Incentive use has grown dramatically and become a more prominent – and challenging – part of economic development work. Today’s environment requires better analytics to reduce risk, quantify benefits, refine strategies, explain and build support for decisions and, most importantly, to achieve better outcomes when using economic development incentives.
To accomplish these objectives, economic developers need to manage incentives through their entire life cycle, not just complete a deal. The graphic above summarizes the fundamental elements of good incentives program management.
The four core elements are data, analysis, transparency and accountability. We need specialized data and analytical tools to support decision-making throughout the incentives process. We need to improve our ability to monitor and report on incentive outcomes to provide greater transparency and accountability in our use of incentives.
Economic developers can apply these principles to the four different stages of the incentives process:
- Recipient – As you begin the negotiation, have you done your due diligence on the company applying for incentives? Are you prepared to explain your decision to your community?
- Deal – Are you confident you have negotiated a good deal that is likely to generate real benefits for your community? Can you justify this deal to your board, elected officials, and your community?
- Compliance – Once the deal is signed, how will you know if the company has complied with the incentive agreement and met its commitments to your community? Can you answer questions on individual and program compliance rates?
- Effectiveness – Do you know if your incentive programs have helped your community achieve its economic development objectives? Is there a process in place to evaluate programs?
Smart Incentives works every day to provide state and local governments the data and analytics they need to identify what works and to enable sound decisions when awarding incentives.