Public Funds, Private Endeavors: A Primer on Local Economic Development Incentives in Utah

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During the 2019 Utah legislative session, there are at least five bills that directly deal with how local governments award business incentives. Others may indirectly affect local governments’ ability to do so

There are several ways to view local incentives. Critics might see them as public subsidies which distort economic growth. Others take a more neutral view, but focus on the funds that local governments forgo to incentivize economic development. Boosters view them as a critical tool for leveling the playing field in areas of higher-cost development, allowing cities to control their economic destinies. They also highlight the fact that certain economic development endeavors would not occur without incentives. Regardless of the viewpoint, economic development incentives are worthy of the public’s attention. They represent potential expenditures of public funds, and as such deserve careful consideration, strategic thinking and public scrutiny.

With that in mind, Utah Foundation is launching a series of reports analyzing Utah’s incentive programs at the state and local levels. This preliminary report seeks to give a brief background on financial incentives that local governments can provide to private businesses. It also highlights incentives’ salient details, including examining types of incentive tools, sources of funding and analytical processes. It also touches on transparency, competition between local governments, alignment with the state government, and various issues that have arisen with regard to incentives, both in Utah and nationally. The subsequent reports in this series will address local and state incentives in more detail.

Key Findings of this Report

  • The effectiveness and efficiency of local economic development incentives using tax increment financing depend heavily on local policies and processes for evaluating the appropriateness of such incentives.
  • While redevelopment agencies are required to publish data on incentives in annual reports, the availability and quality of these reports vary widely, making it difficult to evaluate the prevalence or effectiveness of incentives on a broad basis.
  • The potential for local governments to engage in unhealthy competition using incentives is a matter of concern both nationally and in Utah. However, several factors work against such competition among local governments in Utah.
  • A given economic incentive package can have differing fiscal impacts on different tax-recipient bodies. As a result, the state, counties, cities, school districts and special districts may have differing motivations and strategies when it comes to incentives.

 

Download the full report here.

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