Please review this paper, part 6 of a 6 part Masters Project analyzing the development implications of government using enterprise zones and government assisted urban renewal projects. I have had it edited for spelling, but of course a second opinion would not hurt. Can it be validated as an effective paper?
Economic Development Implications
Define enterprise zones and explain the utilization of these zones by your chosen government and the state within which the government exists
Enterprise zones, or special economic zones, are programs encouraging development in blighted neighborhoods by offering entrepreneurs or investors the regulation and tax relief in response to development, as adapted from Wikipedia (2007). Usually located within industrial or commercial parcels of a city, incentives are given to hire workers within the area. Local areas compete for state decisions. Their perceptions determine constituent needs and critical mass determined by the federal government. Complex tradeoffs between an area's characteristics and the political forces involved encompass a myriad of business, community and government agencies seeking benefit. The Housing and Community Development Act in 1997 initially created 100 zones with 1/3 of the finds for rural areas. State governments and local cities began to solicit funding for local, and 'zone' programs including smart zones for tech growth and Renaissance Zones for industrial expansion.
Enterprise zones bridge the gap between what lenders and investors will pay and what the job costs. Market rate projects flourishing in stagnant times are spurred on by layering of local state and federal deals and incentives. Mixed use projects such as restaurant, retail, open use parks and the like encourages movement of people within and into a community. Among the most beneficial results of these programs are the maintenance of existing businesses, and grants for homeowners to secure repairs. The rise in home prices and interest rates are encouraging both established communities to provide the incentive for home rehab, while residents in declining cities holdout for more money when development comes calling, or worse, take the money and move to affluent, dense neighborhoods. Grosse Pointe (GP) uses enterprise funds to account for its water and sewage operations, parking facilities and marina. Support from the Michigan Natural Resources Trust Fund, the Michigan Transportation Enhancement Act, and the Land & Water Conservation Fund (City of Grosse Pointe Master Plan, 2006), have allowed the city to maintain forestry programs, protect eroding shorelines and fund parking developments or infrastructure repair. The city of GP largely uses its general fund, but sets aside funds matched with revenue sharing or earmarked for future goals. Options for which the city qualifies include MSHDA's (Michigan State Housing Development Authority) Home Improvement Program providing low interest loans, the Neighborhood Improvement Program, the Community Development Block Grant (with money from equally prosperous Oakland County). Given the high median income, only a few activities are occurring. Happening now is revitalization of 'the Village' shopping district through a downtown development authority, as well as the Detroit/GP Collaborative. This collaborative is at present removing a one block eyesore at the border between the towns and developing a community park. Its efforts include physical revitalization and social equity programs via cross-community business associations, neighborhood organizing, and youth programs. Working through the national LISC (Local Initiatives Support Organization), the joint partnership benefits from the largest community development support agency in the nation.
Assess how the enterprise zones could be used to enhance the economic development implications of your policy issue
Enterprise zones enhance the economic development implications of regional collaboration and shred partnerships. Of benefit to SE Michigan, especially between Detroit and GP. Established in 1994, the JCDE (Joint Cities Development Enterprise) worked to secure an Eastside area for empowerment funds. Half in Detroit, half in GP; these zones utilized diverse networks to focus on the Mack Avenue commercial strip. A community development bank was also established to provide capital for start up businesses and provide financing. (JCDC 2007) In Michigan, zone status can last up to 15 years with a 25% phase-out of credits during the last three years, known as term financing. Fifteen neighborhood associations and 17 human service agencies comprise Cluster 3 of Detroit's Eastside region near the GP border, hoping to retain the vibrancy of a stable, albeit declining community. (City of Detroit) Some of the Detroit incentives encourage reduction of blight such as the Brownfield credit and the Obsolete Property Rehab Tax Abatement.
Human service agencies in the zone such as Wolverine Human Services, offer meals 3x per week and tutoring programs for youth. With its administrative office in GP and facility in Detroit, the organization is working to uplift youth from ages 5-15. The fair share concept of housing prompted the GPP Northwest Tax Increment Financing Authority to find money seeking ways to deal with overcrowding, some say encroachment of many upwardly mobile blacks to a community famous for segregated lending practices in an exclusionary policy. The Detroit/GP Collaborative attempting to change all that is part of an effort to maintain and beautify Alter Road and Jefferson Avenue bisecting the disparate areas. Regional cooperation is affected by 'devolved power that create the fragmented governance.' (Weiss. 2006)
Funding is being sought for regional mass transit. GP Woods has opened up its parks and free space to citizens in the region. Detroit secured Michigan funding for the Tri-Centennial State Park, a first of its kind. Retaining local control over issues that transcend boundaries helps the affluent suburbs feel they have a say in how regionalism affects their areas, while aggressive citizen involvement gives those will receive the most benefit, the loudest voices on their block. Mayor Kilpatrick has over 7400 housing units started in the region in three years. Visibility has been heightened by the New Far Eastside Development Company; the developer responsible for building 1500 homes in the area. Infill housing, platted lots, streetscape improvements and infrastructure are being supported. Former HUD Secretary Henry Cisneros holds a 25% stake in the local investment. Condo and homeowner associations plan to raise funds to build pocket parks, open spaces, and multifamily dwellings of by-right use, not conditional as existing in GP. Note: In GP Park, the tax incentive tried to retrofit multifamily housing to decrease car congestion, some say to scatter increasing numbers of African Americans down from an unheard of 2% (2500) in a city of 50,000. The area also includes joint city police patrols, many community watch groups, but struggles with police profiling on a major county thoroughfare even though perceptions about crime exist. The Detroit Transit Options for Growth Study (DTOGS 2007) suggests that a casino, entertainment, sports or empowerment zone tax be added to support rapid transit, as competing city and suburban systems serve divergent populations, doing little to bring people together. Incidentally, the group is interdisciplinary, and supported the recent Michigan Civil Rights Initiative (the Ward Connerly California anti affirmative action quest) and now affirmative action based on race is against the law for all entities doing business with the state of Michigan.
