Openness would help economic development

info@islandpacket.comJune 18, 2013 

This week, we expect to learn what we're getting for our $850,000 when state and county officials tell us about "Project Robot," a company planning to locate in the Beaufort Commerce Park.

We should learn the terms of the state and local incentives to get the company to come here and what we can expect in jobs as a result. We can begin to weigh whether what we put into the deal is worth it.

Unfortunately, the deal will be done before the public can assess it. Economic development as practiced here and in most other parts of the country can be summed up in two words: "Trust us."

Competitive disadvantage is the oft-cited reason for keeping these deals close to the vest until they're completed. That goes for the public entities offering incentives and the companies seeking them.

But is all this secrecy really necessary? Would economic development be turned on its head if we knew who wants extra help from the government, why they want it, how much help they want and what we're to get in return?

State and local officials point to the state's Freedom of Information Act, which exempts these negotiations from disclosure until the deal is made public or the company agrees to it, whichever comes later. But the law doesn't require secrecy; it only says officials "may" keep the negotiations secret.

As with most issues having to do with government, the process -- and the result -- would be helped by openness. Officials would do a better job of negotiating the terms and evaluating their effectiveness if they were on the table for all to see before they became final.

Other aspects of doing business in the state are public and don't suffer irreparably from it, including zoning, licensing and environmental permitting. Why should economic incentives be different?

Why should we care? In 2012, the Pew Center on the States looked at how states make sure economic incentives deliver a strong return on the investment. South Carolina was one of 26 states "trailing behind" in the scope and quality of evaluating incentives.

"Deciding whether to make these investments, how much to spend, and which businesses should receive them involves policy choices with significant implications," said Jeff Chapman, senior researcher with the group. "When states forgo revenue by offering economic development tax incentives, they have less money to spend on education, transportation, health care and other critical services. Conversely, if states do not use incentives or use them well, they may be missing opportunities to create jobs and attract new businesses."

The Pew Center recommends states do the following and offers examples:

  • Build evaluation of incentives in policy and budget deliberations to ensure lawmakers use the results. In Oregon, tax credits expire every six years unless lawmakers extend them, and the state sets a spending cap, which forces lawmakers to choose which incentives should continue and in what form.

  • Establish a strategic and ongoing schedule to review all tax incentives for economic development. In 2007, Washington began a 10-year process to review every tax incentive it offers. It includes a citizens commission to analyze the incentives and public hearings to review the recommendations.

  • Ask and answer the right questions using good data and analysis. To determine the number of jobs a tax incentive is creating, Louisiana's economic development agency takes into account whether new jobs displace existing jobs at competing businesses.

  • Determine whether tax incentives are achieving the state's goals. In 2010, Connecticut's economic development agency assessed the state's major tax credits, concluding that some were not meeting the state's goals, but others were beneficial and cost-effective.

  • The S.C. Policy Council has been pushing for South Carolina to do a better job with its economic incentives. Among its recommendations:

  • Hold politicians accountable by allowing the public to review the proposed investment and requiring all economic development policies to undergo independent cost-benefit analysis.

  • Make companies apply openly for the special deals they want from the state. The applications should include specific job-creation goals and require annual progress reports on meeting the goals.

  • Hold companies accountable for the incentives they receive. They should pay back the money if they fail to meet their end of the deal.

  • The common thread in all of these is open debate and accountability, something we don't see enough of in South Carolina.

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