Most local governments pursue some degree of economic development activity to strengthen their economy by adding jobs and generating tax revenue. Witness the growth in tax increment financing, property tax abatements, tax credits, and exemptions for economic development. These state and local incentives totaled more than $80 billion in 2012. Economic development projects can represent a significant boon for a local economy. Estimating how much money they might generate, however, is not as easy as it initially seems, and jurisdictions can receive far less net new revenue than developers predict. Most consumers have finite incomes, which limits their discretionary spending. Spending at a new venue can generate a shift or transfer in discretionary spending from one product, service, or place to another because limited income forces consumers to choose how, where, and when to spend money. Even spending at such a unique place as an amphitheater displaces spending.
Original Publication Citation
Harris, P., Berkebile, R., Martin, J., & Filer, L. (2016). The big economic development project question: Is it new revenue or a spending transfer? Public Management, 98(7), 10-13.
Harris, Paul; Berkebile, Ronald; Martin, Julia; and Filer, Larry, "The Big Economic Development Project Question: Is It New Revenue or a Spending Transfer?" (2016). Economics Faculty Publications. 38.