10-14-2026 2:14am

From Public Forum By Dr Shellie M Bowman Sr

John Williams Editor

Local governments are expected to accomplish a great deal with resources that are seldom unlimited. Residents expect safe communities, reliable infrastructure, effective schools, accessible services, and responsible taxation. Businesses seek predictability, infrastructure, and opportunities to grow. Meanwhile, local officials must balance competing priorities while making financial decisions whose consequences may extend decades beyond their time in office.

Within this complexity lies a responsibility that receives relatively little public attention: the diplomacy of local government.

Diplomacy is often associated with international relations, foreign policy, and negotiations between nations. Yet local governments practice their own form of diplomacy whenever they negotiate economic development agreements, coordinate with neighboring jurisdictions, seek state and federal partnerships, or work with private enterprises to advance community interests.

These relationships can strengthen a locality’s economic position. However, the value of diplomacy cannot be measured simply by the number of agreements signed, businesses attracted, or investments announced.

The fundamental measure must be the public value produced, the financial obligations assumed, and the benefits ultimately delivered to the people.

Local Government Diplomacy Is More Than Cooperation

Effective local government diplomacy requires officials to recognize that economic opportunities seldom exist within the boundaries of a single jurisdiction.

A business considering a major investment may require transportation improvements, utility capacity, workforce development, regulatory coordination, and cooperation among multiple levels of government. Neighboring localities may share infrastructure needs or discover that coordinated investments offer advantages that neither could achieve independently.

Virginia law recognizes these opportunities.

Under Virginia Code § 15.2-1300, political subdivisions possessing similar legal powers may exercise those powers jointly, subject to statutory requirements. Section 15.2-1301 further authorizes voluntary economic growth-sharing agreements between localities, including arrangements involving economic development projects and shared fiscal benefits (Virginia General Assembly, n.d.-a, n.d.-b).

These provisions establish a legal foundation for intergovernmental collaboration. They do not, however, establish that every collaborative arrangement is financially beneficial.

That distinction matters.

A successful negotiation should account for more than what participating governments expect to receive. It should also identify what each government must contribute, what risks it assumes, and how the resulting obligations affect residents over time.

Diplomacy without financial discipline may produce an agreement. Diplomacy supported by sound fiscal analysis has a stronger foundation for producing sustainable public value.

Economic Development Is Not Revenue Until the Numbers Work

Economic development announcements frequently emphasize capital investment, projected employment, construction activity, and anticipated tax revenue. These indicators are relevant, but they do not provide a complete picture of a project’s fiscal consequences.

Consider a hypothetical development expected to generate $10 million in annual local tax receipts after becoming fully operational.

That figure may appear promising. Yet suppose the locality must also finance infrastructure improvements, provide economic development incentives, expand public services, or share portions of the resulting revenue with another jurisdiction.

The relevant question is no longer simply how much revenue the development generates.

It becomes how much net fiscal benefit remains, when that benefit materializes, how reliable the projections are, and whether the resulting revenue is available for the public priorities residents expect government to fund.

This distinction is consistent with the Government Finance Officers Association’s recommendations.

In Evaluating and Selecting Economic Development Projects, the GFOA (2017b) recommends analyzing the benefits, costs, and risks associated with proposed economic development initiatives. Its guidance emphasizes evaluating the assumptions underlying financial forecasts and determining whether projects advance public objectives.

A projected increase in revenue should therefore be evaluated alongside the public expenditures and obligations necessary to obtain it.

For capital-intensive development, additional considerations may include changes in taxable property values, depreciation, infrastructure maintenance, financing costs, and the timing of future receipts. The significance of each factor depends on the project, applicable tax law, and contractual terms.

A development can be economically productive without immediately improving a locality’s operating budget. Conversely, a project with substantial upfront costs may eventually provide meaningful long-term fiscal benefits.

Responsible analysis must consider both possibilities.

The Government Finance Officers Association and the Discipline of Stewardship

The GFOA provides a useful professional framework for evaluating the relationship between economic development and public finance.

Its recommendations extend beyond deciding whether a project appears attractive at the time of negotiation.

In Establishing an Economic Development Incentive Policy, the GFOA (2017a) recommends formal policies addressing project evaluation, performance standards, monitoring, and compliance. The guidance also discusses contractual remedies when agreed-upon performance standards are not achieved.

Similarly, Monitoring Economic Development Performance recommends that governments establish clearly defined processes for evaluating whether projects and incentive programs achieve their stated objectives (GFOA, 2015).

Together, these recommendations suggest that responsible fiscal stewardship requires attention to several questions:

1 What measurable public benefit is the agreement intended to produce?

2 What direct and indirect financial commitments must government make?

3 How reliable are the assumptions supporting projected revenue and costs?

4 Who is responsible for monitoring compliance and reporting performance?

5 What remedies are available if contractual commitments are not fulfilled?

These questions should not be interpreted as opposition to economic development. They are tools for evaluating whether public resources are being committed responsibly.

