Direct Funding Methods for Economic Development Organizations
In April of 2010, IEDC interviewed a broad cross section of U.S. based economic development organizations (EDOs) to identify unique methods of direct funding. Findings indicated that the two most common methods of funding were fees applied to certain business related transactions and special taxes on income and sales. In all cases, the programs were enabled by state legislation. Below is a summary of our findings.
Fee-Based Funded EDOs
City of Austin Economic Growth and Redevelopment Services Office – The city municipal utility company charges a small surcharge to all utility bills. The funds raised from the surcharge are reallocated to the City of Austin Economic Growth and Redevelopment Services Office, which is a branch of city government. The program generated approximately $7 million in 2009 and comprises approximately 1/3 of the EDOs budget. The funds go into the EDO general fund.
Beacon Council –Miami-Dade County government charges a business Tax Receipt fee for all new entities creating a business within its jurisdiction. A county-wide ordinance is in place that allows a portion of the fees collected to be reallocated to the Beacon Council, a private not-for-profit EDO. By ordinance, the Beacon Council can use the funds for all aspects of economic development relating to its county-wide marketing efforts. In 2009, the program generated approximately $750,000 for the Beacon Council comprising 3/4 of the annual budget.
Cape Cod Economic Development Council –Barnstable County receives a 35% share of the State of Massachusetts’ revenue earned by the sale of license plates within the county’s jurisdiction. Those funds are reallocated to the Cape Cod EDC. The Funds are used for various economic development grant programs and special projects including the recent completion of a comprehensive 5-year economic development plan.
Northern Kentucky Tri-ED –A three county region capitalizes on their close proximity to the Cincinnati International Airport by charging a 3% fee on all short term rental car transactions. The fees are collected by each county and reallocated to the regional EDO. The funds comprise $5 million of the Tri-ED’s $5.2 million budget and are used for salaries, operations, and economic development programs.
Special Tax Funded EDOs
Greater Topeka Chamber of Commerce – A State of Kansas legislated program allows county municipalities to raise economic development funds by levying an additional .05% sales tax on purchases made within their counties. The program must be approved by voter referendum every 5 years. The Greater Topeka Chamber of Commerce receives up to $5 million in funds reallocated from Shawnee County. Any additional funds raised by the county are used for county-wide economic development related infrastructure projects. In 2009, Shawnee County reallocated $5 million to the Greater Topeka Chamber of Commerce which makes up all but $200,000 of the chamber’s budget. The county collected an additional $8 million of funds from the program that was used for infrastructure improvements.
Port Arthur Economic Development Corporation –A State of Texas legislated program known as 4A allows city municipalities to raise industrial development funds by levying an additional .05% sales tax on purchases made within their cities. In 2009, the Port Arthur Economic Development Corporation received $3.5 million of its $4 million budget from the program. The funds must be used for industrial development based projects such as industrial grant programs and the salaries and operations of staff working on those programs. The State of Texas also has a 4B program that is much like the 4A program, but it can be used for a wider variety of project types, including quality of life amenities required to attract companies. With the 4B program, the economic development corporation undertaking the action must hold at least one public hearing before the project begins.
Wayne County Economic Development Corporation –A State of Indiana legislated program allows county municipalities to raise economic development funds by levying an additional .025% income tax known as CEDIT or County Economic Development Income Tax. CEDIT must be approved by a voter referendum every 4 years. The Wayne County Economic Development Corporation receives a discretionary amount of funds from Wayne County government. The amount of funding is determined by an ad hoc board that creates an annual budget for the organization. If funds raised exceed the pre-determined budget the leftover money is placed in a trust for future economic development efforts. In 2009, Wayne County reallocated $900,000 to the Wayne County EDC which makes up 100% of its budget. The county collected an additional $1.2 million of funds from the program that was used for infrastructure improvements.