Strengthening Local Economies Through Economic Development Planning

Hardly a day goes by without news reports of increases in the cost of living, growing wealth disparity, and volatile financial markets.

The unpredictable nature of the current economic situation understandably creates anxiety for residents and business owners in Washington communities, as well as for local governments. As the cost of providing government services also increases, this is often accompanied by the unwillingness (or inability) of community members to support additional tax revenues needed to fund those services.

One way local governments are addressing these challenges is through enhanced economic development programs. This blog will describe how Washington cities, towns, and counties can build successful economic development programs that strengthen a local government's fiscal capacity and improve a community's economic well-being.

Purpose of Economic Development

When planning for economic development, the goal is to create and maintain a strong, vibrant local economy. A local government’s economic development plan provides an overview of the local economy, sets a policy direction for economic growth, and identifies strategies, programs, and projects to improve the economy.

Plans developed by individual cities, towns, or counties are typically part of a regional overall economic development strategy, so planning at the local level must also involve coordination between neighboring local governments, economic development agencies, and other organizations.

Economic development strengthens a local government’s fiscal capacity by increasing the tax base and providing additional revenue. Increased local revenue promotes self-sufficiency because an agency can use these funds rather than intergovernmental fund transfers to support, maintain, and improve public services.

Economic development plans and programs should also include strategies aimed at reducing economic disparities within a community. Resources like the Puget Sound Regional Council’s Opportunity Mapping tool and the Economic Development with Community Reinvestment Program from the Washington State Department of Commerce (Commerce) can help examine a community's access to education, economic health, housing, child care, transportation, health, and other factors to identify where disparities exist.

Diversification of a local economy reduces a community's vulnerability to failure in a single business sector and may help reduce economic disparities.

Economic Development Planning in Washington

RCW 36.70A.070(7) calls for counties and cities planning under Washington's Growth Management Act (GMA) to include an economic development element in their comprehensive plans—however, this is not mandated until state funds are made available to cover local government costs to create these (RCW 36.70A.070(10)).

While state funds have not yet been appropriated, many jurisdictions choose to adopt an economic development element because the work detailed benefits the community. MRSC’s Planning for Economic Development webpage contains numerous examples.

Economic development elements are most effective when coordinated with other comprehensive plan components that plan for housing, capital facilities, utilities, transportation, land use, and parks.

Economic development elements should recommend policies, programs, projects, and partnerships that will support:

• Business retention, expansion, and attraction (known as BREA);
• Small business success;
• Place-branding and opportunities for tourism; and
• Education and workforce development.

(See the American Planning Association’s blog: Five Challenges for the Future of Economic Development.)

Economic development elements should also identify specific actions to accomplish the proposed work, such as:

• Funding programs that support local business formation and growth,
• Targeted infrastructure investment (including broadband internet service),
• Job development programs,
• Vacant or blighted properties rehabilitation, and
• Designation and support of industry-specific focus areas, such as manufacturing hubs, artisan/craft districts, or tourist attractions.

Increasingly, local economic development plans emphasize small business formation and growth. Researchers and practitioners generally agree that is more important to long-term economic health than attempting to attract large businesses or corporate investment through tax breaks, real estate matchmaking, or speculative infrastructure investments (which often simply shift economic activity from one place to another).

A focus on small businesses also better promotes equitably distributed benefits. For example, the economic development element of Bothell’s Comprehensive Plan includes a strong focus on neighborhood centers containing smaller businesses in addition to larger commercial centers.

Regional Coordination

Economic activity in a county, city, or town is part of a larger regional economy. To effectively plan for local development, cities, towns, and counties should consider coordinating planning efforts with the following types of plans or organizations:

• Strategic action plans for economically important districts, such as:
  • Downtowns and other regional commercial centers;
  • Industrial hubs;
  • Neighborhood commercial districts;
  • Natural resource-based industries like agriculture, forestry, and mining; and
  • Major industrial developments in rural areas.
• Comprehensive Economic Development Strategies (CEDS) adopted by federally designated Economic Development Districts (EDDs) in each region. Consistency with CEDS may be required to be eligible for certain grants, including some for public works and economic development.
• Strategies adopted by an Associate Development Organization (ADO). These organizations are funded by Commerce and, in many cases, led by Economic Development Councils (EDCs) that consist of representatives of local governments and business organizations.
• Tribes
• Ports
• Utilities and providers of energy, broadband, and other infrastructure services (particularly in areas targeted by developers of energy facilities and data centers)
• Educational institutions
• Workforce training organizations

Conclusion and Additional Resources

Washington local governments should include an economic development element as part of their comprehensive plan. When well-coordinated with the other elements of a comprehensive plan and with the broader regional economy, economic development elements ensure that local communities are taking advantage of opportunities to strengthen local businesses and benefit communities.

Additional resources on creating local economic development elements are available at the links below:

• Commerce: Growth Management Services – Assigns planners to every city, town, and county in Washington to assist with all aspects of comprehensive planning.
• Institute for Local Government: Economic Development – Contains numerous resources for economic development planning.
• Puget Sound Regional Council: Economic Development Element Guide (2022) – Guides central Puget Sound jurisdictions to build local economic development elements consistent with the VISION 2050 regional plan.
• U.S. Economic Development Administration – Offers programs, including funding, to assist with economic development planning.
• Washington Economic Development Association (WDEA) – Organizes state-level economic development planning efforts and offers helpful resources.