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How effective are 'incentives'?
Joe Wilson's op-ed column on Fredericksburg and the use of incentives

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Date published: 1/1/2012

AS LOCAL govern- ments seek to build their tax bases and increase sources of revenue, incentive performance agreements are more aggressively used as a business-development tool. Agreements that return a portion of government revenues to a new or expanding business are used by the city of Fredericksburg in its economic development.

The Fredericksburg Economic Development Authority works closely with the city's business-development staff and is responsible for making the annual performance grants to the businesses approved for incentives by City Council. The EDA acts as agent for the city in reimbursing the applicable percentage of sales, meals, or lodging taxes to the approved businesses over a five- to 10-year term based on performance.

Performance measures are in the form of stated levels of capital investment, job creation, and business activity. Incentives help the EDA achieve its mission as a catalyst for responsible economic growth in the city and further the objectives of the JumpStart! Fredericksburg program.

Separate from its participation with the city on incentives, the EDA has over the past 10 years made more than 90 JumpStart! grants totaling over $1 million to a wide variety of businesses, arts organizations, special events organizers, not-for-profit groups, and the city for projects and activities that have expanded the city's economy and improved the quality of life for its residents.

The money to make these JumpStart! grants comes not from the city, but from annual fees paid to the EDA by borrowers such as Mary Washington Healthcare and the University of Mary Washington Foundation on low interest, mostly tax-exempt bonds issued through the EDA for their building and equipment projects.

Incentive programs are much more prevalent today than they were five years ago. The city's programs are responding to businesses that are looking for every advantage in making a business location decision.

Currently, the city has 14 active agreements in place with a mix of retail, hotel, restaurant, and technology businesses. These agreements represent to the city more than 730 jobs, $42.4 million in capital investment, and approximately $17.2 million in net retail, meals, lodgings, and business and professional-licensing taxes over the term of the agreements.

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Joe Wilson is chairman of Fredericksburg's Economic Development Authority.