HD10 - Local Incentives Provided to Private Businesses for Economic Development Purposes [HJR 75 (2008)]


Executive Summary:
House Joint Resolution 75, agreed to during the 2008 Session of the General Assembly, established a joint subcommittee to study to study local incentives provided to private businesses for economic development purposes. The study resolution charges the joint subcommittee to (i) determine all incentives that localities are permitted to provide to private businesses; (ii) evaluate the impact of such incentives on smaller local competitors of the businesses provided the incentives; and (iii) evaluate the effectiveness of the incentives that are provided. The joint subcommittee was required to complete its work in time for the 2009 Session of the General Assembly.

The Joint Subcommittee held three meetings during the 2008 interim. Several presentations were made relating to a wide variety of issues affecting the use of incentives by local governing bodies including an overview of the types of incentive programs that are currently in use and the role of Economic Development Authorities and Regional Economic Development Marketing Councils. The Joint Subcommittee also received input from the private sector, local government economic development professionals and other interested parties. Particular focus was given to efforts at the state level to assist localities in expanding broadband access, which is essential to attracting businesses. Another focus was evaluating the impact of incentive programs on existing businesses in the locality that do not get the incentives.

At its last meeting the Joint Subcommittee reviewed two legislative proposals aimed at addressing the appropriate use of economic incentives. The first proposal would have prohibited a locality from expending funds or otherwise providing advantages to a private entity unless it is determined that such funds or advantages are necessary to induce the private entity to act in the manner which the locality is attempting to induce, such as relocating to the locality or expanding operations. The second proposal would have prohibited a locality from providing economic incentives to (i) a private entity that is already located in the locality unless it is likely that the private entity would relocate outside of the locality without the incentive, or (ii) to a private entity located outside of the locality unless it is likely that the private entity would not relocate within the locality without the incentive. Despite extended discussion no consensus was reached on either of the proposals.