industrial development usually craft
incentive packages. After identifying
potential communities and conducting
a comprehensive cost-benefit analysis,
contact these offices to find out
what incentives they may offer. An
organization's home state may be the first
place to try, especially if an organization
is thinking about leaving for a bordering
state. Neighboring states often compete
aggressively to retain jobs, income taxes
and investment dollars.
Businesses can increase their
competitive advantage by pitting one
state against another. Some companies
even tap multiple states for incentives
simultaneously. Don't overdo it, however.
While some give and take is expected, no
state or community wants to be pressured
into unfair inducements.
One caveat: Just because a state or
community makes an offer doesn't mean
it's legitimate. The landscape is littered
with what's commonly known as a "happy
letter" one that says officials are happy
to provide various incentives with no
guarantee that they'll follow through on
to be realistic with one another and be
held accountable for promises made.
Also beware of overly optimistic
financial projections. Many incentives
are paid out over a period of years and
have stringent application and eligibility
requirements. When the time comes for
businesses to claim the incentives they
negotiated, they may find the process
more difficult than they had anticipated.
A growing number of states and commu-
nities have begun exploring how best to
provide incentives responsibly so no one
loses in the end.
Finally, an organization that is
mulling a move or expansion needs to
be discreet. Economic incentives often
attract the ire of critics who maintain
they waste scarce public dollars and
spur unfair competition by helping
some companies and industries but not
others. Keeping plans out of the public
eye as long as possible to avoid losing
bargaining power is critical. It can often
take six to nine months to negotiate an
optimal package. When owners make
their final decisions, they can announce
them to shareholders, employees and
the media.
ing the options, as well as the associated
tax implications, requires a great deal
of time and effort. One state may offer
cash-oriented incentives, including
up-front funding for facility construction
and equipment purchases, while another
dangles corporate income tax credits and
employee training reimbursements.
A business can get the most favorable
offer in the least amount of time by work-
ing with an experienced adviser who has
analyzed incentives for other companies,
structured large and small packages, and
worked for a state economic develop-
ment organization. An adviser will also
conduct a detailed cost-benefit analysis
that will help owners make informed
decisions.
Incentives have skyrocketed in recent
years and show no signs of abating.
Companies that consider these offers
to fuel growth will gain an important
competitive advantage.
to attract companies and jobs. Specifics and eligibility requirements vary widely.
Here are the most common examples: