The Coronavirus Recession is forcing even the most well-capitalized companies to deliver cost savings across their supply chains. To weather the crisis, companies must reassess opportunities to source products and services domestically, reduce exposure to regional labor market disruptions, navigate ongoing rent, utilities, debt service obligations, and redeploy their workforces across their physical and digital facilities. The importance of a sound corporate location strategy has never been more apparent, and the need for collaboration with the public sector never more pressing.
The crisis at hand presents unique challenges to company supply chains and economic development organizations, challenges that affect the fiscal positions of both companies and local authorities in then incentive negotiation process. Just as companies must manage risks across their supply chains, cities and states facing shortfalls in sales and income tax collections are reassessing their approaches to the incentive negotiation, with a new need to realize savings as well as to identify opportunities for growth.
Successful location and supply chain analysts in the time of the Coronavirus Recession will be the ones that can leverage creative funding opportunities to realize cost savings for both the public and private sectors.
Opportunity for Companies
The current crisis will only wet the appetite for job-creating and -retaining projects. Experts predict unemployment could reach as high as 12% by summer, with a long recovery anticipated as testing regimes are implemented and states and cities reopen for commerce. Companies that can weather the storm, either on reserves or through loans through assistance from the SBA’s Paycheck Protection or Economic Injury Disaster Loan programs, or through a variety of emergency state grant and loan programs, will be greeted with new interest from state and local economic development officials, and with lender and grant-making agencies searching for investment opportunities, and interest rates at historic lows, the time for project success will be ripe, whether that be looking into ways to make working safer for these companies (such as those listed by Vantiq) or for launching whole new ventures.
Opportunity for Communities
Deals that deliver value during the Coronavirus Recession and recovery will begin with understanding the evolving needs of host communities. During the last recession in 2007-2009, local governments were forced to make cuts to important public services, including cuts to community and economic development spending necessary for attracting and retaining jobs. Facing significant shortfalls in sales, income tax, and state aid, municipal, county, and state government budgets will tighten across the country. This will constrain the work of public and nonprofit economic development organizations tasked with facilitating investment in their regions, including the use of tax relief, business grants, lending programs, land donations, utility assistance, tax credit financing, and other statutory and discretionary programs which at play in established location projects. Revenue constraints will affect location projects as well as structure the landscape of deal negotiation during the recovery.
Tight government budgets present new opportunities for more dynamic site selection practices and value opportunities for companies. Incentive negotiations may be put on hold, but so too will be planned investments in roads, utilities, broadband, and other critical infrastructure that both clients and communities rely on to maintain their competitive edge. City, county, and state capacities to invest in public services directly, as well as to participate in federal matching grant programs, will be strained just as need for new investment is highest, creating a new need to collaborate with the private sector to secure funding, demonstrate impact, and access public and philanthropic funds necessary to make improvements needed for a quick recovery. Site selection practices that leverage the emerging need for public-private collaboration can build successful partnerships both now and through the recovery.
Opportunity for Partnership
New funding sources softening the landing for economic development entities across the country and the location analyst’s new tool for success. The Economic Development Administration, the Department of Housing and Urban Development, and the Department of Agriculture have all been provided new sources of funds for infrastructure, business development, and employment retention for government and nonprofit partners for the specific purpose of stimulating private sector investment. There’s also been a resurgence interest in philanthropic support for business grants, lending, and entrepreneurship-focused initiatives that can strengthen the efforts of local economic development partners. Banks, foundations, and private donors interest in these emergent needs can be harnessed to realize new value for communities through grants, public-private, and private-nonprofit partnerships, creating space for company negotiations to continue moving forward.
Successful location analysts understand that now, more than ever, the public and private sectors need each other. Location strategies during the time of coronavirus must embrace both demand for supply chain optimization from clients and demand for high-value investment partnerships from the public sector organizations they work with. Host communities still need to attract and retain jobs, and are seeking creative ways to continue to carry out their missions.
Partnerships around new public and nonprofit grant funding sources can create win-wins for clients and communities, becoming a new tool in the site selection tool belt and making assembling a diverse and versatile team essential for modern corporate supply chain optimization. During the Coronavirus Recession, the strongest teams are the ones that can deliver these wins for all parties involved.
Members of the Location Strategies Practice Group of Evergreen Advisors focuses on assisting private and public companies with short and long term location strategy, supply chain optimization, site selection and in the strategy, structuring and negotiation of various economic incentives (i.e. tax credits, abatements, grants, loans, etc.) with state and local governments, agencies, authorities, public/private programs and/or quasi-government entities, as enticements for capital investment and job creation
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About Evergreen Advisors
Evergreen Advisors is a middle-market investment bank and corporate advisory firm focused on servicing organizations throughout their financial lifecycles to drive successful outcomes. Serving the Mid-Atlantic region including Maryland, Washington D.C., Virginia, and Pennsylvania, Evergreen Advisors, LLC was formed in 2001 to provide innovative and strategic solutions to meet our clients’ evolving business needs.