By Ellen Harpel.
Incentives are not just about winning a deal or completing a transaction with an investor. Smart incentive use is always connected to a larger economic development strategy.
Any project for which incentives are offered needs to be evaluated in the context of community economic goals and strategies. Many communities have an economic development strategy, though perhaps of varying quality, and making sure that an incentivized project aligns with the broad statements and values within that strategy is an important first step. Unfortunately, a surprising number of communities either do not have strategies in place or do not align their incentive programs to those strategies. Community discussions on incentive use focus on the deal, not the reason for the deal. My work around the country has revealed that the public, elected officials and even economic development board members do not see how incentives are connected to the broader economic development mission, seeing them entirely as necessary evils to enable business recruitment.
Policymakers are increasingly ensuring that individual incentive programs have clear goals, although we have seen that guiding legislation can be frustratingly unclear, making both implementation and evaluation difficult. Clearly defining the purpose of an incentive program helps ensure it will be used as intended. Otherwise, it runs the risk of being offered to all comers regardless of their capacity to connect to community goals. Communities also often have specific objectives related to supporting target industries or developing individual sectors of the economy. Economic developers may be urged to support small businesses or firms meeting certain demographic criteria. Economic development organizations often work with regional or national organizations and may need to align efforts with their broader strategies. Sustainable development may be a priority. These are all additional strategic factors that should be considered when assessing the basic project benefits that an incentives investment might generate. Good economic development organizations know their communities well and should be able to relatively easily assess whether a proposed investment aligns with community values on these factors, singly or in combination.