Subsidy accountability strategies can help cities ensure that businesses supported by public resources deliver measurable public benefits and that economic development plans are equitably designed and executed. Municipalities across the United States provide economic incentives and subsidies to attract businesses and create jobs: over $80 billion of public money is spent each year on programs that finance business relocation and development, including tax abatements and exemptions, low-cost forgivable loans, cash grants, and utility discount rates. Tax breaks and other corporate subsidies are often wasteful and ineffective; however, when thoughtfully crafted and paired with explicit equity goals and strong accountability mechanisms, these types of subsidies can contribute to equitable economic development, creating positive social impact and good middle-wage jobs that are accessible to traditionally marginalized workers. Clawbacks, the gold standard in subsidy accountability, are legally-binding contract provisions that provide a “money-back guarantee” by requiring companies to repay subsidies if they fail to meet their obligations. Critics argue that subsidies given to large corporations disadvantage local businesses and divert funds from the public good without proven benefits, and urge greater accountability for this use of public funds. At the same time, insisting on accountable subsidy practices presents an opportunity to promote equity outcomes through greater public participation and the enforcement of strict community standards.
See Good Jobs First for more resources on subsidy accountability.