How Some Locations are Making Their Business Case for Incentives
Incentives are only part of an area’s economic development strategy and they are a necessity for companies that are struggling to compete in challenging economic times. See how Columbus, Ohio, Alabama and New York city have all recently successfully used incentives to promote economic growth.
David J. Robinson, The Montrose Group, LLC (Q1 / Winter 2013)
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State and local incentives helped secure the $600 million Airbus SAS final assembly plant in Mobile.(Shown here: Airbus Chief Executive Fabrice Bregier and Alabama Gov. Robert Bentley)
Reshaping the South
Alabama is a global manufacturing powerhouse, and economic development incentives have been key to making that happen. Alabama not only has attracted three auto assembly plants but also recently landed an Airbus facility that will produce thousands of jobs. While Alabama has half the population of Ohio, the two states have the same number of auto assembly plants. Just consider the factors that shaped Airbus’ decision when comparing Alabama to Ohio. Ohio is home to GE Aviation, the U.S. Air Force Research Lab, NASA Glenn Research Center, and NetJets. Yet Alabama landed a high-profile global aviation project.
How? Incentives and a strong rebirth of manufacturing in Alabama helped it to land the project.
The Alabama deal did not happen because of the weather. State and local incentives totaling nearly $158.5 million helped secure the $600 million Airbus SAS final assembly plant in Mobile. Local incentives will total $33.6 million between the city, county, and airport for a project that will create 1,000 direct jobs, but have an overall economic impact estimated to be at $162 million over three years. The state and local governments will have their return on investment within three years and the region will benefit for decades from this addition to the global aviation industry. Moreover, Alabama has translated the success of three global automakers into a manufacturing success story for the state. If the state can build cars, it can surely build airplanes.
The Midwest and South are not the only places to use economic development incentives to create wealth. Incentives have been an essential part of the revival strategy of struggling downtowns throughout the United States. Take Times Square — the iconic “capital” of New York City.
New York City has a story to tell when it comes to addressing crime and using economic development incentives to breathe life back into this area. The city successfully attacked the crime and blight issue in Times Square. However, New York officials recognized safety was not enough. They needed the high-paying jobs the region is known for to locate in the area to create a long-term economic success. Enter economic development incentives: New York City used a range of tax incentives to recruit major companies to Times Square. Morgan Stanley received a $40 million abatement; Disney received a $25 million low-interest loan; and Ernst & Young obtained a $20 million incentive package — and there were more.
Businesses are no longer avoiding Times Square. The economic development strategy to save Times Square is an impressive American success story. A recent economic impact study indicated Times Square represents only 0.1 percent of New York City’s land area, but 5 percent of New York City’s jobs, and the district generates 10 percent of the city’s economic output. Times Square is host to 200,000 jobs, with approximately 70 percent of them in finance and the creative industries. Indirect economic impact of Times Square adds an additional 190,000 jobs throughout New York City, and data from even a couple years ago estimates the neighborhood contributes $1.1 billion in annual taxes to New York City, and $1.3 billion in annual taxes to New York State.
Key to Competitiveness
Winning in a global economy is hard work, and $80 billion in economic development incentives is a small price to pay for global economic competitiveness. States and cities have no choice but to use economic development incentives to retain existing companies, recruit new global investment, and revitalize once thriving but now struggling neighborhoods. To not use these economic development incentives would be a sign of surrender in challenging economic times.