This post was written by Ellen Harpel, founder of Smart Incentives and president of Business Development Advisors LLC (BDA), an economic development and market intelligence consulting firm. Post originally appeared on Smart Incentives blog.
City leaders have many concerns about the cost and effectiveness of economic development incentives in their communities, as we learned from the session on economic development financing tools during last year’s Congress of Cities. A new initiative working to develop best practices for evaluating incentives at the state level will help local elected officials whose communities use state incentive programs for business attraction. It should also provide some guidance for cities striving to assess their own local incentive programs.
The Pew Charitable Trusts recently announced the launch of the Business Incentives Initiative. This Initiative will help improve data collection, management and reporting within state incentive programs in order to “improve decision-makers’ ability to craft policies that deliver the strongest results at the lowest possible cost.”
Pew and the Center for Regional Economic Competitiveness will engage leaders from seven states (IN, LA, MD, MI, TN, OK, VA) to develop best practices for evaluating economic development incentives by:
- Identifying effective ways to manage and assess economic development incentive policies and practices.
- Improving data collection and reporting on incentive investments.
- Developing national standards and best practices that states can use to successfully gather and report data on economic development incentives.
As project manager Jeff Chapman explained in an interview with Bloomberg BNA:
This initiative builds on Pew’s ongoing project to help state policymakers implement ongoing evaluation of economic development incentives. As states work to measure the effectiveness of these programs, they often find they lack the data needed to determine whether an incentive is producing the expected outcome. Further, there is currently no source that has identified and compiled the best practices on how to overcome this obstacle.
All states were invited to submit proposals to participate, and seven were selected. They have agreed to commit top decision-makers from economic development, revenue, and other relevant state agencies to work intensively with Pew throughout this 18-month program. Each of these seven states has also already begun to address the challenges associated with economic development incentive program management and evaluation. The Pew team will work with the states to develop and implement tailored solutions for each state, while also paving the way for development of best practices and training that will be available to all states.
I am pleased to be part of the Center for Regional Economic Competitiveness team working with Pew on this important effort. Our role will be to leverage our economic development and incentives expertise to provide technical assistance to the states.
Here at Smart Incentives, we have emphasized the importance of data, analysis, transparency and accountability in economic development incentive use. The lack of quality data regarding compliance and effectiveness is a significant problem for the economic development field and policymakers trying to do what’s best for their communities. The Business Incentives Initiative represents a notable step forward in enabling smart incentive use in all states.
Ellen Harpel is President of Business Development Advisors (BDA) and Founder of Smart Incentives. She has over 17 years of experience in the economic development field, working with leaders at the local, state and national levels to increase business investment and job growth in their communities.