Describe how a cost-benefit analysis of an economic development can be performed
Cost-benefit analysis is a set of procedures that are practical in order to guide decisions on public expenditure. Determination of how beneficial economic development will be follows successful market strategies. Valuation of commodities allocates resources based on social benefit exceeding social cost. Real benefits achieved based on the present value of money have to account for inflation ant the value of promised funds received in the future. Governments that perform cost-benefit analysis should reflect the present value consistent with the lower rate of investment by private sector. Marginal social costs and benefits that are refuted based on the declining value of money consider market prices when implementing 5 or 10 year strategies. Most cities Master Plans are made within these parameters.
The impact of taxes, unemployment and time are analyzed when studying the impact of various alternatives use cost effectiveness analysis. When the dollar values cannot be juxtaposed due to externalities, scarce resources or measures of value- the chain reaction of subsidiary measures such as correlating businesses; add benefit to redevelopment in a projected area targeted for rebirth. Labor in such regions will not rise for everyone unemployed and permanency of such job classifications cannot be reflected in studies of improvement. True benefits from a 'double-counting' game (Rosen, 2001) reflect these externalities and the amount of social good that arises. Investment in a parcel increases the value of the purchased land, and the benefits derived from it. Net increases in utility are influenced by the net present value of a project, which imposes costs on some members of society at the expense of others who benefit, even if a shared benefit with participation or involvement based on characteristic factors. Typically urban renewal programs of the 1950s and 1960s created housing projects and freeway development at the expense of displaced residents, and those who did not qualify. Bias and preferred selection drove these issues of distribution into optimal classifications and criteria such as income, weighted benefits, and unfunded mandates. Thus, ethically value judgments and political considerations are rated upon the assumptions and non monetary returns. Based on the predicted efficacy or a fault of unforeseen circumstances, the value of expected social benefits includes concurrent suppositions. Interdisciplinary approaches require assumptions in a social science model in order to measure returns and define the uncertainty. Compared to rational and scientific models of theory that presume cause and effect and cost benefit in practical terms, the use of social capital and aggregates of time, place and price suffer from lack of consensus and .face constraints on subjugating this analysis to uniform regulation and conformity that cut a broad swath. Float as a percentage of demand determines how dollars are being spent in a radius of a community and whether or not the money is being spent in the area or floating to others.
Evaluate incentives currently given to developers and agencies to enhance economic development by local and state governments
The weighting of these broad elements influence the decisions policymakers use to judge how these programs should be made operational, is known as the policy capture method. (Dandridge 1990) Multiple decision makers exist within the context of multiple constituencies served from political and data-based variables. An interpretation of how an enterprise zone is constituted is based on criteria that federal and local official deem sufficient to satisfy local needs. Some states have competitive programs (Florida), while Ohio 'requires participating local governments to propose incentives that would expand business and employment bases as long as benefits, (particularly to the residents of the community) exceed costs.' (Dandridge 1990) Variables such as transportation, zoning, vacancy rate, and employment likelihood are used much like retailers study radius, density, income composition and traffic patterns to determine where to build. The Detroit LISC announced a 2005-2007 40 million campaign to benefit neighborhoods and inner ring suburbs. Local governments in the Detroit/GP border region are among the most economically varied, as the median home price of $63,600 in Detroit contrasts with $331,200 in Grosse Pointe Park. Gracious streets lined with shops in GP are blighted in Detroit. Physical infrastructure, streetscape and façade improvements are all inclusive projects sponsored by the Ford Foundation, and supported with a litany of community groups. Investors combine the credits from the government often with historic district tax credits. Designation of an area as historic enhances the incentives already offered. Often impoverished inner city residents live here. Therefore the incentive to the investor is a favorable tax yield, and the city gains increased equity. 'These subsidized projects could create incentives to improve the 'human capital'. Job training or child care to residents would become invested...if they can see how it will eventually benefit them.' Reutter, M. (2006)
Federal incentives given to developers include the EZ and RC Wage Credit, the Work Opportunity Tax Credit, and the Welfare to Work Credit, IRS forms, all. In Detroit, the creative efforts to assemble land for redevelopment involve high powered business leaders. United Way has its roots in SE Michigan and many other partnership organizations like the nation's oldest Chamber of Commerce (Detroit) share a rich history. Notwithstanding the current economic malaise, the Detroit area consistently is among the leaders in philanthropy and giving. Community groups like the Warren-Conner Development Coalition and the Detroit/GP Collaborative have won incentives as a result of high involvement by stakeholders and partnerships with schools and businesses. Growth of charter schools has given many businesses room to support private funding that could be quasi-public if the zone was also designated to receive state and local funds as well. The MEDC (Michigan Economic Development Corporation) touts itself as a corporation, not a bureaucracy on the state of Michigan web site. The 21st Century Jobs Fund works to provide 2 billion until 2017 promoting new investment and relocation of high tech firms. Our Renaissance Zones offer real, personal, and school taxes with 100% abatement. Also, the cumbersome SBT (Single Business Tax) is reduced as part of allowable credits, easing the strain of a flat 25% tax on labor, capital and resources used to produce goods. Brownfield redevelopment, 'smart zones' and collaborative small business federal packages are also state managed.
