Intelligent Incentives
13 Nov, 2012
By Wen Sun and Sarah Gutschow
To make an ultimate site selection decision, businesses usually have to go through a multi-step screening process and evaluate large numbers of candidate communities on a series of critical factors based on a business’s operational needs. These include economic base, community image, workforce quality, infrastructure and utilities, quality of life, business climate, etc. In particular, to get a good sense of the business climate of the candidate communities, growing companies explore and compare various business incentive programs provided by the communities that might address their specific business needs. This is a very time consuming and labor intensive process during which key information can be easily neglected. Luckily, we live in the information technology era that allows us to gather most of the information we need in a timely manner by conducting Internet research.
There are many online sources that provide critical business information to assist in your search. These information centers allow site selectors to search and compare the incentive programs offered by the potential communities based on specific business needs.
One online resource is the State Business Finance and Incentives Resource Center (SBFIRC), a national database produced and maintained by the Council for Community and Economic Research (C2ER). C2ER promotes excellence in community and economic research by working to improve data availability, enhance data quality, and foster learning about regional economic analytic methods. The organization’s mission is realized through professional networks, training, advocacy, research, and delivering innovative products and services. C2ER is an affiliate association managed by the Center for Regional Economic Competitiveness (CREC).
With regularly updated information on almost 2,000 incentive programs from all 50 states, the resource center provides economic developers, business development finance professionals, and economic researchers a cost-effective, extensive database for state-to-state comparisons.
The resource center can be used to search state incentive programs based on a broad variety of search criteria such as state, incentive category, type of financing, geographic focus and business needs. The main categories of incentives are direct or indirect business financing, direct or indirect community financing and tax incentives. The different types of incentives are based on the type of financing provided by the incentive, such as grants, loans, bonds, tax credits or exemptions, or equity investments. The database can also be used to search for incentives that have a geographic focus, such as enterprise zone programs, technology zone programs, development or redevelopment zone programs, or other specific local regions.
Finally, users can use the database to search for incentive programs tailored to business needs such as capital access or formation, facility or site location, technology and product development, marketing and sales assistance, product and process improvement, and workforce preparation or development.
The site selection process can be an exciting time for your company. Cut down on the amount of research by using online databases that allow you to compare your options when it comes to incentive programs that meet your specific business requirements.
Problem- and Solution Scenarios
*Workforce
Businesses often cite the availability of a skilled, well-trained workforce as the most important factor determining their choice of site location. Investing in “human capital” is generally regarded as an effective and prudent investment of economic development funding. This is because the knowledge and skills obtained by workers from training programs will remain an asset to the local economy even if the company that received the incentive closes down or leaves the area. Therefore, almost all states offer workforce incentives of some kind, including incentives for recruitment or screening assistance and new or incumbent worker training. State workforce incentives usually take the form of training or retraining assistance, rather than recruitment or screening assistance. Some prominent examples of state workforce incentives include Louisiana’s LED FastStart Workforce Training Program, New Jersey’s Customized Training Grants and Arkansas’s Existing Workforce Training Program (EWTP).
To pull together workforce training programs offered by a specific state, the user can simply choose the state he/she is looking for, and pick “workforce development and preparation” from the “Business Needs” menu.
The user can examine the details of each individual program, such as program providers, eligibility requirements and the general program rules. The Existing Workforce Training Program provides financial assistance to Arkansas’s businesses for upgrading the skills of their existing workforce. The purpose of the training is to provide existing, full-time employees with the new skills necessary to enhance their productivity and performance. More specifically, skills upgrade training helps a company and its employees to adapt to new or altered technologies and acquire the new skills needed to remain competitive and economically viable. Skills upgrade training is usually conducted in a classroom environment at a work site or an educational institution. The EWTP is generally used to cover classroom instruction, but training other than traditional classroom training may be considered for reimbursement as well. Companies that use their own employees or company-paid consultants to deliver classroom training to their employees may be eligible to receive an Arkansas income tax credit.
Customized workforce training programs such as Arkansas’s EWTP are some of the most frequently searched for incentive programs in the SBFIRC database.
*Manufacturing focused programs
In today’s economy, one of the key factors manufacturers considering when choosing a location is how a community’s incentive programs can assist them in developing a leaner and more innovative production process. In fact, almost every state offers various incentive packages that speak to manufacturers’ specific needs, such as manufacturing machinery and equipment use and sales tax exemptions/abatements, research and development tax credits or grants, training programs designed for manufacturing workers, etc. However, a common issue many manufacturing site seekers encounter when they do their online research is how to gather information on all these manufacturing programs in one place without missing any key information. The C2ER incentive database can serve as a starting point to solve this issue. By conducting a quick search, users are able to get an overview of manufacturing related programs offered by specific states.
For instance, if a site seeker wants to know what manufacturing related incentives North Carolina offers, he/she can simply choose North Carolina from the “State” drop-down menu and type “manufacturing” as a key word in the quick search box. By doing so, any North Carolina programs that contains “manufacturing” in any of the data fields will show up in the search results, which allows users to examine each individual program.
*Corporate tax incentives
Corporate tax incentives are the most commonly used economic development tools. Each state offers various types of corporate tax incentives such as corporate income tax credits, property tax incentives, sales tax incentives, tax deferrals, etc. These corporate tax incentives also provide benefits for businesses involved in a wide range of industry activities. Some of the widely used examples include new job creation income tax credits, inventory property tax credits, research and development tax credits, enterprise zones, etc. Because it can be time consuming to examine the numerous tax incentives and determine which ones actually fit a company’s needs, using the advanced search function in this incentive database, can save a significant amount of time on the initial screening of programs and allow site seekers to directly focus on the programs that most interest them.
For example, say a site seeker wants to find out what tax credits his/her business might qualify for in State A and State B. The user clicks on “Advanced Search” page, chooses the state of interest to them and selects “tax” from the “Program Category” menu, then chooses “Tax credit” from the “Program Type” menu. Following the same process, the user can conduct a quick comparison on the the tax credits offered by these two states.
The site selection process can be an exciting time for your company. Cut down on the amount of research by using online databases that allow you to compare your options when it comes to incentive programs that meet your specific business requirements.
Wen Sun, research manager at the Center for Regional Economic Competitiveness, manages the State Business Finance and Incentives Resource Center. Sarah Gutschow, research analyst at the Center for Regional Economic Competitiveness, serves as the subject matter expert on the incentives related topic. For complete details about the resource center, visit www.stateincentives.org or www.c2er.org.
