The Importance of Economic Development Incentives in Site Selection

Posted: Updated:

While opinions regarding the appropriate use of economic development incentives vary amongst reasonable people, there is no question that incentives play a vital role in the site selection decision making process. Companies can conduct business from more global locations than ever due to greater telecommunications connectivity. And, since the recession that began in 2008, they think differently about where to invest capital. This has created a drastically more complex economic development environment.

In today's world, companies are concerned about many things. Some can be controlled by the company, while others cannot. One of the most important things that a company can control relates to financial costs of a site selection project. Expenses related to a site selection project are typically broken down into two groups: project costs and operating costs. It is important for economic development organizations and governmental entities to look at ways they can help address these two areas.

Project costs are very impactful due to the upfront nature of the costs. Items such as real estate acquisition, infrastructure improvements, workforce recruitment, equipment purchases, and furniture & fixtures impact the cash flow of a company. Incentives that can help offset these costs are highly valued by corporate decision makers during the site selection process.

Operating costs are impactful in terms of the company's facility's annual financial performance. Expenses such as local and state taxes, utility costs, labor costs, and transportation costs impact a company's annual profit and loss. This is the area where incentives that result in the lowering of ongoing operating costs become important to companies when deciding where to locate or expand.

Recently, our firm had the pleasure of serving a global company considering different potential locations to invest capital and add team members. The company has several large facilities throughout the world. We worked closely with our client to complete an exhaustive location modeling process to present the client with a set of findings to position them to make a well informed decision.

The client assembled an outstanding internal team to work with us. Representatives from the company's Governmental Affairs, Finance, Operations, Real Estate and Tax teams were all involved in the process. This approach ensured that all key disciplines were at the table throughout the process to evaluate key data. In addition, the personal involvement of the senior leadership of the company positioned the project for success. The project team worked collaboratively to achieve its goals, which made our job easier when working with local, regional, and state economic development and governmental entities. This allowed us to clearly present the project and the best ways for key officials to address project and operating costs associated with the project.

Larry Gigerich serves as Managing Director of Ginovus.

  • Perspectives

    • Want to Lower Your Medicare Premiums?

      If you’re nearing retirement age, health insurance and Medicare are probably on your mind as well. Do you understand how Medicare works and how the monthly premium is determined? You need to be in the know to avoid making costly mistakes. Here are some tips for potentially lowering your Medicare premiums.

    More

Events



  • Most Popular Stories

    • Photo courtesy of Key Detail

      Internationally-Known Artists to Paint Greencastle Mural

      Key Detail, an internationally known mural artist, has been selected to create one of Indiana’s largest murals on four large grain silos at the corner of Veterans Memorial Highway and U.S. 231 in Greencastle. The Putnam County Mural Project received more than 70 applications from muralists worldwide for the project, which is a canvas of up to 8,000-square-feet and a primary gateway for Greencastle.  

    • Alexa Deaton and Colby Shank

      Higher Ed Commission Promotes Two

      The Indiana Commission for Higher Education has promoted Alexa Deaton to associate commissioner and Chief Financial Officer. She previously served as director of accounting. Also, Colby Shank has been promoted to associate commissioner for student financial aid, a new position for the organization. He most recently served as assistant commissioner for financial and student support services.
    • Rob Baker and Ryan Chelli

      Foundation Announces Promotions

      The Community Health Network Foundation has promoted Rob Baker to vice president of foundation operations. He most recently served as executive director of finance. Baker joined the organization in 2016 and received his bachelor of arts degree from Purdue University and law degree from Indiana University School of Law – Indianapolis. Also, Ryan Chelli has been promoted to vice president of donor relations.  

    • Photo courtesy of Purdue University

      Purdue Offers 'Stranger Things' Replica Tee

      Purdue University has partnered with trademark licensing agent CLC to produce a special-edition replica Purdue shirt that appeared on an episode of Netflix’s “Stranger Things 3.”  The university also teamed up with Venley to accurately replicate the shirt, which will be available at retailers on the West Lafayette campus and online later this month.

    • (photo courtesy of The Times of Northwest Indiana)

      Historic Hospital to be Torn Down in Gary

      A building that once represented the racial divide in the city of Gary, but long provided health care to the African American community, will soon fall to a wrecking ball. The city says it intends to raze the long-abandoned St. John’s Hospital.