Post on 12-Oct-2020
transcript
3 TRENDS IMPACTING THE FUTURE OF ECONOMIC INCENTIVES
8TH ANNUAL WOMEN IN ECONOMIC DEVELOPMENT FORUM
SEPTEMBER 2017
SITE SELECTION GROUP | PAGE 2
AGENDA
Site Selection Group Update1
Economic Trends2
The 3 Big Trends3
5 Ways to Prepare4
Q & A5
SSG UPDATE
4
SITE SELECTION GROUP
1,253GLOBAL
LABOR
MARKETSproactively researched
100+PROJECTS
completed
per year
$2.0B+ECONOMIC
INCENTIVESsecured
25FORTUNE
100companies
represented
30+EMPLOYEES
and
GROWING
100%REVENUE
GROWTHIn last 3 years
5
CORE SERVICES
LOCATION
ADVISORY
LOCATION ADVISORYECONOMIC INCENTIVE
SERVICES
CORPORATE REAL ESTATE
SERVICES
ECONOMIC DEVELOPMENT
CONSULTING
Consulting Services
▪ Demographic analysis
▪ Workforce assessment
▪ Labor cost analysis
▪ Labor supply-demand forecasting
▪ Occupational demand analysis
▪ College/university assessment
▪ Commuter analysis
▪ Segmentation analysis
▪ Infrastructure assessment
▪ Logistics analysis
▪ Utility cost analysis
▪ Employer interviews
▪ Competition saturation analysis
▪ Operating cost comparison
▪ Location optimization analysis
▪ Customized GIS mapping
Identification & Evaluation
▪ State and local tax evaluation
▪ Program research and evaluation
▪ Request for proposals
▪ Economic incentive comparison
▪ Financial analysis
▪ Economic impact modeling
▪ Market comparables
▪ Negotiation strategy
Negotiations
▪ Tax credits and abatements
▪ Sales and use tax rebates
▪ Cash grants
▪ Real estate grants
▪ Enterprise zones, TIF’s, PID, etc.
▪ Employee training subsidies/grants
▪ Special public/private financing
▪ Site Infrastructure grants/rebates
▪ Competition restrictions
Administration & Compliance
▪ Application preparation
▪ Contract review
▪ Documentation administration
▪ Annual compliance
▪ Financial reporting
Market Research
▪ Market research
▪ Site/building tours
▪ Site/building inspections
Negotiations
▪ Acquisitions
▪ Dispositions
▪ Sale lease-backs
▪ Developer bidding
▪ Lease Renewals
▪ Lease restructuring
▪ Subleases
Construction Management
▪ Site visits/assessment
▪ Vendor bidding and supervision
▪ Budgeting and scheduling
▪ Telecom and IT interface
▪ FF&E management
▪ Move coordination
Portfolio Management
▪ Strategic portfolio planning
▪ Lease database management
▪ Lease audits
▪ Vendor management
▪ Occupancy forecasts
▪ Organization planning
Consulting Services
▪ Economic analysis
▪ Demographic analysis
▪ Competitive benchmarking
▪ Industry cluster analysis
▪ Target industry analysis
▪ Economic impact analysis
▪ Underemployment studies
▪ Commuter studies
▪ Site certifications
▪ Economic incentive design
▪ Organizational planning
▪ Marketing plans
▪ Real estate development plans
▪ Real estate re-use plans
6
GLOBAL LOCATION INTELLIGENCE
10,000+ LOCATION VARIABLES
25,000+ ECONOMIC INCENTIVE COMPS
1,253 METRO AREAS
70 COUNTRIES
7
DIVERSE INDUSTRY EXPERIENCE
ECONOMIC
TRENDS
WHAT ECONOMIC TRENDS WILL
IMPACT THE FUTURE OF
ECONOMIC INCENTIVES?
10
THE INDUSTRIAL RENAISSANCE
11
CHANGING VALUE PROPOSITION
12
AUTOMATION VS OFFSHORING
13
INDUSTRY CYCLES
14
PROJECTIONS VS REALITY
15
RISK OF SITE CLOSURES
Skills gap
Automation
Labor arbitrage
Industry challenges
Company problems
16
RESHORING TRENDS
Government
Incentives
Logistics:
Shorter lead time /
time to market
Ecosystem
Synergies /
localization
Proximity to
customers
Lower cost gap
Image/brand(made in America)
*Compiled by the Reshoring Initiative
17
The Media
Tax Reform
Reporting
THE 3 BIG TRENDS IMPACTING
ECONOMIC INCENTIVES
THE MEDIA
WHEN IS THE MEDIA EXPOSURE
RISK GREATER THAN THE
FINANCIAL REWARD?
