Debate Magazine

Incentives--From Where We Came to Where We Are

By Kelly058
Some thoughts after reading today's story on incentives in the Free-Lance Star:
http://www.fredericksburg.com/News/FLS/2011/022011/02052011/604459
Incentives should be used to meet economic development goals. Goals which as originally discussed must look beyond just direct impacts of jobs and revenues to include diversification of our tax base, sustainability, more higher paying jobs, and compatibility with the city's character.
In setting up the incentives program it was important to place benchmarks like jobs , revenues, and capital investment to be achieved before tax dollars and fees would be reimbursed. We have dealt with the direct impacts and seem to have stopped and there have been consequences.
For downtown an existing business creating 5 jobs, and $125,000 capital investment and 10 jobs and $250,000 capital investment, are the benchmark for qualifying for incentives. As for job creation we are not differentiating between a $25,000 a year job and a $125,000 a year job. If we take into consideration the costs associated with those jobs the return to the city could also be negatively affected. In regards to capital investment we are looking at revenues to the city of only from $1,000 to $2,150 a year based on the current real estate tax rate. How much of a return are we actually getting? As for revenues projections we base them only on the business' projections but not on the potential impact on other businesses.
Case in point, a new restaurant downtown would probably have a negative impact other downtown restaurants' revenue. Just providing incentives for one sector, i.e., restaurants for example, can be counterproductive.
The benchmarks for Celebrate VA and Eagle Village are 25 jobs and $500,000 capital investment which seems low knowing what type of businesses are planned for those areas. It should also be noted that we have since tweaked our incentive programs to bring them in line with our neighbors. Based on the first come first serve approach one has to question the validity of the incentives program. It should also be remembered than one of our goals was to get away from our reliance on retail/service.
We are failing on two counts. We have forgotten some significant reasons we had for implementing incentives in the first place--diversity, sustainability, more higher paying jobs, and compatibility with the city's character (I'll deal with the Kalahari comments as they come). Secondly, they were put in place so that the city could pro-actively work towards achieving diversity, sustainability, more higher paying jobs, and fitting the city character. It time to reevaluate where we are with incentives and also take a moment to provide the community with the vision of what is to be achieved with them.
Is there a role for incentives in Fredericksburg?

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