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Naughty or Nice: Which States and Locations Will Bring Business Executives Holiday Cheer?

If you’re contemplating a relocation or expansion or are consolidating operations, you will inevitably be evaluating your existing locations to determine if they are productive business partners. How do you decide which economic development agencies are naughty or nice?

Directory 2016
A version of this story originally appeared in the Winter 2016 "Real Estate Monitor Newsletter", published by BDO

The new year is right around the corner, and corporate C-Suites are abuzz as executives decide how to deploy capital during the 2016–17 cycle. With competition for investment growing fiercer than ever, executives and their consultants have the dual luxuries of mobility and choice. So if you’re contemplating a relocation or expansion or are consolidating operations, you will inevitably be evaluating your existing locations to determine if they are productive business partners.

How do you decide which economic development agencies are naughty or nice? We’ve made a list and checked it twice — find out which development practices are helpful and which are worthy of a lump of coal.

Nice List

Locations meeting these rules just might find a few shiny new companies under the tree this year:

  • Feel the love: Though it might have been repeated more often than the chorus of “Jingle Bell Rock,” this rule is time-tested and critical: the best economic development agencies treat their existing business community as a valued partner. They don’t disappear after the ribbon cutting ceremony. Smart economic developers stick around, answer questions, and are willing to help businesses succeed. A business that feels valued and understood rewards its community with growth, new leads, strong references, and a warm holiday glow that lasts all year long.
  • Play with the all-star team: Stronger teams are simply better suited to win projects and be active partners after the deal is won. They get and stay organized, know their product through and through, and work overtime to provide information and answers to key stakeholders quickly. They’ll be on the nice list and their community will land on the short list among companies looking for a new home.
  • Boring is the new glamorous: Businesses thrive on certainty. In this context, boring isn’t a drag; keeping things predictable is good for planning purposes. Smart businesses want to look years ahead and be reasonably certain of tax rates, assessment methods, incentive programs, and other key financial and operational considerations. So go ahead and look for a community that is the right kind of boring!
  • Find Santa’s helpers: In government matters, red tape is the equivalent of fruitcake on the holiday dessert table. Red tape may be unavoidable, but with the right strategy, it can be managed and minimized when helping companies apply for incentives and permits. Find an economic development partner who knows the system and acts with a sense of urgency.
  • Know who needs you: Like Hermey the Misfit Elf turned dentist, the best agencies play to their strengths. Rather than trying to be all things to all companies or all industries, they target the best fit for their community’s demographics, labor force, and business environment. It’s worth investing in location analysis to cut through the blizzard of sales and marketing to find your match.
Naughty List

Locations that treat companies like this could wake up with coal in their stockings:

  • Run from a Scrooge: In recent years, several states and cities have broken their commitments for incentives, even while the businesses were meeting their commitments. Locations with a history of reneging on their incentives deals risk being seen as the misfit toys of the site selection industry. Trust is hard to regain, but bad memories linger.
  • Watch out for smoke and mirrors: Don’t expect to feel the holiday magic if your state stuffs its incentives packages full of complex tax credits, training services, and other benefits your company may never use or need. Companies want tangible benefits they can use, and the most desirable incentives packages maximize cash or cash-equivalent savings in the early years when expenses are high.
  • Value efficiency: Some economic development programs operate more like the DMV rather than Santa’s lean factory line, with complex applications, long multilayered review and approval processes, and staff who fail to communicate. These inefficiencies will blow your deadlines, costing time and money. Look for a stronger partner in your region or hop the next sleigh out of town.
  • Don’t wait to be called on: In today’s economy, each and every asset can be monetized, and businesses are more mobile and more aware of their worth than ever. If you’re committed to your community but want to explore savings opportunities, you might need to make the first move. Not every agency excels at business retention and, in fact, most prefer to chase new businesses like kids looking for shiny new toys.
  • Beware of taxation without communication: When evaluating locations, companies might be wondering about the return on the investment of a particular location. How are the roads, schools, and other assets? States and jurisdictions need to understand their value proposition and actively communicate it. If a community can’t show companies value for their taxes paid, it needs get to work on those metrics.
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