Location:
ECONOMIC DEVELOPMENT; MUNICIPALITIES; REGIONAL PLANNING;

OLR Research Report


July 1, 2009

 

2009-R-0233

INTERMUNICIPAL ECONOMIC DEVELOPMENT

By: John Rappa, Principal Analyst

You asked us to summarize the laws allowing municipalities to collaborate on economic development.

SUMMARY

Reducing costs, generating revenues, and creating businesses and jobs are the desired outcomes of many economic development laws, including those authorizing collaborative municipal actions. There are other outcomes, such as eliminating slum and blight, establishing and maintaining viable urban communities, and improving infrastructure, and we included them, too. As Attachment 1 shows, some of the laws intend more than one outcome.

We divided the collaborative economic development laws into two groups. One group allows municipalities to organize themselves for collaborative action. These allow municipalities to establish regional economic development commissions or form agreements jointly to deliver a service or perform a function. One law authorizes state grants for municipalities that regionally deliver services.

The other group authorizes different economic development activities that municipalities may implement separately or jointly. These activities encompass:

1. acquiring and developing slum or blighted property or doing other things to improve urban conditions;

2. allowing municipalities, acting through their respective regional planning organization, to develop infrastructure benefiting the region;

3. allowing municipalities jointly to issue bonds to finance projects and share the property tax revenue they generate; and

4. allowing them to acquire and improve land for developing business facilities.

ORGANIZING FOR COLLABORATIVE ECONOMIC DEVELOPMENT

Municipalities can collaborate on economic development in several ways. The law allows two or more municipalities jointly to track economic conditions and trends and recommend how they can improve their economies. CGS 7-137 allows them to adopt ordinances establishing a regional economic development commission exercising the same powers and duties as local commissions. The local commissions must jointly determine the regional commission's membership.

Municipalities may jointly plan and implement economic development programs and projects under other statutes that authorize a wide range of interlocal activities. Among other things, CGS 7-339a-7-339l allows municipalities to enter into interlocal agreements to provide redevelopment services and market their region's advantages. The statutes specify the process for entering into these agreements.

Municipalities' authority to act collaboratively is much broader under CGS 7-148cc. That statute allows municipalities jointly to perform any function they can perform on their own under any statute, special act, or charter. It allows them to do so by adopting an agreement the same way they adopt ordinances or budgets. Participating municipalities must renew the agreement every five years.

Lastly, municipalities qualify for state funds under CGS 4-124s regionally to deliver a service. But they may access these funds only through their respective regional planning organizations. The statute specifies the process and criteria for accessing the funds.

COLLABORATIVELY PLANNING AND IMPLEMENT ECONOMIC DEVELOPMENT POLICIES AND PROGRAMS

Physical Development Projects

The statutes authorizing single municipalities to acquire, improve, and transfer property allow them to do so collaboratively. The redevelopment statutes allow them to do these through a regional or metropolitan planning agency, which may exercise the same powers as local redevelopment agencies (CGS 8-139). Municipalities may create the agency by concurrent action of their respective legislative bodies.

The community development statutes allow municipalities to accept federal community development block grant funds and comply with the rules governing their use. They authorize municipalities jointly to implement community development activities under an agreement that must, among other things, specify how they will share the associated costs and revenues (CGS 8-169j).

The regional economic development statutes represent a different approach to collaborative economic development. While the redevelopment and community development statutes focus on municipalities, the regional economic development statutes focus on regional organizations operating on municipalities' behalf. They authorize competitive grants to help regional economic development commissions and regional planning organizations construct infrastructure that benefits a region's economy (CGS 32-328).

The statutes specify the procedure for awarding the grants. The regional entities must prepare a plan listing the proposed infrastructure projects in rank order. The economic and community development commissioner must approve the proposed projects based on statutory criteria that include diversifying, stabilizing, or developing the region's economy. The amount of funds she can provide for a project depends on its location. It ranges from up to 90% funding for projects in state-designated targeted investment communities to 66.6% for projects in regions without such communities.

