Quasi-Governmental Institutions as a Form of Local Boundary Change: Explanations for the Proliferation of Economic Development Corporations in Texas

Article excerpt

INTRODUCTION

A central goal of general-purpose governments in the United States is to establish an environment that encourages new investments by the business community. This goal has led to the creation and proliferation of a variety of quasi-governmental institutions over the last three decades (Sagalyn 2007). Today, the number of business improvement districts throughout the nation is estimated at over 1,000 (Morcol and Zimmerman 2006), every state has legislation promoting some form of tax increment financing (Byrne 2006), and the numbers and types of dependent and independent special districts continue to grow unabated (U.S. Bureau of the Census 2002). In addition, state governments have greatly expanded their use of tax abatement programs, capital subsidies, and enterprise zones in hopes of bringing economic growth to distressed areas (Greenbaum 2004).

One of the most prevalent quasi-governmental institutions is the economic development corporation. While legal definitions vary greatly by state, an economic development corporation (EDC) is typically a non-profit corporation overseen by a board of directors made up of representatives of business, state and local government, and the public at-large (Wisconsin State Code 2006). The general purpose of an EDC is to improve the economic climate within a specific region (Oregon State Code 2006), county (Kansas State Code 2006) or municipality (Texas State Code 2006). Towards this end, an EDC pursues a number of strategies such as publicizing local tourism, enhancing a city's central business district, providing low-interest loans to new businesses, and planning local development. EDC's are funded through an assortment of means, including contributions from participating businesses and local governments (North Dakota State Code 2006), loan and service payments (New Mexico State Code 2006), and specially designated sale taxes (Texas State Code 2006).

While it would seem that the creation of such institutions as business improvement districts, enterprise zones, and economic development corporations should be largely driven by economic need, the literature suggests caution before accepting such a conclusion (Greenbaum 2004). Indeed, Burns (1994) asserts that the formation of new governmental organizations is often intended to benefit specific public and private entrepreneurs. Focusing upon municipalities and special districts, Burns notes that groups which successfully instigate and complete the process of incorporation are well-positioned to institutionalize their own values as a central component of the new organization, be it a desire for low taxes or the provision of select services. These findings serve as a basis for much of the subsequent research on local boundary change (Foster 1997; Feiock and Carr 2001).

Unfortunately, the U.S. Bureau of the Census does not monitor economic development corporations and few states follow their activities after formation. In addition, academic theory and research in connection to EDC's remains limited (Olberding 2002). Consequently, this analysis examines the ability of the most prominent theories of local boundary change to account for variations in the use of economic development corporations across the state of Texas. Texan EDC's have been selected for study due to their prominent role in the development of local economic policy as well as the fact that they are created through public referendums sponsored by municipal governments (Texas Office of the Comptroller 2004). The analysis uses negative binomial distributions to test whether economic conditions at the county level drove the proliferation of EDC's throughout Texas during the late 1990's or if more political considerations were at work.

EXPLANATIONS FOR LOCAL BOUNDARY CHANGE

"Boundaries determine who is included within a jurisdiction and define local arrangements of service provision and production, patterns of economic development, and the exercise of political power" (Feiock and Carr 2001, 383). …