EXPLOSION IN SUB-MUNICIPAL EDOS
The eighties witnessed a veritable explosion of new programs—strategies which created literally thousands of sub-municipal specialized EDOs, still currently active and a well-recognized element of our current ED landscape. Programs/EDOs created in the early eighties include: enterprise zones (EDZs), business improvement districts (BIDs), Main Street programs and TIF/RDA financing districts.
Why were so many sub-municipal, specialized programs/EDOs created? The usual answer is that Reagan’s fiscal austerity and devolution forced local/state innovation. But a simple “Reagan did it” is an oversimplification. A second answer is that sub-municipal districts addressed then-felt needs to deal with CBD, distressed neighborhoods, commercial revitalization and development/redevelopment. Neighborhood-level community/economic development and downtown revitalization by the early eighties had become primary ED/CD strategies. Relatively inexpensive cities, suburbs and small towns could undertake and customize these programs/EDOs to fit their needs and demands. If one “inhaled,” one might think neighborhood commercial centers/ strips were the service sector equivalent of an industrial park.
Main Street
“Main Street” arrived on the local scene in 1980 when the National Trust for Historic Preservation founded the National Trust Main Street Center. By 2013, the Main Street Center claimed more than 2000 “programs and leaders use the Main Street approach to rebuild the places and enterprises that create sustainable, vibrant communities.” The Trust asserts that since 1990, 1600 communities have adopted Main Street,6 an approach that can be used for downtown or neighborhood commercial districts. Main Street integrates a community’s past and emphasizes activities that bring the community together. The Main Street approach is based on four “points” and eight “principles.” The four points are:
- Organization: To build partnerships and boards of directors based on consensus and cooperation.
- Promotion: To create a positive image that rekindles community pride and improve consumer and investor confidence.
- Design: Creating a safe, inviting environment for shoppers, workers and visitors.
- Economic restructuring: Retaining/expanding successful businesses to provide a balanced commercial mix, sharpening competitiveness and owner merchandising skills, and attracting new businesses that the market can support.
The eight principles are:
- Comprehensive (no single activity dominant).
- Incremental (take baby steps).
- Self-help (rely on local consensus).
- Partnerships (public–private).
- Identify/capitalize on existing assets (develop uniqueness).
- Quality (do it right, even if more expensive).
- Change (district success can change public perceptions).
- Implementation (complete projects).
Main Street points and principles suggest to us an intriguing blend of planning (and implied historic preservation), volunteerism and a public–private partnership based on shared community visions. Main Street is not a microeconomic, business-based approach to commercial revitalization (that’s a BID). Rather, it is a CD approach to commercial revitalization. Business is a partner, not a dominant driver, in a community-based initiative, relying less on profit than visual enhancements and sound project management that reshape perceptions and consumer demand.
Business Improvement District
The 1908 San Francisco fire/earthquake led to the creation of the Down Town Association of San Francisco. During the 1920s through 1940s, downtown property owners formed membership organizations such as Detroit Business Property Owners Association and Downtown Council of Chicago to combat decentralization (Fogelson, 2001). In the 1950s and 1960s, chambers (like Denver’s) formed CBD-based organizations to advocate, plan and participate in UR CBD projects and to intensify efforts to resist intense suburbanization (Hoyt and Gopal-Agge, 2007, p. 947).
Allegedly, the first true BID was Toronto Canada’s 1969 establishment of “an autonomous privately managed entity with the power to impose an additional tax on commercial property owners to fund local revitalization efforts.” The first US assessment-financed business district was New Orleans Downtown Development District in 1974. The first district to call itself a “BID” was New York City (1980s). By 1997, an estimated 1000 BIDs operated in the USA, 50 in New York City alone (Nelson et al., 2008). A 1999 survey suggested that 60 percent of these were created after 1990 (about 400 in the 1980s) and about 28 percent were established after 1995 (Mitchell, 1999). BIDs started slowly in the early 1980s, picking up steam later in the decade (Briffault, 2010; Houstoun, 2003; Mitchell, 2009).
BIDs provide a variety of agreed-upon services and coordinate business practices and advertising on behalf of the businesses within demarcated geographical boundaries. Staff and services costs are borne largely by a self-imposed tax collected by the appropriate taxing authority—which could be the BID itself. BID governance is usually private sector elected by its membership, and often includes local government representatives. BIDs can, and frequently do, serve neighborhood commercial centers as well as a downtown/CBD area. The concept, linked to historic preservation, expanded to include Residential Improvement Districts (RIDs).
