Economic Development in Washington State: An Introduction
What is Economic Development?
Economic development should not be an isolated activity taking place within the borders of a jurisdiction. It is an activity that is regional or county-wide, and sometimes even broader. Successful economic development activities are carried out through partnerships with other governments, associate development organizations, and local business groups such as the chamber of commerce. Economic development is better described than defined. In a presentation to the city attorneys' association, the former director of the then-Department of Community Development, Richard Thompson, described economic development as job creation, job retention, job training programs, public and private capital investments, and business and community capacity-building to allow the business or community to do the job themselves.
The term economic development is not statutorily-defined, although various statutes describe its goals and broad scope while providing authority for certain economic activities. For example, when setting up the state's Economic Development Tax Authority, the legislature stated that economic development is essential to the health, safety, and welfare of all Washington citizens by broadening and strengthening state and local tax bases, by providing meaningful employment opportunities and thereby enhancing the quality of life. The Community Economic Revitalization Board (CERB) fosters economic development through the stimulation of investment and job opportunities and the retention of sustainable existing employment for the general welfare of the inhabitants of the state. The Growth Management Act in RCW 36.70A.020(5) lists 13 planning goals, one of which is economic development:
Encourage economic development throughout the state that is consistent with adopted comprehensive plans; promote economic opportunity for all citizens of the state, especially for unemployed and disadvantaged persons; and encourage growth in areas experiencing insufficient economic growth, all within the capacities of the state's natural resources and local public facilities.
Most local government economic development programs cite the above goal.
Cities and counties undertake a variety of activitiesthat relate to the fostering of economic development in their regions. Most typical are tourism, facilitating industrial development through land use policies, and creating the infrastructure framework that supports economic development activities. All activities must be for a proper public purpose and not in violation of the state's constitutional restrictions on the giving of money or the lending of credit. A list of incentives provided to new and expanding businesses by economic development organizations illustrate what local governments can do to foster economic development.
Authority for local economic development activities
Washington local governments are very limited as to what they may undertake in the area of economic development. For cities, the statutory provision is in RCW 35.21.703. The authority for counties to engage in economic development activities is RCW 36.01.085. Neither statute defines "economic development." The original intent of these statutes was to enable cities and counties to join and pay dues to economic development councils and consortiums.
Limitations on economic development
Due to strict constitutional limitations, cities and counties in Washington State have very few avenues open for direct participation in private economic development projects. There are potential legal issues regarding the loaning or gifting of public funds. Under article 8, section 7 of the Washington State Constitution, a city or county may not directly give or loan money to private businesses for economic development. The State of Washington is one of the more restrictive in the nation in regard to how public funds may be utilized to attract private investment. Specifically, Article 8, section 7 of the state constitution provides:
No county, city, town or other municipal corporation shall hereafter give any money, property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm.
This constitutional provision has been interpreted in numerous cases in this state and generally has been interpreted very narrowly in regard to allowable uses of public funds to aid private businesses or corporations. A city or county does not have direct authority to construct and operate industrial and commercial facilities, or to pay city funds out for the purpose of attracting private industrial development, neither does the city have indirect authority to pay an industrial development council (not a municipal corporation) for performing those functions [ Morgan Jacobson & James Pharris, MRSC Information Bulletin No. 432 (1985)]. In addition, a city's general funds cannot be expended for "industrial development projects." See Hogue v. Port of Seattle, 55 Wn.2d 153 (1959); art. XXXII, § 1, Washington State Constitution.
What economic development activities can be undertaken by cities, towns and counties?
- Assisting Economic Development: Do's and Don'ts of Public/Private Partnerships and Financings, by Hugh Spitzer, Foster Pepper & Shefelman, Information Bulletin No. 489 (1995), Legal Notes, Proceedings of April 26-28, 1995, pp. 7d-1 - 7d- 14
- Cities and Economic Development Programs: Are Cities in the "Business Business" - Should They Be?, by James K. Pharris, Senior Assistant Attorney General, State of Washington, Information Bulletin No. 444 (1987), Legal Notes, Proceedings of October 12-15, 1986, pp. 27-33
- City Involvement in Economic Development, by Don L. Hogaboam, Senior Assistant City Attorney, City of Tacoma Information Bulletin No. 489 (1995), Legal Notes, Proceedings of April 26-28, 1995, pp. 7b-1 - 7b-19
- Efficient and Effective Uses of Public Corporations/PDA's, by B. Gerald Johnson, Attorney, Preston Thorgrimson Shidler Gates & Ellis, Information Bulletin No. 473 (1992), Legal Notes, Proceedings of June 20-21, 1991, pp. 191-197
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