Glossary A - L >>> M N P Q R S TU V W X Y Z

M
mean - the mathematical average; see per capita income and median income. For reasons explained in median income below, mean income is a poor measure in economic development and is therefore seldom used. If mean income were used to refer to the average income of all workers earning a paycheck, it would be different than per capita income, which would include all residents of an area, including children, retirees, the disabled and other people without payroll incomes.

median income - the income level in the middle of a ranked list of incomes. That is, if 99 people were listed in order of their incomes, the median income of the group would be that of person #50. Median income is used as a measure of an area's income instead of the mathematical average (the mean) because it is more reliable at describing the typical income. That's because a few high-income people can skew an average. If you averaged the income levels of 98 Nike shoe-makers in Indonesia with the income of Bill Gates, the average (or mean) would be far higher than the median and would hardly describe the typical living standard of members of the group.

metropolitan planning organization (MPO) - A metro-regional governmental unit that has legal jurisdiction over a geographic area for government service planning such as transportation or land use zoning. MPOs oversee implementation of the Transportation Equity Act of the 21st Century (TEA-21) and are therefore the organizing targets of transit activists.

metropolitan statistical area (MSA) - a discrete population center, as designated by the federal Office of Management and Budget. While OMB designates MSAs for statistical use by federal agencies, the designations can be very useful for advocates researching income and other demographic trends. An MSA is an urban area that has at least 50,000 people and is predominantly surrounded by non-urbanized areas. MSAs are defined by county, except in New England, where the definition varies in some cases. The 2000 census uses new regional designations that broaden MSAs to include outlying counties from which a substantial number of workers commute into an urban area. A Consolidated Metropolitan Statistical Area (CMSA) is an MSA that has more than a million people. CMSAs are broken down into smaller units called Primary Metropolitan Statistical Areas; a PMSA is a large urban county, or set of socially and economically linked counties, located within a CMSA. Thus New York City is one of many PMSAs within the New York - Northern New Jersey - Long Island CMSA.

micro-credit - see micro-loan.

microenterprise - a very small business of five or fewer employees. Microenterprises often lack access to conventional loans and may benefit from community development financial institutions or other non-traditional lenders. See also micro-loan and community development financial institutions.

micro-loan - a very small loan (usually between $500 and $3,000) to an individual starting a small business but who lacks access to credit. The loan may be unsecured (that is, the borrower puts up no collateral). Micro-loans have proven to be very effective ways to help low-income people, especially women in developing nations, get basic tools they need to improve their incomes. The Grameen Bank in Bangladesh is the most famous example of this. In the U.S., there are many local microloan programs, usually sponsored by non-profit groups known collectively as community development financial institutions (CDFIs). See also community development financial institutions.

mil - one thousandth, as in a property tax milage rate of 10 mils, or 10/1,000 or effectively one percent of the assessed rate.

milage - see mil.

minority-owned/women-owned business enterprises (MWBE) - Some states and cities have subsidy programs targeted to MWBEs; they are usually similar to small-business programs (loan guarantees and management advice). To redress historical discrimination and promote diversity in business development, many cities and states also seek to procure a percentage of their goods and services from MWBEs.

MPO - see metropolitan planning organization.

MSA - see metropolitan statistical area.

multiplier or multiplier effect - a way to express the economic benefits of a deal; the number of jobs and/or amount of tax revenues that will result indirectly from a subsidized project (above and beyond the direct new jobs and tax revenues). The multiplier effect is a number that is frequently misunderstood, often overstated, and seldom analyzed by the news media. Yet it is a critical device used by companies and their consultants to justify massive subsidies. The most common problem with the number is this: when a company claims a multiplier of, say, 2.5 jobs, that number almost always includes the original 1.0 subsidized job, so in fact the indirect jobs are only 1.5. A figure of 1.5 indirect jobs is a high number that would be generated by a high-input manufacturing facility such as an auto assembly plant. Yet companies often claim multipliers higher than 2.5. The methodologies used to derive multiplier numbers are irregular and often indefensible, but journalists seldom question the numbers, so that misunderstood and overstated numbers dominate public debate and help companies win more subsidies. Multiplier jobs are divided into "upstream" jobs (such as those at supplier firms) and "downstream" jobs (such as those at local retailers where workers shop). So, for example, because manufacturing plants usually require many suppliers (some of which will be local), and because they have mostly full-time jobs with better than average wages, they generate much bigger multipliers (but seldom higher than 2.5) than low-wage retail projects (with typical multipliers of 1.6).

