Economic Development Corporations are Under the Microscope

Some state legislatures are demanding more transparency into the use of funds and incentives by economic development corporations (EDCs), and new rules from the Government Accounting Standards Board will require local and state EDCs to report more information on their tax breaks.

Many such agencies—including those in Indiana, Ohio, North Carolina, Michigan and Missouri—have had success attracting and retaining companies by offering incentives like tax breaks, job training grants and access to capital for entrepreneurial ventures.

Yet EDCs in many states are coming under fire. Florida’s economic development organizations have been fighting legislation seeking to eliminate tax incentives, while Virginia was rocked by a state audit that revealed misuse of funds by an economic development group. Greg LeRoy, executive director of policy resource center Good Jobs First, questions some EDCs’ lack of transparency, doling out “corporate welfare” and failure to deliver returns.

Designed and managed well, however, EDCs can give state economies—and employment rates—a boost. Jeff Finkle, CEO of the International Economic Development Council, concedes that qualifying a return on investment can be “a difficult measurement issue,” but adds that EDCs can point to metrics like the number of companies moving to the state, capital investments and wage growth. An IEDC report says that “high-performing” EDCs tend to be driven by their customers, operate with a strong strategic plan, constantly evaluate and adjust, and are efficient with funding and resources.