Biotechnology has been and remains one of the most sought-after industries in economic development. The huge opportunities, dynamic growth, and high talent pool skill sets generated by the industry make biotech companies very attractive candidate companies in the eyes of state and local economic development officials. Therefore, it's no surprise that biotech companies consistently rank at the top of most economic development departments' target wish lists for new projects.
So what are biotech companies looking for in a location? Traditionally in this industry, brainpower was the key driver in biotech site selection decisions. Locations that offered the right mix of universities, incubators, and highly skilled labor were the only possible locations that biotechs would or could consider for their relocation needs. To this day, this seminal requirement has not changed.
However, globalization has created ever-growing clusters of talent-rich locations throughout the United States and around the world. Simply put, the portability of talent means that biotechnology firms are no longer bound to a location merely because of geography. Such newfound geographic flexibility is allowing biotech companies to seek out new locations that have the optimal blend of skills sets in addition to other important site selection factors such as quality of life, cost-effectiveness, and business incentives.
As site selection and incentives practitioners, we would be the first to say that business incentives alone can never turn a bad location decision into a good one. However, effective and relevant business incentives can and do make a good location great. Further, they can secure a company for the long haul by allowing a firm to achieve a measure of cost certainty. This advantage comes at a time when biotechnology firms are increasingly being pressed by their equity partners (both public and private) to show fiscal accountability and profitability. Where they locate is increasingly seen as a decision that has profou
Let's detail some of the interesting incentives that biotech firms are increasingly availing themselves of:
Massachusetts historically has had a very strong biotech community on the basis of its world-class research universities and the work force that has subsequently developed around them. However, the Bay State has always been seen as a place where it's very costly to do business. Thus, in order to obtain continued access to those workers and their intellectual capital, biotech firms are increasingly working with economic development officials and consultants to find ways of mitigating the costs through a host of old and new incentive programs.
Several programs in particular have become very useful to the growth and retention of both small and large biotech projects. Regional infrastructure grants, which are large-scale awards of up to $2 million, are designed to assist in revitalizing the infrastructure of a community to enhance its ability to meet high-tech company needs. The economic development incentive program is designed to attract and retain businesses in specific Economic Target Areas (ETAs) by means of a 5 percent Economic Opportunity Area (EOA) investment tax credit. Eligible firms include a business that is expanding its existing operations, relocating its operations, or building new facilities and creating permanent new jobs within an ETA.
Municipal Tax Incentives
Businesses in ETAs are also entitled to municipal tax incentives, including special tax assessments and tax increment financing, which is a 5- to 20-year property tax exemption based on the increased value of the project property due to new construction or significant improvements. Recently, through special legislation, the EOA tax credit was allowed to be transferred or monetized for large-scale bio pharma investments, thus making this a very attractive tool for new investments in the Bay State.
Another program specifically developed for biotechnology companies, regardless of proximity to an ETA, is the Job Creation Incentive Payment. This program offers biotechnology companies that create 10 or more eligible jobs in Massachusetts during a single calendar year an incentive payment equal to 50 percent of the eligible jobs' salaries multiplied by the applicable Massachusetts income tax rate of the newly hired persons.
Income Tax Credits
North Carolina is fast becoming a desired location for biotechnology and other high-tech pursuits, and it has strong track record of providing incentives. The success of the Research Triangle Park and the state's many national universities are fueling growth of the skilled labor needed in the field at a substantial cost discount compared to many Northeast and West Coast locations.
To maintain this momentum, and fight off potential job loss to other aggressive Southeast states, North Carolina has renewed and created several strong programs. The William S. Lee Income Tax Credits have recently been renewed and their compliance requirements vastly streamlined to encourage greater participation. The Job Development Investment Grant is a discretionary incentive providing annual grants to new and expanding business measured against a percentage of withholding taxes paid by new employees. Further, the state's discretionary grant fund - the One North Carolina Fund - allows the governor to distribute cash grants on an as-needed basis to win strategically important projects that are also looking at another state or country.
The Research Triangle Park also has very aggressive property tax and infrastructure incentives. Essentially a high powered regional economic development entity, the RTP has the ability to leverage North Carolina's usual state incentives as well as to create customized property tax solutions, assist in providing equity financing for high-tech businesses, and to utilize taxable and tax-exempt industrial revenue bonds to finance land, building, and equipment purchases.