MWBE - see Minority-owned/Women-owned Business Enterprises.

N
Neighborhood Housing Services (NHS) - a national network of non-profits which provides loan products like construction loans and first time mortgages to the community-based NeighborWorks nonprofit network in efforts to help revitalize low-income communities.

North American Industry Classification System (NAICS or "nakes") - the official federal classification system for business establishments that replaced the Standard Industrial Classification (SIC) for statistical purposes. States use NAICS classifications when reporting wage data, so understanding this system is critical if you are studying wages. The numbers range from two digits to six, with more digits needed to indicate more-specific activity. For example, NAICS starting with 22 indicate construction companies. Those starting with 31, 32 or 33 indicate manufacturing establishments. So, NAICS 311 is food manufacturing, 3118 is bakeries and tortilla manufacturing, and 311813 is frozen cakes and pies. If you were seeking to create a market-based wage standard by industry, two or three digits will be all the detail you will need.

NHS - see Neighborhood Housing Services.

no wrong door - a term used by those who advocate for "one stop" training centers that house all major programs, a major thrust of the Workforce Investment Act. The idea is that no matter what a worker needs, or what program she qualifies for, once she arrives at the one-stop, she will receive the correct information and be encouraged to enroll there.

O
one-stop center (training) - employment and training facilities that house numerous programs for workers with different needs, such as welfare to work, dislocated worker assistance, and customized training for incumbent workers. A major thrust of the Workforce Investment Act, one-stops have been pushed since Labor Secretary Robert Reich publicized the fact that the federal government sponsors more than 50 different training programs, making it hard for workers to navigate the system to get the help they need. See also no wrong door and Workforce Investment Act.

one-stop center (business assistance) - a state or local government office that coordinates many forms of assistance to business seeking subsidies, such as loan applications, training programs, zoning applications, and site preparation. Since subsidies come from several sources, companies often find it confusing and time-consuming to assemble all of the data they need; states and cities have responded by creating one-stop centers to expedite the process.

open records act - state laws that provide for the public release of most government documents, including those in economic development. See Freedom of Information Act.

P
payment in lieu of taxes (PILOT) - payments negotiated between companies and local governments to cushion the blow to public services caused by property tax abatements. Sometimes PILOTs are pegged to cover a specific portion of a company's normal property tax liability, such as the school increment. See also tax abatements.

PCI - see per capita income.

per capita income (PCI) - the mathematical average income of all people in an area, computed by dividing total income by total population. Per capita income is an inferior wage standard for development subsidies because it does not reflect typical wages, since it includes non-workers as well as workers. Therefore, if it is used as a wage standard, it will set artificially low standards, and be especially unfair to workers in areas with lots of kids or retirees. For that reason, we recommend against it.

performance-based incentives - a phrase used to describe subsidies that can only be collected if a company meets specified targets or requirements. An example would be a job-creation tax credit that a company could only collect by proving (through payroll records) that it has hired new workers.

performance measurement - the criteria used by auditors or evaluators to determine if a subsidy program is working. Examples include job creation or capital investment. The problem with measuring economic development programs is that it is often impossible to definitely determine cause and effect, that the subsidy actually caused the benefits.