Importantly, GFOA recommendations are professional best practices, not statutory requirements automatically imposed on every locality. Their value lies in providing governments with a disciplined framework for exercising judgment and strengthening accountability.

Public Trust Must Be Part of the Negotiation

Public trust is often discussed as though it were separate from economic development. In practice, the two are closely related.

Residents may support commercial investment while reasonably questioning how a proposed agreement affects schools, transportation, public utilities, tax obligations, or long-term public debt.

Those questions deserve substantive answers.

Virginia’s framework for voluntary economic growth-sharing agreements illustrates the importance of procedural accountability. Section 15.2-1301 establishes requirements involving governing-body approval, public hearings, and, subject to specified exceptions, review by the Commission on Local Government. The statute also requires annual reporting between participating localities concerning transferred funds and their uses (Virginia General Assembly, n.d.-b).

These legal requirements provide important safeguards. Nevertheless, compliance with minimum procedural requirements should not be confused with comprehensive public understanding.

A hearing may satisfy the law without resolving every material question about financial assumptions, future liabilities, or the distribution of economic benefits.

For that reason, governments should consider communicating the expected financial effects of major agreements in language residents can understand.

Such communication might distinguish gross revenue from net fiscal benefit, identify the timing of anticipated receipts, disclose material financial commitments, and explain how performance will be evaluated.

Transparency does not require government to guarantee economic outcomes. It requires officials to communicate material assumptions, limitations, and uncertainties rather than presenting projections as established results.

Revenue Generation Should Serve Public Priorities

The purpose of strengthening a locality’s revenue capacity is not simply to collect more money.

Public revenue supports services, infrastructure, and other obligations that residents expect their governments to manage responsibly.

A development agreement may contribute to that objective by expanding the taxable economic base, creating employment opportunities, or supporting complementary private investment. Regional cooperation may also reduce duplicated costs or distribute the financial burden of shared infrastructure.

However, neither economic growth nor increased tax collections automatically establishes that residents will experience lower taxes, improved services, or reduced fiscal pressure.

Those outcomes depend on additional decisions involving budgets, expenditures, tax policy, debt, and the allocation of public resources.

Local officials must therefore connect economic development strategy to the broader financial condition of their communities.

This requires evaluating how proposed investments interact with capital improvement plans, infrastructure replacement, recurring operating costs, and long-term fiscal commitments.

It also requires acknowledging that the public benefits of development may extend beyond tax receipts. Employment opportunities, workforce development, business activity, and improved infrastructure may have substantial value, even when those benefits do not translate directly into unrestricted local revenue.

Sound stewardship considers these benefits while keeping their measurement distinct from the government’s actual fiscal return.

Diplomacy That Answers to the People

Local government diplomacy should neither be reduced to attracting businesses nor characterized as a contest between economic development and public accountability.

The two responsibilities can reinforce one another.

Governments that understand their fiscal position, negotiate clearly defined obligations, coordinate effectively with regional partners, and monitor performance are better positioned to explain the public purposes behind their decisions.

Equally important, residents should have opportunities to examine the evidence supporting those decisions and question whether anticipated benefits are being realized.

The standard should not be whether government negotiated an impressive agreement. It should be whether the agreement advances a legitimate public purpose under terms that can be evaluated, explained, and administered responsibly.

Economic development will always involve uncertainty. Markets change, businesses adapt, infrastructure ages, and revenue projections may differ from actual collections.

Public trust does not depend on eliminating every uncertainty. It depends, in meaningful part, on whether government identifies those uncertainties, exercises reasonable diligence, and remains accountable for the commitments it makes.

Ultimately, the diplomacy of local government is not simply about relationships between institutions. It is about the people those institutions exist to serve.

Economic development becomes an instrument of responsible governance when its promises are measured against its costs, its performance is monitored, and its benefits are evaluated in the public interest.

Before celebrating the next major investment announcement, residents might reasonably ask:

What will this agreement generate, what will it cost, who will benefit, and how will we know whether the promises were fulfilled?

Those are not obstacles to progress. They are questions worthy of a government entrusted with the public’s resources.

References

Government Finance Officers Association. (2015). Monitoring economic development performance. https://www.gfoa.org/materials/monitoring-economic-development-performance

Government Finance Officers Association. (2017a). Establishing an economic development incentive policy. https://www.gfoa.org/materials/establishing-an-economic-development-incentive-policy

Government Finance Officers Association. (2017b). Evaluating and selecting economic development projects. https://www.gfoa.org/materials/evaluating-and-selecting-economic-development-projects

Virginia General Assembly. (n.d.-a). Code of Virginia § 15.2-1300: Joint exercise of powers by political subdivisions. Virginia Legislative Information System. https://law.lis.virginia.gov/vacode/title15.2/chapter13/section15.2-1300/

Virginia General Assembly. (n.d.-b). Code of Virginia § 15.2-1301: Voluntary economic growth-sharing agreements. Virginia Legislative Information System. https://law.lis.virginia.gov/vacode/title15.2/chapter13/section15.2-1301/