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New Orleans Business Alliance to vote on economic development policies

May 9, 2012
By Rebecca Mowbray
The Times-Picayune

The board of the New Orleans Business Alliance, a public-private partnership for economic development, is expected to vote Wednesday on what could become the city’s first set of economic development policies. The policies, drafted over the last six months by the Business Alliance and Mayor Mitch Landrieu’s office based on recommendations from the mayor’s economic development transition team, create a framework for evaluating business proposals that seek public assistance and designate the Business Alliance as the starting point for all applications.

If the policies are adopted, it would greatly expand the role of the Business Alliance, which is charged with recruiting and retaining businesses in Orleans Parish. The group would become the lead agency on economic development, and would make recommendations on whether a myriad of city agencies should offer incentives to prospective businesses, and what those incentives should be, such as a property tax abatement or infrastructure improvements.

Leslie Jacobs, a businesswoman who headed the economic development transition team and who serves as vice chair of the Business Alliance, said the proposed rules get rid of the mysterious “black box” of past economic development decisions. They should help the city focus on worthwhile investments, and should signal to entrepreneurs that they will be treated fairly if they come to the city.

“For a long time, the business community and others have criticized the lack of any process, consistency, set of rules or criteria by which the city awarded incentives. Whether or not they were good decisions, there was always the perception that it was favoritism or an insider’s game,” Jacobs said. “This is a very exciting moment.”

Others were not immediately available to comment on the proposal. The non-profit watchdog group the Bureau of Governmental Research has been pushing for years for stronger policies on economic development. Whether it’s for tax increment financing zones or property tax abatements, BGR has advocated the use of formal scoring systems in evaluating development projects that are seeking city incentives, tying the size of public investment to the value of the expected benefit, and having provisions to rescind investments if the business doesn’t deliver. Janet Howard, chief executive of BGR, said she was unable to comment on whether the proposed Business Alliance policies meet those criteria because she needed to review the document.

Shortly after the Business Alliance hired Rodrick Miller as its chief executive and began operations last year, the group hired the Arizona consulting firm Applied Economics to create models for evaluating the economic impact of a prospective business, such as how many jobs it will create and how much it will spend with local suppliers. Applied Economics also created a model to determine the fiscal impact of a prospective business, or the net economic benefit to governmental bodies after the cost of any increased public services necessary to support the business.

Once the tools for evaluating a business proposition were in place, the Business Alliance and mayor’s office set about creating policies to help them determine whether they should offer incentives to help. The next step, said Aimee Quirk, the mayor’s adviser on economic development, will be to create a “strategic plan” for what types of enterprises the city wants to focus on.

Joe Luchenta, vice president of strategy, policy and research at the Business Alliance, said the effort isn’t aimed at giving money to businesses, but rather deciding whether support is warranted. “This isn’t necessarily a tool to grant an incentive; it’s a tool to evaluate the appropriateness of public support,” he said.

To be a considered for incentives, companies must fill out an application, submit documents specified by the Business Alliance and pay a $2,500 fee to cover the Business Alliance’s costs in evaluating the proposition.

Applications will be reviewed each month, and could involve hiring a third-party consultant if the business proposition is outside the group’s area of expertise. Businesses that are rejected will be notified in writing in 120 days. If the Business Alliance determines that a proposal is worthy of incentives, it will make recommendations to other city agencies about what types of incentives and how much it feels is appropriate. The city would not be required to offer support, and part of the analysis will include looking at the city’s capacity to afford incentives.

The Business Alliance won’t assign numeric scores to projects, but rather will offer its assessment based on all the information it has gathered. Miller said he doesn’t see his group making exceptions for a specific project. “If it falls outside of these (criteria), I don’t think it would make sense for us to recommend it move forward,” he said.

One criteria in determining whether a project is worthy of investment is whether the applicant can provide evidence that it’s more expensive to build the project in Orleans Parish than in other locations, and whether the applicant would use the money to finance public infrastructure improvements near the site.

Jacobs said the Business Alliance wants to understand whether it’s more expensive to come to New Orleans and why, and to have the opportunity to level the playing field. “That’s part of the reason we would give incentives,” she said.

The group will consider whether a company has the potential to create high-wage, quality jobs for Orleans Parish residents, and whether it will improve quality of life for the parish. To those ends, the group will consider whether projects are in areas targeted for investment, whether they’re close to public transportation, whether they fit with the city’s “place-based development” strategies, whether the wages or benefits are above average, whether the business will hire Orleans Parish residents for more than 40 percent of its positions, and whether the company has relationships with disadvantaged business enterprises. The proposed policy doesn’t indicate whether one criteria is more important than another, or how various factors are weighted.

The plan calls for the city to enter into a formal agreement with any businesses that receive public support, and to have provisions to rescind support if the business doesn’t meet its targets.

If the Business Alliance votes to adopt the policies, Quirk said she hopes other city agencies will begin using the same framework for evaluating economic development opportunities, and that they’ll follow the Business Alliance’s recommendations. Quirk acknowledges that the mayor’s office has no power over what the City Council and groups such as the Sewerage and Water Board or Regional Transit Authority actually do on business incentives, but she hopes the wishes of the mayor’s office will be influential.

The Business Alliance, which maintains offices in suite 2020 of the New Orleans Exchange Centre at 935 Gravier St., will hold its meeting at 10:30 a.m. It is open to the public.

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