Economic Development Agencies and Letters and Opinion

Criticism of IEDC was off-point

January 22, 2011

Professor [Morton] Marcus’ warning about the perceived under-appreciation of local economic development organizations [in his Jan. 10 column] places a spotlight on the importance of these groups and those who lead them.

Economic development is becoming increasingly competitive and complex. LEDOs often serve to distill the viewpoints of the divergent players at the local level, whether they are elected officials, advisers or business leaders, and provide a streamlined, central point of contact that addresses a prospect’s questions and needs.

But more than that, as Marcus suggests, a savvy LEDO also is able to play the multifaceted role of caregiver, innovator and adviser to any and all parties involved in a project to keep that deal alive. This critical skill greatly affects the strength of a community’s tenuous grip on a fast-moving, high-maintenance prospect.

Contrary to the article’s criticisms about the Indianapolis Economic Development Corp., however, my experiences with this organization and its predecessor, the Department of Commerce, are different. The IEDC that I work with values the contributions of local government.

Many past and present senior executives within the IEDC come from a LEDO background, and understand a LEDO’s role to a project’s success. The IEDC is keenly interested in the local government’s participation in a project and how the state can tailor its involvement to enhance that project’s chances for success.

I would also take issue with the argument that the state oversells its economic development victories in the press. The IEDC’s role is to retain and attract companies that have the potential to succeed, and to do the best job possible to protect the state’s assets in the process.

On the first point, no amount of due diligence by the IEDC will enable it to guarantee the outcomes of the projects it incentivizes. Further, incurring the expense and delays that would result from dedicating significant resources to that effort would be of a questionable cost/benefit result, since the IEDC’s typical support for a project is in the form of self-policing, performance-based incentives. This leads to the second point.

By definition, performance-based incentives are paid out on a pro-rata basis as benchmarks are achieved. If the jobs are not created, then the incentives are not provided. Criticizing job-commitment announcements for projects that don’t come to fruition may make for provocative headlines, but these announcements are, at worst, victimless events that don’t detract from the state’s deservingly laudable efforts to secure these deals. The fact there will be winners and losers with proposed economic development projects is an occupational hazard of the industry.

Tim Cook
Partner, State and Local Tax Services
KSM Economic Development Advisors

 

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