PIC council - the predecessor regional training agency to the current Workforce Investment Boards. See Workforce Investment Act.

piracy - see job piracy.

predatory lending - when lending institutions offer inferior home loans, with higher interest rates, needless insurance policies and/or other high-risk provisions that increase the likelihood that the homeowner will default and lose the home. Also known as "asset stripping," predatory lending largely replaced redlining, in which lenders used to deny credit outright to lower-income and/or minority neighborhoods. Now, seeking to "comply" with the Community Reinvestment Act, many lenders have subsidiaries that lend in previously-redlined neighborhoods, but on very inferior terms. See also redlining and Community Reinvestment Act.

private activity bonds - government-sponsored bonds, such as industrial revenue bonds, the proceeds of which go to a private entity (for a public purpose). The opposite of a general obligation bond, the proceeds of which go to a public entity. Private activity bonds are essentially private transactions laundered through a public authority, such as an industrial development authority, to become tax-free and therefore low-interest. Private activity bonds do not affect a government's credit rating, since all of the risk is borne by the private lender who buys the bonds. See industrial revenue bonds and general obligation bonds.

private industry council (PIC council) - see PIC council and Workforce Investment Act.

property tax 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.

public-private partnership - a vague, slippery term. In its best sense, it refers to projects in which government and business play their respective roles properly, such as a regional training program in which both parties add to a region's skills base and thereby raise incomes. In its worst sense, it is used by business interests as a euphemism and a public stroke when in fact business has taken taxpayers to the cleaners.

Q
quasi-public - a phrase sometimes used to describe privatized economic development agencies. Such organizations rely heavily on public funds and may or may not be subject to open records acts. The term "quasi-public" does not appear in state constitutions and may be of dubious legal standing.

R
recapture - another word for clawback; a clause in an economic development contract in which a company agrees that if it fails to deliver on the terms of the agreement (such as job creation or dollars invested), it will pay some or all of the money back.

redlining - a discriminatory practice in which banks (or other lending institutions) deny credit or insurance companies deny insurance in certain neighborhoods based on the race of the residents, or the age of the housing stock, instead of the creditworthiness of borrowers. Redlining can be very subtle, involving appraisal and underwriting standards that have a discriminatory effect without appearing bad on their face. See also Community Reinvestment Act and predatory lending.

research and development (R&D) tax credits - dollar-for-dollar reductions in a company's corporate income tax bill in return for spending on research and development. States allow R & D credits usually between 1% and 13%. This subsidy is especially lucrative for industries such as pharmaceuticals and microchips that have to spend large sums on research. A major concern is that the definition of what exactly "R & D" constitutes is often quite vague and may be stretched to include many activities that appear to be routine functions and not a search for new knowledge, products or processes. Even with true R & D, there is no assurance that the credited activity would not have been made in the absence of the credit.

ripple effect - see multiplier.

S
sales tax - a state tax, which often has a local increment added to it, imposed on retail sales or on sales to a corporate end user (such as when a company buys building materials for a new facility). Many states now exempt new-facility construction or expansion from sales taxes. Others divert sales tax revenues into TIF, or rebate a portion of sales tax revenues to developers as a subsidy.

SBA - see Small Business Administration.

SEC - see Securities and Exchange Commission.

Section 108 - a loan-guarantee program used by cities, backed by future Community Development Block Grant revenues.

Securities and Exchange Commission (SEC) - the federal regulatory agency intended to protect shareholders by enforcing laws and rules governing publicly-traded corporations (that is, those whose stocks trade in public exchanges). Companies must file various disclosure reports with the SEC, including the annual report, the 10-K and the proxy statement. These reports are vital tools for researchers and are distributed online via the SEC's website (www.sec.gov)

Service Delivery Area (SDA) - the geographic area served by a Workforce Investment Board under the Workforce Investment Act. See Workforce Investment Act.

SIC code - see Standard Industrial Classification.

single-sales factor (SSF) - a formula used by a small number states to determine a corporation's state income tax liability. SSF is a costly and controversial tax formula being pushed aggressively by manufacturing companies because it drastically reduces their state income tax bills. Traditionally, states use three factors to determine how much of a company's profits are taxable in a given state: 1) the share of its employees that work in the state; 2) the share of its physical assets that are in the state; and 3) the share of its sales that occur in the state. Most manufacturers have their assets and employees in a small number of states, but sell regionally or nationally, so if the states in which they manufacture switch to SSF, their tax bills go way down. Corporate lobbyists have been pushing SSF as an economic development boon, but the emerging evidence shows no such benefits, just declining state revenues, and a burden shift onto other businesses and families.

site location consultants - consultants who often represent companies during subsidy negotiations. Controversial and little-known "middle men" who play both sides of the street- working for companies looking for places and for places looking for companies-  who wield enormous influence in the subsidy debate. The oldest and best-known is Fantus, which is now a division of Deloitte Touche; there are many others.

small business - the incredibly convoluted definition of this term, under the Small Business Act, varies according to what a business does, as well as by number of employees and by annual sales.

