Creating a Win-Win Situation: Incentives Opportunities for Auto Companies in Transition
Larry Kramer, Incentis Group (Automotive Site Guide 2007)
(page 2 of 2)
How Should A Company Present Its Case?
specifically, how does an automotive manufacturer or supplier convince
a state or community that economic incentives will play a vital role in
enhancing the competitiveness and long-term viability of its operations?
it must begin by demonstrating the global competitive realities of the
automotive industry. Statistics pertaining to the out-migration of
automotive plants and jobs are useful. But specific examples of the
company's own offshore relocation of operations or that of its
competitors drive the point home and show that the company is aware of
its location options.
Second, public officials can only justify
the use of incentives if there is a demonstrated benefit to the local
or state economy. The direct jobs retained by a challenged facility
comprise only part of such benefit. The true extent of the benefits to
the economy goes well beyond the four walls of the plant. The economic
impacts of automotive manufacturing operations and their suppliers are
among the highest in the U.S. economy. Each automotive job typically
creates between 2.5 and 6 other jobs within the economy. Likewise, the
higher compensation of automotive employees drives additional indirect
and induced earnings within the state or community. Automotive
operations are also responsible for extensive secondary economic output
in terms of real dollars. Presenting these impacts as well as the
long-term positive fiscal effects upon the public treasury shows that
there are mutual benefits to be shared by the company and community.
companies should be more active in seeking incentive package structures
that provide immediate benefit to the community or state. Since new
capital investment typically generates incremental tax revenues, even
when job levels remain the same or are reduced, incentive packages can
be structured to provide benefits to the company as well as to the
public treasury. As an example, incentive structures can allow for
added benefits to entities such as school districts while providing
meaningful value to the company's operations through such mechanisms as
payment-in-lieu-of taxes (PILOTs) or by integrating state
school-funding formulas into the incentive structure. These tools were
used in the automotive supplier example presented above.
competition that has reduced jobs and earnings in many U.S.
jurisdictions has impacted a far wider range of industries than
automotive. State and local economic development officials,
legislators, and administrators must continue to look at the use of
economic development tools that address the retention needs of the
highly valuable automotive industry along with corporations within all
competitive industries well in advance of events that necessitate
corporate decisions resulting in unfavorable jobs consequences. And
companies, for their part, should be more aware of incentives
opportunities that may aid them in retaining operations and their
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