| The debate over whether government incentives and tax abatements will enhance economic development continues to receive serious consideration by granting agencies. The State of Texas authorized the use of economic development programs via the Development Corporation Act in 1989 and various incentives have been used by Texas cities since its enactment. Currently, all fifty states and over 13,000 cities utilize many types of government incentives to stimulate economic development.;While many government agencies continue to utilize incentives, there are no published financial models to help determine if the use of taxpayer dollars to stimulate economic development is a good financial investment of resources. This paper is an attempt to determine if the goals of granting economic development incentives have been realized and to shed light on the organizational and service characteristics that make it more likely that the results of offering a particular incentive will be positive. To ascertain the research goal, the financial models (slightly modified) of Net Present Value (NPV), Internal Rate of Return (IRR), and the Payback Method were studied for seven Texas cities with unique characteristics. In addition to utilizing the models, several personal interviews were conducted of economic development professionals to understand the practical application of the incentives. While practicing economic development professionals acknowledge that all decisions to grant or not grant economic incentive applications are not purely financial and include political consideration, this dissertation seeks to add a financial calculation that may be considered in the decision making process. Of the seven cities studied, five showed positive results while two showed negative results. |
