A B C D E F G H I J K L >>> Glossary M - Z

A
abatement - when a local government exempts a company from paying all or some of its property taxes. In dollar terms, tax abatements are often the largest subsidy a company receives, especially property-intensive companies such as manufacturers.

accelerated depreciation - depreciation is an accounting device that allows a company to write off decreases in the value of its physical assets (such as machinery, computers, or vehicles) as business expenses. The effect is to both reduce corporate income taxes by reducing taxable profits and to reduce the value of property that is assessed for determining property taxes. Businesses take depreciation charges according to prescribed schedules, depending on the kind of asset. Accelerated depreciation is a tax-law change that allows a company to write down the value of an asset in fewer years than before. By giving the company a larger write-off sooner, accelerated depreciation gives the company lower taxes in early years and therefore higher profits.

anti-piracy - the movement against the use of development subsidies to lure a company and its jobs from one labor market to another. All of the major federal subsidy programs -- including Community Development Block Grants, Workforce Investment Act, and Economic Development Administration -- have anti-piracy rules. Some states also have anti-piracy rules that apply to companies relocating within their own borders.

appropriation - a government expenditure involving a transfer of money from one public agency to another or from an agency to a private party. Distinct from a tax expenditure, which is tax revenue not collected in the name of economic development (due to subsidies such as a property tax abatement or a corporate income tax credit).

as of right - a phrase used to describe a subsidy, usually a tax break, to which a company is automatically entitled. For more detail, see Entitlement.

assessed rate - the officially-estimated value of a property for the purpose of assigning a property tax to it. The assessed value times the milage rate equals the tax. For example, if a factory is assessed at $10 million, and the milage rate is 20 mils (or 20/1,000ths of the assessment), the tax due would be $200,000. The assessed rate may or may not be the approximate market value of the property; jurisdictions have different formulas for assigning assessed rates.

assessment - see assessed rate.

audit - a review of a program, deal, or agency, usually by a state auditor or an outside accounting firm. Compliance audits are simply financial reviews to ensure that monies have been spent properly; they are annual or bi-annual and are of little interest except for budget data (unless, of course, they uncover embezzlement of other major problems). Performance evaluations try to make qualitative judgments about outcomes and are therefore of greater interest. Unfortunately, they are also infrequent.

B
bidding war - an episode in which two or more jurisdictions compete -- much like an auction -- for a deal, by offering ever-higher subsidies. Although high-profile bidding wars for auto assembly plants are the best known, bidding wars for smaller deals happen every day. Site location consultants are often involved as middle men in the process, and public officials often describe their situation as a "prisoner's dilemma." That is, government officials only communicate with the company during the bidding process, not with officials in the other jurisdiction(s), so they have no way of knowing if the company (or consultant) is telling the truth about the competing bids.

big-box stores - large retail stores which typically occupy more than 50,000 square feet of space, profit from large sales volume, rely on shoppers who arrive at the store by car, include acres of parking and occupy a large footprint, create site development that neglects any community or pedestrian amenities, and pervade almost every community but provide no unique culture, products, or identity.

blight - a term (sometimes paired with "distressed," see that term also) used to describe an area that has a high percentage of buildings that are dilapidated, deteriorated or substandard. Therefore, it may qualify for a geographically targeted subsidy such as an enterprise zone or a tax increment financing (TIF) district to encourage redevelopment. The blight criteria, however, are a classic case of good intentions gone awry. While some states continue to define blight honestly so that subsidies really get targeted to needy areas, others have loosened the definition so that even healthy areas can qualify for the subsidy. Citizens of a rural town near St. Louis were horrified to learn that officials, in a quick drive-by, had estimated that most of their farm houses were more than 35 years old, so their neighborhood was "blighted." Rules in the State of Maine now effectively make every Central Business District eligible for TIF, even those that are healthy and vibrant.

