Using incentives to achieve community goals nlc 2013

USING INCENTIVES TO ACHIEVE COMMUNITY GOALSEconomic Development Financing Tools

National League of Cities

Congress of Cities - Seattle, WA

November 15, 2013

Ellen Harpel, PresidentBusiness Development Advisors

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© 2013 BUSINESS DEVELOPMENT ADVISORS

BDA’s Incentives Framework

Recipient

Deal

Compliance

Effectiveness

Data and analytical tools to

enable better decision-making

Prepare for a future of greater

transparency and accountability

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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

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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

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II. Using Incentives – Is this a good deal?

• Project Benefits• Fiscal Impact• Economic Impact

Can this incentive deal generate net benefits for your community?

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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?

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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

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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

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III. Managing Incentives – WAS this a good deal?

• Monitor compliance - performance• Assess effectiveness - evaluation• Reporting and policy feedback

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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

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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

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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

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Contact Information• Ellen Harpel

President• 571/212.3397

• [email protected]• www.businessdevelopmentadvisors.com• www.linkedin.com/pub/ellen-harpel/a/448/266

[email protected]• http://www.smartincentives.org/• Twitter: @smartincentives

http://www.businessdevelopmentadvisors.com/

mailto:[email protected]

http://www.smartincentives.org/

http://www.smartincentives.org/

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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

http://www.stateincentives.org/

http://www.pewstates.org/projects/economic-development-tax-incentives-project-329163

http://www.smartincentives.org/blogs/blog

http://informanalytics.org/

http://www.impactdatasource.com/

http://www.remi.com/the-remi-model/topic-areas/economic-development