Rethinking Economic Incentives in New Orleans, Indianapolis, Columbus, and Cincinnati
Economic incentives are used across the country to attract and retain jobs and spur capital investment. These incentives represent a significant expenditure of local resources, in many cases eclipsing other investment in economic development. According to Princeton Economics, state and local governments spend a minimum of $30 billion a year on business tax incentives alone. Today, many cities are reconsidering their incentives to ensure that their investments are not only producing reasonable returns but also driving public benefit and inclusive outcomes.
HR&A has led efforts in cities including New Orleans, Indianapolis, Columbus, and Cincinnati, to evaluate the performance of existing economic incentive programs, realign programs to meet current-day public policy objectives, and design new tools to evaluate deals, track performance, and maximize public ROI. This work often involves engaging with local stakeholders to understand community priorities and program impacts, benchmarking national best practices, developing financial models to evaluate the impact of incentives policies on development feasibility and other forms of investment, and recommendations on the design and rollout of new policies and programs.
Highlights of our national incentives practice include:
Amidst a resurgence in growth and investment in areas of the city, New Orleans sought to understand the effectiveness of its economic incentive programs, align future deployment with broader public policy goals, and formalize a process for incentive application review and award. HR&A assessed the effectiveness of four major programs within the City’s toolkit by quantifying costs and benefits to the City and crafting recommendations to improve the efficiency and effectiveness of its programs in driving equitable economic outcomes. HR&A then collaborated with the City to begin implementing core recommendations, including convening an intensive multi-day workshop to develop a standard protocol to evaluate project applications and encourage project delivery of core policy objectives, such as affordable housing production in high-opportunity neighborhoods. New Orleans released the new incentives framework in the summer of 2018, launching the first of a series of major changes to its economic incentive toolkit, currently underway.
Indianapolis is a growing city with an emerging tech hub. Despite overall low unemployment, not all segments of the population have been able to share in the city’s prosperity. Building on citywide efforts to ensure more equitable growth, HR&A supported the Indianapolis Chamber of Commerce to reposition existing economic development incentive programs and institute reforms to spur inclusive economic growth. After evaluating past incentive use and performance, HR&A benchmarked national best practices and hosted stakeholder roundtables designed to understand community priorities. Our recommendations included changes to the tax abatement and training grant programs to align evaluation criteria with inclusive values, as well as the establishment of a community impact network. The Community Impact Network is a pioneering new shared-values approach whereby businesses receiving economic incentives commit to supporting workers through civic engagement, social support services, and skills development. HR&A crafted a narrative around the policy rationale and benefits associated with each recommendation and developed an implementation roadmap to guide the process. The Mayor’s Office announced HR&A’s recommendations to advance inclusive economic opportunity – which prioritized a higher minimum wage, health and childcare benefits, workforce training, and positive community impacts – in the summer of 2019.
Columbus is experiencing a period of sustained urban growth and revitalization, supported by strong investment in its downtown and surrounding core neighborhoods. The City engaged HR&A to assess how it could best utilize its economic incentive portfolio to realize community and development objectives in response to the evolving local economic and real estate context. In light of its success, Columbus wanted to assess how to adapt its incentives approach in rapidly developing neighborhoods, while also encouraging greater benefits for underserved communities. In early 2018, the Mayor of Columbus announced progressive changes to the City’s incentive programs to drive the creation of new affordable housing in high opportunity neighborhoods, building from the recommendations of HR&A’s study.
Cincinnati’s Department of Trade and Development administers 11 incentive programs intended to facilitate real estate development and business growth, including property tax abatements, earnings tax abatements, and direct loans. HR&A assessed the performance of these programs and the city’s overall competitiveness. Based on our analysis, HR&A recommended changes to Cincinnati’s existing incentive programs and operating procedures and suggested additional tools that would enable Cincinnati to better meets its economic development goals in a cost-effective manner.
For more information about HR&A’s work on economic incentive policy and strategy, contact Partner Cary Hirschstein at email@example.com.