Small Business Administration (SBA) - a federal agency that assists small businesses. The SBA provides many kinds of help (such as counseling and mentoring, and help with contracting and procurement awards). Its subsidy program consists of loan guarantees for businesses that are unable to get loans through normal lending channels.

smart growth - a term coined in 1997 by then-Gov. Parris Glendening of Maryland. This is a broad term encompassing many kinds of policies. For example, the law Glendening won says, in essence, that people can build anywhere they like, but if they build outside designated "Priority Funding Areas," (areas that already have infrastructure or are planned to get it) the project will not be eligible for subsidies. Other examples include: 1) State land-use laws that encourage development (and redevelopment) in areas that already have infrastructure, encourage adherence to long-term planning goals, and/or encourage cities to cooperate through regional strategies. About a dozen states have adopted some version. 2) Regional tax-base sharing among cities to deter job piracy and other tax-base competition and encourage regional cooperation. 3) Metropolitan or "Unigov" systems to merge counties with cities and thereby deter regional in-fighting. 4) New criteria for state investment funds to give preference to projects that revitalize blighted areas, promote public transit, or involve mixed-use structures. 5) Open-space preservation, including bond referenda to pay for the public purchase of open space, incentives to encourage private donations of land and state land preservation programs. 6) "Urban growth boundaries" or "greenbelts" around metro areas to set geographic limits on new development and encourage more intensive use of core areas and suburbs inside. 7) "Infill" development projects on vacant or underutilized parcels of land in areas that already have infrastructure. 8) Reclamation and re-use of "brownfields," or contaminated land sites left behind by previous industrial users. 9) Affordable housing programs in the suburbs so that lower-income workers can have greater access to jobs. 10) "Transit-oriented development," (TOD) in which cities use subway and commuter rail stations as hubs for mixed-use developments within a half-mile radius, including retail, housing and day care, etc.

smokestack-chasing - an informal and usually negative phrase referring to states and cities that seek factory investment by offering ever-higher subsidies. The phrase came into common use by the mid-1980s because factory deals such as General Motors' first Saturn plant, which prompted 30 states to compete in 1985, got so much attention. Today, the general practice has spread to many other sectors, such as corporate headquarters, financial services, warehousing and distribution, call centers and back offices. See also cash register-chasing.

spatial mismatch- the theory that unemployed workers in urban areas are disenfranchised from job opportunities in growing suburbs because they lack cars and also mass transportation choices that would help them access these jobs.

sprawl - development patterns that have: low density and a lack of mixed-use projects (for example, no apartments above stores); a lack of transportation options (forcing everyone to drive to work); strict separation of residential from non-residential property; and job growth in newer suburbs with job decline in core areas (including both the core city and older suburbs). These trends result in increased dependence on automobiles and longer average commuting times, deteriorating air quality, and rapid consumption of open space in outlying areas. They also cause disinvestment of central city infrastructure and services, and they strain city budgets at the core (caused by a declining tax base) and in the suburbs (caused by overly-rapid growth at the edge). The decentralization of entry level jobs makes work less accessible to low-skilled, unemployed workers. Since the suburbs lack affordable housing and public transit fails to reach many suburban jobs, sprawl effectively cuts central city residents off from regional labor markets. That means greater concentrations of poverty in core areas. See smart growth for a definition of the opposite of sprawl.

SSF - see single-sales factor.

Standard Industrial Classification (SIC or "S-I-C code") - the U.S. Department of Commerce system of classifying business establishment for statistical reporting purposes. In January 1997, the SIC was replaced by the North American Industry Classification System (NAICS). See North American Industry Classification System.

startup - a newly-formed business. Startups are fragile and usually need equity (cash) and loan guarantees; they also need management advice.

subsidy - any form of government support that lowers a company's cost of doing business.

sunset or sunset review - a tool used in state budgeting. When a government program is "sunsetted," that means it expires after a set number of years, unless it is reviewed and found to be effective enough to justify re-authorization. Most economic development subsidy programs are not sunsetted, especially tax credits, and that is another reason so many have become ineffective.

sunshine or sunshine law - a disclosure or a law requiring disclosure. As the saying goes: "sunshine is the best antiseptic."

