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Area Development - Site Selection, Facility Planning and Workforce Development

Ranked #4 - State and Local Incentives

Apr/May 07
The findings should not be surprising since corporate decision-makers have become increasingly focused on finding ways to significantly reduce costs and maximize return on investments. Most corporate executives that have experience implementing large investment projects are likely to have pursued state and local support and understand the virtues of such assistance. If they have not pursued incentives for investment projects, they are likely to have potential opportunities presented to them at some point by economic development agencies, consultants, or, frequently, by their peers.

Using one example to demonstrate how incentives have grown in importance as a location factor, Olympus America, on its corporate website, cited "the ability to find the best economic incentives" as one of four key decision factors in recently relocating its corporate headquarters from Long Island, New York, to the Lehigh Valley, Pennsylvania. This is quite telling when you consider the myriad factors that go into making a complex headquarters location decision such as this.

Let's look at the reasons why incentives have become increasingly transparent and how this has affected the site selection process in practice.

Incentives are all around us.
In recent years, companies have become much more proactive about seeking and securing incentives as part of the facilities planning process. This focus is driven at least in part by the desire to reduce the significant costs typically associated with constructing, expanding, or repositioning operations, not to mention the operational and cultural adjustments that often accompany such moves. Clients are asking about incentive opportunities at the earliest stages of the site selection process and remaining engaged during the incentives administration term after a decision is made. Corporate real estate and financial executives are quick to point out that incentives are an important factor in the site selection process.

"When I am presented with a project involving hundreds of jobs or millions in capital, my first two phone calls are to my broker and to [my consultant's] location incentives group to start the ball rolling on both fronts. For both purposes, getting an early start is critical to achieving an optimal outcome," notes a corporate real estate VP at a major healthcare technology company who requested anonymity. "Getting [my consultant] involved early allows him to get us the best information and utilize his inside knowledge of the incentives opportunities to best position our project and maximize results."

The fact that corporate decision-makers are becoming more diligent about pursuing incentives is driven in part by the amount of information that is available about incentive programs and how they are utilized to attract and retain businesses.

How have corporate executives become so knowledgeable about incentives? The answer is that there are a growing number of sources that provide information regarding the types of assistance available and how to go about obtaining them. As mentioned earlier, these sources included state and local economic development professionals, site location consultants, the media, as well as fellow industry executives. Each group has its own objective in disseminating this information. However, at the end of the day, the result is generally the same - incentives are an important part of the site selection process.

• Economic Development Professionals: State and local economic developers are challenged with the goal of creating and retaining employment in their respective regions. In order to do so, they must articulate all of the positive attributes of those areas. It is well-documented in site selection circles that it can be very difficult to make an area with high labor costs or poor accessibility to highways appear more attractive than it really is. However, economic development professionals will use available incentive programs as the "tools" that will help their locations to measure up with other locations in competitive situations. Economic developers are typically very effective in demonstrating the value and flexibility of state and local incentive programs and that their region offers a pro-business climate. Many of the best economic development professionals regularly reach out to corporate end-users and their consultants in order to extol the virtues of their region and, in particular, their incentive programs.

• Site Location Consultants: Consultants can also be very effective in disseminating information about incentive programs to corporate decision-makers. Whether they are working an active project or trying to develop a relationship with a potential client, location consultants will make it clear that there are many opportunities to secure cost savings through both discretionary and as-of-right incentive programs. Perhaps the greatest value that consultants offer is the ability not only to identify incentive opportunities within the site selection process, but also to help end-users understand how to optimize the benefits and implement an incentives program.

• Media Outlets: It is almost impossible to go a few weeks without reading an article in a local newspaper or business journal that a major corporation has decided to relocate its operations from one state to another. In many instances, those articles will have a paragraph alluding to the fact that state and local incentives were awarded to induce the relocation. For large projects, such as the Dell project in North Carolina, major corporate relocation incentives deals will be front-page news because of the size of the public investment being made. These types of major deals put incentives on everyone's radar screen even if most other initiatives are much more modest.

• Peer Groups: Quite often the financial and real estate executives that are responsible for leading corporate site selection efforts will network within the same professional circles. Participating within these professional networks allows executives to discuss their work and share ideas about how to more effectively carry out their responsibilities. Decision-makers are likely to discuss their successes and challenges in implementing relocation and expansion projects, and oftentimes incentives will be a topic of discussion.

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