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Health & Fitness

Plans and Incentives

I mentioned in my last post that I make my living in economic/community development and also in corporate site selection.  Right now I’m out running a roundtable at the International Economic Development Council’s leadership summit, and I wanted to touch on a policy issue that affects us in Newton.

The City of Newton was recently approved as a Regional Technology Center Economic Target Area and is now participating in the Massachusetts Economic Development Incentive Program (EDIP).  This designation brings a host of new tools for business attraction to the table, particularly a powerful set of local tax credits, backed by further incentives from the Commonwealth of Massachusetts.  Needham already has the same designation in place, and used this toolset to attract Trip Advisor to the New England Industrial Park. 

While they can be used well, these tools can also be used poorly.  There is a considerable amount of literature available that describes them as corporate welfare, and subsidizing private businesses to the detriment of the community.  A three-part series in the New York Times in November 2012 outlined many of the ways these programs have been used across the country with little in the way of accountability from the companies, and with few means for evaluating whether the incentive programs actually resulted in a net benefit for the community.

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However, well-designed incentives can provide a real benefit for the community and - for example - help us draw business and office investment to the Wells Ave park.  When the community’s goals are clear, the desired outcomes are realistic, and the responsibility of all parties expressly laid forth, benefits can be achieved for both the public and private sector.  

In many years of both helping both companies and communities evaluate location projects, I believe there are two key questions to be asked when thinking of incentives:

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1.       Would the company choose to locate in the community regardless of the incentive? and,

2.       Does the community receive a net benefit as a result of awarding the incentives?

Companies choose to locate in communities when that location allows them to solve a problem.  This means that the location gives them access to a combination of factors including workforce, cost environment, partner organizations, regulatory and tax environment, educational characteristics, transportation, hazards and risks, and sometimes even quality of life (or, the ability to recruit talent to the area).  Incentives don’t address any of these directly, but they remain a key part of the site selection discussion in later stages when the fundamentals have already been established. 

In the last stages, an incentive program can sway a location decision (where the other location basics are sound) while also building a strong ongoing relationship between company and the community.  Such a relationship can only develop where the incentive program creates a situation that benefits not only the company, but also the community at large.  

Training grants often fit this description.  They allay company costs, provide a trained workforce, and also improve the general skills base for the community and region.   Even if the company in question fails or pulls back from the community, the community and its residents are left better off than before. Likewise, some tax increment finance programs allow for redevelopment of disadvantaged sites, clearing a path for business, increasing municipal tax revenue, and – if well guided – providing better places for the community over the long term.

The key is to design the incentive offering and guidelines that directly in line with the community’s overall economic development strategy.  The community must be able to know when an incentive will be an effective and appropriate tool in order to try to seal the deal.  Local government also needs to understand when such an incentive will not be needed, or to identify when the company in question will not be able to uphold their end of the bargain.

Now that Newton has the full set of EDIP tools, we have the ability to participate in new and powerful ways to attract businesses to the City.  To make the most of these tools, we now need to have a plan and priorities that clearly state what we want and how we will use these incentive tools to achieve these goals.

Chris Steele is a husband and a father of 2 children in the Newton Public School system.  He is also an economic and community development consultant (COO at www.ic-associates.com) as well as an activist and volunteer.  You can contact him at steelch@yahoo.com

 
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