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.
- 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.
- 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.
- 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.
- Elected officials and community groups are scrutinizing incentive programs and demanding better data on compliance and outcomes associated with incentive agreements.
- 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.
- 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.
- 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?