Today’s post by guest blogger Joshua Hurwitz describes the new report on innovative and cost-effective incentives from the International Economic Development Council (IEDC) .
Economic developers seek effective tools to grow their community’s prosperity. Traditional incentives can create jobs, investment, and taxes; Incentives for the Twenty-First Century are innovative and cost-effective, too.
The Economic Development Research Partners’ (EDRP) new report presents path-breaking designs for incentives—South Carolina’s tax credits to rehabilitate abandoned buildings that do not qualify for historic credits; rural Kansas’s forgiveness of student debt; even loans from the Development Authority in Ponca City, Oklahoma—a traditional oil-and-gas town—for businesses that install high-efficiency lighting and geothermal heating.
Some of the most interesting incentives are a new take on an old practice. Economic developers have encouraged brownfield cleanup, for example, for years. But now, forward-thinking organizations are earmarking cleanup funds for industrial tenants rather than housing or retail. Philadelphia and Pittsburgh stand out as cities that recognize that brownfields are great places to create middle-income, inner-city jobs.
Economic developers know that small businesses create most jobs; unfortunately, many incentive programs exclude small business with their high bars on job creation and investment. Part of the solution is to recognize that most of what we call small business development services—counseling, venture capital, loans–are also incentives. But communities are also increasing the relative share of incentive resources that go to entrepreneurs, by creating new programs like mentorship networks and angel investing tax credits.
Other incentives are informed by the latest wisdom in economic development. Communities are reaping benefits from companies that ship to the world, a practice that can be encouraged with small export readiness grants. Elsewhere, economic development organizations are learning that they can attract young talent and reduce taxes by giving credits to businesses that advance smart growth and placemaking initiatives.
Our report highlights incentives that are notable for being highly effective. Site selectors tell us that the talent pool is far more important than taxes in deciding where the big plants go. So it’s understandable that many communities are orienting their incentives toward workforce issues–even using talent as an incentive. For example, companies that relocate to Louisiana and Florida are offered complimentary assistance in recruiting, screening, and hiring employees. Economic developers then design training programs that are completely customized to individual businesses’ needs. These initiatives catch companies’ attention save lots of time and money, yet cost little to the public.
A wonderful by-product of many incentives in our report is that they advance social development goals, like revitalizing neighborhoods, helping out the disadvantaged, and reducing carbon emissions. The success of each of these incentives, however, is that they induce businesses into doing an activity that they would not have done (that’s the definition of an incentive, after all) and saves businesses significant money on hiring, marketing, and real estate. In turn, these incentives help businesses grow right in the community. While that’s not a new idea, it’s still a great one for the Twenty-First Century.
Incentives for the Twenty-First Century was prepared by the Economic Development Research Partners (EDRP) program, the in-house think tank of the International Economic Development Council (IEDC). The report is available for sale at www.iedconline.org.