By definition, an economic development plan or strategy for a government is intended to affect its economy and, by extension, its budget. The same is true of any economic development project. In addition, some proposed economic development projects, and particularly redevelopment projects, involve the financial participation of state and local governments. This participation can take the form of both traditional and non-traditional public sector financial tools. Before governments adopt and implement an economic development plan or elect to participate financially in a proposed economic development project, governments should analyze the economic and budgetary impacts and the risks and uncertainties associated with the plan or project.
The government’s finance officer or budget officer is a logical choice as a key participant in that analysis. The finance officer or budget officer is likely to have more financial and analytical training and experience in economic matters and budget matters than most other governmental staff. In addition, the finance director or budget officer does not have a vested interest as a proponent or opponent of any particular development plan or project, and therefore is in an excellent position to be considered unbiased in the analysis.
While the finance director or budget officer may be best suited within government staff, he or she may not have all the specialized knowledge and experience required for economic development analysis and it may not be available elsewhere in the organization. If the necessary expertise is not available within the government, governments should consider retaining outside assistance to ensure that economic policies and economic development proposals are reviewed by qualified experts. In the case of developer-originated proposals, governments should consider requesting reimbursement from the developer for costs incurred. This is because an independent analysis of a developer’s proposal could be considered part of the cost of submitting a proposal.
GFOA recommends that the finance officer or budget officer lead or be a key participant in the analysis of the economic and fiscal impacts, as well as the risks and uncertainties, associated with proposed economic development plans, strategies or individual projects. In addition to roles in project leadership and management, roles that should be considered are outlined below.
Assisting in creating or updating an economic development plan or strategy
- Being a member of the team developing economic plans or strategies
- Identifying means of estimating economic and fiscal impact of the plan or strategy
- Assessing the financial and economic impact of a proposed plan or strategy
Creating financial incentive tools and the policies for their use
- Participating in the development of various financial incentive tools
- Identifying the general financial cost, financial impact and risk of using the financial incentive tools and the capacity of the tools
- Participating in the development of the proposed policies and practices for using incentives
Analyzing and/or assisting with creation of individual development proposals
- Development of general tools and approaches to evaluate economic development proposals as to the economic and fiscal impact and their risks and uncertainties
- Development of tools and approaches to evaluate financial incentives for an individual economic development project
- Assessing the overall financial impact of individual economic development proposals and their risks and uncertainties
- Assessing the developer’s financial strength, the proposed project pro-forma, and the developer’s ability to complete a proposed project
- Coordinating internal analysis of development proposals
- Assisting with determining the legal foundation for requested financial incentives for economic development projects
- Assessing any required governmental debt issuance or credit enhancement
- Identifying issues to be addressed in future contract negotiations for an individual economic development proposal
- Assisting with preparation of any recommendations or reports
- Determining the need for outside professional assistance in analyzing and making recommendations on development proposals
Negotiating development agreements
- Participating in the negotiation process for an economic development agreement
- Analyzing proposed development agreements and assisting in their development
- Identifying areas of concern that should be negotiated and included in an agreement
- Identification of risks and risk mitigation strategies to be negotiated
- Determining the need for outside professional assistance in analyzing and making financial or risk related recommendations on development proposals
Monitoring compliance with ongoing development agreements
- Working with a compliance team and establishing the system for monitoring compliance with the financial aspects of the development agreement
- Working with a compliance team and providing periodic reports on the project’s progress and conformance with financial aspects of the development agreement
- Assisting with decisions and recommendations with regard to management of any significant variations from the development agreement
Facilitate the government’s ongoing economic development program
- Assisting in educational forums and public information efforts
- Providing long-range forecasts of the status and impacts of current financial commitments
- Periodically updating forecasts to incorporate the future impact of the government’s economic development policies and strategies
- Providing forecasts of the available financial capacities of incentive tools within legal and policy limits
Elected Official’s Guide to Economic Development, GFOA, 2005.
Steven G. Koven and Thomas S. Lyons, Economic Development: Strategies for State and Local Practice, Washington, D.C., International City/County Management Association, 2003.