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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 activities that 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 and 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.