Development Officials Getting Aggressive with Incentives
LeRoy, Greg, Talanker, Alyssa, Nation's Cities Weekly
In a little-noticed policy shift, economic development officials are rewriting the way they grant and monitor economic development incentives. The trend is toward more targeting, higher job-quality standards, more disclosure and tougher enforcement.
Despite the current economic downturn, development officials increasingly see incentives as a way to target good employers. Using standards and safeguards, they ale encouraging employers to adopt "high road" practices that can improve productivity, reduce turnover and ensure that taxpayers get a fair return on their investment. To paraphrase one practitioner, "We are aggressive but prudent: we attract the kind of companies we want and avoid the bottom-feeders."
Other trends include the increasing use of clawbacks, or recapture provisions, to ensure that companies deliver on performance requirements or repay some or all of the incentive. Clawbacks are far more common than they were five years ago, especially among cities, and there is a modest body of experience now accumulating on best practices in the construction and enforcement of recapture provisions.
Additionally, two states (Minnesota and Maine) have enacted disclosure laws that provide state-compiled reports on local incentive outcomes. The resulting data on wages and compliance have enabled them to further improve programs. Three other states have central databases with information about companies that receive local property tax abatements, and at least one tracks the intrastate relocations of companies that have received enterprise zone tax credits.
The potential uses for such data are many. …