ICMA’s recent Economic Development Survey results showed that as a condition for providing incentives for new business, only 18% of local governments require a percentage of employees be hired from within the community. A cost benefit analysis is reported by a smaller percentage of smaller communities than large communities. Smaller communities are also less likely to measure the effectiveness of business incentives.
In the city of College Park, Georgia, a suburb of Atlanta, this is not the case. An Atlanta suburb known as Georgia's Global City/Air Transportation Gateway, College Park is home of the Hartsfield-Jackson Atlanta International Airport, the world's busiest airport. College Park is also home to Chick-Fil-A Corporate Headquarters, one of the United States top five Coca-Cola Bottling Company's production and distribution plants, and 33 hotel and motel facilities. With a daytime population of 300,000 and 20,000 permanent residents, College Park is also home to the Southern United States regional headquarters of the Federal Aviation Administration. Municipal operations include the Georgia International Convention Center, the newest and second largest convention facility in Georgia, as well as a multiple service public utility, including College Park Power, the city's electricity distribution system. The city functions with 15 operating departments, with an annual operating budget of $125 million.
Artie Jones III, director of economic development, has been with the city for 11 months. He describes the city as aggressive with both business incentives and performance milestones. Businesses interested in locating in College Park and receiving incentives must submit an application demonstrating what they need to be competitive and why they need it. For example, if a company wants to build a hotel, they may need a parcel of land owned by the city. Their application will need to demonstrate the number of jobs that will be provided, salary information, and what increased tax value will be realized, if the city leases property to the firm for the hotel.
The city uses a broad array of benchmarks to determine if the numbers provided in the application are accurate. A 75,000-square-foot office building may not need a huge footprint for parking. But the city considers what happens if it goes vacant. The city might have to again sell that parcel, but if all other buyers want a large parking footprint and there is no land for that purpose, the city loses. The city might require a larger parcel of land to be purchased by the initial buyer to safeguard against that scenario.
As Jones describes it, “We are the stewards of the taxpayers’ money.” The city is business friendly but will not enter into any agreement that has the potential to adversely affect the city. The city puts together a memo of understanding about what both parties want to accomplish. Then a binding agreement is developed after the details are worked out. The details typically include clawbacks and penalties if the commitments made by the company are not fulfilled. In one instance the clawback provides that if the company does not meet one of its commitments in a certain timeframe, it will incur heavy financial penalties. Built into the agreements are stipulations that city staff can come in and audit the developer’s records, such as verifying the employment of city residents.
The deals keep the developers honest. If the city provides 100% tax abatement for the first few years, the developer has to deliver as well. Having rigorous measures of effectiveness, penalties, and detailed agreements in place helps ensure the success of business incentive arrangements.
City Manager Terrence Moore was in the middle of high level negotiations at the time of the interview, so he was unable to participate. He offered an important piece of advice: “Never be afraid to walk away from a proposal that may not benefit the city, as more meaningful opportunities typically become imminent when keeping true to the merits of an economic development vision that is consistent with desired goals and objectives of the community.”
Incentives, especially the use of tax abatements, are of particular importance to local governments as GASB is considering requirements for disclosure of tax abatements provided to businesses in which the business commits to action that contributes to economic development.