incentive policy establishment guide that aims to mitigate risk while addressing real challenges within a community. The guide has been adapted from information published by the US Government Finance Officers Association. x
1. Incentive Policy Establishment
• Outline Clear Goals and Objectives: The policy must include goals and objectives such as revitalising a downtown area or attracting more new businesses in a certain industry. Supporting these goals and objectives with data about the challenges within the community will ensure the policy address underlying issues.
• Clearly Defined Study Area: Incentive schemes should include a defined geographical area( e. g., a downtown core). Establishing a geographic boundary helps to reduce scope creep, focus impact where it is most needed which helps when reporting. Additional incentive programs can be rolled out to target different areas and needs if successful.
• Leverage Economic Multiplier Effect: A key benefit to incentive schemes is that they harness the power of private sector capital to multiply the initial impact of government investments. Consider establishing incentive schemes that require co-contribution from businesses or developers to access( e. g., matching grant funds). Incentive schemes also allow municipalities to better influence private sector decision making in visible public areas( e. g., incentivising businesses to upgrade signage or repaint facades).
• Define Specific Incentive Programs and Limitations: Limitations can include spending caps, time restrictions for project completion, and defining projects or businesses that are ineligible. xi
• Test, Pilot & Adjust: The power of incentive programs lies in their compounding effect over time. A small pilot program addressing a visible need( e. g., street beautification) allows EDOs to test the policy and gives businesses time to understand its scope and impact. Multi-year incentive schemes with rolling application periods are generally more effective.
• Include Detailed Administration Procedures: Incentive policies must clearly outline the management process. These include a clearly defined evaluation process of successful applications to ensure consistency and transparency.
2. Evaluation Process
• Establish Clear Criteria Aligned with Economic Goals: For example, if the goal is to create local jobs, establish in the criteria, the number of full time local jobs expected to be created and employed within a 12- 24 month period.
Incentive schemes should include a defined geographical area( e. g., a downtown core). Establishing a geographic boundary helps to reduce scope creep, focus impact where it is most needed which helps when reporting.
• Compare Incentive Costs to Expected Benefits: With support from finance officers, analyse the cost of the program including any reduction in tax or rate revenue over the program period. Also consider the impact awarding the incentive will have on existing businesses. Consider if the project would happen without the incentive.
3. Performance Standards
• Set Specific, Measurable Standards for Each Project: Standards can include qualitative and quantitative measures spaced as milestones throughout the policy period. These could include project completion timelines and budget, quality standards, local spending or recruitment requirements.
• Include Clawback Provisions: A clawback provision in a contract is a recapture provision, which requires a business to fulfil their contractual agreement otherwise the government can recapture some of the public funds expended. For example, if a business fails to complete the project in the agreed time period, the initial investment can be recaptured.
4. Monitoring and Compliance
• Monitoring: Successful incentive policies dictate monitoring criteria and reporting frequency to ensure that incentive schemes are performing at a satisfactory level. Clarity on the roles of responsibilities of each team or department within a government agency is also important.
• Compliance: Reports should be publicly available and published within a specified timeframe, as outlined within the incentive policy framework. Incentive policies rely on public money and therefore should be transparent. Ensure annual reports are published detailing investment decisions
COMMUNITY IMPROVEMENT PLANS: A CANADIAN CASE STUDY FOR SUCCESSFUL INCENTIVE SCHEME IMPLEMENTATION AT THE MUNICIPAL LEVEL The final section of this article examines Community Improvement Plans( CIPs) in Canada and their potential adaptation in Australia. CIPs, used since the 1970s, are financial incentive tools for EDOs at the municipal level. xii In Ontario, CIPs are formal planning tools under section 28 of the Ontario Planning Act, allowing municipalities to offer various incentives within a Community Improvement Project Area( CIPA). xiii Typically, municipalities establish multiple CIPs targeting different geographic areas with tailored incentive programs.
CIPs were designed to be a versatile set of tools that can be adapted to each municipal situation. For example, a non-metro LGA could design a CIP that focuses on downtown revitalisation whereas a metro LGA could create a CIP more targeted towards incentivising housing supply. Overall, CIPs enable a municipality to:
• focus public attention on local priorities and municipal initiatives;
• target areas in transition or in need of repair, rehabilitation and redevelopment;
• facilitate and encourage community change in a coordinated manner; and,
• stimulate private sector investment through municipal incentive-based programs. xiv
Due to regulation requirements around CIP establishment, monitoring and reporting, CIPs remain an effectively governed mechanism for governments to direct and influence private sector change.
ECONOMIC DEVELOPMENT JOURNAL VOL 18 NO 1 2025 09