In This Edition of Econ. Info:
Corporate Tax Break Incentives

Feature Article
Cities Counties Take Back Corporate Tax Breaks

Local Connection
Companies Who Received Incentives Fulfill Their Job Promises

Idea Corner
How Clawbacks Work

New Resources

Feature Article

Cities Counties Take Back Corporate Tax Breaks

Business Week

Cash-strapped communities have a message for corporations that promised jobs in return for tax breaks: A deal's a deal.

As the recession drags on, municipalities struggling to fix roads, fund schools and pay bills increasingly are rescinding tax abatements to companies that don't hire enough workers, lay them off or close up shop. At the same time, they're sharpening new incentive deals, leaving no doubt what is expected of companies and what will happen if they don't deliver.

"We will roll out the red carpet as much as we can (but) they are going to honor the contract," said Brendon Gallagher, an alderman in DeKalb, Ill., where Target Corp. got abatements from the city, county, school district and other taxing bodies after promising at least 500 jobs at a local distribution center.

So when the company came up 66 workers short in 2009, Target got word its next tax bill would be jumping almost $600,000 -- more than half of which goes to the local school district, where teachers and programs have been cut as coffers dried up.

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Local Connections

Companies Who Recieved Incentives Fulfill Their Job Promises

Newnan Times-Herald

Many cash-strapped communities are starting to penalize corporations that have promised jobs in return for tax breaks, but didn't deliver. But apparently Coweta companies are making good on their promises.

The issue came up at the Thursday meeting of the Coweta County Development Authority. President Greg Wright was asked to look into promises that were made by local companies, and whether or not those promises have been kept.

"You need to keep your word," said Jim McGuffey, development authority board member. "That's why clawback provisions are negotiated in with the incentives."

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Idea Corner

How Clawbacks Work

GoodJobsFirst.org

When a company signs a subsidy deal, it typically promises to deliver a set of public benefits. For example, a company may state on its subsidy application that it will invest $1 million in a new plant projected to employ 100 people full time at $20 per hour. If that company fails to follow through on the investment, number of jobs, employment hours, or wage rate in a specified amount of time, and the subsidy deal has a clawback provision, the company must forfeit or repay all or part of its subsidies to the state or local government that awarded them.

Many clawback laws are written so that different penalties apply depending on how badly a company fails to meet its targets. A clawback may prorate a subsidy; for example, if the company falls 10 percent short of its goal, it has to pay back 10 percent of the subsidy. A steeper penalty may apply if the company falls far short. If a company shuts down or moves out of state, the government may require it to pay back the full amount of the subsidy, with interest.

Clawbacks are added to development subsidy programs through the legislative process at the state and/or local level. They are also included as a provision of subsidy contracts negotiated and signed by governments and developers.

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New Resources

Georgia Entrepreneur and Small Business Program

The OneGeorgia Authority has provided funding to the Georgia Tech Enterprise Innovation Institute and the University of Georgia Small Business Development Center to deliver expanded services to entrepreneurs and small businesses in rural Georgia.   This new partnership program is called the Georgia Entrepreneur and Small Business Program or GA-ESB for short.

More information

EDA Project Evaluation Tool

This tool, created by the W.E Upjohn Institute for Employment Research, provides qualitative and quantitative analysis of a project to help economic development practitioners determine its likelihood of success in a given region.

View the tool

Economic Development and Social Media Survey

In partnership with the International Economic Development Corporation (IEDC), DCI conducted the following survey focusing on the use of social media within economic development organizations. For the purposes of the survey, social media is defined as online tools that allow groups of people to interact with one another by exchanging content, opinions and insight.

Visit website hosting survey.