7 Economic Development Incentive Trends

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I am often asked about trends in incentive use by economic developers trying to stay competitive.  Here is a quick summary of the trends we see across the U.S.

  1. Incentives for everyone. Every type of entity that "creates" jobs, ranging from McDonald's and car dealerships to PhD-laden federal agencies (see National Science Foundation), wants and is likely to get state and/or local incentives from some community.
  2. Incentive programs that benefit third parties other than the companies in the community, such as transferable tax credits and credits to investors, are growing in popularity.
  3. Programs designed to help distressed areas - such as enterprise zones - are losing steam, in large part because they have not accomplished hoped-for change in those locations.
  4. Elected officials and community groups are scrutinizing incentive programs and demanding better data on compliance and outcomes associated with incentive agreements.
  5. More states and localities are employing caps, clawbacks, performance agreements, and sunset clauses to limit the risk associated with incentives - but they are also finding these policies are harder to implement than expected.
  6. Communities are offering a variety of taxpayer-backed financing programs to entrepreneurs and small businesses that would not have received attention from economic development organizations in the past. 
  7. Specialized services to businesses - especially small, entrepreneurial and innovation-oriented firms - are rising in popularity as a complement to financial incentives.

What are your experiences with these trends? What other trends do you see?

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