Smart Incentives joined nearly 300 individuals and organizations providing comments on the proposed Governmental Accounting Standards Board (GASB) Tax Abatement Disclosures guidelines. GASB notes that most projects receive between 50 and 150 comment letters, so this topic has definitely generated strong interest. A key point for the economic development community: nearly very letter started by agreeing that there should be greater transparency and accountability in incentive use. Any disagreements were over whether this standard accomplishes that goal or not.
As you may recall from our previous post on the topic, GASB’s guidelines are intended to provide insight into how certain economic development incentives might diminish a community’s tax base. The disclosure standards require information on the number of tax abatement agreements entered into and in effect during the reporting period, dollar amount of taxes abated, and other commitments made by the government. Details on individual transactions would not need to be provided.
You can see the comment letter from Smart Incentives founder Ellen Harpel here. Many commenters focused on whether individual transaction information should be released (comments are divided on this) and whether it is meaningful to require disclosure only for single year reporting periods. Our comments addressed the following challenges in the proposed standard:
- The language in the proposed standard is not clear on the matter of performance-based agreements and should be clarified.
- Disclosing the amount of taxes abated during each reporting period without context on related commitments in other years or the reasons for providing the abatement is of limited value.
- The draft standard assumes the required reporting would not be an administrative burden for local government. Our work with economic development organizations and state & local governments suggests otherwise.
The next steps in GASB’s process are to review and redeliberate issues based on the comments. By July 2015 GASB will review a preballot draft of the final Statement, with the final Statement being issued in August 2015. If passed, the standard would take effect at the end of 2015.