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BEST PRACTICE

Economic Development Incentives (1990) (CEDCP)

Background. Economic development incentives are tools used by state and local governments to retain or attract jobs and/or tax base. There are expenditures and/or opportunity costs as well as potential or actual benefits associated with these incentives. These costs and benefits often do not clearly appear in a budget or financial statement, and if they do, the overall impact of these incentive costs and benefits often take place over many years.

Recommendation. The Government Finance Officers Association (GFOA) recommends that any jurisdiction's economic development incentives have specific goals and criteria that serve to define the economic benefit both the government and the entities receiving the incentives expect to gain from the incentives, the conditions under which the incentives are to be granted, and the actions to be taken should the actual benefits differ from the planned benefits.

For any specific economic development incentive, it is recommended that the economic benefit to the government, as well as the cost of the incentive, be measured and compared against the goals and criteria that have been previously established.

Approved by the GFOA’s Executive Board, 1999.