States and cities around the United Sates have financial incentive programs that can save millions of dollars off the bottom line of businesses. Designed to attract and retain businesses, stimulate job growth, and spur capital investment, these programs take the form of tax breaks, low interest loans, energy discounts, or cash grants. Businesses availing themselves can save in space, personnel, and utility costs over an extended period -- often as long as 20 years.
What Does That Look Like?
Manufacturing Example: A food manufacturer on Long Island receives $2 million in business income tax credits (refundable in cash), $200,000 in capital grants, and 10 years of sales tax exemptions for plant expansion.
Tech Firm Example: A tech company in California receives $2 million in business tax credits over 5 years for creating 300 jobs and investing $8 million in company expansion.
Life Science Example: A biotech firm in New Jersey receives 10 years of business income tax breaks worth over $3 million for creating 45 jobs and investing +$900,000 in company expansion.
Most executives are unaware that these programs exist. Others assume that they are limited to not-for-profits or community projects such as schools or public housing. Not so.
Most economic programs are geared to companies, because business is the engine for job creation and private investment that help keep economies of cities and states stable and healthy.
How can a business get access to these programs? A little digging, preparation, and fortitude are essential. Timing is also key.
Top 5 Practical Tips:
1) Take a look at your jurisdiction’s local economic development agency. Every state, every major city, and most every county has one. See what programs the agency has to offer.
2) Ideally, you can bundle a number of incentives around a relocation or expansion projects. For example, if you need to upgrade and expand a plant, you are probably looking at making sizable investments in new equipment and build outs, and you may also need to hire and train workers. This one project could then translate into real estate tax breaks from the locality, capital grants and payroll tax breaks from the state, low cost loans from the county, training grants, and electricity discounts from the local utility provider over many years.
3) Act early. Timing is key. Once you have made your investments or hired your new workers, the need to incentivize you is over (from government’s standpoint), and you might unwittingly take yourself out of eligibility for any benefits. It is therefore critical to start pursuing financial incentives during the planning stage, before you have committed to anything.
4) Consult an expert. Economic development is a specialized field, and dealing with government can be time-consuming and daunting. With the right expert to help you navigate the system, you can save time while maximizing your chances of success and making sure that you get every dollar that’s on the table.
5) Economic development is a competitive enterprise! Cities and states around the country compete for business, so if you have multiple locations, or options to expand in more than one place, it pays to court your opportunity with competing jurisdictions. Show them you’re in play, run the cost-benefit analysis, and negotiate the best package of economic benefits for your business.
Good luck and Godspeed!.
Author: Geoffrey Smith, Vice President of Marketing at the New York Grant Company, a private consulting firm specializing in securing financial incentives.