By Ellen Harpel.
Data is one of the key elements of the Smart Incentives 4×4 framework that enables communities to make sound investment decisions. Unfortunately, good data on how well incentive programs work is often lacking. This lack of data hinders both economic development professionals in their day-to-day work and policymakers in their leadership and oversight roles.
Last year one report concluded unhappily, “We simply don’t have the information we need to make good decisions about incentives.” The Pew Charitable Trust’s widely-cited 2012 report, Evidence Counts, found that “half the state have not taken basic steps” to provide evidence of whether incentives work well or not, and “no state regularly and rigorously tests whether those investments are working,” though many states have taken valuable steps to begin to understand and evaluate the impact of their incentive programs.
Here we consider 3 data themes: available resources, challenges in data collection, and organizational advice to improve data management.
1. We have better data than ever on existing state incentive programs and past dealsthanks to the Council for Community and Economic Research (C2ER) State Business Incentives Database and Subsidy Tracker 2.0 from Good Jobs First. These resources provide a great start for understanding the incentives environment. Further, many states are striving to improve the quality of reporting on their incentive use, providing new insights into existing programs.
2. We know we still need to improve data collection to assess compliance and outcomes associated with incentive deals, but we first must overcome substantial challenges. These include but certainly aren’t limited to:
- Applying consistent definitions to the various measure of merit, including how we count jobs (all, new, over a baseline, full-time (by number of hours worked?), part-time), wages and investment
- Accessing data sources to obtain and validate these measures by project
- Determining project timing for compliance versus evaluation purposes
- Tallying the exact cost of each incentive, both on a project and a program basis. This is particularly challenging for many tax–based incentives taken as needed over a multi-year period. Further, should costs be calculated by project? by annual budget impact? by program?
- Deciding who should collect the data and how the data management effort should be staffed and funded
3. Enabling economic development organizations to address these data challenges requires significant effort, including the following critical steps:
- Assembling a team with analytical skills as well as subject matter expertise. The team should encompass economic development knowledge, experience working with businesses, political awareness, analytical skills and information system expertise. You’ll probably have to look beyond your own agency to pull together the talent you need.
- Asking the right questions to guide data improvements by defining the current situation, describing an improved state, focusing on the most important issues that need to be addressed, and agreeing on a desired outcome.
- Collaborating with other agencies to collect data and share analytics expertise. Development finance entities, tax and revenue departments, and workforce or labor departments are all potential allies for data collection, analysis and verification of incentive use and compliance.
- Setting expectations at senior levels for analysis and accountability in incentive programs. Staff must know that their efforts to track compliance and performance are important to the economic development mission and the organization’s leaders.
Smart Incentives works every day to provide state and local governments the data and analytics they need to identify what works and to enable sound decisions when awarding incentives. Founder Ellen Harpel is also pleased to be part of the Center for Regional Economic Competitiveness team working with the Pew Charitable Trusts on the Business Incentives Initiative, designed to improve data collection, management and reporting within state incentive programs.
This post was written by Ellen Harpel, founder of Smart Incentives and president of Business Development Advisors LLC (BDA), an economic development and market intelligence consulting firm. Post originally appeared on the Smart Incentives blog and cross-posted at Cities Speak.
Ellen Harpel is President of Business Development Advisors (BDA) and Founder of Smart Incentives. She has over 17 years of experience in the economic development field, working with leaders at the local, state and national levels to increase business investment and job growth in their communities.