Friday, June 17, 2022
HomeAccountingCast of characters in economic development projects need good direction

Cast of characters in economic development projects need good direction

I recently attended a theatrical production that involved 80 actors under the age of 18. You can imagine some of the challenges that had to be surmounted along the way — competing interests, talents and attention spans. But with the help of a dedicated director, the performance was a success.  

Successful economic credits and incentives present similar challenges in their pursuit. Incentives, the often-discretionary awards for new business endeavors, bring an “X factor” into the equation that many other credits do not involve: politics. Due to the approval process and nature of incentives, political allegiances and opinions often influence community decision-makers and the outcomes of incentives activities. The “cast of characters” involved with credits and incentives projects is often complex and dynamic, never reflecting a one-size-fits-all approach. Understanding and navigating these complexities is critical to realizing a successful outcome for clients seeking to utilize these valuable tax benefits.

“Communities” have many layers, and growing clients seeking incentives likely will interact with all of them at some point. A community may refer to the state or even a region that overlaps several states, such as the Philadelphia, Memphis or Portland areas. A community can be a region inside a state that covers a wide area — metropolitan communities often overlap several counties, independent cities and towns. Within metropolitan communities are unique authorities and neighborhoods that have interests in how their communities grow and develop.

Ultimately, a community is made up of individual stakeholders, be they business owners, property owners or concerned citizens. With so many individual opinions and preferences, clients seeking to utilize credits and incentives need to ensure they are working with a confident and competent credits and incentives consultant to successfully navigate these potentially competing interests.

Understanding the intricate interests of community stakeholders is important, but so is appreciating the governing bodies within these groups that utilize tax revenues and have the ability to offer economic credits and incentives. Governing bodies are numerous and known by different names in different geographic regions. Louisiana has parishes, Pennsylvania has boroughs, Tennessee has county mayors and Kentucky has judge executives within county government. The arrangements between these forces may not always be apparent. City mayors may have significant input into economic development decisions, but the city council may be the ultimate decision-maker on authorizing economic incentives. Governor’s offices may have separate funds for “deal closing” that can be brought to the table on top of statutory credits and local discretionary incentives. As these elected offices are publicly voted on, having a high-level understanding of the political current within the community is important for traversing programs, negotiations and benefits. 

Additionally, non-authority bodies, such as the state economic development office or department of commerce, often have significant autonomy in approving projects on behalf of the authorizing bodies. State economic development entities regularly shape programs, manage applications and approve incentives that are captured through the state’s tax department. Regional and local economic development organizations (REDOs and LEDOs) have considerable sway over which projects receive approval. These organizations assist local authorizing bodies with much of the evaluation and recommendations of incentives proposals. Working with economic development groups early in the process will create a clear pathway forward for incentives. Understanding the programs available, the requirements to qualify, the mechanisms for receiving benefits long-term and influential governing and non-governing bodies all factor into whether an expansion or new project receives an incentives offer.

Finally, individual stakeholders within a community have the capacity to bolster a project or create unanticipated roadblocks to the process. Advocates for positive change to a community, such as the repurposing of a blighted area or the renovation of a dilapidated structure, can lend urgency and support to the approval process. However, there are individuals who will, for one reason or another, personally disagree with a particular change or incentives offered. Addressing these concerns and anticipating counterarguments through early conversation with community decision-makers can often ease the approval process.

Often, a community might need education on its own tools. This can be touchy, as it involves such a complex blending of roles, rules and relationships (including relationships with the general public and their perceptions). Community decision-makers and stakeholders have many demands on their time and attention. While some communities may have departments or in-house staff to support key decisions, smaller communities may not have those same resources available or understand how credits and incentives programs function. Credits and incentives consultants work closely with clients and communities to make sure all programs are utilized and beneficial to the project.

With so many voices involved in the economic credits and incentives discussion, it is important to focus on the facts of the project: new investment and new jobs to the community. Good economic development groups will identify potential pitfalls and help navigate the approval process, acting as a liaison between the business community and government agencies. 

Economic credits and incentives are a complex process, but a trusted advisor creates a seamless process for clients and generates a successful outcome. As with a theater production involving many different roles — all important to the story — a knowledgeable director is required for a winning performance.



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