Economic Development Incentives Revisited

Prairie Business, a magazine that covers North Dakota, South Dakota, and Minnesota business issues, has released a piece on the use of incentives in the economic development world. The cover story does a nice job showing both the positives and negatives associated with incentives — they can be a key piece to landing a coveted company, but they also can leave a community burned if things don’t work out.

One success story is Fond du Lac, Wisconsin’s retention of Mercury Marine, a story chronicled in this case study EMSI released a few days ago.

You can find the Prairie Biz story via this link. Here’s a key excerpt from the article:

Nationwide the use of incentives is intensifying, sweetening the pot for companies looking for prospective sites to house operations ranging from manufacturing to customer service and back office support. Many communities and states have upped the ante to win the economic development sweepstakes at all costs. While most cities in the region have been fairly conservative, some mostly smaller communities have been more aggressive in attempts to lure factories, jobs and increased tax revenue.

Some communities have benefitted from offering companies financial incentives. But the slippery slope of economic development subsidies has backfired on a number of communities, leaving them holding the bag when call centers and similar customer service-related businesses leave town after the tax breaks and inducements expire.

“It’s a game that is being played all across the nation,” says Ben Snow, the new president of the Rapid City Economic Development Partnership, who previously held a similar position in a Denver suburb. “Some companies are on an incentives shopping trip. They are looking for the best offer. The community just needs to be careful that the incentive being offered is used in a wise manner for a company that will become a long-term member of the business community. You have to get a comfort level that the company isn’t just going to bail out when the incentives go away.”