BDA Smart Incentives presentation to the National League of Cities - Economic Development Financing Tools workshop

1. USING INCENTIVES
TO ACHIEVE
COMMUNITY GOALS
Economic Development Financing Tools
National League of Cities
Congress of Cities - Seattle, WA
November 15, 2013
Ellen Harpel, President
Business Development Advisors

2. 1
BDA’s Incentives Framework
Data and
analytical tools to
enable better
decision-making
Prepare for a
future of greater
transparency and
accountability
Recipient
Deal
Compliance
Effectiveness
© 2013 BUSINESS DEVELOPMENT ADVISORS

3. 2
I. Incentive Basics
• Categories
• Direct business financing
• Indirect business financing
• Community-oriented
• Tax-related
• Types
• Bonds
• Grants
• Investments
• Loans
• Tax abatements, credits, deductions, exemptions
Source: C2ER - www.stateincentives.org
© 2013 BUSINESS DEVELOPMENT ADVISORS

4. 3
Incentive Basics (continued)
• Business Need
• Capital access
• Facility/site location
• Infrastructure
• Marketing
• Product/process improvement
• Regulatory climate
• Workforce
• Discretionary and non-discretionary
• Targeted (or not) by industry or geography
© 2013 BUSINESS DEVELOPMENT ADVISORS

5. 4
II. Using Incentives – Is this a good deal?
• Project Benefits
• Fiscal Impact
• Economic Impact
Can this incentive deal generate net benefits
for your community?
© 2013 BUSINESS DEVELOPMENT ADVISORS

6. 5
Project Benefits
• Project characteristics
• Jobs, wages, investment, location
• Fit with economic development strategy
• Target industries, business types, regional support, match with
program criteria
• Timeframe
• Timing and lifespan
• Likelihood of Success
• Other backers? Risk level?
© 2013 BUSINESS DEVELOPMENT ADVISORS

7. 6
Fiscal Impact
• Tax and budgetary implications for state and local
government of incentive decisions
• Are taxes generated likely to exceed the cost of the
incentive and additional costs of service
• Consider:
• Can you quantify the cost and timing of the incentive?
• What type of tax revenue will the project generate?
• What additional expenditures might be required?
• Do a formal analysis
© 2013 BUSINESS DEVELOPMENT ADVISORS

8. 7
Economic Impact
• Traces the flow of money throughout the economy after
the initial investment
• To estimate the contribution of economic activities to a
regional or state economy
• Economic impact depends on industrial structure and size
of your region
• Consider:
• Indirect and induced impacts?
• Quality of data inputs
• Interpret carefully
© 2013 BUSINESS DEVELOPMENT ADVISORS

9. 8
III. Managing Incentives – WAS this a
good deal?
• Monitor compliance - performance
• Assess effectiveness - evaluation
• Reporting and policy feedback
© 2013 BUSINESS DEVELOPMENT ADVISORS

10. 9
Performance Agreements
• Are performance requirements clearly defined?
• Are expectations laid out in a signed agreement?
• Is the company required to report on its progress in
meeting those requirements?
• Over what time period?
• Is there a way to verify reported information?
• Are policies in place to protect the community in the case
of non-performance?
COLLECT THE DATA to figure out what is working and
what is not
© 2013 BUSINESS DEVELOPMENT ADVISORS

11. 10
Evaluating incentive programs
• Did the incentive affect the choices businesses made?
• Were existing businesses harmed by the incentive?
• Did the benefits outweigh the costs?
• Is the program meeting the community’s goals?
• How could it be improved?
• Are the community’s incentives working together
efficiently?
Source: Pew Center on the States
© 2013 BUSINESS DEVELOPMENT ADVISORS

12. 11
Reporting and Communication
Elected officials and community groups are demanding
better data from economic development organizations on
compliance and outcomes associated with incentive use.
• Many organizations still struggle to report basic
information about incentive use
• We are still figuring out how to do this well:
• What exactly should we measure?
• How to obtaining, verify and evaluate company data?
• What is the best way to present and share this information?
• Internal tools and processes for program evaluation
• Staffing and resources
© 2013 BUSINESS DEVELOPMENT ADVISORS

13. 12
Contact Information
• Ellen Harpel
President
• 571/212.3397
• eharpel@businessdevelopmentadvisors.com
• www.businessdevelopmentadvisors.com
• www.linkedin.com/pub/ellen-harpel/a/448/266
ellen@smartincentives.org
• http://www.smartincentives.org/
• Twitter: @smartincentives
© 2013 BUSINESS DEVELOPMENT ADVISORS

14. 13
Additional Resources
• C2ER State Incentives Database
• Pew Center on the States Economic Development
Incentives Project
• Evidence Counts
• Avoiding Blank Checks
• Smart Incentives blog
• Cost – Benefit Analysis
• informAnalytics
• Impact DataSource
• REMI
© 2013 BUSINESS DEVELOPMENT ADVISORS