In the past two years, corporate incentives have been a hot topic of discussion for both the media and corporate executives. Regardless of whether incentives are perceived as “good” or “bad,” panelists at the Site Selectors Guild Conference believe incentives are both necessary and extremely important components of convincing a company to select your location.
Experts on incentives and negotiations who spoke at this year’s Site Selectors Guild Conference included Angelos Angelou, AngelouEconomics; Tracey Hyatt Bosman, Biggins Lacy Shapiro & Company; Mark Sweeney, McCallum Sweeney Consulting; and Mark Williams, Strategic Development Group, Inc.
While incentives are just one component of the overall site selection process, here are several “best practices” for economic developers to keep in mind when showcasing and/or negotiating incentives:
- Timing is Everything: Timing is critical especially when it pertains to the start date of benefits, frequency of payments and the net present value. Also remember that wage requirements can greatly impact an incentive program’s value.
- The Devil is in the Details: When it comes to incentives negotiations, always pay close attention to the fine print on claw-back provisions, understand conditions and payment schedule of tax credit refunds, keep records of incentives commitments and make sure to develop innovative incentives that target project specific needs.
- Beware of the Bottom Line: Economic developers must be aware of the client’s internal targets, e.g. “this move needs to save us X amount of money.” Also highlighted was the importance of demonstrating a unified front between state and local governments whenever possible. Side note: it’s a big plus to get approval without the name of the company being disclosed.
- Incentives Can Get You in the Game: Incentives are great marketing tools because they set the tone of your community’s or state’s business friendliness, which in turn can increase the number of calls and “get you in the game.” One example shared by the panelists is that of New Jersey, which has received a lot of attention recently about the state’s incentives overhaul. It’s likely that New Jersey will make that initial list more frequently as a result of this positive publicity.
So despite the perceived controversy surrounding incentives, they do ultimately play a strategic role in site selection decision, especially toward the end of the process when incentives could be the deciding factor on whether or not a company decides to commit.