Management and Performance Review of County Government ...

Assessment of the Finance and Business Functions
While job creation is the most easily quantifiable benefit of firm expansion or location into
an area, many direct and indirect impacts benefit the local area that, theoretically,
outweigh the costs of the tax abatement or other incentives to the local government.
The first step in developing a coherent business incentive policy is to carefully
assess the overall nature and scope of the net social benefits of some of these
instruments to the taxing jurisdictions and taxpayers.
In addition to the traditional economic development goal of job creation (which is
focused on the firm that will create the new positions), incentive policy can also
acknowledge the need for investment in projects that enhance or preserve the
community’s tax base, increase the community’s competitive advantage, and provide
other significant public benefits. There are a number of important regional and national
trends supporting this approach including the increasing importance of quality of life
considerations in creating and maintaining an economically vital region and the longterm
economic, fiscal and environmental benefits of sustainable development patterns.
Project-based incentives are typically targeted towards disadvantaged areas in an effort
to stimulate investment, in order to fuel both the economic and social revitalization of the
area. Many local governments encourage mixed-use developments to direct new
development in more sustainable patterns.
These incentives often include tax
abatements and sometimes special financing options, such as Tax Incremental
Financing or matching funds provided by Community Development Block Grants.
If used effectively, these economic development incentives can be useful tools for
channeling investment into the local area. Through carefully evaluating and targeting
incentives offered, local governments can successfully attract economic development
projects with net social benefits to their communities.
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