DOCUMENTS > ECONOMIC DEVELOPMENT COUNCIL
THE CASE FOR LOCAL ECONOMIC DEVELOPMENT INITIATIVES
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By Amy Denham on August 22, 2013 | 0 Comments By Ken Springer, Vice President of the EDC
In the minds of many Americans, economic development and the provision of tax incentives to relocating companies are synonymous concepts. If I had a dollar for every time someone passed off the economic development industry as nothing more than a vector for delivering wheelbarrows full of government cash to private interests, I could retire young. Incentives generate an intense amount of attention (usually negative), but remain a core component of our work as economic developers.
Incentives are a necessary fact of life in this industry. Proposals for major economic development projects always require four components: suitable real estate, infrastructure, a ready workforce and incentives. Communities that lack any one of those four critical components will generally be ruled out as a location for a project. Breaking “incentives” down, there are usually state-based incentives and then there are locally-based incentives that work in conjunction with each other.
State-based incentives can be quite lucrative. For those states that levy an income tax, that tax can be abated, rebated or credited to create significant reductions to a company’s tax burden. States that levy personal or real property taxes can reduce those taxes in similar ways. States can also provide large-scale financing programs such as revenue bonds and loan programs. Local incentives usually include property tax abatement, tax-increment financing and the occasional non-traditional lending program. Of these, TIF is typically the most lucrative, but carries with it significant political risk and long-term commitments.
In Bloomington-Normal, we traditionally haven’t had a lot of local incentives in our economic development toolbox. During the last few decades, our community’s incumbent employers grew exponentially and ushered a wave of growth in both population and economic output. During this period, our community’s most pressing economic issue was not figuring out how to grow this community, but rather how to deal with the rapid growth we were already experiencing. In that kind of environment, incentives lost their importance to our economy.
Alas, the economic world has changed. While our incumbent institutions are still thriving, the rate of growth experienced prior to the 2008 recession has not resumed apace. As the local agency responsible for economic development in Bloomington-Normal, we need bigger and better tools with which to vie with our competitor communities and win our share of deals in an increasingly-more competitive environment. Playing the economic development game in the post-recession economy with a pre-recession toolbox isn’t going to cut it.
Thus, the EDC has brought forth a proposal to create three new incentive programs that would provide local incentives to major expansion and relocation projects. These programs include a limited-term property tax abatement on improvements to real estate, a small cash-grant for hiring high-wage positions and a workforce-readiness/worker screening program. These programs are not radical, nor are they even particularly aggressive in comparison to what other communities around the country are presently using. But they’re a start. Combined with the commendable assets and infrastructure already present in Bloomington-Normal, the establishment of even these mild local incentives ought to go a long way towards improving our competitiveness.
In the coming months, the EDC will be advocating for the creation of this proposed incentives framework in the public sphere. The establishment of these incentive programs today will ensure that our economic development program will be able to assist with the growth of existing and new projects in the future. We urge you to contact your local elected officials and voice your support for robust economic development tools.
Categories: "Economic Development", Incentives
In the minds of many Americans, economic development and the provision of tax incentives to relocating companies are synonymous concepts. If I had a dollar for every time someone passed off the economic development industry as nothing more than a vector for delivering wheelbarrows full of government cash to private interests, I could retire young. Incentives generate an intense amount of attention (usually negative), but remain a core component of our work as economic developers.
Incentives are a necessary fact of life in this industry. Proposals for major economic development projects always require four components: suitable real estate, infrastructure, a ready workforce and incentives. Communities that lack any one of those four critical components will generally be ruled out as a location for a project. Breaking “incentives” down, there are usually state-based incentives and then there are locally-based incentives that work in conjunction with each other.
State-based incentives can be quite lucrative. For those states that levy an income tax, that tax can be abated, rebated or credited to create significant reductions to a company’s tax burden. States that levy personal or real property taxes can reduce those taxes in similar ways. States can also provide large-scale financing programs such as revenue bonds and loan programs. Local incentives usually include property tax abatement, tax-increment financing and the occasional non-traditional lending program. Of these, TIF is typically the most lucrative, but carries with it significant political risk and long-term commitments.
In Bloomington-Normal, we traditionally haven’t had a lot of local incentives in our economic development toolbox. During the last few decades, our community’s incumbent employers grew exponentially and ushered a wave of growth in both population and economic output. During this period, our community’s most pressing economic issue was not figuring out how to grow this community, but rather how to deal with the rapid growth we were already experiencing. In that kind of environment, incentives lost their importance to our economy.
Alas, the economic world has changed. While our incumbent institutions are still thriving, the rate of growth experienced prior to the 2008 recession has not resumed apace. As the local agency responsible for economic development in Bloomington-Normal, we need bigger and better tools with which to vie with our competitor communities and win our share of deals in an increasingly-more competitive environment. Playing the economic development game in the post-recession economy with a pre-recession toolbox isn’t going to cut it.
Thus, the EDC has brought forth a proposal to create three new incentive programs that would provide local incentives to major expansion and relocation projects. These programs include a limited-term property tax abatement on improvements to real estate, a small cash-grant for hiring high-wage positions and a workforce-readiness/worker screening program. These programs are not radical, nor are they even particularly aggressive in comparison to what other communities around the country are presently using. But they’re a start. Combined with the commendable assets and infrastructure already present in Bloomington-Normal, the establishment of even these mild local incentives ought to go a long way towards improving our competitiveness.
In the coming months, the EDC will be advocating for the creation of this proposed incentives framework in the public sphere. The establishment of these incentive programs today will ensure that our economic development program will be able to assist with the growth of existing and new projects in the future. We urge you to contact your local elected officials and voice your support for robust economic development tools.
Categories: "Economic Development", Incentives