Raleigh City Councilors are beginning to discuss their economic development policies, with the bulk of the conversation centered on business incentives.
Following up on some feedback from the Council’s January retreat, city economic development staff presented the pros and cons of incentives to attract new businesses at the Council’s Tuesday work session. City Manager Ruffin Hall said the presentation is just the start and staff is “putting the ideas and the concepts on the table.”
Councilors have used incentives in the past, most notably to woo Red Hat and Citrix into their downtown digs. The companies also received state and county incentives, which are tied to capital investment and job creation.
But, the city’s official policy is nonexistent, and incentives are awarded on a case-by-case basis.
Councilors could decide to continue to review incentives individually, but James Sauls, the city’s economic development director, said that businesses are already asking if an incentive policy is in place.
While tax breaks are the most widely known type of incentives, Council members could also consider job training, public-private partnerships, infrastructure improvements or a streamlined permitting process.
Large businesses, such as Red Hat, often take advantage of tax and infrastructure incentives, but those are generally not appropriate for small businesses. Small businesses, said Sauls, look at loan programs or grants as a way to get funding to get off the ground or expand.
Sauls said there are pros and cons to incentives. Incentives can increase job creation, redevelopment, and the tax base, but sometimes companies overestimate their job creation or capital investment. Businesses and governments could enter into unfavorable contract terms and like most investments, there is a level of risk involved. Sauls said that incentives could also pit cities against each other.
Hall said that not all incentives work for all businesses.
“It can be that there are a lot of different tools in the toolbox,” he said.
Councilor John Odom said he’s very nervous about the precedent that could be set by creating a formalized incentives policy.
“We seem to be doing it because everyone else is doing it,” he said.
Odom said that while he’s wary of tax-based incentives, he’s more in favor of infrastructure improvements.
The city has used incentives in the past, Hall said, and those companies will likely cite what they’ve done previously.
“They’re coming anyway,” Hall said. “What I’m looking for is guidance when the wolf isn’t at the door.”
Companies are already sniffing around, Sauls said. Raleigh could be narrowed down to a top position without city officials even realizing it. It’s during those last discussions that incentives often come up.
Councilors will continue to discuss the framework for a possible incentives policy in the Budget and Economic Development Committee, but will come back to full Council during their regular work sessions to continue working out the details.