block grant - A block of federal dollars sent to the states for a general purpose, allowing the states a lot of flexibility on how to use it. This practice has become increasingly common as federal "devolution" has reduced the role of uniform national procedures for running many programs. The U.S. Department of Housing and Urban Development has given cities and states Community Development Block Grants for decades; CDBG is the most common block grant used for economic development purposes. More recent examples of other types of block grants include Temporary Assistance to Needy Families, the Child Care Development Block Grant and the Social Services Block Grant. Critics argue that without uniform federal safeguards, cities and states are prone to using the funds in ways that reward more affluent citizens or other favored constituencies, instead of helping the truly needy.

bond - a certificate of debt that bears interest, issued by a government body or a private corporation to finance infrastructure, construction, new equipment or other improvements. "General obligation bonds" are bonds issued by governments that are backed by the full faith, credit and future tax revenue of that government; examples include school bonds and sewer bonds.

"Private activity bonds" may include industrial revenue bonds. They are backed by revenues from the project and not by a government or its general tax base. Private activity bonds are typically private transactions (both the borrower and lender are private parties) laundered through an economic development authority so that the interest becomes tax-free. This funding vehicle is allowed because the loan's use is deemed to meet the public purpose of economic development, such as job creation or retention.

brownfield - a property that has environmental pollution which resulted from a previous occupant. Brownfields are a major cause of urban abandonment and tax-base loss. They range from major sites which are designated EPA Superfund sites to lesser sites that fall under different federal or state laws. Until the pollution is cleaned up and the legal liability is thereby eliminated, it is usually impossible to redevelop a brownfield site because banks will not make a loan for fear of becoming entangled with clean-up liabilities. Because the pollution sometimes happened decades ago, it can be difficult to find the responsible party or to get money from that party for the clean-up. In recent years, many states and the federal government have debated or enacted changes in their brownfield-liability laws to encourage redevelopment; many have also created new subsidy programs to help finance clean-ups, especially when the polluting party cannot be compelled to pay. (Some cities use TIF or Section 108 monies.) Brownfields are sometimes a source of political tension between environmentalists and urban developers. Developers advocate for less stringent clean-up standards, especially if the land is going to be used for non-residential purposes while environmentalists advocate for strict clean-ups, arguing that city residents are already exposed to disproportionate levels of toxic hazards.

business inventory exemption - a corporate tax exemption that is commonly included in state enterprise zones. "Inventory" means goods and supplies held by a company before they get used or sold. Therefore, it is a corporate asset, and many states tax it as such. Manufacturers and warehousing companies have the most inventory and therefore benefit most from inventory exemptions. Indeed, some enterprise zones studies find that the zones simply cause existing warehouses to relocate into the zone to avoid the inventory tax, creating no new jobs. Honest observers admit that in some states, the proliferation of enterprise zones is a de facto rewriting of the corporate tax code to reduce or eliminate the inventory tax.

business climate - a highly subjective and hotly-debated term referring to how favorably businesses view an area, especially as they consider a relocation or expansion. This is the heart of the whole "candy store" debate: public goods vs. private deals. On one side are those who argue that the most important factors in companies -- location decisions are business basics, such as proximity to customers, proximity to suppliers, the availability of skilled labor, the quality of infrastructure, and the supply of other key inputs depending on the particular business (such as water, air transport, or a university research and development center). In other words, they argue that public goods that benefit all employers are the key to a good business climate, and therefore spending for economic development is best directed to education, skills and infrastructure. On the other side are state and local chambers of commerce and manufacturers' associations, companies that are playing jurisdictions against each other and/or their site location consultants, and other people who have financial self-interests in winning new subsidies. They argue that more tax breaks and other subsidies determine a good business climate. The breaks and subsidies usually benefit only certain kinds of companies or newly arriving companies. In other words, they argue that private deals for specific companies or favored groups of companies creates a good business climate. A dramatic moment in the history of this debate involved the Chicago accounting firm of Grant Thornton. During the 1980s, this firm released an annual 50-state "business climate" rating. Typically, it gave top ratings to states such as North Dakota, that had lax regulatory standards, low wages and low taxes even though its top rated states often ranked very low in actual performance. Grant Thornton's rating system was demolished by a 1986 publication from the Corporation for Enterprise Development titled Taken for Granted: How Grant Thornton Leads the States Astray, which exposed massive flaws in the accounting firm's methodology. For example, it revealed the fact that each year, Grant Thornton allowed each state's manufacturers' association to subjectively weight its state's rating factors. That allowed politics to taint the results, because the manufacturers would overweight the issue of the day, such as worker compensation tax rates, making the results invalid. The CFED study also provided a terrific summary of the academic literature on how companies actually decide where to locate or expand (i.e., business basics, as outlined above). Within several years, Grant Thornton abandoned the field and CFED's annual Development Report Card of the States became the standard.

