A Must-Read: Ellen Harpel’s 6 steps to smart incentives use

There are very few people that I will Tweet or post sight unseen (which apparently gives me another piece of weirdness cred).  Ellen Harpel of SmartIncentives.org is about the only one for which I will do that consistently.  Her understanding of the potential and failures of economic development incentives (a topic that I gave a lot of space to in the book), eclipse pretty much everyone.

This not-so-recent-but-still-spot-on post sums up her approach and gives valuable links to deeper explanations.  I’m pasting in her text here, but the hyperlinks are to her pages.

In short: read, follow and learn.  And then do.  And my deep thanks to Ellen for articulating all of this so clearly and concisely.

cut up money
Photo via Tax Credits/Creative Commons


  • Define the goal of each incentive clearly.   This is a surprising gap in many incentive programs. You can’t tell if it is working if you don’t know what it is supposed to achieve.
  • Review your entire portfolio of incentive programs to understand risks, costs and to make sure it is aligned with your overall economic development strategy.  Make adjustments and rebalance as necessary.
  • Conduct background research on incentive applicants. This is especially important for small firms and start-ups that are increasingly the focus of many incentive policies. The more you know about a company, the better deal you can create for both the business and your community.
  • Perform due diligence on the deal.  An incentive deal is an investment for the community.  As with any investment, a lot can go wrong. Due diligence can strengthen your hand during negotiations and lead to better outcomes.
  • Conduct an “ROI” analysis for your community by considering how well the project fits your strategy, the fiscal implications, and the potential economic impact.  It may seem expensive, but it is worthwhile to devote some resources upfront to make better decisions and communicate the rationale for those decisions to stakeholders.
  • Track performance.  Monitor and report on compliance with performance agreements.  Economic development organizations need resources to manage and monitor incentives, as well as to enforce contract provisions when necessary, not just make the awards.


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