Kansas City, MO Debates Incentive Policy Options

Having a policy to guide the use of economic development incentives is a good thing. There is only one thing better. That is having the "right" policy that aligns squarely with your economic development goals or priorities.

This should be the heart of the debate in Kansas City about whether and how to best target its incentives to achieve the biggest bang for the buck. Should these tools be focused more intensively in downtown, or should other targets of opportunity be given more support? These choices must be approached carefully.

Here is our advice on this matter:

1. Incentive policies should reflect the area's most important economic development priorities. It does not make sense to have a policy that focuses on anything but that.

2. Economic development priorities should be reviewed regularly to ensure that efforts are focused on what is most important. If adjustments are made to your priorities, then your incentive policy should also be adjusted to reflect the priority shift. In other words, don't be afraid to change your policy. Too many communities believe they should set their policy once and stick with it forever. That is a mistake. You must remain in alignment with the marketplace.

3. Incentive policies should be implemented on four levels: a) final decision-makers, for example City Council; b) economic development management; c) businesses; and d) citizens. All four stakeholders must understand the policy and how it works. In these tough economic times, everybody must understand how the policy impacts them.

4. These policies should be performance-based. An ongoing monitoring and analysis capability should be implemented to provide reliable data and information about the performance of deals/investments.

5. As a related component of the performance assessment system, the local and national economic outlooks should be reflected. This provides a context for understanding possible risks to deal/project success at any given time. Right now, everything is more risky than it would normally be, which is why most businesses have delayed investments until the uncertainty level in the world drops.

6. As part of your annual work program, you should include objectives and strategies defining how your incentives will be used in the coming year. Reasonable and appropriate expectations should be set in this regard. Define risks to your investments at least on an annual basis. As we have said before, economic risk management is one of your new roles.

7. Finally, think of your incentive deals as an "investment portfolio." Set annual objectives for your overall portfolio in terms of job development, tax revenue growth, capital investment, etc. Everyone tries to avoid making bad deals, but even good deals can head south on you. For this reason, the overall portfolio's performance is most important.

The good news in the Kansas City situation is that they have a very experienced and savvy economic developer, Andi Udris, who really understands economic development finance. Andi was the former development chief in Cleveland and Cincinnati.

Go here to read more about the Kansas City incentive policy debate.