I stumbled on something interesting yesterday. It’s called “Building a More Sustainable Economy – Economic Development Strategy and Public Incentives in Austin“.
The study is about public support of private initiatives. It looks at the goals of the public support, the decision-making process, and the quantifiable results. From my reading, it appears that things went pretty well in Austin until fairly recently and then there were some projects that, to say the least, did not achieve the desired results. The study also includes recommendations for improving the economic development and public incentives processes in Austin.
I’m not sure that I agree with all of the objectives of the group that initiated the work or all their opinions on the causes and effects of the less than successful projects. However, I thought their analysis of the economic development and the evaluation/decision processes was quite useful.
The full report, with its valuable appendix, is almost 100 pages. There is a good executive summary if you’re in a hurry.
The author examines the stated goals of economic development activities, the objectives of incentives, what kinds and amounts of incentives the city is using, and what the taxpayers are getting from the public investment. There is an admirable effort to put dollar values to the incentives to and the results from the projects, as well as the loss or return to the taxpayers.
The study distinguishes two types of incentives. One is called “firm-based” and encourages firms to locate or expand in Austin. The second is called “project-based” and seeks to influence the locaion and quality of development. Based on my reading, there seems to have been more success with the former than the latter.
In grading Austin’s performance in economic development and incentive allocation over recent decades, the author notes both strengths and weaknesses. The strengths are in clarity about the businesses desired and consistency in tying the release of incentives to private expenditures and jobs created. The weaknesses are in analysis of the costs and benefits of project proposals and the sharing of critical quantitive information with the taxpayers.
The study identified key questions for broad community discussion of economic development goals: “What kind of jobs and industry growth do we want to encourage?”, “How do we want our city to grow?” and “How do we better balance economic growth with the preservation of our quality of life?”. It was suggested that “to be effective, economic development strategies and policies must be tied to goals that are consistent with deeply held community values and visions for the future”.
The author defines economic development strategy as an effort to “create an environment that encourages private sector investment and business expansion and tries to influence the kinds of industries and activities that form the economic base of a city”. I particularly enjoyed the first part of that definition. He goes on to note that in fact “economic growth in a metro region is primarily the outcome of the investment decisions of thousands of private firms”.
According to the study, public incentives are only one piece of private investment decisions. At least important are such things as appropriateness of the labor force, quality and affordability of sites, community infrastructure, including K-12 education, healthcare, utilities, water and sewer, and quality of life, including neighborhoods, personal and property safety, clean environment and cultural activities.
The key recommendations for greater economic development success and public incentive decisions include: a consistent process, a fiscally responsible process, a deliberative process, an accountable process, and a strategic process. Again and again, the author emphasizes better cost-benefit analyses and the provision of quality and timely information the taxpayers. Finally, the study is full of such useful resources as key questions for developing incentive policies, several model evaluation matrices, a model economic development policy and, my favorite, a prototype cost-benefit analysis.
I can’t really tell you whether or not this particular study is one of the finest available. However, I do think it’s useful in structuring a discussion of the topics of economic development and incentive policy and provides some tools to examine your community’s objectives, processes, and results.