At Biggins Lacy Shapiro & Company (BLS & Co.), we are asked frequently to provide a preliminary valuation of potential incentives benefits for client projects. When we possess sufficient facts (or reliable assumptions) about a project such as the number of new jobs, total payroll, levels of capital investment, projected state tax liability and the timeline, we are able to assess whether or not a project would be eligible for incentives and if so, the approximate value of those benefits.
However, we know that there are many situations when a project is insufficiently conceptualized to permit such an evaluation, yet a company still might wish to comprehend if incentives can play a role in their ultimate location decision. It is for such circumstances that we have crafted this brief questionnaire. It can alert you to the likelihood that your project may be able to benefit from state and local incentives and thus help you keep incentives in the proper context as your plans evolve.
This tool is not intended to replace a wide-angled and rigorous assessment of location-specific incentives programs (and benefits) nor a comprehensive comparative cost analysis of alternate destinations, both of which we would urge be performed on behalf of any project that has attained a level of certainty regarding those variables that will drive incentives eligibility and value.
OK, with such caveats in mind, let’s begin your review:
Is there at least one genuine, viable out-of-jurisdiction option?
If there is a location option in another municipality or county, it's possible local incentives may be available.
If there is a location option in another state, it's possible that more lucrative state incentives may be available.
How many full-time, permanent new jobs will be created? (Note: “new” doesn't mean new to the company necessarily. Existing jobs that may relocate from the current location to the new jurisdiction also factor into job creation in most situations).
If ten or more new jobs will be created, it's possible incentives will come into play.
If 25 or more jobs are to be created, it's likely.
(See note below in “Other” list on existing/retained jobs)
Will these new jobs be well-paid and be covered by health insurance?
If the jobs pay at least 125% of the prevailing wage in a given market and offer medical benefits, it's possible incentives will be awarded.
If the jobs pay 50% or more above local wage levels, with benefits, it's likely.
What is the planned new investment, including land, building, tenant build-out, machinery and equipment, FFE, IT systems, etc. (keeping in mind that for some incentive programs the NPV of your lease is an eligible investment)?
If there will be at least $1 million of new investment, it's possible incentives will come into play.
If at least $5 million of new investment is planned, it’s likely.
The answers to still other questions may serve as further indicators that a project may be eligible for incentives:
Are there large numbers of existing jobs that may be preserved in the present jurisdiction? If such jobs are shown to be at risk, some states will incentivize their retention, particularly if the same project would result in the creation of additional jobs and investment.
Is new construction or substantial build-out of an existing facility involved?
Does the project involve a manufacturing operation, a headquarters office, or an R&D facility?
Does the project have trophy value; does it involve a highly-regarded and well-known company?
Would employee wages be unusually high?
Are they considering a brownfield or disadvantaged location for a new investment?
What modes of transportation are being used/considered? (In some cases there may be incentives for additive use of rail and/or seaports depending on volumes.)
No project will score on all of these factors; however a project that meets many such conditions is more likely than not to be eligible for incentives. Of course, a full-featured review of potential incentives will go far beyond the issue of eligibility to assess the level of benefits that might be achieved and the “usability” of such benefits (for example, state tax credits are generally of little or no value unless the company would have sufficient tax liability or unless the credits are refundable for cash or can be sold to another party). Such an incentives assessment would weigh the expected level of benefit against the contractual commitments that must be made and also examine the likely timeline associated with the approval processes, and the costs that might be expected to secure the benefits.
If you believe your next project has the potential to attract incentives, please reach out to discuss how such preliminary due diligence can be integrated into your next location assignment.
Tracey Hyatt Bosman is a Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal location and securing incentives to support new ventures.