Tuesday, June 28, 2005

Same Old RDA Problem: More Economic Development Investment Tools Needed

A working group of local government officials put together by the Utah League of Cities and Towns has been meeting and discussing ideas about where to head with the state legislature on the RDA issue.

Much of the conversation has been about economic development as viewed by the state (high paying, high tech jobs to generate more income tax) and by the local communities (high retail sales volume to generate more local sales tax revenue). Most of this is a by-product of the state's tax system, where the main generator of revenue for local governments now is sales tax, whereas it is income and sales tax for state government.

RDAs have been squeezed to contort into shapes and tools not originally intended because of this changing tax structure over the years.

Rick Horst, South Jordan City manager, in a working paper he produced for the RDA group's consideration, wrote, "While manufacturing, high technology, or research and development create jobs and builds upon the 'income tax' base of the state, the minmal benefits derived via the local community is lost based on the demands for new infrastructure, maintenance of infrastructure and other public services such as public safety. Such offering does little to enhance the local communities effort to build upon the 'quality of life' and perhaps do more to diminish existing qualities."

What Rick seems to be pointing out here is that local communities need some "benefit" if they are to be asked to provide the infrastructure and services that business development requires. This goes back to the point I have made in earlier blog entries on this subject, that we need to craft a variety of tools to use for economic development at the local level to work in conjunction with a true redevelopment program. RDAs become just one of a variety of tools.

Lincoln Shurtz of the League summarized this discussion well in a draft of potential policies to be considered on the RDA issues. He wrote, in part, "The increased use of tax increment financing for an area's initial development is symptomatic of the lack of economic development tools that exist at the local government level. If additional, well crafted and narrowly tailored economic development tools are made available to local governments, the propensity to use redevelopment tools for initial economic development would wane."

Lincoln also summarized the issue by writing, "In the current national economic development environment, it is imperative for the State of Utah and local governments to create and use well crafted business incentives that are mutually beneficial to the well being of the state of Utah, all involved taxing entities, and the targeted businesses. Frequent cost-benefit analysis of these measures is imperative to their success."

I'm not talking about corporate welfare here, where we look to give "freebies" to business if they'll just land their facility here in Utah. I mean that we need well-crafted tools to help local governments invest in the infrastructure that is needed to make an area available for business development -- water and sewer lines, roads, power, telecommunications, etc. We do this for residential areas, often paid through impact fees. Business development generates substantial new tax revenue, we just have to have a way to build the infrastructure first and pay it off with the new tax revenue, to get those businesses to land here in the first place.

This is not a new problem. Back in 1991, when the state legislature was taking a hard look at RDAs and eventually made some modifications to allow for what is called the "economic development" track, then-president of the Utah RDA Association Blaine Gehring said, "Probably better than 50 percent of the economic development in the state of Utah is occurring with the assistance of redevelopment agencies. What these people and some legislators are saying is that there have been some problems with RDAs. But unless there is an alternative for economic development by cities and local governments, that's the only tool we have right now." (as quoted in a Deseret News story, January 16, 1991).

It's still the same problem.

10 Comments:

At 8:56 AM, Blogger pglauser said...

Wilf articulates quite well the dearth of economic development tools we have in Utah, which over the years has led to the co-opting of redevelopment as really the only economic development tool available for local governments. This was formalized largely with the addition of Economic Development Project Areas to the statute in the early 1990s, but has also been manifested in the increasing use of blight-type redevelopment areas for primarily economic development-oriented projects.

But let's not forget that redevelopment in Utah began as a tool for accomplishing other goals besides economic development (read: jobs and tax base creation). Starting with the Neighborhood Development Act in the early 1970s, redevelopment was intended to deal with problems of physical as well as economic decline. Redevelopment has always been about preserving and efficiently using what we have already invested in downtown infrastructure (both public and private)over the years, primarily in the older city cores. It's really only been in the last 10-15 years, as many growing suburban communities have come to rely on tax increment financing, that redevelopment has been cast in distinctly economic development terms.

Now, with the Redevelopment Agencies Act on the ropes at the Legislature, economic development interests across the state are scurrying around trying to formulate more palatable economic development tools, perhaps playing to the Governor's stated interest in economic development to win him as an ally at the Capitol.

Speaking for a city that still uses redevelopment to meet the more traditional, quality-growth-type objectives, I hope these traditional objectives aren't ignored in a slapdash effort to get new tools oriented just to tax base generation. We are all still in essentially the same business, even if our cities have somewhat varying needs and thus apply the tools somewhat differently. Let's continue to work together in a common cause to maintain & formulate the tools we all need.

Paul Glauser
Provo Redevelopment Agency

 
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