Types of Economic Development Organizations

1. Types of Economic Development Organizations Public Private Public-Private

2. Public EDO’s • Independent Agencies • Regular Local Gov’t departments • Part of one of the local departments • Part of the local gov’t manager or mayor’s office

3. Public EDO’s Encourage Econ Development Thru Implementation & utilization of: • Infrastructure Improvements • Eminent domain • Ownership of land • Control of right of ways • Zoning and regulatory powers • Special permits • Special Improvement Dist. • Tax Increment Financing agreements (TIF’s) • Construction and operation of public facilities • Business incentives both tax and non-tax varieties • Business Marketing, retention & expansion • Entrepreneurial/minority business assistance

4. Catalytic & Facilitating Community-Owned Competitive Mission-Driven Results Oriented Anticipatory Decentralized Market-Oriented Enterprising Customer-Driven Characteristics of an Innovative, Entrepreneurial Public Sector Organizations

5. Types of Public EDO’s • Local Governments • Regional Planning Organizations • State Economic Development Organizations

6. Executive Director Deputy Director Business Development Finance & Administration Assist. Dir. Administrator Assist. Dir. Mgr Account. PR Procurement

7. Potential Problems • Duplication of work between departments • Staff may make assumptions about what others are responsible for • Poor coordination of department efforts • Ability to build consensus, but difficulty in spurring action • Poor communication or coordination with field offices • Duplication of mission and/or efforts between area EDO’s

8. Advantages of Public EDO’s • Access financing mechanisms to leverage private investments • Direct access to sources of public funding (CDBG, revenue sharing) • Municipal powers: taxing authority, eminent domain, ownership of land, rights of way, zoning, and regulatory powers and the ability to construct and operate public facilities and services , which can be used in economic development initiatives.

9. Advantages continued • Access to other city or county resources such as planning, research, and public works. • More likely to have better buy-in from public officials and executives for economic development initiatives • Can use their municipal powers and planning capability to create/coordinate city and countywide policies and strategies

10. Disadvantages • The economic influence of public EDO’s is essentially limited to their surrounding political area • Public EDO’s face municipal debt limitations, which restrict economic development finance. • Often prohibited from lending money directly to the private sector and often cannot participate in profit-making ventures.

11. Disadvantages Continued • Normally cannot build or operate non-public facilities. • Elected official turnover can cause inconsistent economic development policies. • Commitment by officials may vary. • Private organizations often mistrust governmental activities. • Public disclosure laws may prevent private negotiations with relocating businesses or developers.

12. Private EDO’s • A Private EDO is defined as an organization with the express mandate of promoting economic growth, but which has no public control of governance and no formal links to government. A private Edo can rely more on its own decision making process to act quickly and flexibly. Private agencies can lack adequate clout with local policy makers, potential major limitation.

13. Types of Private EDO’s • Chambers of Commerce • Membership Services • Business Marketing • Business Advocacy • Job Training • Neighborhood and downtown revitalization • Business Advocacy • Regulatory reform

14. Types of Private EDO’s con’t • Community Development Corporations • Community Development Financial Institutions • Community Development Banks • Community Development Credit Unions • Community Development Loan Funds • Communtiy Development Venture Capital Funds

15. Private Advantages • Serve as intermediary through which individuals can deal with the government on behalf of a private client. • Not directly accountable to a broad constituency. • Organized to make decisions quickly. • Perform functions and activities that may be in the public interest but are not necessarily allowable by “government activities” for a municipal corporation. • May invest equity capital and generate profit • Can raise funds in the private market • Can receive donations (nonprofit corporations only)

16. Advantages con’t • Are able to successfully insulate individual investors from risk. • Free to utilize subsidiary for-profit and nonprofit resources for project development purposes. • Can receive some federal (like SBA) funds.

17. Private EDO Disadvantages • Lack powers of eminent domain and other public land management powers • May lack public sector support and commitment, which means they take risks in assuming responsibilities for economic development. This may make it unprofitable and inefficient for them to assume the responsibility for economic development without government cooperation. • May face excise taxes on investment income (1-2% annually)

18. Disadvantages con’t • Face strict prohibitions on self-dealing. For example, a director is prohibited from selling an asset to the foundation even on terms extremely favorable to the foundation. Finally minimal annual distribution of assets are required. • Since the private agency must support itself, sometimes efforts are shifted away from economic development.

19. Public/Private EDO’s • Public-Private organizations are usually formed as a result of cost savings and collaboration. Public-private organizations share long-term goals related to the social, political, and business environment in a community.

20. Public-Private Participants • CEO’s form major businesses • Utility representatives • Chambers of Commerce • Banks • Industrial Parks • Real Estate Developers and brokers • Accounting and law firms • Public and private colleges • Labor organizations

21. Successful Characteristics • Clearly defined missions that address concerns of public and private sectors • Internal autonomy over the organization • Consensus among members regarding the mission of the organization and how to implement the mission • Adequate funding to achieve goals • The commitment of the public & private sector • Established performance measures & benchmarks to justify continued support and funding

22. Public-Private Advantages • Excessive politicization of the EDO’s work is less likely to occur • Neither public nor the private EDO’s have the degree of freedom in hiring, firing, and setting salaries than public-private agencies • Greater risk takers because directors and board members do not run for election. An unpaid board has little to lose from making bold decisions. Able to use resources and powers without public limitations (red tape, citizen review, civil service restrictions)

23. Public-Private Advantages • Free to expand on gov’t powers, are not restrained by city charters. Can invest in nonprofit and profit ventures if needed • Some agencies can take on projects, proposing the project, sampling public reaction and allow gov’t/planning to support of oppose. • Private sector has three things the gov’t needs: • Resources, knowledge, and public support • Public is less willing to support public sector spending. I a public agency wants to develop a project, it may find a better source of funding in the private sector than the legislator • Draws on a broader range of expertise. Working together builds upon & creates news skills and understanding of various points of view

24. Public-Private Financial Advantages • Mobilization of resources, and financially flexible • Maximize use of available gov’t funds • Use financing tools to pay for large, revenue- generating infrastructure projects • Can invest in private business ventures • Municipal debt ceiling does not affect public-private EDO’s borrowing powers • Able to accept donations due to tax exempt status, offer tax advantages to contributors • Insulate governance from financial risk through incorporation laws • Potential self supporting through management and service fees and/or membership dues

25. Public-Private Disadvantages • Not under the same degree of public control, limiting its accountability • Limited accountability may cause a public-private EDO to forfeit a portion of their influence if the public sector and the citizenry are not satisfactorily represented • Limited accountability can also restrict its freedom of action

26. New Organization Chart