20
WHO IS IMPACTED BY MEDIA?
Corporate Executives
Elected Officials
Appointed Officials
Economic Developers
THE POSITIVE IMPACT
21
THE NEGATIVE IMPACT
22
STATE TAX REFORM
IS THE SHORT TERM WIN
MORE IMPORTANT THAN THE
LONG TERM FINANCIAL RISKS?
COMPETING TAX STRUCTURES
Program Type Ohio Texas
Job Creation Tax Credit (Payroll Rebate) $1,200,000 N/A
JobsOhioWorkforce Grant $500,000 N/A
JobsOhio Revitalization Grant $ 250,000 N/A
Texas Enterprise Fund N/A $1,250,000
In Kind Training Assistance Value N/A $415,000
City/County Grants $350,000 $1,000,000
Local Income Tax Rebate $550,000 N/A
Forgivable Loan/Local Econ Dev Fund $100,000 N/A
Property Tax Abatement/Rebates $1,100,000 $750,000
DP&L Economic Development Grant $75,000 N/A
TOTAL $4,125,000 $3,415,000
Return on Investment 12% 10%
Property Tax Avoidance – Personal Property $5,000,000 N/A
TOTAL $9,125,000 $3,415,000
Return on Investment 26% 10%
Medical
Manufacturer
Machinery &
Equipment
$32.000,000
Building Costs:
$3,000,000
New Jobs:
195
Retain OH Jobs:
97
26
EFFECTS OF APPORTIONMENT
Financial Services
Company
Pre-Apportioned
Taxable Income
$50,000,000
Total Property:
$15,000,000
Total Payroll:
$30,000,000
Total Sales
$250,000,000
Michigan (SBT) State A State B State C
Property $13,500,000 $450,000 $300,000 $750,000
Payroll $27,000,000 $ - $2,400,000 $600,000
Sales - Market
Based$62,500,000 $37,500,000 $12,500,000 $75,000,000
Sales - Cost of
Performance$225,000,000 $ - $20,000,000 $5,000,000
Sourcing
MethodologyCOP COP Market Market
Property Factor 90% 3% 2% 5%
Payroll Factor 90% 0% 8% 2%
Sales Factor 90% 0% 5% 30%
Factor Weights 5%, 5%, 90% Equally Double Sales Single Sales
Apportionment
Factor90% 1% 5% 30% 126%
Apportioned
Taxable Income$45,000,000 $500,000 $2,500,000 $15,000,000
Tax Rate 2% 5% 4.50% 7%
Tax $900,000 $25,000 $112,500 $1,050,000 $2,087,500
Single Sales Factor
Apportionment25% 15% 5% 30% 75%
27
SPECIAL LEGISLATION
REPORTING
WHEN DOES THE COMPLIANCE
BURDEN BECOME GREATER THAN
THE REWARD?
30
GOVERNMENTAL REPORTING
GASB Statement No. 77, Tax Abatement Disclosures
o Effective for periods beginning after 12/31/15, GASB 77 requires disclosure
of tax abatement information about 1) a reporting government’s own tax
abatement agreements and 2) agreements that are entered into by other
governments that reduce the reporting government’s tax revenues.
What is a “tax abatement”?
o Reduction in tax revenue that has the following characteristics:
o An agreement between one or more governments and an individual or
entity in which:
• one or more governments promise to forgo tax revenues to which
they are otherwise entitled and;
• the individual or entity promises to take specific action after the
agreement has been entered into that contributes to economic
development or otherwise benefits the governments or the citizens
of those governments.
31
GOVERNMENTAL REPORTING (cont’d)
Consultant fees arrangements
Accountability & transparency
o Economic incentive data vs project data
o Auditing
Reporting methods
o PDF, Excel, Interactive?
32
CORPORATE REPORTING
Internal reportingo Provisions and valuation allowances
o FASB?
Compliance requirementso Increase in detailed reporting
o Change in requirements
o Increased financial disclosures
o Varied timelines
o Multiple departments
Clawback triggers & considerationso M&A
o Bankruptcies
o Private equity transactions
o Change in management
o Highly cyclical industries (energy)
o Force Majeure
33
COMPLIANCE & REPORTING TOOLS
Incentive Compliance
Reporting
Document Storage
Project Management
Market Research
Job & Capex Tracking
5 WAYS TO PREPARE
1 Control communication
2 Identify business cycles
3 Evaluate the project risks
4 Understand your limitations
5 Develop a compliance strategy
Q&A
www.siteselectiongroup.com | 1.866.938.SITE (7483)