"but for" test - a requirement common to tax increment financing as well as "gap financing" programs that call for a discretionary determination by government officials. Typically, the company must certify -- or the government agency must find -- that the project would not occur in the foreseeable future "but for" the subsidy. This is a frequently-abused rule that is almost impossible to verify and has more to do with covering politicians' backsides than preventing needless giveaways. One state audit found that local officials had six different definitions for the term.

C
cash register-chasing - (see also fiscalization of land use) a phrase we coined in 1994 to describe some cities' granting of massive subsidies to shopping malls and "big box" retail stores such as Wal-Mart and Home Depot. This practice became rampant in states such as California and Utah, where laws such as Proposition 13 depressed property tax rates, making cities desperate to find other sources of revenue. Most states allow cities to add on a local sales tax if the sale occurs in that city. Cities may rebate some or all of their sales tax to the developer as a subsidy, or divert sales tax revenue into a tax increment financing (TIF) district that benefits the development. Because outlying suburbs have the most undeveloped land available for such projects, they often have an advantage competing under such rules. Hence, critics now argue that Proposition 13 and its ilk are a major cause of suburban sprawl. Critics also point out that retail has very low "ripple effects" and very low job quality, and is therefore a dumb activity to subsidize. But because they need the revenue, cities do it every day.

Chamber of Commerce - an association of businesses at the local or state level. Chambers lobby for subsidies and deals, and in many areas, they are the privatized industrial recruitment agency, paid for by taxpayers under a public contract. Chambers sometimes also have seats on the boards of state development authorities that grant subsidy deals.

CDFI - see community development financial institutions; see also micro-loan.

clawback (also known as recapture) - money-back guarantee language canceling, reducing and/or recovering a subsidy when a company fails to deliver. It is an enforceable penalty in a development subsidy contract saying that if a company fails to deliver a specified public benefit in a specified period of time, it must repay some or all of the subsidy already received and/or lose some or all future benefits of the subsidy. (This is identical to the "penalty provision," which is standard in civil contract law.) A prorated clawback would say, for example, that if a company falls 10% short of its job-creation goal, it would have to refund 10% of the subsidy. Some clawbacks set a steeper penalty, even including interest penalties. Clawbacks may also apply to other goals, such as capital investment. Clawbacks are the ultimate taxpayer protection against a company failing to deliver. They also strike most people as common sense. What state would contract for 100 miles of highway and then allow a contractor to build only 50 miles and keep the money? Trouble is, cities and states fail to make job "projections" binding, so such shortfalls are routinely allowed in economic development. However, clawbacks are finally catching on: more and more states now apply a clawback of some sort against at least one development subsidy.

cluster strategy - an economic development strategy based on the fact that many industries tend to cluster together geographically. The high-tech cluster around San Jose, California called Silicon Valley is the best-known. Since the early 1980s, American scholars have studied a number of European clusters, such as those in the northern Italian province of Emilia-Romagna, where dozens of small companies have clustered to become highly successful in ceramics and textiles production. A cluster strategy seeks to stabilize and strengthen such companies, usually by helping them cooperate on "pre-competitive" issues such as export promotion, quality control, or recruitment and training. Cluster strategies can be very cost-effective. They also have the benefit of helping many companies and creating enduring skills and relationships for the community. That means less taxpayer risk if one subsidized company fails.

