Economic Development in Washington State: An Introduction
This page is an introduction to the series of MRSC webpages on Economic Development and sets the context for economic development in this state.
What is Economic Development?
The term economic development is not statutorily defined, although various statutes describe its goals and broad scope while providing authority for certain economic activities.
For example, when setting up the state's Economic Development Tax Authority, the legislature stated that economic development is essential to the health, safety, and welfare of all Washington citizens by broadening and strengthening state and local tax bases, by providing meaningful employment opportunities and thereby enhancing the quality of life.
The Community Economic Revitalization Board (CERB) fosters economic development through the stimulation of investment and job opportunities and the retention of sustainable existing employment for the general welfare of the inhabitants of the state.
The Growth Management Act in RCW 36.70A.020 lists many planning goals, one of which is economic development:
Encourage economic development throughout the state that is consistent with adopted comprehensive plans, promote economic opportunity for all citizens of this state, especially for unemployed and for disadvantaged persons, promote the retention and expansion of existing businesses and recruitment of new businesses, recognize regional differences impacting economic development opportunities, and encourage growth in areas experiencing insufficient economic growth, all within the capacities of the state's natural resources, public services, and public facilities.
Most local government economic development programs cite the above goal.
Cities and counties undertake a variety of activities that relate to the fostering of economic development in their regions. Most typical are tourism, facilitating industrial development through land use policies, and creating the infrastructure framework that supports economic development activities. All activities must be for a proper public purpose and not in violation of the state's constitutional restrictions on the giving of money or the lending of credit.
Economic development should not be an isolated activity taking place within the borders of a jurisdiction. It is an activity that is regional or county-wide, and sometimes even broader.
Successful economic development activities are carried out through partnerships with other governments, associate development organizations, and local business groups such as the chamber of commerce.
Authority for Local Economic Development Activities
Washington local governments are very limited as to what they may undertake in the area of economic development. For cities, the statutory provision is in RCW 35.21.703. The authority for counties to engage in economic development activities is RCW 36.01.085.
Neither statute defines "economic development." The original intent of these statutes was to enable cities and counties to join and pay dues to economic development councils and consortiums.
Limitations on Economic Development
Due to strict constitutional limitations, cities and counties in Washington State have very few avenues open for direct participation in private economic development projects. The State of Washington is one of the more restrictive in the nation in regard to how public funds may be utilized to attract private investment, and there are potential legal issues regarding the loaning or gifting of public funds.
Under Article 8, Section 7 of the Washington State Constitution, a city or county may not directly give or loan money to private businesses for economic development:
No county, city, town or other municipal corporation shall hereafter give any money, property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support of the poor and infirm.
This constitutional provision has been interpreted in numerous cases in this state and generally has been interpreted very narrowly in regard to allowable uses of public funds to aid private businesses or corporations.
A city or county does not have direct authority to construct and operate industrial and commercial facilities, or to pay city funds out for the purpose of attracting private industrial development, neither does the city have indirect authority to pay an industrial development council (not a municipal corporation) for performing those functions [Morgan Jacobson and James Pharris, MRSC Information Bulletin No. 432 (1985)]. In addition, a city's general funds cannot be expended for "industrial development projects." See Hogue v. Port of Seattle, 55 Wn.2d 153 (1959) and Article 32, Section 1 of the Washington State Constitution.
What Economic Development Activities Can Be Undertaken by Cities, Towns and Counties?
- Downtown Development and Redevelopment: Challenges and Opportunities in "Public/Private Partnerships" by Hugh Spitzer, Foster Pepper PLLC, 2006 WSAMA fall conference.
- City Involvement in Economic Development, by Don L. Hogaboam, Senior Assistant City Attorney, City of Tacoma Information Bulletin No. 489 (1995), Legal Notes, Proceedings of April 26-28, 1995
