Using incentives to achieve community goals nlc 2013
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The document outlines a framework for using incentives in community economic development, emphasizing the importance of effective decision-making and compliance monitoring. It describes various incentive categories, assesses potential project benefits, fiscal and economic impacts, and provides guidelines for managing and evaluating effectiveness. The need for transparency and accountability in incentive usage is highlighted, alongside shortcomings in current reporting practices.
Using incentives to achieve community goals nlc 2013
- 1. USING INCENTIVES TO ACHIEVE COMMUNITY GOALS Economic Development Financing Tools National League of Cities Congress of Cities - Seattle, WA November 15, 2013 Ellen Harpel, President Business Development Advisors
- 2. 1 BDA’s Incentives Framework Data and analytical tools to enable better decision-making Prepare for a future of greater transparency and accountability Recipient Deal Compliance Effectiveness © 2013 BUSINESS DEVELOPMENT ADVISORS
- 3. 2 I. Incentive Basics • Categories • Direct business financing • Indirect business financing • Community-oriented • Tax-related • Types • Bonds • Grants • Investments • Loans • Tax abatements, credits, deductions, exemptions Source: C2ER - www.stateincentives.org © 2013 BUSINESS DEVELOPMENT ADVISORS
- 4. 3 Incentive Basics (continued) • Business Need • Capital access • Facility/site location • Infrastructure • Marketing • Product/process improvement • Regulatory climate • Workforce • Discretionary and non-discretionary • Targeted (or not) by industry or geography © 2013 BUSINESS DEVELOPMENT ADVISORS
- 5. 4 II. Using Incentives – Is this a good deal? • Project Benefits • Fiscal Impact • Economic Impact Can this incentive deal generate net benefits for your community? © 2013 BUSINESS DEVELOPMENT ADVISORS
- 6. 5 Project Benefits • Project characteristics • Jobs, wages, investment, location • Fit with economic development strategy • Target industries, business types, regional support, match with program criteria • Timeframe • Timing and lifespan • Likelihood of Success • Other backers? Risk level? © 2013 BUSINESS DEVELOPMENT ADVISORS
- 7. 6 Fiscal Impact • Tax and budgetary implications for state and local government of incentive decisions • Are taxes generated likely to exceed the cost of the incentive and additional costs of service • Consider: • Can you quantify the cost and timing of the incentive? • What type of tax revenue will the project generate? • What additional expenditures might be required? • Do a formal analysis © 2013 BUSINESS DEVELOPMENT ADVISORS
- 8. 7 Economic Impact • Traces the flow of money throughout the economy after the initial investment • To estimate the contribution of economic activities to a regional or state economy • Economic impact depends on industrial structure and size of your region • Consider: • Indirect and induced impacts? • Quality of data inputs • Interpret carefully © 2013 BUSINESS DEVELOPMENT ADVISORS
- 9. 8 III. Managing Incentives – WAS this a good deal? • Monitor compliance - performance • Assess effectiveness - evaluation • Reporting and policy feedback © 2013 BUSINESS DEVELOPMENT ADVISORS
- 10. 9 Performance Agreements • Are performance requirements clearly defined? • Are expectations laid out in a signed agreement? • Is the company required to report on its progress in meeting those requirements? • Over what time period? • Is there a way to verify reported information? • Are policies in place to protect the community in the case of non-performance? COLLECT THE DATA to figure out what is working and what is not © 2013 BUSINESS DEVELOPMENT ADVISORS
- 11. 10 Evaluating incentive programs • Did the incentive affect the choices businesses made? • Were existing businesses harmed by the incentive? • Did the benefits outweigh the costs? • Is the program meeting the community’s goals? • How could it be improved? • Are the community’s incentives working together efficiently? Source: Pew Center on the States © 2013 BUSINESS DEVELOPMENT ADVISORS
- 12. 11 Reporting and Communication Elected officials and community groups are demanding better data from economic development organizations on compliance and outcomes associated with incentive use. • Many organizations still struggle to report basic information about incentive use • We are still figuring out how to do this well: • What exactly should we measure? • How to obtaining, verify and evaluate company data? • What is the best way to present and share this information? • Internal tools and processes for program evaluation • Staffing and resources © 2013 BUSINESS DEVELOPMENT ADVISORS
- 13. 12 Contact Information • Ellen Harpel President • 571/212.3397 • eharpel@businessdevelopmentadvisors.com • www.businessdevelopmentadvisors.com • www.linkedin.com/pub/ellen-harpel/a/448/266 ellen@smartincentives.org • http://www.smartincentives.org/ • Twitter: @smartincentives © 2013 BUSINESS DEVELOPMENT ADVISORS
- 14. 13 Additional Resources • C2ER State Incentives Database • Pew Center on the States Economic Development Incentives Project • Evidence Counts • Avoiding Blank Checks • Smart Incentives blog • Cost – Benefit Analysis • informAnalytics • Impact DataSource • REMI © 2013 BUSINESS DEVELOPMENT ADVISORS