collateral - (also known as security) an asset used by a borrower as security for a loan; if the borrower defaults, the lender gets title to the collateral. In some cases, development subsidy programs have less stringent collateral requirements than a private bank would have, or are willing to take a subordinated position on collateral behind private lenders.

community benefit agreement (CBA) - a project-specific contract between a developer and one or more community groups and/or labor unions, in which the developer agrees to provide various benefits as part of a redevelopment project. Such agreements are usually tied to the developer's receiving economic development subsidies; community-labor coalitions use the subsidies as leverage. Benefits may include first-source hiring, living wages, relocation assistance, access to affordable housing, parks or other public-space improvements, and traffic or parking improvements.

Community Development Block Grants (CDBGs) - large, multi-purpose annual grants to cities and states from the U.S. Department of Housing and Urban Development. "CDBGs" are the largest federal pot of money used in state and local economic development deals.

community development corporations (CDCs) - local non-profit organizations promoting neighborhood revitalization. Most CDCs focus on affordable housing rehabilitation and construction; some also work on the retail and industrial sectors. Many CDCs were created by grassroots community organizations seeking to save their neighborhoods against redlining and disinvestment. See also Local Initiatives Support Corporation, redlining, Community Reinvestment Act, disinvestment, and industrial retention.

community development financial institutions (CDFIs) - make loans to individuals, small businesses, affordable housing and vital neighborhood services such as day care, health and education, targeted to benefit disadvantaged people and communities. CDFIs seek to counteract redlining and other discriminatory practices that reduce the flow of credit to the neediest communities. See also micro-loan.

Community Reinvestment Act (CRA) - the main federal law to discourage redlining (when lending institutions discriminate geographically against certain neighborhoods based on race or the age of the housing stock, instead of the creditworthiness of borrowers). Since 1979 it has required banks and savings and loan associations to meet the credit needs of low- and moderate-income neighborhoods in their service areas. Combined with geographic lending data mandated under the 1975 Home Mortgage Disclosure Act, CRA enables community groups to get banks and S&Ls to the bargaining table and has been responsible for billions of dollars in neighborhood victories over the last two decades. See also redlining and predatory lending.

Consumer Price Index (CPI) - the most widely-used measure of inflation, a monthly statistical series issued by the Bureau of Labor Statistics (BLS) that estimates the changes in the price of a fixed "basket" of goods and services typically purchased by consumers. The CPI is used by many government agencies (such as the Social Security Administration) as well as private entities (such as parties to collective bargaining agreements) to adjust benefit payments or wages so that people do not suffer a declining standard of living due to inflation. To see CPI data, go to www.bls.gov.

CPI - see Consumer Price Index.

cost-benefit analysis - a comparison between the costs of a deal or program and the benefits it creates. Cost-benefit analysis in economic development is a hotly-contested issue with a very problematic history. Project supporters such as companies, Chambers of Commerce and their consultants often exaggerate the benefits of a subsidized deal to help justify massive costs. Mayors and governors are also prone to repeating the exaggerations for their own political benefit. But very few states have invested in the technical capacity to really determine when or if taxpayers will break even.

creaming - a recurring problem in training programs, especially with private training contractors. Creaming occurs because a contractor wants to report great-looking results, such as rapid placements and/or high wages on the new job, so it "skims the cream" of the population that needs help. That usually means taking disproportionately high numbers of younger, more educated and/or more skilled workers and fewer older, less-skilled workers.

credit (noun) - a dollar amount applied against a liability, such as a tax credit applied against a tax liability. See tax credit.

credit (verb) - to apply a dollar amount for a specific purpose, such as crediting a share of company's new capital investment against its state income tax liability.

credit rating - a judgment about the financial strength of a government body or a corporation that is used to determine the interest rate it must pay when borrowing money by issuing bonds. Governments or companies with strong ratings pay lower interest rates (because they are considered to be at lower risk of defaulting); those with weaker ratings must pay higher rates. Three private rating agencies dominate the credit rating business: Moody's, Standard & Poor's, and Fitch.

