PDI Blog

Presidential Post - March 15, 2013

Brent Willett 2012I expect many of you have seen the article by David J. Robinson in the most recent edition of Area Development magazine discussing the importance and value of incentives to successful economic development, “How Some Locations are Making Their Business Case for Incentives”.  If you haven’t, it’s worth a read, particularly in light of where the discussion in our state on the subject stands today.  The article, which takes a national perspective, argues that the lion’s share of state and local economic development incentives awarded each year throughout the country represent critical deal-closing levers and that detractors overstate their proportionate sum [$80 billion throughout the US in a $16 trillion economy last year, or one half of one percent] and understate their essential role in securing projects for states and communities.

And yet, despite evidence to the contrary, economic developers throughout our state are battling in yet another legislative session for only a modest economic development project funding pool in two parts- that of an increase in IEDA’s tax credit cap to its former $185 million and for a direct financial assistance pool of about $19 million, or about one-third of one percent of a $6.5 billion budget.  For really the second legislative session in a row, a single economic development project has been teed up and demagogued at the expense of a more considered, rational and fair conversation about the importance of these resources.  Last year with the help of numerous other groups PDI was able to largely fend off an attack on TIF which was mounted largely in the context of a single deal, and we find ourselves back at it again, only with a different project and a different but no less critical tool to defend. What’s gotten lost in many of the arguments for and against these incentives is, simply, how important they are to communities throughout this state for projects large, yes, but mostly modest- the 30-job expansion/retention of a local employer or the repurposing of a vacant building by a new company. 

Robinson’s article argues that incentives, assuming judicious use, should be viewed in the context of profit/performance alignments in the private sector, in that economic development incentives represent an ‘area of public policy where government rewards positive behavior…just as stock options create an incentive for private companies to care about the performance of their employer, economic development incentives create a major incentive for private companies to grow in a region or state…’ and goes on to remind the reader that the vast majority of incentives awarded throughout the country are performance-based and have post-creation triggers based on jobs and revenue state and local governments don’t currently enjoy.  I think you’d be hard-pressed to find a private-side business decision maker who would characterize employee performance incentives as ‘waste,’ ‘subsidies’ or ‘employee welfare’, but rather essential contributors to growth.  Alas, it is not the case in our economic development dialogue today.

I may have just preached to the choir, but I hope you’ll turn around now and preach to your [legislative] congregation.

Don’t forget…

Tuesday, March 26 marks the return of the PDI/IEDA one-day event for statewide economic development partners.  The morning has PDI hosting the PPP [Partners, Profession and Process] event at the Iowa Farm Bureau, with the afternoon session “Getting to Know IEDA,” hosted by IEDA later that day.  Both events are excellent opportunities for those new or relatively new to the economic development profession or new to it in Iowa.  Plan on a day packed with  information, resources and networking with your statewide partners at IEDA.

 

Written by Brent Willett
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