Wisconsin in 1983 approved a state-wide Business Improvement Districts Act, empowering local municipalities to create a BID. Eventually 95 BIDs were formed (20 in Milwaukee).7 Other examples suggest the variety inherent in BIDs. For example, New Jersey empowered “special improvement districts,” Texas “public improvement districts” and Pennsylvania “neighborhood improvement districts.” In many instances, BIDs can be autonomous of municipal government or its subsidiary. In many cities they were spun off from chambers or can be a chamber subsidiary. The variety of configurations is huge.
BIDs have engendered some controversy in the academic literature due to their Privatist structure. Briffault comments that BIDs’ justification has been an underlying belief that “cities exist to create opportunities for individual wealth accumulation and business leaders are best qualified to devise (or advise on) policies toward that end” (1999, p. 470). In effect, BIDs permit private elites to govern and tax, albeit in a limited area, for private commercial benefit. This raises “more questions than answers, regarding the effect of BIDs on such issues as democracy, accountability, and the regulation of public space” (Hoyt and Gopal-Agge, 2007, p. 947). Still, BIDs are comfortably adopting many Main Street principles and are often members of both the Historic Trust and the International Downtown Association. By their structure and business composition, BIDs are the Privatist counterpart to the CD-style Main Street approach.
Economic Development Zone
At decade’s end (estimated) nearly 1000 EDZs existed. EDZ diffusion was a statedriven process; as described above, the federal government never approved an EDZ program in the 1980s, but a coordinated “effort” by HUD, working with a score of think tanks, NGOs and professional associations, prodded states into authorizing EDZs. Ultimately, 40 states adopted some form of EDZ; by 1995 only ten states had not approved an EDZ.8
EDZs did not necessarily require a distressed area, and often were geographically targeted concoctions of each state’s favored programs and initiatives. States were not attracted to the EDZ because of its Privatist nature (some states opposed it precisely for that reason), but because it fit quite nicely within the state economic development system: “To the states, however, enterprise zones embodied targeted economic development rather than supply-side economics” (Mossberger, 2000, p. 121). Arguably, most, states used EDZ programs as vital elements of their interstate attraction programs. Small business seems to have dropped out of EDZ priorities early on.9
State diffusion came in bursts. The first period (1982–83) enlisted 20 states, the second (1984-89) 16 and the last (1993) four.10 The motivations behind each diffusion/ burst are particular to that period. The 1993 burst was largely a reaction to the Los Angeles (Rodney King) riots. There is evidence the 1984-89 middle diffusion period was driven by the “arrow-in-the-quiver” mentality of state EDOs desiring to catch up with early adopters. Mossberger asserts that in middle period: “Continued state adoptions probably occurred in part because of increased interstate competition for business investment and rising state interest in economic development programs of all types” (2000, p. 82).
Officially, the first state was Connecticut in 1981, but Illinois and Florida were early entrants as well (Mossberger, 2000, pp. 81–3). EDZs in several first-burst states were more community development than economic development oriented (Illinois, Kentucky and Indiana). Massachusetts waited for more than a decade before it put its toe in the water (1993). There partisan politics were the issue. Democrats wouldn’t touch it; but when William Weld (Republican) was elected governor in 1992, he got it approved.
Looking back in 2000, Mossberger comments that EDZs over their first 20 years:
drifted away from the notion of decreasing governmental activity … But regulatory reform largely withered in the process of diffusion … [and] Most state programs emphasize economic development objectives … over community development objectives … .States often link a number of [non-zone] economic incentives to the enterprise zone concept [such as low interest loans, TIF, IDB, MBE, infrastructure, venture capital, workforce] … with which the state has had previous experience. (Mossberger, 2000, pp. 85–6)
Tax Increment Finance Districts
In 1970 tax increment finance districts had been adopted by California and six other states. The last sub-municipal EDO, the TIF, is linked to their diffusion during the eighties. TIFs capture incremental tax revenue growth generated by physical development within a defined district. Incremental tax revenues pay for the public infrastructure installed to spur development. A TIF is typically presented as self-financing, as costs of development are paid for by the increased revenues resulting from TIFfinanced growth—thus avoiding tax increases. It didn’t hurt that TIF is “off budget” and the RDA outside of formal municipal accountability.