D
dba - "doing business as," the least formal form of business registration, used to register the fact that one company or person is doing business in another name.

dead malls - a nickname for vacated retail malls. Greyfields and ghostboxes are similar terms.

depreciation - an accounting device in which a company charges, as a business expense, some percentage of an asset's value each year until the end of the asset's depreciable life (examples include machinery, computers or vehicles). The effect is to reduce the company's officially reported profit and therefore its tax burden. Since depreciation is an accounting charge, not a cash expense, it is excluded when a company's cash flow is computed.

development authority - a government body authorized to exercise development powers such as granting TIF districts, issuing revenue bonds or instituting eminent domain. Development authorities include cities, industrial development authorities (which are usually county or state bodies), port authorities, housing and redevelopment authorities, and rural development finance authorities.

discretionary subsidy - a subsidy granted to a specific company or project based on a decision made by a government body. The opposite of an entitlement.

disinvestment (also known as "bleeding" and "milking") - letting something run down by failing to reinvest in it. Disinvestment may occur within a company when it lets an individual facility run down. Or it may occur to an entire neighborhood when banks and insurance companies "redline" it, or when the local government fails to provide a fair share of public services and physical maintenance. Corporate disinvestment of a facility takes many forms, including cutbacks in maintenance, lack of support for new products, demands for wage and benefit concessions, and transfer of top managers. Public disinvestment of a neighborhood also takes many forms, including failure to maintain infrastructure such as roads and schools, and unjust distribution of critical services such as health care and emergency response. See also redlining, Community Reinvestment Act and early warning systems.

distressed - A term (sometimes paired with "blight," see that term also) used to describe an area that has a high rate of low-income households, or of households receiving public assistance, or of unemployment, and therefore may deserve a geographically-targeted subsidy such as an enterprise zone or a tax increment financing (TIF) district.

E
early warning system - a system used by some cities and states to try to identify workplaces that are at risk of closing, so that government officials can intervene to either save the jobs or better assist the dislocated workers. The first early warning systems were developed by plant closing activists in the mid-1980s and taught to public officials in the late 1980s. By the late 1980s, the Job Training Partnership Act (predecessor to the Workforce Investment Act) required Private Industry Councils (now Workforce Investment Boards) to look for workplaces showing early warning signals. See also disinvestment.

economic development - multiple choice:

a. a simple process in which businesses get a lot of money from government, politicians get to take credit for creating jobs, the details aren't discussed, and folks hope everything works out all right.

b. a very complicated process involving lawyers, bankers, planners, studies, agreements, and reams of paper that no average citizen could ever hope to understand.

c. raising the living standards of average working people.

Economic Development Administration - an agency of the U.S. Department of Commerce that focuses mostly on building infrastructure, such as industrial parks, to encourage rural development.

enterprise zones - geographically designated areas (also known as "empowerment zones" and by state-specific names such as Michigan's "Renaissance Zones" or New York's "Empire Zones") in which companies can get multiple subsidies (usually property tax abatements, inventory tax exemptions, and various corporate income tax breaks, including employment tax credits). EZs are located in economically-depressed areas, the theory being that poverty can be alleviated by encouraging companies to locate in them. However, there are many problems with this theory, especially the fact that it is very hard to ensure that poor zone residents will actually benefit from corporations moving into a zone. As well, EZs are premised on piracy. That is, they raise the classic "zero-sum" criticism of subsidies: that no net new economic activity is being created; jobs are merely being shuffled around.

