 50% less for up to 12 years on new investments of real or personal property or Renaissance Zones where residents pay no real property tax or payments in lieu of taxes (PiloT)."
The variety and specificity of incentives is growing. For example,
* Incentives have changed to lure new high tech jobs such as abatements on IT gross business receipts and stock options
* Performance-based incentives that require accountable returns to the community
* Recipients must meet practice standards
* 46 states, including Michigan, now use TIFA's
* Attempts to outlaw incentives at the local level have failed.
"I think practice has changed with the use of incentives," she said. "I think that 'clawbacks' are an important and valuable component to any incentive program. A 'clawback' is basically what happens if the company does not come forth with their end of the deal. Incentives need to be given out with accountability."
The Tri-County Regional Planning Commission is a quasi-governmental non-profit organization of Eaton, Clinton and Ingham counties. It provides regional coordination and assist communities in planning for development. The programs offered include transportation planning, environmental protection planning, regional economic development planning and is a federal data center for aerial photography and census data.
Susan M. C. Pigg has been working in economic development in the Tri-county area since she came to here to graduate in the 1990's. She is a Certified Economic Development. Her doctoral work is in Community Development with a slant toward environmental risk. She is currently Executive Director of the Tri-county Regional Planning Commission located in Lansing. For more information please contact her at spigg@ mitcrpc.org.
Published: Thu, Mar 17, 2011
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