Although the statutes governing this program are still on the books, the legislature has not authorized bonds for it since its inception in 1993.

Financing Economic Development

The state provides bond funds to municipalities for planning and implementing some economic development projects meeting state criteria. Other statutes also allow municipalities to issue their own bonds to fund projects. CGS 7-136n allows them to do so jointly to fund any type of project, not just economic development. It specifies the conditions and procedures for issuing these bonds.

Bond-funded economic development projects often involve constructing, expanding, or rehabilitating business facilities, activities that increase a municipality's tax base and generate new revenues. This factor could prevent municipalities from collaborating on a project because the new property tax revenue it generates benefits only the municipality where the project is located.

CGS 7-148bb addresses this barrier by allowing two or more municipalities to share property tax revenue. Those that choose to do so must adopt an agreement endorsed by each participating municipality's legislative body. Among other things, the agreement must identify the source of the shared revenue and describe how the municipalities will collect and share it.

Business Development

Creating new businesses and jobs is an explicit goal of many state and local economic development programs, including the Department of Economic and Community Development's Manufacturing Assistance Act. That program provides financial assistance to businesses and municipalities. Municipalities can use the assistance to acquire land and construct the infrastructure needed to support business projects. The amount of state assistance depends on several factors, including the number of municipalities sponsoring the project. As Table 1 shows, the funding level increases when two or more municipalities sponsor a project. [Note to AA: Table was cut and pasted from another document.]

Table 1:  Funding Levels for MAA Projects

Type or Number of Applicants

Funding Level

Project Location

Business or municipal applicant

Up to 90% of project costs

Anywhere in a town with an enterprise zone (i.e., targeted investment community (TIC), currently 17 towns)

Business or municipal applicant

Up to 50% of project costs

Anywhere in a non TIC town

Table 1:- Continued-

Type or Number of Applicants

Funding Level

Project Location

Two or more non TIC towns

Up to 75% of project costs

Anywhere in a non TIC town

TIC town and one or more non TIC towns

Up to 75% of non TIC town's cost and up to 90% of TIC's town's cost

Anywhere in a TIC or non TIC town

Municipalities can acquire and develop land for business projects without state funds. CGS 8-186 to 8-200b allows them to do so separately or jointly. Either way, they must prepare a plan identifying the parcels they intend to acquire and develop. They may also issue bonds to implement the plan. The statute specifies the process for preparing plans; acquiring, developing, and conveying property; and issuing bonds. CGS 8-196 specifically allows municipalities to do these things jointly if their respective legislative bodies approve.

Attachment 1: Laws Authorizing Municipal Collaboration for Specified Purposes

Statute

CGS

Year Enacted

Eliminate Slum and Blight

Develop Viable

Urban Communities

Cost Savings

Revenue Generation

Business and Job Creation

Develop Public Infrastructure

Regional Performance Incentive Program

4-124s

2007

   

X

     

Joint Issuance of Bonds by Two or More Municipalities

7-136n

1998

X

X

X

 

X

X

Regional Economic Development Commissions

7-137

1955

X

         

Agreement between Municipalities to Share Revenue Received from Payment of Property Taxes

7-148bb

2000

     

X

   

Joint Performance of Municipal Functions

7-148cc

2001

X

X

X

 

X

X

Interlocal Agreements

7-339a

1961

X

X

X

 

X

X

Redevelopment: Joint Action by Two or More Municipalities

8-139

1949 Rev.

X

         

Community Development: Joint Activity by Two or More Municipalities

8-169j

1975

 

X

       

Municipal Development Projects: Joint Projects

8-196

1967

       

X

 

Manufacturing Assistance Act: Application for Financial Assistance

32-223

1990

       

X

X

Regional Economic Development

32-326

1993

         

X

JR:ts