T
10-K - a detailed annual disclosure form every publicly-traded company must file annually with the Securities and Exchange Commission. The 10-K is the most detailed report a company must file explaining its financial results and disclosing major events that have affected or may affect those results. See Securities and Exchange Commission.

Targeted Jobs Tax Credit - see Work Opportunity Tax Credit.

tax abatement - see property tax abatement.

tax base - the amount of assets or economic activity from which a government generates some of its tax revenue. To a city government, the most important tax base is usually the amount of taxable local property. For state and local governments, retail sales form the base for sales tax revenues. For the federal government, personal income is one large tax base.

tax-base sharing - a practice in some metropolitan areas in which cities share some of their tax revenues, such as commercial property tax or sales tax. This is meant to reflect the fact that, for example, most of the people who work in a factory in an industrial suburb probably don't live in the same city as the factory, and most of the people who shop in a suburban mall probably don't live in the same city as the mall. Advocates of tax-base sharing believe that it reduces the incentive for cities to use subsidies to simply pirate companies or sales from each other, thus stabilizing their tax base and reducing sprawl.

tax breaks - a broad term that includes many different kinds of subsidies, including property tax abatements, many kinds of corporate income tax credits and reductions, sales tax cuts, and utility tax cuts.

tax credit - one of the most aggressive subsidies a state can grant. Tax credits reduce state corporate income taxes. They are usually granted for specified kinds of corporate activities (such as spending for new plant and equipment or for research and development). Normally, a company would account for such expenses like any other business expense; higher expenses mean lower profits and therefore less taxable income (profits). But if the investment is eligible for a tax credit, a company is allowed to take a percentage of the expense- dollar for dollar- from its corporate income tax bill. If a company incurs a large expense eligible for a tax credit, some states' credits are so generous that the credit can actually wipe out the company's entire state income tax bill. And if a company's credit exceeds its tax bill for the year, states usually allow the company to carry the unused credit forward against its next year's tax bill. This is called a "tax-loss carryforward." Some states also grant tax credits for hiring disadvantaged workers or for hiring any new workers; see job creation tax credits.

tax expenditure - 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). Distinct from an appropriated expenditure for development, which is a transfer of money from one public agency to another or from an agency to a private party. See also entitlement.

tax-exempt bonds or tax-exempt financing - low-interest loans made to companies in the name of economic development. See industrial development bonds and industrial revenue bonds.

tax exemption - a broad, general term that may refer to many kinds of tax cuts, including property tax abatements or enterprise zone tax credits.

tax increment - see tax increment financing.

tax increment district (TIF District) - see tax increment financing .

tax increment financing (TIF) - an economic development subsidy program usually paid for by the diversion of property taxes, and sometimes by the diversion of sales taxes. TIF is regulated by the states and is locally-controlled. A city designates a TIF district for redevelopment. Based on the expectation that property values in the district will rise as a result of that redevelopment, the city splits the property tax revenues from the district into two streams: the first consisting of revenues based on the current assessed value; the second based on the increase in property values- the "tax increment." The tax increment is diverted away from normal property tax uses, such as schools, police and fire, and into the TIF district. There, the money can be used to back bonds or otherwise finance many different activities that subsidize the redevelopment. TIF is very popular with local officials because of its flexibility but controversial with many other parties.

tax-loss carryforward - see tax credit.

tax loophole - a popular (negative) term for special language in a tax code that favors a particular industry or small group of companies. For example, the oil depletion allowance in the federal tax code gives oil companies a special tax favor.

tax rate - the percentage of the value of a private economic asset or activity used by government to fund public services. For example, a city may tax property at 10 mils, or 10/1000ths (or 1%) of its value. A state government may tax personal income at a rate of 3%.

