The Abridged version:
- All levels of government in the Sacramento region are spending millions to compete for large economic development projects – and the jobs they generate.
- Some call economic development a race to the bottom as jurisdictions compete to attract employers with incentives that enrich companies at taxpayer expense.
- The Greater Sacramento Economic Council has won acclaim for its work, generating $17.5 billion in economic output in 10 years.
You may already know about major development projects happening in the Sacramento region, like life sciences hub Aggie Square at the UC Davis campus in Oak Park and the soccer stadium that just broke ground in the downtown Railyards. Or high-profile companies making a big commitment, like Bosch announcing it will invest $1.2 billion in a Roseville facility and start manufacturing semiconductors there in 2026.
The collective efforts of government officials, business leaders and community members get these projects off the ground, and those efforts fall under the catchall term of economic development. But what exactly is it? Does it make a difference? And how much do taxpayers spend on it?
The U.S. Economic Development Administration defines it as anything that “creates the conditions for economic growth and improved quality of life by expanding the capacity of individuals, firms, and communities to maximize the use of their talents and skills to support innovation, lower transaction costs, and responsibly produce and trade valuable goods and services.”
It’s broad, squishy and difficult to quantify.
Spending comes from all levels of government
Government spending on economic development does not fit neatly into one line item on a budget.
Staff salaries for economic development departments at most cities, counties and utility companies in the region count. So does spending on roads and utilities to serve developments like the Railyards and local incentives like grants for hiring new workers, permit fee deferrals and property tax abatements. When you add in state and federal spending such as tax credits and grants from the Governor’s Office of Business and Economic Development and subsidies for research and development, government spending on economic development adds up quickly.
The Sacramento region is “punching above its weight” as it competes against Silicon Valley, San Francisco, Los Angeles and other areas to attract and retain companies and workers, said state Sen. Christopher Cabaldon, D-West Sacramento. He’s the former mayor of West Sacramento who now chairs the Senate budget subcommittee that oversees state economic development programs. He also served as a public policy professor at Sacramento State University.
Governments need discipline when they spend on economic development, Cabaldon said. Programs must aim for companies and efforts that are on the right track but need a boost to put them across the finish line, he said. Governments shouldn’t hand out subsidies just because companies expect them. The smartest economic development efforts create the conditions for private investment, like housing availability and infrastructure, rather than handing the same money that could be spent on those projects directly to a company, he said.
“Often an economic development conversation begins and ends with how much subsidies we can afford,” Cabaldon said. “It can’t mainly be about subsidies.”
Those subsidies can be tax breaks, grants or low-cost loans that go directly to companies. For example, Bosch won a $25 million state income tax credit from GO-Biz in exchange for promising to invest $1.2 billion in upgrades and hire at least 140 people. And CTI Housing won a $15 million loan and property tax abatement from the city of Sacramento for its 230-unit building under construction on Stockton Boulevard, not far from Aggie Square, that will include a mix of market-rate and affordable rents.
Private and quasi-public groups also join the effort
Private sector and quasi-public groups are involved, too, and are usually funded with assessments on their own members. Their efforts are often less tangible than a tax break.
Programs like the Sacramento Hispanic Chamber of Commerce’s 10-week class called Emprende helps Spanish-speaking entrepreneurs and small business owners learn how to start and grow a business with instruction on business planning, financial management, cost control, licensing and permitting, operations, access to capital and market analysis.
Organizations like the Stockton Boulevard Partnership and Mack Road Partnership, funded through assessments on property owners, act as liaisons between businesses, property owners and government. They do everything from advocating for better bus service and organizing street cleanups to recruiting businesses and smoothing the way for them to obtain planning approval and permits.
“This type of work is not glamorous,” said Stockton Boulevard Partnership Executive Director Frank Louie.
A few large organizations with ties to major companies and employers, government entities and universities work on projects with the most splash. Scratch below the surface on big announcements and you will find the fingerprints of these groups.
The Greater Sacramento Economic Council puts together pitches to attract major projects like Bosch’s that cover everything from government subsidies to power and water reliability for manufacturing plants, workforce availability, housing costs and school options for employees with families. The organization, funded by its corporate members, competes against well-resourced consulting firms that companies hire to assemble packages with tax incentives and other promises from locations they are considering.
The council focuses on “industries of the future,” like agricultural and food technology, clean technology, semiconductors and precision manufacturing, President and Chief Executive Officer Barry Broome said.
Economic development is “the ability for a community to organize and sustain itself on the basis of its assets and capabilities,” Broome said. “Economic development isn’t spending the government’s money.”
Valley Vision, a civic leadership organization, uses research, events and partnerships with industry to improve the region’s livability, for example, by recommending how the workforce can be prepared to meet the needs of employers. Valley Vision is also the organization managing grants and other economic development efforts from the state through GO-Biz and We Prosper Together. That effort covers Colusa, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.
The capital region has received $14 million over the past three years from the state-level program to attract high-quality jobs and specific projects to the region, $5 million for planning and $7.8 million for the Alchemist Public Market, a food entrepreneur incubator expected to launch in 2026, GO-Biz spokesman Willie Rudman said.
Economic development on any scale is helpful, said Cathy Rodriquez Aguirre, president and chief executive officer of the Hispanic chamber. She also sits on the economic council board of directors.
“We want to make sure as best as possible that people won’t be left behind,” she said. “It is a building block.”
Is it worth it? Would development happen on its own?
The basic question economists ask when evaluating economic development programs is whether the economic activity would have happened anyway. Would Bosch make semiconductors in Roseville without the state tax credit? Would the new retail shop in your neighborhood have opened without help from the local business group? Sometimes it’s not clear.
Skeptics call economic development a race to the bottom as jurisdictions compete to attract employers with incentives that enrich companies at taxpayer expense. Remember when Amazon started a bidding war in 2017 by asking cities around the country to compete for a new headquarters location? A study from the Mercatus Institute at George Mason University found the 20 semifinalists offered billions in subsidies and concluded “even subsidies worth billions of dollars are unlikely to sway Amazon’s decision.” The company chose Arlington, Va., which offered $750 million in tax breaks, and Long Island City, N.Y., which offered nearly $2 billion in tax breaks, grants and other subsidies.
Economic development advocates point to plenty of statistics to back up their work. The International Economic Development Council just named the Greater Sacramento Economic Council the best economic development organization in the world. Among its accomplishments: generating $17.5 billion in economic output in 10 years, establishing a $100 million fund for affordable housing and placing 135 companies in the region to create or retain 36,900 jobs.
On a more granular level, the Stockton Boulevard Partnership was instrumental in bringing the first Dutch Bros. Coffee to Sacramento. The Hispanic chamber helped A Mi Astilo go from an unpermitted Peruvian street food vendor to having a regular spot at the Midtown Farmers Market.
It’s one thing to see jobs being created in the region, for example in the emerging field of artificial intelligence, said Cabaldon, who represents Yolo, Napa and Solano counties and parts of Contra Costa, Sacramento and Sonoma counties. But there’s more to it.
“Can workers qualify for those jobs, and can they afford to live near them?” he said.
Laura Mahoney is a regular contributor, writing Dollars and Sense for Abridged.