Tell Me About Incentives

Friday, January 04, 2019

The word "incentive" carries many different definitions, and in speaking it, generates a multitude of different emotions. Here's what I know for sure-

The most valuable business incentive is a pro-business climate; a growing diversified economy; moderate and stable taxes; and, a conservative, results-oriented approach to business regulation. When a positive business climate is combined with convenient location, productive workforce, and an excellent quality of life, a community has the ingredients for economic success. 

Incentive programs have grown to be a significant part of economic development. Incentive programs cover a broad category of terms related to forms of aid to businesses for the purpose of encouraging new business activity and investment. Federal, state, and local  governments each can offer incentives. However, utilities and nonprofit organizations (like OEDC) can also offer incentives. These can include, but are not limited to:

  • low interest, forgivable loans
  • below-market land
  • property tax abatement
  • relocation assistance
  • infrastructure development
  • specialized utility rates

Most incentives are temporary in nature, provide benefit over a defined period of time, and are closely related to livable wage or better job growth. Usually, retail and small commercial projects do not qualify because of lower wage thresholds, significant part time positions, or small staff structures.

Because negotiations for discretionary incentives occur in private, a lack of transparency is a common source of pubic acrimony, although it shouldn't be. Its unfortunate that mismanaged or failed incentive projects get the most attention, because rigorous prequalification procedures and designated performance metrics provide greater accountability on behalf of the incentive provider(s).  

Sweeping generalizations such as 
incentives are bad are invalid. It's inappropriate to draw a conclusion from a single or small group of instances. Those who offer incentives look beyond the immediate transaction; those who offer incentives hope to leverage the investment of a vibrant business that will generate future growth paying an additional dividend beyond the short-term. (from the book Economic Development for the Team,Eric P. Canada)

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Ottumwa Economic Development Corporation 217 East Main Street Ottumwa, Iowa  52501
Phone 641-682-3465 Fax 641-682-3466