HOUSE BILL REPORT

HB 2881

BYRepresentatives Kirby, Doty, Cantwell, Rayburn, Ferguson, Scott, Basich and Wineberry

Encouraging economic growth throughout the state.

House Committe on Trade & Economic Development

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Doty, Ranking Republican Member; G. Fisher, Kirby, Kremen, Moyer, Raiter, Rasmussen, Rector, Schoon, Tate and Youngsman.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 6, 1990

BACKGROUND:

The Puget Sound region faces problems associated with rapid growth, while much of the rest of the state faces the problems associated with slow growth. In comparison to the central Puget Sound region, many rural areas have higher unemployment, lower per capita income, and reduced governmental services because of declining public revenues.

Current state (and federal) economic development programs focus on improving economic development in general or focus on improving specific areas of economic development, such as rural revitalization.  Many of the programs that are not directly related to rural revitalization assist rural communities indirectly.  State economic development efforts can be categorized as follows: (1) international and domestic trade promotion; (2) business development, assistance, and investment; (3) tourism promotion; (4) financing programs; (5) tax incentives; (6) local economic assistance programs; and (7) training and education programs.

The primary state agencies responsible for economic development are the Department of Trade and Economic Development (DTED), the Department of Community Development (DCD), the Employment Security Department (ES), and the Department of Agriculture.  The Associate Development Organization network is a statewide program that is managed by DTED and is comprised of local economic development officials.

Generally, the state economic development programs targeted to rural communities can be summarized as follows: (1) Financing - Many of the state financing programs are targeted to distressed or rural areas.  The major financing programs targeted to rural or distressed areas include the Community Economic Revitalization Board (CERB) in DTED, and the Development Loan Fund and the Coastal Revolving Loan Fund in DCD; (2) Tax incentives - Business and Occupation Tax credits and Sales Tax deferrals for locating/expanding a business in distressed communities are used to attract businesses to these areas; and (3) Local Economic Assistance - Programs in this category focus on helping local governments and organizations develop economic growth, and are either tied to specific areas, specific industries, or apply to all local areas.  The Community Revitalization Team (CRT), the Community Development Finance Team, and the Mainstreet program, all in DCD, provide technical assistance to local governments on financing or on revitalizing their local economy.

In DTED, the Marketplace Program attempts to assist rural areas by matching local suppliers with local buyers who are purchasing supplies outside Washington State.  The Business and Job Retention Program attempts to help employers and employees of businesses that are at risk of failing by providing technical and other assistance.

The state also provides funding for programs that local communities can utilize for economic development efforts.  Team Washington, Tri-cities Diversification, the 1989 Timber Package and the Rural Economic Development Pilot Program (in DCD)  are examples of state spending to directly help local area economic development efforts.

SUMMARY:

SUBSTITUTE BILL:  The establishment of urban-rural links is required in the Marketplace Program, and encouraged in the Small Business Export Assistance Center.  The Marketplace Program is expanded to help suppliers in rural communities find purchasers for their product in urban areas who are currently meeting their needs out-of-state.  The Small Business Export Assistance Center is required to assist small business exports in both rural and urban areas.

The Department of Trade and Economic Development (DTED) and the Department of Community Development (DCD) are given policy direction by the Legislature to promote balanced growth statewide, and to focus on promoting economic growth in the areas not experiencing economic prosperity. DCD is instructed to prioritize its programs based on community needs and resources.

A grant program is established in DCD.  The program provides grants to local nonprofit organizations for rural economic development, focusing on:  (1) building local capacity; (2) establishing urban-rural links; and (3) increasing exports from rural areas.

The Local Economic Development Service Program is created in the Department of Trade and Economic Development to coordinate the delivery of state economic development services to local communities. The Local Economic Development Service Program is to contract with Associate Development Organizations (ADO) to help provide economic development services to local communities. Local ADOs are encouraged to join together to form regional partnerships to better access and deliver available state and federal services.  State agencies, local governments, Small Business Development Centers, ports, and higher education institutions are encouraged to coordinate with the Local Economic Development Service Program to enhance the delivery of economic development services to local areas.

A Service Delivery Task Force is created to review the present system for delivering state economic development services and make recommendations to the Legislature and governor by November 1, 1990.  Organizations represented by the task force include: (1) the Legislature; (2) the citizenry; (3) state agencies; (4) local governments; (5) Associate Development Organizations; (6) small businesses; and (6) the Northwest Policy Center and the Public Policy Institute.  The key questions the task force is required to address include: (1) What should be the structure for delivering state economic development services to enhance local capacity? ; and (2) How can state programs be better coordinated to avoid duplication and fragmentation? The task force must consult with interested parties in its deliberations and in making its recommendations.

A grant program is established that is administered by the Business Assistance Center in DTED.  This program provides grants to local organizations or individuals to provide industry modernization services in targeted sectors or to form business networks in targeted sectors.  A field agent, or broker, must coordinate the industry involvement.

State agencies must approve or deny permits within 30 days, and, in the case of denials, must list the permit requirements that must be met for approval.  The Business Assistance Center is required to work with appropriate state agencies to improve the processing of state permits.

The allocation of current state infrastructure financing through CERB, the Development Loan Fund, and the Public Works Assistance Fund is redefined to focus on the benefit the projects provide to the community rather than the absolute number of new jobs created.  The Community Economic Revitalization Board can be used to finance the infrastructure to accommodate relocation of businesses from non-distressed urban areas to distressed rural areas.

Two additional staff persons are provided for DCD's Community Development Finance Program in the appropriation.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Changes are made to the membership of the Service Delivery Task Force by the substitute bill as follows:  (1) two representatives of local governments, rather than four; (2) two representatives of ADOs, rather than four; and (3) a citizen involved in economic development replaces the representative of the Governor.

The requirement that state agencies process permits within 30 days is added. The Community Economic Revitalization Board can be used to finance infrastructure to accommodate relocation of businesses from non-distressed urban areas to distressed rural areas.

Appropriation:    $1,000,000 is appropriated for this act.

Fiscal Note:      Requested January 16, 1990.

House Committee ‑ Testified For:    Representative Neal Kirby, Prime Sponsor; Mr. David Harrison, Northwest Policy Center; Steve Worthington, Small City Economic Specialist, Spokane Economic Development Council; Pam Brown, Director, Lewis County Economic Development Council; Rex Eads, Big Bend Economic Development Council (Lincoln and Grant Counties); Judith St. Claire, Clallam County Economic Development Council; Art Yoshioka, Executive Director, Pacific County Economic Development Council; Kathy Coombs, Thurston County Economic Development Council; Laurie Owen, Seattle-King County Economic Development Council; Elizabeth Fernando, Skagit Indian Foods; and Jeff Parsons, Citizens for Balanced Growth.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Growth must be encouraged in rural areas so that they too can participate in the benefits of economic prosperity.  Links between prosperous urban areas and rural areas with low economic growth should be established.  A balanced state economy benefits both the Puget Sound region and the rest of the state.

State services should be reviewed and targeted to enable local communities to build capacity in the community to develop and accommodate economic growth.  The severity of the local needs should be considered in assistance provided by the state.  Formalizing the ADOs in statute can help coordinate economic development services provided to the local community by public and private organizations so that businesses and local governments have better access to these services.

House Committee - Testimony Against:      None.