Negotiating State & Local Economic Incentives
Governments award public incentives to lure companies to their localities – actions that can minimize taxes and offset capital and operating costs.
We can 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, a standard procedure in the site search 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 robust incentives while others have none that will benefit you. Also, laws, priorities and public budgets change every year, making it difficult to determine which agency is offering what types of incentives at the time your project qualifies for consideration.
Economic incentives are important but they do not make a bad location a good location. They do aid in making a good location a better location.
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 Boards 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 all legal requirements, supported with credible data, and presented in a convincing manner.
Also, incentives can spark a public outcry by anti-business zealots, 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 Abatement
- 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 incentive opportunities through Economic Development agencies and the likelihood of receiving incentives is explored. Sometimes it’s helpful to provide the agency with an Economic Impact Analysis (some states require such a study) to illustrate to the grantors what benefits will result for the state and community from the incentives. Once semi-finalist locations are selected, we will coordinate the application process, will negotiate for an Offer Letter, and facilitate the authorizations and contracts required to receive the awards. This can be a complicated process since multiple agencies may be involved.
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 costly clawbacks by the granting agencies and adverse media coverage.