Distinguishing Development Incentives from Developer Give‐Aways: A Critical Guide for Development Practitioners and Citizens

Abstract

The vast majority of commwrities offer fuuuzcial incentives to private businesses and, among these, tax incentives remain the most widely used. Tax and other f-ial subsidies used to attract firm account for the bulk of public resources spent on economic development. Yet the interests of city residents-especially those marginalized in city politic~enerally are not a key consideration in the fashioning of incentives. Using a hypothetical abatement proposal, this article highlights nine key questions that must be addressed to understand the potential benefits to the community of tar incentive programs. This exercise demonstrates how proponents of incentive deak typically overvalue benefrts. By asking the right questions and conducting their own analysis, citizens can arrive at a more realistic estimate of net benefits.

Partnerships and the Fiscal Implications of Planning and Development: A Case Study of Maynard, Massachusetts

“…Safeguards against the overuse of fiscal incentives include contracts outlining specific goals and benefits expected from the businesses toward the host communities, and correctly assessing the benefits of incentive deals. The greatest income benefits will be realized when incentive deals are geared towards projects aimed at increasing the net wages of low-income residents (Oden & Mueller, 1999). Weber (2002) cautions against the use of subsidies and incentives to firms as gifts.…”

“…While referred to by different names and designations such as empowerment zones, economic target areas and renaissance districts, property and sales tax advantages are critical incentives. Of these incentives, tax abatements are the primary tool used by governments to influence private investment (Oden & Mueller, 1999). Tax incentives come in a variety of forms that essentially give credits, exemptions or abatements on business costs.…”

Do State‐Designated Enterprise Zones Promote Economic Growth?

“…In response to this uneven economic development, public and private actors with a vested interest in the economic health of places have become involved in growth promotion (Logan 1978;Logan and Molotch 1987;Zukin 1991). It is now common for cities and small towns to provide tax breaks, subsidies, and other incentives for firms to relocate from elsewhere or to simply remain in the area (Green, Fleischmann, and Kwong 1996;Oden and Mueller 1999). The literature on the ability of local actors to influence local economic outcomes offers mixed results.…”

“…Further, Humphrey and Wilkinson (1 993) found that tax incentives had no effect on net migration or property sales. However, it is tax cuts that are the most commonly employed incentive within the enterprise zone development strategy (Oden and Mueller 1999).…”

Holding Their Feet to the Fire

“…Some studies do offer regionally specific (Sands, Reese, & Kahn, 2006) or national scope (Dalehite, Mikesell, & Zorn, 2005) descriptions of the extent of municipal use of these controls, and there are discussions of the merits and problems of such controls (Oden & Mueller, 1999;Weber, 2002). Some studies do offer regionally specific (Sands, Reese, & Kahn, 2006) or national scope (Dalehite, Mikesell, & Zorn, 2005) descriptions of the extent of municipal use of these controls, and there are discussions of the merits and problems of such controls (Oden & Mueller, 1999;Weber, 2002).…”