Empowerment Zones - the first name for federal enterprise zones. See enterprise zones.

Employee Stock Ownership Plan (ESOP) - a form of employee ownership that is encouraged by the federal tax code and by federal pension rules. First enacted in the late 1970s and amended by Congress many times since, ESOPs create powerful financial incentives for companies to sell some or most of the company stock to employees. ESOPs are especially attractive for family-owned companies when the founder is approaching retirement. They are also used by larger corporations that are spinning off subsidiaries. Some unions, such as the United Steelworkers of America, have used ESOPs as a job-retention strategy for their members.

Entitlement - a subsidy to which a company is automatically entitled by virtue of meeting some criteria or performing some specific activity. The opposite of a discretionary subsidy.

ESOP - see Employee Stock Ownership Plan.

F
First-source hiring - a program that requires employers to use qualified workers referred from a certain source as their "first source" of applicants to fill available jobs. That source is usually a government-sponsored workforce development program that helps place needy workers, such as former welfare recipients or chronically underemployed. First source hiring rules are typically attached as a condition for private contractors doing public work, or for business receiving economic development subsidies. Similar programs -- sometimes called "targeted hiring programs" -- require that employers make efforts to hire certain workers (e.g., workers from certain neighborhoods, or low-income workers).

fiscalization of land use - what happens when cities or counties encourage development that will maximize tax revenues and minimize new demand for public services. For example, another strip mall might generate a lot of sales tax for a city. The retail project will get the subsidy, even though people may need affordable housing much more than they need another place to shop. But because more housing means more school children, and that means more classrooms and more teachers, a city may shun such a project. See also cash-register chasing.

franchise tax - taxes paid by companies for the privilege of doing business in a state. More than half of the states have such taxes, which are typically calculated as a percentage of a company's capital or net worth. Some states, such as California and New Jersey, use the term franchise tax to refer to a tax on a company's net income, making it very similar to a corporate income tax.

Freedom of Information Act (FOIA, or "FOY-ya") - a federal law enacted in 1974 that requires Federal agencies to provide public access to and copies of existing agency records. States have enacted similar laws, often called Open Records Acts. Both federal and state FOIAs allow government agencies to exclude some materials from public review.

FTE - see full-time equivalent.

full-time equivalent - the sum total of full and part-time employees, expressed as how many full-time employees they are equivalent to.

G
gap financing - a government-sponsored loan or other subsidy that fills the gap between what a developer needs to finance a project and what private lenders are willing to lend. Often, gap financing serves to give a private lender or a private investor more confidence in a deal, or to increase the rate of return for an investor to satisfy his or her perception of the deal's risk.

general obligation (GO or "GEE-oh") bonds - government-sponsored bonds, such as school bonds, the proceeds of which go to a public entity. The opposite of a private activity bond such as an industrial revenue bond (IRB), proceeds of which go to a private entity. GO bonds are backed by tax revenues and are rated by credit rating agencies depending on the financial health of the government body that is selling them. GO bonds are not usually considered economic development subsidies, because they do not go to specific deals. IRBs, which do go to individual companies, are called private activity bonds, because they are essentially private transactions between private lenders and private borrowers which are laundered through a public agency.

Geographic Information System (GIS) - a database system about the earth's surface. Originally created as a military tool, GIS has in recent years been commercialized in software programs such as ArcView and is increasingly popular as a tool for mapping issues as varied as crime locations, dislocated workers or urban sprawl.

ghostboxes - a nickname for vacated retail space. Greyfields and dead malls are similar terms.

GIS - see Geographic Information System.

