State, county and municipal governments often seek to improve local economic conditions by working with private sector entities. In general terms, economic development consists of the following steps:
- Create a Vision and Plan. A unit of government must identify its goals, like employment opportunities for residents, or a better quality of life. It should also identify the broad strategies it will use, as well as the limits it will observe. As part of this step, a government’s finance and economic development staff should work together to form a partnership.
- Find Opportunities. By using incentives and other tools, a government can create conditions or an environment that helps to promote economic development; thereafter, the most cost-effective opportunities can then be selected.
- Do the Deal. Economic development projects often require a formal contractual agreement with private sector entities. After the deal is signed, the vision must be implemented.
- Monitor & Adjust. Economic development projects are often complex with many uncertainties. Therefore, progress must be carefully managed and course corrections should be applied as the project unfolds.
GFOA Best Practices and Advisories
GFOA has identified the following best practices related to Economic Development.
Create a Vision and Plan
- The Role of the Finance Officer in Economic Development. The finance officer should lead or be a key participant in both the creation of a plan and the analysis of potential projects.
- Establishing an Economic Development Incentive Policy. Jurisdictions should create policies, as necessary, regarding the appropriate parameters for utilizing incentives.
- Coordinating Economic Development and Capital Planning. State and local government officials should coordinate their economic development and capital improvement strategies.
- Evaluating And Selecting Economic Development Projects. Governments should analyze risk and uncertainty when evaluating economic development opportunities.
- Creation, Implementation, and Evaluation of Tax Increment Financing (TIF). Governments should evaluate whether TIF is a locally appropriate tool for economic development.
- Public-Private Partnerships (P3) Advisory. P3s are complex undertakings. This advisory reviews key points for governments to consider when evaluating such opportunities.
Do the Deal
- Negotiating Economic Development Agreements. Economic development agreements should clearly define expected benefits and establish a linkage between the incentives offered by a unit of government and the performance achieved by a particular project.
- Administering Economic Development Agreements. GFOA recommends governments take steps to ensure effective administration of economic development agreements through an on-going assessment of government benefits, monitoring of commitments and requirements, and communicating progress to the governing body.
- Monitoring Economic Development Performance. Once completed, GFOA recommends that finance officers monitor economic development projects for compliance ad to ensure that the project’s goals are achieved.
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