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An Innovative & Transparent Approach to Incentives

Every year, state and local governments from across the country provide economic development incentives to help attract jobs and investment to their communities. 
Limited budgets present an ongoing challenge for elected officials, but these incentive programs are a key tool to assist economic developers in their mission to attract quality employers who will create jobs and provide economic opportunities to their community. Done correctly and with a focus on transparency, the use of incentives can become a strong catalyst for economic growth.
Earlier this year at an International Economic Development Council event, the Greater San Marcos Partnership (GSMP) was invited to participate on a panel to discuss incentives because of our region’s innovative approach on the topic. The session drew more than 80 economic development leaders from around the country, reflecting the importance of incentives for the economic development industry. Alongside GSMP, senior economic development leaders from Oklahoma, Florida and Missouri shared their region’s approach to incentives and how recent changes in federal law will impact their communities. 
The Challenge
Our conversation began with the current challenge of balancing the use of incentives to result in a community benefit. Nationally, the economic development industry is constantly facing an uphill battle to educate elected officials on the need to use incentives and why they are a critical tool to economic growth. 
The Greater San Marcos Approach
In the Greater San Marcos region, incentives are performance-based. In other words, the company must perform in order to receive the benefit. We do not employ a claw-back approach, typically used in most communities. The process begins with utilizing project-specific information provided by the company, on an application, seeking incentives from either the city and/or the county. The application provides a wealth of economic data that is reviewed against a dashboard of metrics, reflecting the priorities and values of the community. The dashboard provides an objective and consistent way to understand the value of the potential project to the community and helps determine the appropriate incentive for a project.
In addition, the city and county view incentives holistically – meaning it’s not always about minimizing the financial risk associated with a relocation or expansion. The city often reviews requests for adjustments in zoning and other development codes and considers public-private partnerships in the development of public infrastructure to service the needs of the company and community. Once the contract between the municipality is drafted, the documents are publicly posted prior to a final vote by the elected officials. 
The Result 
In Greater San Marcos, relocating or expanding companies make significant capital investments in purchasing real estate and potentially building a facility, and training and hiring staff. At the end of the year, they pay their local taxes in full. For the period of the agreement, the city and/or county governments will conduct an annual review of the terms of the agreement and evaluate the company’s performance in meeting their commitments. If all contractual obligations have been met, the city and/or county governments rebate the taxes paid by the company as specified in the incentive agreement. This incentive model provides an innovative and transparent solution to address some of the major concerns regarding economic development incentives. 
Going Forward
Incentives are intended to help a company minimize the risks associated with the establishment of a new or expanded operation. GSMP’s philosophy is that a community should be able to provide an appropriate level of incentives to remain competitive, but in a way that ensures proper stewardship of taxpayer dollars. Incentives will continue to be an important tool for economic development across the country. The economic development professionals in our region will continue to do all we can to attract new investment, while ensuring we follow an objective and transparent process. The future of our industry and growth of the Greater San Marcos region demand nothing less. 
For more information, please contact Jason Giulietti at jasong@greatersanmarcostx.com.
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