Executive Summary
In an era of rising public expectations about government transparency — and persistent concerns about economic well-being — the use of public funds to subsidize private employers in the name of economic development is often controversial. Key to civic engagement in the economy is the ability to see where public money is going and what results from these investments.
Hence our evaluation of transparency as it is practiced by 229 small- and medium-sized U.S. cities in 45 states for their major economic development incentive programs. We find that for one major program in each place:
- Only 11% “Meet Transparency Expectations.” These cities have both transparent pre-approval and post-approval processes, meaning they post company names and project information before and after subsidies are approved; they also require a public meeting for incentive approval. These cities also disclose job information, subsidy amounts, and information on the timeline of the project, all in accessible form.
- Just over a quarter of the cities (26%) are “Approaching Transparency Expectations.” These cities disclose the names of companies receiving incentives both before and after deals are approved and require a public meeting for approval, but are otherwise less robust than the top rank.
- Almost half (49%) fall “Below Transparency Expectations.” These cities have at least one transparency element, but do not disclose company names both before and after incentives are approved.
- Finally, 14% of the cities rate as “No Transparency.” They post no information online about companies that apply for or have received local development incentives.
Cities can disclose company-specific details of an incentive deal before and after the deal is approved. Some do one or the other, some do both, and some do neither. To assign cities to one of the above transparency tiers, we began by determining the extent of a city’s pre- and post-approval disclosure:
• Almost 7 out of 10 cities have a transparent pre-approval process, meaning subsidies are approved in a public meeting and the names of the companies receiving the subsidies are disclosed.
• Barely 4 out of 10 cities have a transparent post-approval process, meaning the names of the companies receiving subsidies, along with some other details about the deals, are disclosed on a separate webpage.
• Overall, 37% of cities have both transparent pre-approval and post- approval processes.
• Finally, 14% of the cities don’t disclose at all.
This report is based on careful examination of city websites, local and state transparency portals, program rules and regulations, and actual city practices over two years. More granular results are in the Key Findings chapter and the Appendix detailing each of the 229
cities’ specifics.
Specific disclosure practices vary widely. For example:
• 85% of cities require a public hearing to approve a deal, but only 41% of cities have an easy way to sign up for emails to be notified of upcoming hearings.
• Only 8% disclose actual jobs created and only 1% report actual wages paid.
States legally enable and regulate the incentives used by cities. Cities in a handful of states tend to rate better on transparency because those states maintain robust disclosure websites for specific programs. In such programs, these states require cities to report on each specific deal, and the states combine the local data and post it online. We recommend that to each program’s enabling legislation, states should add language requiring such city-to-state reporting. If a state-level combining database does not exist, we recommend that cities create their own user-friendly transparency portals with comprehensive information on incentivized companies and projects.
Just because a program is transparent does not make it accountable or effective. But deal-specific online transparency can enable residents and officials to shape incentive deals to make them more responsive to community needs. Unfortunately, we found that only a small percentage of cities disclose companies’ promises and outcomes: just six percent disclose both jobs promised and jobs actually created, and only 6% report promised and actual amounts of capital investment.
This is our seventh study on economic development transparency, our third on local governments, and our first on small- and medium-sized cities (with populations between 50,000 and 350,000).
It is also our most rigorous attempt to evaluate local transparency processes before incentives are approved, such as advance notice, advance posting of applications, and ease of getting regularly informed ahead of time about proposed deals. While we have always insisted that awarded deals must be disclosed online over time as they play out, we looked here also at how civic engagement before approval is facilitated by city government.
We recommend that local officials provide advance, pre-approval disclosure of incentive applications and all related materials, such as any cost-benefit analysis, at least 60 days ahead of the public hearing at which they will be considered. To encourage engagement, localities should also make it easy for residents to sign up for advance-notice emails of each approaching hearing docket, with links to each deal’s files.
Introduction
Consider two tales of local development:
In City #1, a resident reads in a newspaper that a major project is coming to her community.
She reads that during last night’s city council meeting, a resolution was passed to approve a tax incentive agreement with an unnamed company. No community members were present during the meeting. After the project is built, our resident learns from others that only a few workers from the community got jobs at the company, but there is no way to check those numbers exactly. Two years later, during a PTA meeting, our resident learns that the local school district is struggling financially. She asks school leaders: isn’t that new company paying property taxes that support the school? She is told no; the deal abated the company’s property tax. Our resident is surprised because no information exists for her to know about this.
In City #2, a resident gets an email from her city council with a notification that in two weeks a public meeting will take place. During the meeting, the city council will discuss the arrival of a big project and a proposed incentive package.
The agenda provides some information about the project but doesn’t say whether any of the new jobs will go to local workers. Our resident reaches out to her local community group, and it contacts groups in other neighborhoods. They organize to push for a community benefits agreement. By the time the city council meets to discuss the deal, the coalition has a list of demands: local hiring, a living wage for workers, a contribution to a childcare center, and smaller tax breaks than are being proposed. The city uses those requests to negotiate with the company. The company agrees. Two years later, our resident can see online that the company hired 23 city residents at a living wage. A new childcare center is operating, and local schools can raise teachers’ salaries.
The difference: transparency. Enough advance notice and information for residents to decide if they want to weigh in to support, oppose, or improve a proposed project. And follow-up reporting so people can see that the company is delivering on its end of the deal.
Over the last two and a half decades, we at Good Jobs First have demonstrated that subsidy transparency is a cornerstone of equitable economic development. Indeed, we have issued more national studies on state and local subsidy transparency than on any other subject. This is our seventh study on this subject and our third study of local government disclosure practices. But it is our first to look specifically at small- and medium-sized cities. It is also our first attempt to evaluate pre-approval transparency at the local level.
In this study, we examine 229 small- and medium-sized cities across the country and evaluated transparency practices attached to one major locally controlled incentive program.
Transparency before an incentive deal is formally approved matters immensely for civic engagement. It helps local officials better design incentive deals that respond to community needs, such as the creation of jobs that pay living wages or the construction of affordable housing. That’s why we assess local governments on process measures in this study. We refer to this practice as “pre-approval transparency.”
Transparency after an incentive is awarded is also essential. That means, for every deal, online reporting at least once a year of the value of the incentive and how the company has performed on obligations like job creation, wages, and capital investment. Without post-award disclosure, public officials – not to mention journalists, academics, or community-based organizations – have no way of evaluating a program, of weighing its costs and benefits.
Throughout the study, we refer to transparency after an incentive is awarded as “post-approval transparency.”
Cities use a variety of incentives to attract and retain businesses or to support real estate development. Tax expenditures, such as property tax abatements or exemptions, and tax increment financing are common programs we examined. All of these subsidies come with different levels of disclosure. While a lack of transparency is still common and cost-benefit analyses are rarely published for projects seeking public assistance, we were happy to see that many localities require a public meeting to discuss and approve incentive deals. Most cities disclose some basic information on incentivized projects, but data on actual job creation and wages can be hard to find.
We are yet again calling attention to the significant role states can play in local transparency. Nearly all locally administered incentive programs are enabled by state legislation. In some states, those enabling laws require local jurisdictions to report deal-specific data to a state agency for online posting. We found such requirements to be one of the best ways to achieve uniform local incentive transparency across an entire state.
And finally: the arrival of Governmental Accounting Standards Board Statement No. 77 on Tax Abatement Disclosures has tremendously improved access to program cost data at the local level. Statement No. 77 notes in the cities’ audited financial statements were our main source for costs of tax subsidies.
Full Report
Read the rest of the report here.