When applying for incentives, three key factors are critical to success: jobs, investment, and preparation. Companies should show the financial impact their particular project is going to have in a particular jurisdiction—and any financial gaps that exist between Dallas-Fort Worth and competing sites.
That’s the advice from Kelley Rendziperis, a principal with Site Selection Group, a global advisory and incentives firm based in Dallas. Sometimes, she says, companies aren’t really aware of what to ask for—or even what the impact of doing business in Texas could be.
In Texas, there are a number of incentives opportunities available. Because it’s so complicated—and high impact—businesses often turn to consultants for help navigating the process.
Jubal Smith, executive vice president at JLL, says companies must be prepared to come to the bargaining table with details about the impact they’ll have. “What kind of jobs? What is the wage of those jobs and the breakdown on the types of jobs?” he says.
Secondly, businesses must be prepared to discuss the investment they’ll make—how much it will spend on real property and personal property.
Kim Moore, managing director with Newmark Grubb Knight Frank, says the community will want to know that the company they are dealing with is financially sound. “And they’ll want to make sure it is a win-win,” she says.
Most cities will run an economic impact analysis to see if it makes sense to provide incentives. That analysis will look at the direct and indirect impact of the project, including construction, potential home and retail sales, and other factors.
Detail is important for providing an accurate analysis, says Moore, a former incentives expert with the city of Dallas.
“We’ll ask things like, ‘How many visitors are you going to have a day? How many overnight visitors are you going to have a year? How many nights does the average visitor stay in a hotel?’ ” she says. “We try to look at every single way that the business is going to impact a community.”
It’s also important to pay attention to the type of industry seeking incentives, says JLL’s Smith. Companies in specific industries should be prepared to show cities how they are importing new money into the community, not just recirculating money that already exists.
As they prepare, corporations should have a clear understanding of how different communities tax businesses. If a company is coming from out of state and is used to a traditional income tax state, for example, they will be surprised—and likely confused—by Texas’ margins tax. Communities have different guidelines, and some have thresholds for job creation or investment that must be met before they will consider incentives. As they begin the incentives process, companies need to learn what the community provides or doesn’t provide.
TIMING IS KEY
Incentives are less likely to be given if a location is already selected. Most companies will, at least initially, consider multiple locations. Where businesses sometimes falter, however, is when they determine where they likely will put a facility based on triggers such as labor cost and availability before they ever inform the community that they’re interested in obtaining incentives for their investment.
Consultants like Site Selection Group try to let communities know early in the process when they’re being considered for a new project, even if they’re unable to identify the company until later in the process. That allows incentives discussions to begin.
“When the press is out there saying the company is already going to make that move, it makes it politically difficult (for the community) to incentivize them to bridge any gaps,” Rendziperis says.