Structurally, a TIF requires establishing a legal entity with a defined geographic area (TIF district) and a determined assessed property valuation that serves as the base for future tax revenue growth. Tax receipts above the base pay off installed infrastructure, and net proceeds are paid to eligible taxing districts, captured by the RDA or distributed according to a state legislative formula. Legally separate TIF districts are created for each defined geographic area, each managed by the master redevelopment agency (RDA). The RDA (usually) issues bonds to pay required infrastructure costs. Autonomy enjoyed by the RDA varies by state, but can be considerable. TIF can be used for development (Greenfield) or redevelopment; PILOT agreements are also common. Only Oregon used TIFs extensively to finance urban renewal projects.11
TIF is the quintessential state ED program. Every aspect of it is defined by each state; commonalities exist but are overwhelmed by state variation. The purposes desired by each state differ and are reflected in types of projects, processes, actors, etc. The complexity of state variation is massive—some ways states differ include:
- Who is authorized to create a TIF district (state, county, municipality, RDA).
- How long can a district exist? Accountability, audits and reporting requirements.
- Preconditions with which the TIF district must comply—e.g. blight (how defined?); “but for” (a legal concept specifying that without TIF initiative Western civilization will end in seconds); and a “plan” which includes TIF/project goals, costs/benefits estimates, base value and projects incremental revenues given type of projects anticipated.
- Form of community input required for TIF plan and specific TIF actions.
- Uses allowed for TIF districts (commercial, residential and affordable housing).
- How the plan is adopted/approved; who has the final say.
- Issuance of bonds—types, terms and conditions, who issues them, eligible uses of bond proceeds, repayments, surpluses, losses and default (Johnson and Man, 2001).
TIF, in some form, may be the most used local government development/redevelopment tool in America; tax abatement is its chief rival. California, its originator, was arguably TIF’s most aggressive user—its growth was fueled as a bypass of 1978 Proposition 13 (property tax relief). In 1980 there were 299 TIF districts in California (Briffault, 2010, p. 70) and by 1987, 467 Californian cities operated TIF districts (Johnson and Man, 2001, p. 32). By 1988 almost 600 project districts/RDAs received 6 percent of the state’s property tax receipts, and by 1990 there were 658 districts (Briffault, 2010, p. 70). In 1998 TIFs garnered 8 percent of property tax receipts despite major state legislation intended to rein them in, limit, refine and refocus use of TIF by California’s municipalities. At that time (1990) there were 351 RDAs in existence and over 700 ongoing projects.12 In 1998 five project districts exceeded 18 square miles each; by 2008 six projects exceeded 30 square miles each.13 In the period 1990–2010 TIF was the prime strategy/tool employed by California EDOs. Its RDAs were (essentially) terminated in 2012.
Through the seventies, states incrementally adopted versions of TIF, but the real explosion occurred after Reagan. TIF’s attractiveness as a substitute for federal (UDAG) dollars was compelling. By 1984, 28 states had approved TIF legislation, 33 by 1987 and 44 by 1992 (Briffault, 2010, p. 70). In Illinois, for instance, the number of TIF districts quintupled in a single year after the state loosened the requirements in 1985 (Kerth and Baxandall, 2001, p. 5). Indeed, Chicago’s Mayor Daley (son) proclaimed TIF as “the only game in town” and the city’s “only tool” for promoting economic development. In 2007 Chicago was home to 155 TIF districts (Briffault, 2010, pp. 65–6). There are many other examples:
At the end of the 1980s there were more than 1000 TIF districts, although most of them are concentrated in California and in the upper Middle West states of Minnesota, Michigan and Wisconsin. Minneapolis has been a particularly heavy user (Briffault, 1997). There is no national registry of TIF districts and many states do not centrally collect or publish data on their TIFs either … In 2003 Wisconsin had 789 TIF districts … Missouri in 2007 there were at least 291 TIF projects … In Iowa in 1999 there were more than 2400 TIF districts covering 7.1 percent of the urban tax base … In 2007 there were 402 active TIF districts in Cook County Illinois covering more than 10 percent of the county’s land area. (Briffault, 2010, pp. 70–71)
In contrast to this, Hawaii, Mississippi and New Jersey had laws authorizing TIF back in 1985, but none had an operating tax increment district as of 2001 (Johnson and Man,2001, p. 32). By 1997, 48 states had approved TIFs (including North Carolina, which subsequently rejected a constitutional amendment). Arizona and Delaware were the laggards; by 2010 only Arizona had not adopted some form of TIF.
