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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