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Negotiating Incentives? Avoid These Common Pitfalls.

Here’s how to deal with some common challenges that often come up during the incentives negotiation process.

Q4 2018
Dave Cooper, Shareholder, Economic Development & Incentives Practice Group at Maynard Cooper & Gale, speaks with Area Development on how to deal with the challenges that often come up during the incentives negotiation process. Interview conducted by Margy Sweeney, Founder and CEO, Akrete, Inc. and Area Development Editorial Board member.
Real estate development is full of expected unexpected issues. Among the most common: headaches from negotiating incentives. The complexity of zoning processes and the inconsistency across incentives programs can result in scheduling problems, halted projects or financing obstacles. Creative uses of public-private partnerships really have the potential to advance the ball in economic development in a lot of different areas. Dave Cooper, Shareholder, Economic Development & Incentives Practice Group at Maynard Cooper & Gale

However, it is possible to avoid common pitfalls when dealing with incentives for your upcoming projects. Understanding the following pitfalls will help your team navigate these common challenges that come up all too frequently during the incentives negotiation process.
  • Inexperienced counsel. For a project in an unfamiliar location, it’s risky to work with attorneys who lack expertise or experience with the transaction requirements. Consider working with local counsel with experience with local abatements, incentives, and complex real estate transactions.
  • Falling short on project requirements. If you’re attempting to take advantage of a particular incentive program, ensure that you can meet all the requirements. In particular, keep an eye out for the application requirements and timing; job or capital investment recapture/clawback provisions; low-to-moderate income hiring requirements; and local participation requirements.
  • Unclear approval process. What are the steps to incentive approval? Without a clear process, you can wind up renegotiating what you thought was a local agreement with various city, county, and state decision-makers. Every city, county, and state has different approval processes, so make sure you understand what applies to your project. Ask the EDO to spell out the process and the timeline so you can build the approval process into your project plan.
  • Misusing grant funds. Different grant programs come with different eligible uses. Ensure that the grant funds really are applicable to your project, whether for infrastructure, capital improvements or training and travel.
  • Ignoring public works procurement laws. Some states and municipalities require competitive bidding processes when public entities are procuring materials and supplies for public works projects. Confirm whether these laws apply to your project, factor in the timeline of the process, and plan accordingly.
  • Accidentally becoming a lobbyist. In petitions for incentives, some civil bodies consider site selectors and attorneys to be lobbyists. They may require your company or your advisors to register as lobbyists, a process that would require disclosure of the project sponsor’s name — which is not ideal. To avoid these complications, take a close look at state lobbying laws and guidelines, and formulate a strategy accordingly.
  • Disregarding site history. Cover all your bases and know the ins and outs of site ownership history. The EDO should be able to discuss whether a site is currently in private-sector hands and how your company could gain ownership, lease the land or otherwise be able to use a site.
  • Misunderstanding ownership requirements. In incentive programs, ownership requirements and restrictions vary widely. Figure out whether the local government or industrial development board (IDB) must own the site or not, and how the ownership requirements fit into the financing picture overall.
  • Confidentiality breaches. To avoid unnecessary complications and media inquiries, keep your lips sealed on all details of the project. Require your advisors, consultants, and brokerage teams to also stay mum while the government agencies involved follow the proper processes for compliance with sunshine laws.
Editor's Note: Area Development’s Indianapolis Consultants Forum featured a presentation on navigating incentives for your community’s next project by Dave Cooper, Shareholder, Economic Development & Incentives Practice Group at Maynard Cooper & Gale. The preceding were some key topics from Cooper’s presentation and subsequent sit-down interview with Area Development.

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