Authored By: Jacob Di Mattia
Any capital expenditure within your current facility network, expansion of new facilities, or network realignment, can bring significant economic value to a community, but companies should not assume the incentives offered by a state or local government are the best available. Economic incentives can have a meaningful impact on the overall cost of a project, making incentive analysis and negotiation an important part of the site selection process.
Understand What Your Project Brings to the Community
Before entering an incentives negotiation, understand the economic impact your project is expected to create. Factors such as capital investment, job creation, wages, property tax revenue, and long-term economic impact, as well as other project-specific facts, can strengthen your position.
This information also helps state and local economic development agencies understand why your project is valuable and what may be required to secure it.
Identify Potential Economic Incentives
Economic incentives vary based on the location and specifics of a project, including the level of investment, number and quality of jobs, wages, industry, and other factors. These may include tax credits, property tax abatements, grants, workforce incentives, infrastructure assistance, tax increment financing, other state and local incentives, and special case economic incentives.
The key is understanding what may be possible and negotiating the strongest incentive package based on the full scope of the project. Factors such as investment, jobs, wages, industry, location, and overall economic impact can all influence the incentives a company may be able to negotiate.
Identifying and negotiating incentives early and tying them to site or location-specific needs can also give companies greater leverage. Companies that evaluate incentives across multiple locations and tie incentives to specific needs before making a site decision are often better positioned to negotiate a stronger, more robust overall package.
Compare Incentive Packages
The largest incentive package is not necessarily the best one. The best incentive package is the one that can be fully utilized and adds the largest value to the bottom line. Companies should evaluate the total cost versus incentive benefit of each location, including the value, timing, eligibility requirements, and conditions attached to each incentive.
A thorough economic incentive analysis can help compare locations on an apples-to-apples basis and determine how incentives affect the project’s overall cost and return.
Negotiate Based on the Full Project
Successful incentive negotiations are about more than asking for the largest possible incentive. Companies should be prepared to demonstrate the value of the investment while understanding what state and local governments need in return. This may include commitments related to capital investment, job creation, payroll, project timelines, or other economic development goals. Having a clear understanding of these requirements can help companies negotiate an incentive package that is both competitive and achievable.
Start Early
Economic incentives should be evaluated before a final site decision is made. Bringing incentives into the site selection process early gives companies more leverage, helps address site or location-specific needs, and helps identify the true cost of each potential site.
Ready to Evaluate Your Options?
Evergreen Advisors helps companies identify, evaluate, and negotiate economic incentives as part of the broader site selection and facility investment process. Contact our Location Strategies team to discuss your project and determine which incentives may be available to support your investment.