Optimizing business incentives: preparation and creativity are the keys.

• Author: Lemmon, Helen

Competition among state and local governments has resulted in a daunting array of incentives, including cash grants, tax credits and abatements, infrastructure assistance, land grants, utility rate reductions, and streamlined permitting. Each program has its own rules and is tied to specific government priorities. The companies that are most successful in obtaining incentives combine thorough research with creative thinking about how their plans align with the relevant governmental priorities. This strategic approach allows these companies to negotiate enhanced incentives for their projects. These companies then follow through with the proper compliance procedures to ensure full realization of the benefits of these incentives.

Three questions can help focus your thinking about how a strategic approach to business incentives can support your company's investment in new or expanded facilities.

* How do you prepare to discuss incentives with state and local officials?

* How will you know if an incentives offer is "fair"?

* How will you make sure that your company realizes the benefits of multi-year incentives agreements?

Preparing for Incentives Negotiations

At the outset, it is critical to assess the project timeline and to control public dissemination of information about the project. If economic development officials know that a company's project will move forward with or without the incentives, they will be much less likely to grant discretionary incentives. Many jurisdictions require that the company seeking incentives certify that its project would not move forward "but for" the granting of incentives. Problematic information about the status of a project can leak out through discussions with customers or suppliers, stories in the employee newsletter, building permit applications, or "moving dirt" at the project site. It is critical to take affirmative steps to prevent the premature disclosure of project information prior to and during incentives negotiations.

Information about state and local incentives is available through a variety of sources, including legal databases, government websites, and informal discussions with officials. Another important aspect of preparation for incentives negotiations is to gain an understanding of the state and local political climate and legislative budget cycle. For example, the election of a new mayor can change the availability of the city's property tax abatement. Some states make it a priority to attract specific industries or specific types of projects (e.g., computer software, alternative energy, and manufacturing). Also, funding for certain grants may be limited of unavailable as the...