Temporary Assistance to Needy Families (TANF or "TAN-if") - the new name given to federal welfare for families in the 1996 welfare reform act. Formerly Aid to Families with Dependent Children (AFDC), TANF represented a major shift in welfare policy. Among its most important provisions is a five-year lifetime limit on assistance, a great deal of state control on program design and delivery and a heavy emphasis on steering welfare recipients into job-search activities ("work first"). TANF's emphasis on work first has caused some state welfare agencies to get much more involved with local economic development efforts, sometimes reducing the long-standing problem of poor coordination between welfare and development programs. But it has also led to numerous abuses, in which welfare agencies aggressively shuffle people into a job- any job, even with a temp agency- to declare that work first has been successful in breaking the welfare "dependency" cycle. TANF's changes have also increased the amount of privatization in welfare to work, with all the usual problems- such as creaming- seen when human services are contracted out. See also creaming.

TIF - see tax increment financing.

TIF district - see tax increment financing.
transient occupancy tax (TOT), also known as the hotel tax - a tax imposed on hotel and motel customers. Because travelers- not local residents- bear the brunt of a hotel tax, some cities have enacted TOTs in excess of 10%. Traditionally, TOTs were justified with the understanding that some of the revenue would be used to promote tourism (thus helping to fill up the hotels and restaurants), with the rest going to the general fund to support local public services. But increasingly, TOTs are getting diverted into special projects such as sports stadium deals. For example, a stadium deal may call for the incremental growth in TOT revenues to be dedicated to paying off stadium bonds. That means that even if tourism grows, and more people patronize hotels, taxpayers won't get any new TOT revenue for public services.

transit-oriented development - development projects in which new housing, retail, and/or office space is deliberately located near transit stops.

trophy project - a high-profile deal that will get a lot of media coverage. When public officials feel they might land a trophy project, they are very prone to spending too much for it, because they are prey to the argument that such a deal will have enormous "intangible" benefits and send positive "business climate" signals. Examples include auto assembly plants, micro-chip fabrication plants, and large-company headquarters facilities (such as the competition between Dallas, Denver and Chicago for Boeing's headquarters).

U
Urban Development Action Grants (UDAG) - a now-discontinued federal loan program that was run by the U.S. Department of Housing and Urban Development. Although the program is discontinued, many cities have revolving loans funds created by the re-use of UDAG loan proceeds as they get paid off.

urban sprawl - see sprawl.

V
venture capital (or "VC") - a high-risk investment, usually in a young company, in which the investor may seek very high rates of return (30% to 40% or more) through interest and/or equity in the company to offset the risk that the company will fail and the investment will be lost. Some states have created publicly-sponsored VC funds, sometimes using tax credits to attract capital. Not surprisingly, since they involve small numbers of people seeking to get rich quick, some have dubious histories.

W
welfare to work - a phrase referring to the increased emphasis, under the 1996 welfare reform act, in steering welfare recipients into work. The phrase also refers to a federal subsidy program created to encourage companies to hire former welfare recipients. See also Temporary Assistance to Needy Families.

workforce development - a broad term used to describe education and training programs that raise the skill levels of a workforce. At its best, workforce development can be integral to a sectoral program that raises people's lifelong skills and living standards. At its worst, it may refer to a program that forces people into meaningless training for dead-end jobs.

work first - see Temporary Assistance to Needy Families.

Work Opportunity Tax Credit (WOTC, or "WATT-see") - a federal corporate income tax credit program to encourage companies to hire "hard to employ" workers such as ex-offenders, workers leaving welfare, recent food stamp recipients, low-income veterans or the disabled.

Workforce Investment Act (WIA or "WE-uh") - the largest federal training program. A multi-purpose program administered by the U.S. Department of Labor that sends money to regional Workforce Investment Boards and to the states. WIA is usually the largest source of training money involved in major subsidy deals. The predecessor law was the Job Training Partnership Act (JTPA) and the predecessor regional bodies were Private Industry Councils, or "PIC Councils."

Workforce Investment Board (WIB or "wib") - see Workforce Investment Act.

Z
zoning - when local governments designate land for various kinds of uses, including commercial and industrial. Control over zoning can be highly politicized, because changes in land use can greatly affect land prices.