Use Your Incentives Wisely
The use of incentives has become a routine issue in economic and real estate development and their use to attract desired projects such as Tesla or Apple is frequently questioned. Often, people ask if officials are simply helping private parties make bigger profits at the expense of the general public. This is a legitimate question.
Government has several roles in controlling behavior of market participants – one is to restrict or control by regulation and another is to incentivize. Markets prefer incentives. Incentives are many things, but they need to be used to implement public policy and not just to secure development of disparate projects. They should be tied to where we want to go and what we want to be as a community.
This implies a need for a vision or a brand. It’s too broad to say, without a brand, we want a skilled workforce, quality transportation infrastructure, quality places to live, a wide range of housing, a favorable business climate, quality education and other considerations. What are the critical economic drivers that will make us a player in a dynamic global economy?
Answering that question helps us create a brand and that is how we should define incentives and how to apply them. This will also help create a trust earned when public officials are clear about the purpose of, and approach to, incentives — and are transparent in their granting and reporting of results that are used to achieve brand promise.
It is critical to monitor the effectiveness of an incentive program and to do this transparently. This is about outcomes. One of those outcomes is impact on the area, neighborhood and overall community. Not just answering the question “did the project work?” but did it have the desired impact?
Remember it is not City/Town Councils, Planning and Zoning Commissions or neighborhood groups that build communities – it’s private developers. Incentives are an important part of shaping growth but they need to be looked at in the context of community investment and creating a desired place and focusing the development community to help deliver a brand promise.