Incentives, primarily in the form of tax abatements, are one of the most popular, prominent and efficient forms of direct development assistance.
Incentives are generally not categorized as “financing” but rather a tool to reduce financial barriers facing businesses, investors or industry. As such, CDFA focuses exclusively on tax abatements when discussing incentives.
A tax abatement is the relief of tax liability by a tax-payer. For example, if a company locates a plant in a community, it may ask for and receive a tax abatement for relief of all or a portion of its property tax liability. Tax abatements are provided at both the state and local level and can be applied to property, sales, income or other tax liabilities.
Nearly every state authorizes the use of tax abatements. However, many communities do not employ this tool a part of their incentive policy. Conversely, many communities are very aggressive in their use of tax abatements. State agencies are particularly active in the use of tax abatements as incentives to attract and retain businesses.
Tax abatements also come with a considerable amount of accountability. In recent years, tax abatements have spiked controversy throughout the country. Greater due diligence measures and performance based awarding of tax abatements are becoming common place in development industry. In addition, tools such as smart analytics and abatement reduction have also emerged to ensure accountability on the part of government and business when employing tax abatements.
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Interested in learning more about Incentives? This section contains resources on understanding the basics of Incentives.
Effective Use of Property Tax Incentives - Lincoln InstituteMembers only Login
This study was published by the Lincoln Institute. The authors examine how to make property-tax incentives for business more effective. They find that governments should not approve every incentive request, target use of incentives, avoid incentive wars, cooperate with surrounding localities, and conduct regular evaluations.
Examining the Local Value of Economic Development IncentivesMembers only Login
Every year local and state governments in the United States expend tens of billions of dollars on economic development incentives. Under intense pressure to deliver economic opportunity, policymakers utilize incentives to encourage private sector firms to create jobs, invest in communities, and strengthen local industries. Drawing on a detailed literature review and a unique analysis of economic development transactions in four U.S. cities (Cincinnati, Indianapolis, Salt Lake County, and San Diego), this report advances a framework for inclusive economic development to help leaders analyze and evolve their incentive policies.
Striking a Balance: A National Assessment of Economic Development IncentivesMembers only Login
This paper, produced by the Upjohn Institute, analyzes the intensified use of incentives as local governments compete for new plants and corporate relocations, and as private firms increasingly demand a deal. While incentives promise jobs and tax revenue, scholars and practitioners criticize their high cost and limited accountability. Through a comparison of matched establishments, this paper explores how governmental incentive-granting strategy impacts incentive performance.
Search the map below to find incentives programs by state. This specialized search is part of CDFA's State Financing Program Directory
, the only online resource cataloging the development finance programs offered by state governments. Click on a state to see a sample of incentives programs available. Login with a CDFA Member account at the top of the page to view full results.
California Rural Infrastructure Finance Guidebook
CALED knows from its work supporting economic development throughout California that infrastructure financing is a challenge for many rural communities. CALED collaborated with CDFA to develop this guidebook to meet the need for a resource to help build capacity in those areas, as well as move economic development projects forward.
CDFA Food Finance White Paper Series: Food Systems & Targeted Tools
This white paper is part of a series examining the potential creation of a food systems asset class which supports the market growth of local and regional food systems. This paper focuses specifically on targeted financing tools that can be used to geographically target local and regional food system developments.
Growing Food Connections: Aggregation, Processing, and DistributionMembers only Login
View more Case Studies
This brief highlights the many ways and scales at which local governments can invest in aggregation, processing, and distribution infrastructure to support local and regional food systems, from commissioning assessment studies and food hub business plans to supporting the development of facilities and infrastructure or amending policies and codes. Whether driven by the grassroots efforts of farmers, community organizations, or entrepreneurs, or by planning processes and policies, local governments have important roles to play in supporting these efforts by providing technical or policy support, funding, or land and other resources.