The COVID-19 economic downturn has created a need for economic development organizations to adjust existing incentive agreements with companies. State economic development leaders strive to offer flexibility to struggling firms in a fair manner while still protecting the public interest. To help states through this process, Smart Incentives recently collaborated with the Center for Regional Economic Competitiveness (CREC) and the State Economic Development Executives (SEDE) Network to create a guide for adjusting incentive performance agreements during this time of economic and fiscal distress.
A coherent set of principles can help states respond strategically and consistently, rather than on an ad hoc or case-by-case basis, reducing uncertainty for both businesses and government. The principles reiterate the importance of connecting incentives to economic development goals and the value of assisting struggling businesses so that communities can recover and thrive, while acknowledging that all parties must recognize the severe fiscal constraints state and local governments themselves are facing.
Checklist of Questions to Address
A framework for considering critical issues and tradeoffs addresses how to define current economic development priorities, assessing when adjustments are appropriate, how to triage or prioritize projects, recognizing the effects of stay-at-home and essential business orders on compliance with the terms of incentive agreements, and working within the amendment options available through existing statute and program guidelines.
Actions states are taking to modify incentive agreements fall into three main categories – timing adjustments, performance adjustments, and penalty adjustments. Several examples of specific steps states have taken are provided.
To access the full document, please see the Guide to Help States Adjust Incentive Performance Agreements in Response to the Current Economic Crisis