Introduction

Many states and local communities offer companies incentives–cash, low interest loans, tax abatements, etc.–to locate, expand, or invest in a particular place. City and county level incentives can be difficult to locate and each municipality can have unique features to its incentives.

For example, many cities try to encourage businesses to locate in a downtown district and offer a partial or full tax abatement. The City of Henderson offers a a 5 year property tax moratorium for (1) property twenty-five years or older, (2) used as a commercial business enterprise, and (3) located in one of nine zoning districts. For details, see the ordinance. Also, a county might have dozens of cities.

With the many government subdivisions in some areas, it can be difficult know what incentives are available. Written guidelines made available via the internet can assist companies determine their eligibility for incentives. The benefits of written guidelines include building a consensus among local officials, ensuring consistency in granting incentives, and responding quickly to prospects requesting assistance. Many examples of incentive guidelines are available.

Eligibility Criteria

There is a wide variety of programs and eligibility criteria among the different communities. Many of them require applicants meet the “but-for” standard prior to granting any incentives. In other words, no incentives will be granted unless the company can show that the building, investment or job would not have occurred unless the incentive were offered.

Nearly all of them have eligibility requirements that include a minimal investment and jobs requirement before financial incentives could be awarded. Some address labor concerns: Henderson County, North Carolina, requires that the jobs pay above the median wage in the county and Loveland, Colorado, requires that the company provide health insurance to its employees.

Nearly all of them have a maximum time period for which the incentives would be granted for example five years. Finally, some guidelines promote the hiring of employees from within the jurisdiction where the incentives were granted. Companies that derive a substantial part of their revenue through exports are also given greater preference under some guidelines.

Creativity and community values can be seen throughout the different guidelines. For example, Brownsburg, Indiana, offers many kinds of incentives including a “facade improvement grant.” Businesses are eligible if located in certain parts of town and using the funds to improve the exterior of their buildings.

Community Incentive Guidelines

Bloomington, Illinois

Brownsburg, Indiana

Burleson, Texas

Henderson County, North Carolina

Hidalgo, Texas

Loveland, Colorado

Louisville, Kentucky

Lexington, Kentucky

Peoria, Arizona

Resources

Pew, How States Are Improving Tax Incentives for Jobs and Growth (2017)

Pew, Economic Development Incentives: Best Practices (2016)

Stallman & Johnson, Econ. Development Incentive Programs: Some Best Practices (2011)

GFOA, Developing An Economic Development Incentive Policy (2008)

Questions

Should the city and county write down the criteria under which they would offer taxpayer dollars to private companies?

What kinds of companies should receive the most in taxpayer resources?

Do the kinds of companies that locate in Henderson impact its livability?

Should wages or health insurance be addressed in any future guidelines for Henderson?

Summary

Writing financial incentive guidelines builds a consensus among local officials, insures consistency in granting incentives, and allows for quick response to business inquiries. Many of the guidelines embodied the recommendations of Timothy Bartik, a nationally renown economic development scholar. The guidelines targeted export-based businesses, favored local labor, monitored actual jobs, promoted jobs that paid high wages, and recruited companies having high multiplier effects. If Henderson would commit to this basic idea and adopt evidence-based economic development policies, Henderson could regain the economic vitality of its past.