Evaluate the ethical consequences of the economic development initiative
Balance of democratic values of justice, fairness and equality must balance market competition. Reasoning, and thinking about values systematically involves our choices. Proper conduct is assumed from higher order principles (of social and personal conduct). Particularistic experience is driven by social norms, and originates the ideal of ethical behavior. Narrow interests controlling public agencies seek to influence government programs for individual gain. The history of contention avoiding true regionalism in metro Detroit is divided among race, class and income. Local governments got into revenue sharing in order to pay for public service programs, buy new equipment, and training for state of the art workforces. Streamlined tax collection and elimination of some local taxes cause the distribution to cities to offset general revenues. Without the raising of taxes, localities feel the brunt in Michigan. The state cut the sharing from 1 billion down to 407 million, as the state seeks to balance its own budget, as contentious in Lansing as in Detroit. Cities have had to cut police, fire and parts of other agencies. Ethically, many towns pare senior programs, recreation centers while according to Mayor Williams of Grand Rapids, 'the things we have come to depend on the most (or take for granted) are affected by the detrimental impact of statutory revenue sharing.' (MML 2007)
The GP cities have home rule status, but contentiously demands its right to state revenue, while bitter about income qualifications that give Detroit preferred status and additional funds. However, Detroit's 'street level bureaucrats have the day to day contacts and the ability to use this government-client relationship. Clarifications of technical jargon develop role taking and understanding of how clients feel.' Rusaw (2001) this discretion has been adapted by Detroit's current government. The same luck in corporate and fund development with the many agencies of support has snowballed through the successes of the Mayor Archer administration. Accountability questions surfaced in the Mayor Kilpatrick administration over use of a customized Cadillac Escalade for the mayor's wife, and an alleged bachelor party type of soiree on taxpayer dollars.
While the city has placed additional stresses on existing departments with cutbacks, the appearance standard has been raised not influencing the outcome of planned initiatives. Old models abandoned in favor of new tools create understanding of complexity. Relentless media, hostile publics, and competing interests all vie for the same share of the pie, or at least want equal portions, but discretion is necessary to cope with these demands. Covey (from Rusaw) mentions that public leaders need to embody a 'spirit of service', considered appropriate for the trustees of constitutional ideals. Immediate results often demanded from policymakers, government lacks free market competition, and the imbalance between tax revenue and services rendered tend to limit some ethical behavior in favor of promotion for selfish gain. Successful innovation works outward from objectives aiming to decentralize government. Organizations that can adapt to changing functions and conditions absorb the flexibility. Public and private groups with diverse resources should be either sponsors or supporters of innovation driven by proactive leaders and manage change. Thus, ethical cooperation involves steady methodical processes to create a sustained productive future.
Bibliography
Wikipedia (2007). http://en.wikipedia.org/wiki/EnterpriseZone.htm
City of Grosse Pointe Master Plan. (June 2006) www.grossepointemi.us/f/master-plan.pdf
Joint Cities Development Corporation. 2007. www.espolaw.com/cdc.htm
City of Detroit 2007. www.ci.detroit.mi.us/assetprofile/cluster3.html.
Weiss, J. (2006) Conversations with advocates of fair growth. Interview with Steve Lerner. www.commonweal.org
DTOGS (Jan. 2007) Shareholder Interview Summary. http://64.233.167.104.html
Rosen. (2001) Cost-Benefit Analysis. eResource reading from Apollo Library. Week 5.
Dandridge, T., and Miesing, P. (1990) Underlying patterns in a current economic development model. Policy Sciences (23), 231-249. http://web.ebscohost.com
Reutter, M. (2006) Track record of anti poverty 'Enterprise Zones;' is mixed. www.news.uiuc.edu
Vitullo-Martin, J. (Summer 1995) Detroit fights back. City Journal Magazine. http://www.city-journal.org/html/5_3_detroit_fights.html
Michigan Municipal League 2007 video). Revenue Sharing. http://www.ci.grosse-pointe-woods.mi.us/MMLVideo.html.
Rusaw, A. (2001) Ch. 12: The ethics of public leadership. Ch. 11 Public leadership and innovation. Apollo Library eResource. https://ecampus.phoenix.edu
Lamont Powell
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