Download to read offline
Uploaded byEllen Harpel
Using Incentives Effectively - The National Perspective
The document discusses the use of incentives in economic development to achieve community goals such as job creation and investment. It emphasizes the need for data analysis and due diligence to understand the risks and benefits of incentive programs, as well as compliance and effectiveness monitoring to ensure that these incentives deliver net benefits to the community. The author encourages better communication and transparency regarding incentive use and outcomes, advocating for continuous evaluation to improve incentive strategies.
More Related Content
Similar to Using Incentives Effectively - The National Perspective
Using Incentives Effectively - The National Perspective
- 1. Using Incentives Effectively –the National Perspective DARRENE HACKLER, ADVISOR, SMART INCENTIVES CALIFORNIA ASSOCIATION FOR LOCAL ECONOMIC DEVELOPMENT (CALED) AUGUST 2016
- 2. About us Business DevelopmentAdvisors is an economic development consulting firm Smart Incentives helps communities make sound decisions throughout the incentives process 2 © 2016 SMART INCENTIVES
- 3. Why do weuse incentives? To achieve our community’s economic development goals ◦ Jobs ◦ Business Development ◦ Investment ◦ Downtown revitalization ◦ Brownfield redevelopment ◦ Quality of life and quality of place ◦ Strengthen tax base Incentives are not just about winning a deal. Smart incentive use is always connected to a larger economic development strategy. 3 © 2016 SMART INCENTIVES
- 4. Today’s environment requires betteranalytics Reduce risk Quantify net benefits Refine incentive strategies Explain and build support for decisions Achieve better outcomes 4 © 2016 SMART INCENTIVES
- 5. Achieve economic development goals © 2016 SMART INCENTIVES 5 Use data and analysis to enable better decision-making. Achieve greater transparency and accountability.
- 6. Reducing Risk - Making Sound Decisions Data and analysis prior to awarding incentives 6 © 2016 SMART INCENTIVES
- 7. Due diligence Recipient ◦ Background researchon the applicant Deal ◦ Business case analysis of the project ◦ What could go wrong? 7 © 2016 SMART INCENTIVES
- 8. Can this dealgenerate net benefits for your community? Project Attributes and Benefits Fiscal Impact Economic Impact 8 © 2016 SMART INCENTIVES
- 9. Project attributes &benefits Project characteristics Fit with economic development strategy Effect on existing businesses Timeframe Likelihood of success 9 © 2016 SMART INCENTIVES
- 10. Fiscal impact Tax andbudgetary implications of incentive decisions for state and local government Cost of the incentive Tax revenue the project may generate Additional expenditures that might be required Challenges: ◦ Jurisdictions affected ◦ Fiscal impact of indirect and induced jobs ◦ New jobs and new residents ◦ Timing 10 © 2016 SMART INCENTIVES
- 11. Economic impact Traces theflow of money after an initial investment to estimate the contribution to the regional or state economy Economic impact depends on industrial structure and size of your region Components: ◦ Direct ◦ Indirect ◦ Induced Data needs Judgment and interpretation 11 © 2016 SMART INCENTIVES
- 12. Takeaways Devote resources tothe analysis ◦ IEDC, CDFA can help make the case ◦ Band together with others in your community and region Strike a balance between detail and reasonableness ◦ You’ll never be “right” – need order of magnitude estimate ◦ Judgment still needed Be prepared to communicate your process, decision and rationale 12 © 2016 SMART INCENTIVES
- 13. Compliance and Effectiveness Evaluatingincentives outcomes 13 © 2016 SMART INCENTIVES
- 14. Did this dealgenerate net benefits for your community? Project performance Achieving economic development goals 14 © 2016 SMART INCENTIVES
- 15. Compliance – performance agreements Defineperformance requirements Prepare an agreement ◦ Only 56% of local governments report that a performance agreement is required when providing business incentives Tie the project timeframe to the fiscal break-even point Require progress reports Are policies in place to protect the community in the case of non-performance? 15 © 2016 SMART INCENTIVES
- 16. Compliance monitoring Whose jobis it? Can information be verified? ◦ Require reporting as part of agreement ◦ Data sharing among agencies to verify key reporting variables How is data tracked? Timeframe? Site visits and closeout interview Collect the data to see what is working and what is not. 16 © 2016 SMART INCENTIVES
- 17. Effectiveness – evaluation Didthe 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? 17 © 2016 SMART INCENTIVES
- 18.
- 19. Business Incentives Initiative Identifyeffective ways to manage and assess incentive policies and practices Improve data collection and analysis Develop national standards and best practices that states can use to report on economic development incentives Participating states: IN, MD, MI, OK, TN, VA 19 © 2016 SMART INCENTIVES
- 20. Evaluating to informpolicy choices Review your portfolio of incentive offerings Define the goal of each incentive program clearly Consider building reviews into the budget process (RI) or legislative calendar (IN, MS) Create a team with agency experience, analytical skills and subject-matter expertise Collaborate with other agencies to collect data and share analytics expertise Leadership is critical 20 © 2016 SMART INCENTIVES
- 21. Improving communication Preparing forgreater transparency and accountability 21 © 2016 SMART INCENTIVES
- 22. Reporting & communication Electedofficials and community groups are demanding better data from EDOs on incentive use. Many organizations still struggle to report basic project information . . . . . . And aren’t prepared to answer questions on outcomes and effectiveness 22 © 2016 SMART INCENTIVES
- 23. Transparency Lawmakers/the media/the publicgenerally want to know: ◦ How much are we spending? ◦ Who is receiving incentives? Reporting considerations ◦ Individual recipient versus aggregate reporting ◦ Just the facts or analysis? ◦ Need to provide context Usable/user-friendly information 23 © 2016 SMART INCENTIVES
- 24. GASB Statement 77State & Local Tax Abatement Disclosure Disclose agreements between individual taxpayers and the government that might diminish the tax base Includes: ◦ General descriptive information (tax being abated, authority, eligibility, mechanism by which taxes are abated, provisions for recapture) ◦ Commitments made by the recipient ◦ Other commitments made by a government (such as infrastructure) ◦ Number of tax abatement agreements entered into and in effect during the reporting period ◦ Dollar amount of taxes abated during the reporting period Substance of the transaction rather than the name or description determines whether the abatement must be disclosed. 24 © 2016 SMART INCENTIVES
- 25. Some GASB guidelines Nowis the time to determine which tax incentive programs fit the definition. Communicate with government finance staff Transparency ◦ Share process and rationale for decisions ◦ Release basic deal information Accountability ◦ Annual report – what we did and what we hope to achieve ◦ Evaluations every 3-5 years – what worked, how can we improve Context 25 © 2016 SMART INCENTIVES
- 26. Accountability What are wegetting out of our incentives spending? Reporting the results of the evaluations Collaborative approach to evaluation – and reporting Using reporting to improve not punish/get punished 26 © 2016 SMART INCENTIVES
- 27. Concluding thoughts Incentives shouldbe used to accomplish community goals – not just win a deal ◦ The problem is we haven’t known which incentives actually help our communities Economic developers need better data and analytics to identify what works and enable sound decisions when awarding incentives The next few years will see tremendous improvements in the way we talk about and evaluate incentives © 2016 SMART INCENTIVES 27
- 28. Contact us Darrene Hackler Advisor darrene@smartincentives.org http://www.smartincentives.org @dhackler, @SmartIncentives 28 © 2016 SMART INCENTIVES