Economic development professionals filled the room during the International Economic Development Council annual conference session on best practices in incentive due diligence. For those of you not able to attend, here is a synopsis.
Moderator John Sternlicht (King County, WA) emphasized placing incentive use in a strategic context. He also addressed issues to consider when drafting and enforcing performance agreements. John brought a much-needed legal perspective to the incentive conversation.
Ellen Harpel (Smart Incentives) reiterated the point that incentives should be used to accomplish community goals – not just win a deal. She also talked about the Smart Incentives 4×4 framework (see below) and the role due diligence plays in making smart incentive decisions. The presentation reviewed how and why to conduct background research on incentive applicants as well as a basic framework for conducting a business case analysis of proposed projects.
Jerry Walker (Impact DataSource) provided an overview of economic and fiscal impact analysis as a due diligence tool to determine the value (or return on investment) a community might expect from an incentivized project. He encouraged economic developers to take an objective, consistent and analytical approach to impact analysis. Jerry also explained how Impact DataSource’s tools help communities analyze various scenarios to estimate net benefits and set incentives at appropriate levels — noting that rate of return and payback period should be primary factors in awarding incentives.
James Gandy (Frisco, TX) concluded with a discussion of how his community implements these due diligence tools when making incentive decisions. He also described the steps they take to verify compliance with performance agreements, including documenting occupancy or lease agreements, verifying the value of real property improvements, reviewing county appraisal reports and city-issued permits, and examining employee rosters.
Smart Incentives 4×4 Framework