Originally inspired as a Californian tool to raise funds for local match to combat blight in UR projects, TIF has become the go-to tool in the economic development toolbox. In most states TIF is now an all-purpose local government tool for financing public investment (infrastructure) for private development. As of 2010, 16 states no longer require a finding of blight, and other states simply create special “conservation” or “economic development areas.” Wisconsin is a fine example of TIF’s evolution.
Wisconsin adopted TIF legislation in 1975 in response to the challenges of eliminating blighted areas in depressed urban areas … Since it was first adopted in 1975, several major changes … expand the ways that TIF can be used, and have increased the involvement of the overlying taxing jurisdictions and local residents. Changes [include] mixed-use TIDs [tax incremental districts] … multijurisdictional TIDs … New TIF powers were also given to Town governments that allow them to use a Town TIF for specific project types … In recent years, more TIDs are being created in more places … As of January 1, 2011 there were 1,074 active TIDs.14
RDAs were a new variation of the older UR redevelopment agency and TIF, with its alliance with private developers, banks and real estate investors. A powerhouse, bulldozing, property-based ED conglomerate—closely tied to mayors, sometimes county CEOs, mostly loosely attached to city managers—RDA employed an approach/ style the polar opposite of Main Street and BIDs. RDAs could be construed not only as a way to “pay the bills” for the jurisdiction or to move the costs of development and redevelopment off-budget, but also as a way to address the rise of offices, retail and professional service sectors in older central cities. TIF in growing states like California meant malls and sales tax chasing—and higher ranking in the metro competitive landscape. TIF and RDAs brought many a metro region closer to a polycentric landscape than any other ED structural type. In many ways this was a brand new ball game for economic developers. Unless checked by states, TIF and RDAs offered a way around expensive school taxes, and one should not be blamed for thinking of them as a “growth regime coalition.” Their power, aggressiveness and often closed bureaucratic/ expert internal policy-making rendered them both powerful and vulnerable,15 a remarkable icon of physical Privatist development/redevelopment in an Age of Anti-UR.
Below the Radar: Wrapping Up Sub-Local EDOs
If CD took off in the seventies, it is clear Mainstream ED expanded the scope of its activities/strategies greatly during the 1980s. Commercial revitalization coincides with and corresponds to the shift to FIRE/service sectors in jurisdictional economic bases. EDZ marks the increased involvement of states in local ED. Most states ignored “distressed areas,” choosing instead to use the program as an umbrella for their most used arrows in their quiver. In many states it was an open question who really ran EDZs: states or localities? More than any other single program, EDZ was the most significant intrusion of states into local ED thus far. TIF replaced UR as the principal tool to conduct physical development/redevelopment.
These new EDOs offered another opportunity to see onionization in real life—and to observe how onionization drives professional siloization. Professionally, these EDOs attracted a new breed of economic developers. What is a “Main Streeter”? Are BIDs a derivative of chamber-style ED? FTZ brought in export expertise. TIF and RDAs are obvious parallels with the old redevelopment agencies. EDZ, usually a curious blend of ED programs pursuing CD objectives, attracted its own sort of entry-level professionals. All had particular gardens to tend, and they operated out of EDOs, customized with appropriate powers, tools, competencies, political/policy relationships, constituencies— and goals. Strategies pursued several goals simultaneously.
No one planned this fragmentation, and one seriously doubts it could have been avoided. But by the 1980s onionization, siloization and goal complexity explode. EDO onionization drove professional siloization: certifications, bodies of expertise, legislative advocacy, constituencies, tools, programs and funding sources—NGOs, think tanks, policy institutes, higher-level trade associations and, lest we forget, consultants and planners (both profit-making and nonprofit), and academic, media and policy specialists. What a vicious web we weave when we perceive new challenges and opportunity. That we developed into our own growth machine has still to be appreciated. It’s in place by the end of the 1980s.
Ron W. Coan 