Negotiating State & Local Economic Incentives
Governments award public incentives to lure companies to their localities – actions that can help minimize taxes and offset capital and operating costs.
Services are available to identify and negotiate economic incentives at the state, county and municipal levels, and sometimes through utilities. At first, incentives are explored on an anonymous basis on your behalf (your project will be referenced only by a code name, which is a standard procedure in the Site Selection process).
In every project, we inquire about possible incentives! Consider this: In addition to 50 states, there are 3,242 counties and county-equivalents and about 40,000 local governments in the United States. Some have incentives while others have none. Also, laws and public budgets change every year, making it difficult to determine what agency is offering what types of incentives. So, in short, everywhere we go, we ask.
Pressures Limit Incentives
Often unrecognized is the pressure within Economic Development Agencies when competing incentives applications put the agency at risk of exceeding its budgetary or statutory limits. These organizations are run by conscientious people who are accountable to their Board of Directors and often to Governor’s offices, city councils and mayors. Hence, for an application to prevail over competing projects, it must be thoroughly prepared, comply with legal and agency requirements, supported with credible data, and presented in a convincing and timely manner.
Sometimes incentives are curtailed or eliminated outright because of a public outcry that a company received certain benefits but failed to fulfill its obligations. Also, incentives can spark a public outcry, which is what happened in New York City that caused Amazon to abandon it HQ2 project there.
We’ve seen cases where incentives fade away in one location while they become more robust elsewhere.
Examples of Public Incentives
Incentives are either statutory or negotiable and generally fall into the following categories:
- Cash Grants
- Employee Tax Credits
- Training Grants
- Wage Subsidies
- Property Tax Abatements
- Investment Tax Credits
- Energy Investment Tax Credits
- Sales Tax Exemptions
- Low-Cost Financing
- Utility Rate Reductions
- Green and Renewable Energy Credits
- Fee Waivers
- Infrastructure Grants
- Fast Track Permitting
- Inventory Tax Reductions
- Subsidized Land
How it’s Done
We research available incentive opportunities prior to filing for such programs through Economic Development agencies. The likelihood of receiving incentives from different jurisdictions will be explored. It’s often helpful to provide the agency with an Economic Impact Analysis (statutes in some states require such a study). Once finalist locations are selected, we will coordinate the application process and facilitate the authorizations and contracts required to receive the awards, often a complicated process.
After incentives are in place, you must remain in compliance. You may assign tasks and deadlines to a management employee (with compliance duties clearly outlined in a job description). Alternatively, a turnkey arrangement with an incentives management and compliance firm would make sure that you receive the full value of awards as granted. Remaining in compliance is an absolute must. Failing to do so will result in adverse media coverage and potentially costly clawbacks by the granting agencies.