Financial Incentives for Development
Many Americans expect their government to foster job growth in their communities. As the job market grows, wages will rise and unemployment will drop. There are many opportunities for business to locate in an area due to a positive investment environment. Many funds are available through local, state, federal, and private agencies to be used for development.

 

Examples of Communities that use incentives

Lancaster, Texas

Louisiana

Lake Wales, Florida

Both national and local factors determine the investment climate in an area. Investment allows the community to broaden the tax base with commercial and industrial activity. The broader tax base will allow for more services without raising taxes. National factors include: capital availability, interest rates, investment volumes, and competition for development.

Local factors include: ability to attract national investment due to present market conditions, availability of local public incentives (community's willingness to commit funds). Some local incentives include: low-interest loans, revenue or special bonds, tax abatement and rebates, land cost write-downs, and special improvement and taxation districts.

Guides to Incentive Use

SBA

Muncie Chamber

CUED
 Success in competing for funds depends on the market strength and relative risk, in-place financial incentives, development programs, and experienced, willing local lenders. The ICBCC and IDFA provide assistance for high risk lending proposals.

Lafayette Sites

Lafayette Chamber

Lafayette

LUEA

 

 

Incentives assist development in three ways:

  • across the board: Community Development Block Grant and Revenue sharing to generate community development projects.
  • targeted assistance: UDAG and Urban Initiatives to address problems of disadvantaged areas.
  • specialized assistance: tax incentives and loans tailored to individual development needs. An example is the BMT Corporation that provides funding for research and development. There are also the CPL and SLC that guarantee working capital loans.    
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Some tools available to developers include:

  • Direct Financial Assistance: interest rate subsidies, land write-downs, joint investment ventures, tax breaks.
  • Amenities and Facilities provision: public parking, utilities, open space, landscaping.
  • Assistance: acquisition and conveyance of land, forgiveness of back taxes, changes or variances permitted in zoning and building regulation, designation of special districts.
Businesses will locate where there is a market. In two locations where there are equal markets, local tax incentives are one way to attract businesses.  The positive aspects of tax incentives include demonstrating to existing users that the city is interested in lowering taxes to encourage business expansion. The lower tax rate will allow new business formation. However, tax incentives lower the overall tax base.