Local government strategic plans often include goals related to economic development and its impact on community vitality, quality of life, the availability of jobs, and financial stability. So how does a city or county establish indicators to assess the performance of economic development activities in order to track progress toward established goals?
A “Best Practice” approved by the Executive Board of the Government Finance Officers Association (GFOA) provides guidance to assist finance officers and chief administrators in monitoring economic development performance.
Because local governments often provide financial incentives to attract or retain businesses, it is important to establish performance requirements and monitor performance over time. The GFOA Best Practice includes recommendations in three broad categories.
Monitoring Project Performance
GFOA recommends periodic evaluations of each project receiving an incentive to ensure that it meets the compliance standards established in the development agreement—including both timing of benchmarks and actual results compared to targets. These are among the measures GFOA recommends tracking:
- Comparison of actual to estimated expenditures
- Comparison of actual to estimated land use
- Numbers and types of jobs created and average wages
- Net increase in property tax base
- Low-to-moderate income employee qualifications
- Occupancy requirements.
Monitoring Jurisdictional Impacts
According to the Best Practice, economic development performance should be measured against the overall goals and objectives in the government's economic development policy. Among them:
- Tax base changes
- Economic activity changes (e.g., employment, property valuations, average wages and income levels)
- Redeveloped activities in blighted areas
- Housing opportunities
- Credit rating impacts.
Communicating and Reporting Results
Transparency requires that the results be made public to local officials and citizens. “The governmental jurisdiction should be responsible for reporting the project performance and fiscal impact on the jurisdiction of each incentive used and the cumulative impact of all incentives on the overall financial condition.”
As the professional organization of public finance officers, GFOA emphasizes the importance of the chief financial officer’s role in monitoring economic development performance, assessing whether it meets agreed-upon criteria, and communicating with other appointed officials, the governing body, and the community.
About GFOA Best Practices
According to GFOA, "GFOA Best Practices identify specific policies and procedures as contributing to improved government management. They aim to promote and facilitate positive change rather than merely to codify current accepted practice. Partial implementation is encouraged as progress toward a recognized goal."
Two ICMA members sat on the GFOA board of directors that approved this Best Practice: Heather Johnston, city manager, Burnsville, Minnesota, and Bob Eichem, chief financial officer, Boulder, Colorado.
Economic Development Measures
Over time, ICMA has collected data related to local economic development and the government’s responsiveness to developers and builders. These can be tracked for comparison year to year and/or benchmarked with results from other jurisdictions:
- Development permits, inspections, and plan review expenditures and revenue
- Number of building permits issued
- Average calendar days from development permit application to issuance
- Number of development inspections
- Average calendar days from request to development inspection
- Number of plan reviews conducted
- Citizen ratings of the quality of permitting services.