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Legislative Post Audit finds uneven evidence incentives work; calls for clearer goals and better data
Summary
Legislative Post Audit told the Senate Commerce Committee that repeated reviews of state incentive programs show the same patterns: unclear statutory goals, spotty or unreliable data and mixed evidence that foregone revenues are recouped in tax receipts.
Kristen Roddinghouse, deputy director at Legislative Post Audit, told the Senate Commerce Committee that recurring findings across two dozen incentive audits point to the same core problems: unclear statutory purposes for programs, inconsistent or incomplete data collection, and difficulty measuring return on investment.
LPA highlights and findings
- Star bonds: For several STAR bond districts LPA used anonymized mobile‑phone visitation data and found most attractions did not meet Commerce’s stated out‑of‑state visitation targets. Its cost‑recovery models suggested the state would need several decades to recoup foregone sales tax at evaluated projects. LPA recommended Commerce collect reliable visitation statistics and that the Legislature clarify program goals.
- Industrial Revenue Bonds and property tax abatements: Econometric modeling across sampled IRB projects found that most produced positive broader economic impacts but did not generate sufficient direct income, property and sales tax revenue to offset the cost of the property tax exemption over the modeled period. LPA recommended clearer purpose statements and improved central reporting of IRB outcomes.
- HPIP, PEAK and Job Creation Fund: Modeling showed these programs typically create direct and secondary economic activity larger than the program cost, but that projected tax revenues often did not fully offset the foregone incentives. LPA emphasized the need to define whether tax revenue offsets should be the primary success metric.
- Rural Opportunity Zones (ROZ/RAS): LPA concluded the program had limited statewide effect on population decline, though it may have helped 19 counties. Analysts found evidence of internal moves between eligible counties, suggesting reshuffling rather than statewide net inflow.
- Transparency and data quality: LPA’s 2024 limited scope audit found missing programs and incomplete statutorily required fields in Commerce’s incentive transparency database. Subsequent work identified multiple Revenue datasets with conflicting numbers for HPIP credits; LPA declined to report precise utilization rates until Revenue remedied data reliability problems.
Recommendations
LPA asked the Legislature to require clearer statutory definitions of program goals and expected outcomes, tailor evaluation metrics to program type (some incentives are not well measured by ROI alone), centralize and standardize reporting of awarded incentives and outcomes, and require retrospective cost‑benefit reviews for major programs. LPA also urged that Commerce and Revenue develop interoperable datasets so audits can reliably measure program use and fiscal exposure.
Why this matters: LPA’s audits do not uniformly condemn incentives; they show many programs stimulate economic activity. But the recurring themes — missing or inconsistent data and vague statutory goals — make it hard for legislators to evaluate whether the tax dollars and foregone revenues achieve intended public purposes.
Committee reaction: Lawmakers said they wanted Commerce and Revenue to provide corrected, centralized data before the next session and asked Legislative Post Audit to advise drafting clearer success metrics for programs the Legislature intends to continue.
