It was a pleasure to work with the Council of Development Finance Agencies (CDFA) to talk about Compliance, Evaluation and Sound Decisions for Smart Incentives as part of the CDFA/BNY Mellon Development Finance webcast series.  Cheers to CDFA for taking on this topic.

During the hour-long program, we went over a slew of issues associated with economic development incentive use, including:

1. Smart Incentives 4×4 framework
2. Incentives basics:

  • Our working definition of incentives (comments welcome):

Incentives are a) tools to influence business decisions in order to spur the growth of companies and jobs in specific locations and b) taxpayer-financed programs that support individual businesses.

3. Trends in incentives use

4. Sound decisions – using incentives to achieve community goals:

  • Project Benefits
  • Fiscal Impact
  • Economic Impact 

5. Compliance and evaluation:

  • Compliance – performance agreements, monitoring and follow-up
  • Assessing effectiveness – program evaluation
  • Reporting and policy feedback

The single most important theme was that incentives should be used to accomplish community goals – not just win a deal.  The problem is that we haven’t had the data to let us know which incentive packages and programs actually help our communities.  State and local governments need better data and analytics throughout the process to identify what works and to enable sound decisions when awarding incentives.

The next few years will see tremendous improvements in the way we talk about and evaluate incentives.   The stakes are too high and the financial commitments are too great to do otherwise.

You can download my presentation here, and CDFA members can access the webcast here