Securing the right financial incentives is often the most important factor in a business’ decision to build, expand, or even relocate. However, most C-suite executives are too focused on the day-to-day operations of their companies to spend the time necessary to develop and execute a strategy to acquire the funding that serves as the fuel to get most construction projects moving.
Knowing where and how to look for incentives can be a complex process. It makes sense to get the assistance of an experienced economic development partner, one who knows how and where to look for grants, tax credits, and the other important incentives that can pump life into a project that otherwise might run out of gas. Industry data shows that when companies go it alone, they often leave 15-25% of the value of a construction project on the table.
The right consultants understand the incentives companies need to close the funding gap that many times is the reason construction projects stall. Successful firms have relationships with state and municipal agencies and officials whose jobs are to support economic development. They also know how to coordinate with other economic development entities. In Northeast Ohio, that includes Jobs Ohio, the Greater Cleveland Partnership, and the Greater Akron Chamber.
In other words, the right consultant knows where the money is and how to get it. And there is more money out there in the form of financing and tax credits than you might think.
- Property Assessed Clean Energy (PACE) financing – Available to help finance, among others, energy efficient construction, efficiency upgrades, renewable energy installations, disaster resiliency improvements, and water conservation measures.
- Real Property Tax Abatements – Normally offered by cities and counties to encourage construction and economic development in their areas, many times in so called enterprise zones. Property tax abatements are reductions or forgiveness of property taxes for a specified period. The tax percentage can be phased in or even frozen at the rate when construction begins or when an agreement is reached.
- Deferred Infrastructure Taxes – Contractors can apply for deferred infrastructure tax agreement to help pay for roads, water, sewers, sidewalks and curbs in a new industrial development or a new subdivision.
- Private Activity Bonds – Sometimes called conduit bonds, states and cities use private activity bonds to borrow on behalf of a company, lowering a firm’s borrowing cost compared to bank loans or corporate bonds. They also are used to attract business and labor to a region and lower a company’s borrowing cost compared to bank loans or corporate bonds. If the bonds meet specific criteria, the interest earned may be tax-exempt.
- Tax Increment Financing – Usually used to help stimulate development in blighted areas, tax increment financing is public financing aimed at subsidizing community improvement projects, infrastructure, and redevelopment. Typically, cities divert property tax revenue increases from a certain area or district to support an economic development project or public improvement.
- Job Creation Tax Credits – A performance-based, refundable tax credit used to support new jobs, it is a credit based on the payroll created by a project and applied to a company’s commercial tax liability. In Ohio, companies creating at least 10 jobs over three years with a pay rate at least 150 percent of the federal minimum wage and a minimum payroll of $660,000 are eligible. However, the credit must be approved by the state before hiring begins.
- New Markets Tax Credits – Created by Congress to encourage economic development investment in lower-income communities, NMTCs subsidize a company’s investment in historically distressed areas. Usually projects that create jobs, provide job training, and health care are more likely to qualify for these credits.
The process normally begins with the decision that a new or expanded facility is needed or if relocating might benefit the bottom line. That’s the time to call in the experts who can help take you step by step, starting with whether to seek incentives to construct a new building, expand an existing one, or relocate to a new location.
Experienced consultants know how to uncover and secure financing. And they not only can help negotiate agreements with incentive providers, but then follow up to make sure payments are received and that any follow-up compliance requirements are handled properly to eliminate the chance of claw backs.
As with the examples above, most funding comes from state or local sources. And as in most negotiations, there must be benefits for both sides. For the company, it’s the right dollars, the right site, and the right timing. For the city or state, it’s the right number of jobs, the right kind of jobs, and the right timing – for example, close to the next election.
Again, most CEOs and corporate executives are too busy to spend the time necessary to understand the nuances associated with securing the level of incentives that can make a difference. inSITE Advisory Group is a boutique regional economic development consulting firm that specializes in working with both the public and private sector to create and execute construction and development projects. We understand what incentives companies need to close the funding gap and decide whether to build, expand, or move. We also understand what local governments are looking for and what they have to offer, often working as an extension of their economic development staffs.
Securing the right incentives can be a complex process to be sure. But fortunately, companies don’t have to go it alone. There is expert help available, and the right consultant can help executives stay focused on their most important responsibilities while ensuring that they and their companies receive a tankful of incentives — enough fuel to power their projects and the economic development process.
If you would like more information on how to secure financial incentives for your company or if you would like assistance with your economic development efforts, please give us a call at 330-338-4928 | 234-678-1135 or visit our website at insiteadvisorygroup.com.