The Council of Development Finance Agencies (CDFA) wrapped up its Virtual National Summit last week with a session called The Road to COVID Recovery – Moving Forward. I was pleased to join a thoughtful group of panelists charged with offering a positive take on new ideas and approaches in our respective fields.

Incentives are usually a prickly topic, but this year there truly are some positive developments to report. 

Transparency and Accountability

We commend the progress toward greater transparency and accountability in incentive use among economic development organizations. More places are consistently sharing information on who received incentives, how much the incentives are worth, and expected outcomes. Beyond these basics, more state and local governments are conducting formal evaluations of their incentive programs to see if they are working as intended. States have also been upgrading their ability to track compliance with contract terms and program rules on a project by project basis. There are certainly laggards, but the trend toward greater transparency and accountability is clear. 

Equitable Growth

State and local governments have been moving beyond simple job and investment tallies when considering the value of projects to their communities. For example, we have seen a greater emphasis on job quality. Economic development organizations are examining wage levels for all positions (not just an average project wage), benefits that are offered, hours worked, and ability to set people on a career pathway, among other job characteristics when evaluating incentive applications. 

More places are gathering detail on who is getting those jobs. They are assessing whether projects will largely hire current residents or attract new residents. Economic development staff are looking at hiring patterns to see if projects are providing jobs for people in areas that have higher unemployment or have been historically disinvested. They are increasingly reviewing practices to make sure incentives are being used in an equitable manner and do not exacerbate existing racial and economic disparities. 

Small and Neighborhood Businesses

There is greater interest in helping small and neighborhood based businesses, which, by design, had not been the focus of most business incentives previously. Many of flagship business incentives were created in response to the last recession. The businesses affected, circumstances, and needs are very different now during the COVID-19 downturn. We expect legacy programs will get a hard look in the coming year, with adjustments to follow. We will also continue to see state and local governments create new programs designed to address current needs. 

Much but not all of this focus stems from the pandemic’s devastating effect on local establishments. We are wrapping up a study that began pre-COVID that examines incentives for entrepreneurs and small businesses. We look forward to sharing the findings early next year. 

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