Small Town: How Local Government Can Stimulate Economic Growth

Brooke Chaplan
Aug 25, 2017 · 2 min read

Economic growth is often the primary goal of local governments. Increasing their tax base while providing jobs and economic prosperity for their constituents are often an elected official’s primary goal. The steps local governments can take in stimulating their economies are varied in scope, and they are usually limited by state and federal law, as well as their own budgets.

Reasons for Economic Stimulus

Growing a tax base is key to a local government maintaining the many basic services required, often by state law. Tax collection, police and fire, justice, roads, and sanitation are some of the basic responsibilities of local governments. They must continue to grow their sources of revenue in order to maintain high levels of service, especially as a community grows and expands. Increasing construction and improving property values are important steps, as property tax is the primary source of revenue for local governments in many states.

There is also the quality of life issue to be considered. Local officials are often the closest level of government to individual citizens. They hear complaints directly, often about issues directly in the community. Stimulating economic growth on a local level can provide jobs and increase quality of life, and these are some of the main goals local government officials must consider.

Steps Local Government Can Take

Often local governments are limited by scope and size in what they can effectively do to stimulate economic growth. Tax abatements, TIFF districts, and investment credits are some that sacrifice short term gains for greater long term returns. Companies, investors, and home owners are given a reduced tax rate to expand through construction, and for a certain number of years, that money is either returned to them or placed in an escrow for community development. After the set period of time, sometimes in gradual increments, the property is added to tax rolls at its full value.

Economic development groups can be key to bringing new business and investment into a community. One way a local government can gain expertise in this area is to assist their employees in gaining an online economics masters degree and certifications in economic development. Hiring people into administrative roles with education and experience in the economic development and academic world are key to building strong policy. Masters degrees in finance, economics, and public administration can be key parts of building that type of resume in a potential hire.

While their role is limited, often by budget and by law, local governments are absolutely key to developing their local economies. Through that, they can help make local communities better places to live.

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