GO bonds - see general obligation bonds.

grant - a subsidy which simply consists of cash or another asset given from a government agency to a company for use in a development project. In some cases, the grant may have a narrow purpose such as training new workers. In other instances, it may simply be applied to the construction costs of a new facility or for land acquisition.

greenfield - a term intended as the opposite of "brownfield." A greenfield is a site being considered for development that has not been built on before. In a positive sense, that implies it has no environmental contamination. In a negative sense, it implies that the development is contributing to urban sprawl, since such a site is likely on the fringe of an urban area. In manufacturing projects, the term also implies moving to a labor market where workers have not worked in a factory before; such a workforce suggests cost advantages in terms of non-unionization, lower wages, lower healthcare costs and lower pension obligations.

greyfields - a nickname for vacated retail space. Dead malls and ghostboxes are similar terms.

gross receipts tax - levies on the revenues taken in by a company, i.e., its overall level of business activity rather than its profit (which is what corporate income taxes are based on). Only a small number of states, such as Delaware and Washington (which calls it a Business & Occupations Tax), impose this tax on all companies, but a larger number of states apply it to certain sectors, most commonly public utilities.

H
hotel tax - see transient occupancy tax.

I
IDA - see either industrial development agency or individual development accounts.

incentive - something provided to encourage somebody to do something they would not do otherwise. Because there is so much recurring evidence that monies spent for economic development are given to companies that would have done what they did anyway, we seldom say "incentive," preferring to use the more honest term "subsidy." Subsidy is also the word used by the World Trade Organization and other international bodies to describe economic development programs. See also subsidy.

inclusionary zoning - a deliberate attempt to include people of different income levels in developments that otherwise would probably include only market-rate housing. A typical goal is to reserve 15 to 20 percent of the units in a project for low- and moderate-income households.

incubator - a subsidy program to support very small businesses as they get started. Typically, incubators provide start-up companies with affordable space, low overhead, and shared office services. They are usually accompanied by other small-business help, such as management advice and loans.

in-migration - the migration of business facilities into an area; the opposite of out-migration. Economic development officials monitor in-migration and out-migration as a measure of economic health, and to look for clusters, or industry groups.

individual development accounts - an increasingly popular anti-poverty strategy based on the theory that the best way to enable people to escape poverty is to help them save enough money for major investments such as homes, college or small businesses. IDA programs encourage poor people to save by matching personal savings with donations from foundations or governments; the matches range from 1 to 1 to 6 to 1.

industrial development authority (IDA) - a state, local or regional entity that has the powers to give development subsidies such as industrial revenue bonds.

industrial development bonds (IDBs) - see industrial revenue bonds

industrial revenue bond (IRBs) - also known as Industrial Development Bonds; the most common form of economic development loan given to companies. The interest rate on IRBs is low because the interest paid on them is tax-free. That means the wealthy individuals or corporations who buy the bonds will accept a lower rate of interest. IRBs are essentially a private transaction (a corporation borrows money from a private lender, the bond buyer) laundered through a public authority to become tax free. IRBs are enabled and allocated under the federal tax code and regulated by each state. States may attach accountability standards to IRBs, such as wage rules and clawbacks. IRBs are private activity bonds, not general obligation bonds (like school bonds or sewer bonds), so they don't affect the credit rating of the state or local government. See general obligation bonds.

industrial retention - an economic development strategy that focuses on retaining and growing the businesses that are already in an area, instead of spending resources to recruit new businesses from outside. This strategy is based on two facts. One, job retention is usually much cheaper on a per-job basis than recruitment; and two, most new jobs are created by growth in existing businesses, so it is usually more cost-effective to focus on them instead of recruitment. See also clusters and early warning systems.

infill - the development of vacant or abandoned land in an area that is otherwise built out.

infrastructure - publicly-owned physical systems that benefit all businesses and workers, such as schools, roads, sewer systems, libraries and publicly-owned utilities. The term now also often applies to cell-phone towers and fiber-optic networks. Subsidy critics often argue in favor of public goods such as infrastructure and against company specific deals. See also business climate.

inventory tax - see business inventory exemption.

Italian model - see cluster strategy .

