Retention Incentives: Let’s Get

Creative

September 25, 2017

Meegan Lally Spicer, Director,Site Selection and Incentives Advisory

About Retention Incentives

• A job retained is as valuable as a new job! Maybe more . . .

– Local governments rely on tax revenue

– Community & schools rely on contribution and participation (maybe even state

school funding)

– Local businesses rely on spending and economic activity

– Families rely on this financial support to maintain health, education, etc.

• It’s easier to retain what you have, than to go out and win new jobs

for your community

• Part of an “Economic Gardening”

approach to economic development

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Types of Retention Projects

Types:

1. Short Term - Risk of imminent closure of facility

a. With capital investment - easiest scenario

b. Without capital investment

2. Long Term - Facility closure potential if investment project

not implemented

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Important to identify because

business case and support for

incentives varies with each fact

pattern

Types of Retention Incentives

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• Cash Grants

• Tax Credits

• Property Tax Abatements

• Sales Tax Exemptions /

Rebates

• Infrastructure Assistance

• Workforce Development

Assistance

• Favorable Financing

• Utility Incentives

• Federal Incentives

• Other

− Green incentives

− Expedited permit processing

− Fee waivers

− Free or reduced cost land

− In-kind contributions

Considerations: Project Confidentiality vs. Transparency

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Risks: workforce resignations, morale and productivity drop,

bad press, tarnished reputation, mistrust of company and

leaders

Considerations:− Timing – what, when and how to introduce project to

state/local economic development, company’s workforce and

to the general public

− Publicly available material – applications, agreements, open

meeting testimony

− Incentive terms – setting job minimum floors that are

achievable while being cognizant of the potential alarm

amongst employees and in community

Considerations: Economic Impact Analysis

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Quantifying positive impacts of retaining facility in community− Jobs

− Payroll & benefits

− State and local taxes

− Utility purchases

− Local purchases

− Personnel investments

− Lodging and dining purchases

Highlighting company commitments/contributions to local

community− Company direct contributions

− Employee payroll contributions and company match

− Participation in community events – food and toy drives, soup

kitchen, run/walk events, Habitat for Humanity

EIA Sample - Actual Project (fancy data modeling not required!)

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XYZ Plant – Economic Contribution

• Annual Estimates:– Employee Payroll: $15,000,000

– Employee Benefits: $ 5,200,000

– Property Taxes: $ 450,000

– Utility Purchases: $ 8,500,000

– Local Purchases $ 3,500,000

– TOTAL: $32,650,000

• 5 years = $150M +

• Additional economic impact in region generated by multipliereffect

Retention Incentives – Creative Local Examples

• Muskogee, OK – Strategic Investment Program (SIP) Initiative from municipal hospital lease proceeds

• Madison County, IN – Economic Development Fund from Food & Beverage Tax

• Pasco County, FL – Penny for Pasco, Jobs & Economic Opportunities Trust Fund from sales tax

• Racine County, WI – Forgivable loan from issuance of bonds

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Retention Example – Ohio

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Program Description

JobsOhio Economic

Development Grant

• Grant created to promote economic development, business expansion and job creation

• JO may consider providing assistance for projects that improve operational efficiencies or

production expansion, along with the retention of jobs

• Liquor sales profits of about $250 m. annually used to fund economic development projects

Roadwork

Development (629)

Grant Program

• Grant for public roadwork improvements directly connected to business investment

• Requires job creation or retention commitment

• Can general fund up to 50% of roadwork costs

Ohio Rail Improvement

Program

• Grant or loan assistance to companies for new rail or real-related infrastructure to promote

retention and development of Ohio companies through use of effective rail transportation

• Grant funding generally limited to projects with significant job creation or retention involved

• Approx. $8m. available for biennium, awards average about $5,000 per job created/retained

Port Authority Capital

Lease Financing

• Exempts construction materials from sales tax (at county and state level), when they are

used in constructing a port facility financed with a port-authority capital-lease structure.

• Bond counsel is required and various financing fees are applicable.

• Approval at public meeting required

Community

Reinvestment Area

(CRA)/Enterprise Zone

(EZ) Real Property Tax

Abatement

• Real property tax abatement of up to 100% for 15 years in specified geographic zones

(tangible personal property tax phased-out starting 2005)

• School board approval may be required

• Eligibility and terms can vary by jurisdiction

Retention Example – Ohio (continued)

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Program Description

Tax Increment

Financing (TIF)

• Available to local governments to finance “public infrastructure improvements” (broadly

defined); in blighted areas may be used for improvements to purely private property

• Payments derived from the increased assessed value of any improvement to real property

beyond that amount are directed towards a separate fund to finance the project

• Term can be up to 100% for 30 years

Municipal Job

Retention Incentive

• Tax credits or grants created by local municipality (cities or villages) based off of local

income tax rates (range of.5% -3%)

• Eligibility and terms vary widely by local jurisdiction

• Typically, term does not exceed 50% and incentives caps are often applied

• Approval at public meeting required

Utility Economic

Development Funds

• Ohio PUCO approves Electric Security Plans (ESPs) for each utility company for a

specified term

• Various utility companies approved to create economic development funds throughout their

service territories (i.e.: First Energy, Dayton Power & Light)

• Could potentially fund new external utility infrastructure or relocation of infrastructure

Recent Retention Project – 1,000+ jobs, $80 m. investment, incentives

secured about $5 m., plus potential for utility incentives which are in process

Don’t Forget About Federal Incentives

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Program Description

New Market Tax

Credit (NMTC)

• Incentivizes community development and economic growth through the use of tax credits that

attract private investment to distressed communities

• Supported a wide range of businesses including manufacturing, food, retail, housing, health,

technology, energy, education, and childcare

• Eligible project must provide substantial community impact on the low-income community, which

includes job creation and retention

• Business case must address “but, for” test

Community

Development

Block Grant

(CDBG)

• Flexible program provides annual grants on formula basis to units of local government and states

• Program works to ensure decent affordable housing, to provide services to the most vulnerable in

our communities, and to create jobs through the expansion and retention of businesses.

• National Objectives:

− Low- and moderate- income (LMI) persons are a priority (70%/30% funding priority)

− Activities related to economic development for job creation/retention: business loans,

commercial rehab, infrastructure to business

− For retention document that jobs would be lost without CDBG and job currently held by LMI

person or expected to be filled by or available to LMI person within 2 years, there’s LMI

presumption that could apply

Practical Suggestions

• Current ED Toolbox

– Look at existing tools to see which ones could apply to retention projects

– Understand the business case required to access retention tools (i.e.:

“but, for”)

– Lay the groundwork with leadership for the use of retention incentives

– Ask the right questions of a retention project

• New ED Tools

– Think outside the box

– Look at sources of revenue that could fund a program

– Lay the groundwork now for the benefit of future projects

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Q&A

Thank You!

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