Why Are Economic Development Incentives More Valuable During a Recession?
n early March as the COVID-19 was in its infancy in the United States, I was fortunate enough to join my colleagues in person at the Site Selectors Guild Annual Conference in Atlanta, Georgia. Every year it is an important time to come together to share thoughts and ideas around what is happening in the world of site selection with other site selectors and economic development professionals. One debate centered around whether economic development incentives should be eliminated, especially in a period of 128 consecutive months of economic growth in the United States. It is hard to imagine how much things would change within a matter of weeks. However, my stance on incentives and their importance to communities, states and companies has not changed, and here’s why.
Incentives Make a Critical Difference in the Final Round
Economic development incentives become a key differentiator when a company has narrowed its’ options down to its final two or three locations under consideration for a project. When the C-suite decision makers are determining where to deploy talent and invest capital, project and operating cost relief becomes critically important. If an area does not offer incentive programs to support economic development projects, it is very unlikely to be selected as the final site for the project.
Incentives Enable Proactive Public Policy
Economic development incentives also position communities and states to proactively implement public policy strategies for their respective cities and regions. Initiatives focused on targeted industry sectors, sustainability, talent development, inclusive growth, infrastructure development, housing, redevelopment of brownfield and economically disadvantaged areas of a community, healthcare, childcare, charitable giving and other issues are often supported by policies associated with the use of incentives. It is significantly more difficult to achieve desired public policy outcomes if an area cannot positively impact a corporate leader’s evaluation criteria.
Incentives Create a True Public-Private Partnership
Economic development incentive programs create a true public-private partnership between a community, state and company. As these entities become co-investors in economic growth for an area, an opportunity is created for both direct and indirect economic impact based on the company’s economic activity in the area. This can include spending by companies, employees, visiting customers and vendors, new services and products required to support area businesses and the generation of new tax dollars for communities and states. All of this working together creates a positive boost to the overall health of an area’s economy not possible without the company’s presence.
Incentives Are a Vital Part of the New Economy
Our economy is being upended in a way that we have never seen before due to COVID-19 and this has resulted in a need for community and governmental leaders to regularly reassess their plans moving forward. On one hand, economic development incentives might become an easy target for budget cuts during an economic slowdown. However, incentives can serve as a stimulus for economic development to ensure the decline is not faster and deeper than it would otherwise be.
For example, today, we live in a world where capital and talent are more mobile than ever before, being connected to relatively fast Internet connection can be a game changer. It allows a large sector of a company’s workforce to fulfill job functions from seemingly anywhere. As time marches on, this rapid pace associated with the dispersal of a company’s workforce will only continue to gain momentum. A decision to unilaterally disarm leaders from the use of incentives will only create a negative and long lasting fallout. By keeping the power of incentives in play, we give our communities and states a chance to be an important and vital partner in the new economy.