Over the past two years, Good Jobs First has studied the economic development subsidies of nearly 250 small- and mid-sized cities across the United States. During this time, we’ve seen programs that incorporate best practices when it comes to attaching standards to programs that provide companies with public money.
Rather than being no-strings corporate giveaways, some cities ensure that subsidies benefit communities where companies locate. For example:
- Worcester, Massachusetts requires subsidy recipients to hire workers locally and ensure that subsidized jobs go to underrepresented workers, such as women in construction.
- Laredo, Texas uses the Massachusetts Institute of Technology Living Wage Calculator to set wage standards for project that receive city subsidies.
- Louis, Missouri requires contractors on public works projects to work with minority- or women-owned businesses (MWBs). And when a private project applies for subsidies, the project owner scores higher on the city incentive evaluation form if it is an MWB.
- And as we observed in Grand Rapids, Michigan, accountability leads to better project performance – the city’s transparent and accountable tax increment financing (TIF) process leads to the highest return on the public investment among all cities that use TIF in the state (the state also maintains a good TIF portal).
In addition to city-specific best practices, our research led us to one of the most unique regional collaborations we’ve seen. In the Augusta, Georgia-Aiken, South Carolina region, the leading economic development agencies have an agreement not to attract each other’s companies and communicate when a company is looking to relocate within the region.
Among other benefits, this agreement ensures companies aren’t subsidized to simply move jobs around.
These practices promote greater equity in how public money is used and ensure that subsidies benefit local communities and workers first. They also reduce the size of corporate subsidies, leaving governments more money to fund public schools or public healthcare. Because of that those standards could contribute to the eradication of historical racial, gender, income and wealth inequalities.
We were glad to come across so many positive examples of good economic development principles across our scan of 250 cities, but unfortunately, these were more the exception than the rule.
Our findings, released in November, show that many cities disclose which companies are applying for subsidies, but details on how well those companies are performing are still scarce. When cities are open with their residents about the outcomes of subsidy programs, it allows the public to better understand which programs are nothing but corporate giveaways and which ones helped workers and residents.
While there is still a great need to improve economic development practices, there are many cities making sure that subsidies benefit communities and people first. Practices that advance equity, as these cities are showing, can be done.