Downtown Spokane Parking Lot

What Economic Development Is, and Who Has the Authority to Do It

Ask your friends what economic development is and you’ll get a variety of different answers. Ask a county commissioner, ask a city council person, ask Vinny down at Dick’s, and you’re going to get different answers to a person.

The answer isn’t complicated, however. Economic development is the art of filling gaps in the market. Sometimes there’s a 100% gap and we’re creating a whole new thing, like a couple of medical schools in Spokane’s U-District. Most of the time, the gap is much less, like subsidizing losses at the Spokane Convention Center to create multipliers triggered by a robust tourism industry.

If structured correctly, economic development transactions nestle themselves into the marketplace with hardly anyone noticing that the public sector filled gaps in the market to begin with, like Kendall Yards. When structured incorrectly, everyone notices and the city is liable to take a bath, like River Park Square.

Every transaction is different because every project is different. Different market gaps create the need to leverage different tools. Different tools require different partnerships. Different partnerships require different strategies and approaches.

Who, in metro Spokane, has the authority to fill those pesky market gaps? Who has the authority to leverage tools? Who has the authority to close economic development transactions?

It’s your friendly neighborhood city council. Or, if you live in an unincorporated area, it’s the county commission. Of course, the Washington State legislature has authority to fill gaps in the market, too, as do the feds, as you might suspect (but don’t get me started on the feds).

It’s much simpler to get four votes from city council than it is to get however many votes you need in the state legislature (not to mention a signature from the governor), or an act of congress and/or the White House. There are also sub-municipal public entities that have the authority to conduct economic development activities, such as one of our numerous public development authorities (PDA) that, at least in Spokane’s case, operate within the city.

Spokane Valley City Council (or any WA-state city council or county commission) can create a PDA if they feel it is the right tool for the job. In fact, city councils have a wide variety of tools they can create and/or otherwise leverage to achieve results.

Port authorities are a popular tool in many states, including Washington, and they are created via a vote of the people and manage a property tax stream (among other things) to fill gaps in the market. Short of a citizen petition placing a port authority on the ballot, the Spokane County Commissioners could craft up whatever narrow or broad ballot language they like — language that defines what the port authority will do (and what it will not do) — and ask us to vote on it. The point is, most of the time, the most responsive economic development tools are the province of city councils and county commissions.

If creating a non-profit has utility, then do it, because it’s a tool that works from time to time depending on the transaction. One of the first economic development transactions that put a little hair on my chest was a New Market Tax Credit deal whereby we had to create a dummy non-profit corporation to funnel the tax credit proceeds into the transaction. Non profits can also establish themselves as community development corporations and receive a mild perk or two from the feds, like eligibility for grants and better opportunities for foundation monies. Generally speaking, however, a non-profit corporation’s utility within the realm of economic development is superfluous.

A good local example is the University District Development Association, which was another garden variety and ineffective non-profit board doing the same old thing as everyone else but hoping for a different result. Recognizing we had no authority to close economic development deals, no market-driven revenue streams, and picking over the same charitable bushes as our friends at Greater Spokane, Inc. (GSI), Downtown Spokane Partnership (DSP), and Visit Spokane, I decided the University District needed to swim in different waters. Thus, back in 2012, the concept of a University District PDA was born and, by the grace of Spokane City Council, it now manages the tax increment revenue coming out of the district — a market-driven revenue stream whereby the more taxable development you stimulate, the more TIF money you get. Sure beats fundraising, and it’s much simpler being beholden to the market than it is your charitable benefactors.

The University District PDA has a big-time competitive advantage over it’s peers, GSI and DSP, because it has two things they don’t: authority to close a deal, and a revenue stream to pledge toward public improvements (incentives) that grows with the more public improvements it stimulates. Which is to say, the U-District PDA is fundamentally market driven, can fill gaps in said market, and can conduct economic development — a first of its kind mechanism for the city of Spokane.

The keys to the future, people that can relatively simply unlock change, are city council people and county commissioners. Every single agency between you and city council is simply a middle-man, a garden variety used car salesman. If you aim to get something done, if you aim to create a public/private partnership, if you aim to do some economic development, go to your friendly neighborhood city council. They’re the ones with ultimate authority to fill gaps in the market.