J
job creation tax credits - corporate income tax credits granted by state governments or the federal government for hiring workers. In some cases, the credits are granted only for hiring disadvantaged workers, such as the federal Work Opportunity Tax Credit or some state enterprise zone programs. However, some states give the credits for hiring any new workers. These credits typically range from $1,000 to $5,000 per worker -- that is, a dollar for dollar reduction in the company's income tax payment.

job piracy - the use of development subsidies to lure a company and its jobs from one labor market to another. All of the major federal subsidy programs -- including Community Development Block Grants, Workforce Investment Act, and Economic Development Administration -- have anti-piracy rules. Some states also have anti-piracy rules that apply to companies relocating within their own borders.

Job Training Partnership Act (JTPA) - the predecessor law to the Workforce Investment Act.

L
land acquisition and assembly - see land write-down.

land write-down - a subsidy in which a development authority acquires property and transfers it to a private developer for a price below the authority's acquisition cost. Sometimes the deal involves assembling contiguous parcels together. Besides the cost of the land purchases, the authority's expenses may include administrative costs for the exercise of eminent domain, demolition and clearance, and/or environmental clean up. Land write-downs may be subsidized from numerous sources, including a city's general fund, TIF, a brownfields program, and/or CDBG.

land use policy - the way state and local governments regulate our built environment. It includes zoning laws, transportation planning, environmental reviews, and other ways civil society seeks to physically integrate and harmonize workplaces, housing, commercial activity and public spaces.

LBO - see leveraged buyout.

leveraged buyout (LBO) - a purchase of a company often made possible by taking on huge amounts of debt (leverage). LBOs are often led by management. Usually, the company does not keep the debt for a long time; instead, the managers sell off parts of the company and use the proceeds to retire the debt. LBOs can be very profitable because some companies are more valuable broken up than left together. LBOs were especially popular in the 1980s when companies used high-interest/high-risk "junk bonds" to finance the break-up of corporate conglomerates that were so popular in the 1970s.

leverage (noun) -  debt. A company that has a lot of leverage or is highly-leveraged is a company that has a lot of debt.

leverage (verb) - in economic development, using public money to secure private investment. Like the "but for" rule, this is a frequently-abused term that is notoriously hard to verify. That is, if a public official claims that a $1 million subsidy has "leveraged" a $7 million private investment, how do taxpayers really know that the private investment would not have happened anyway? In far too many cases, auditors and journalists have found evidence that leverage claims were dubious or false. See also "but for."

line of credit - an agreement between a borrower and a bank that allows the borrower access to money, at a prescribed interest rate, up to a maximum dollar amount for a set period of time.

linkage requirement - a rule attached to a development subsidy requiring the company to provide a public benefit -- usually hiring local workers first -- in return for the subsidy. Linkage requirements are especially common in training programs and enterprise zones.

LISC - see Local Initiatives Support Corporation.

loan - when one party lends money to another. In economic development, the issue is the terms of the loan. Government-sponsored loans often have easier terms for borrowers than private loans; that is, they often have lower interest rates, they may have longer terms and therefore require smaller monthly payments, and they may have less strict collateral requirements. Especially for capital-intensive manufacturing facilities, economic development loans can be an enormous subsidy. Since government-sponsored loans benefit only certain selected firms, they have the effect of discriminating against companies that use conventional (private) financing. See also industrial revenue bonds, loan guarantee, gap financing, leverage and collateral.

loan fund - government monies dedicated to making loans, usually targeted to a specific size of company, such as small businesses, or a specific industry, such as high tech.

loan guarantee - a government insurance policy given to a bank to secure a loan, usually to a small business. The U.S. Small Business Administration (SBA) is the largest source of loan guarantees.

Local Initiatives Support Corporation (LISC) - a national non-profit corporation that provides support to Community Development Corporations (CDCs).

location-efficient incentives - economic development subsidies that are awarded preferentially to companies locating near public transportation, or creating equivalent access to jobs or affordable housing.

loophole - see tax loophole.

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