Everyone acknowledges that sooner or later, the economy has to cool off. With a slowing somewhere in our future, Indiana’s ability to attract and retain jobs and investment right now is critical. Growing an economic base made of up of good jobs across diverse industries will greatly influence how Hoosiers are impacted by the next hiccup in the U.S. economy.
Indiana and its communities have been on a long streak of economic successes. It is encouraging to see headlines like the recent Inside Indiana Business article that demonstrates another great year for the Hoosier State. The Indiana Economic Development Corporation (IEDC) reported record-level capital investment and wages for 2019, including nearly one quarter of the new job commitments coming from international companies.
The extraordinary level of investment and attraction of higher paying jobs reflect outstanding work by local, regional, and state economic development officials. Indiana is well positioned to compete for these corporate investments as we are blessed by our geography and are in a sustained period of fiscal stability. Even with everything the Hoosier State has in its favor, attracting private sector growth remains a competition. The contest is truly global with cities, regions, states, and countries vying for new jobs and investment. While the importance of locating in an area with a sufficient workforce has risen in importance over the last decade, major investment decisions remain strongly influenced by the financials. To greenlight a project, companies not only need to make the numbers work; they also need to optimize the expected financial outcomes. Incentives play a critical role in achieving this.
Consider how much variation one would see in the financials for just a few locations under consideration across North America. Taxes, labor costs, transportation costs, energy costs…all of these and more create different financial outcomes for the same project, depending on the location. Incentives are used to fill gaps and create advantages that make a location optimal to win the investment. As a friend and Indiana Mayor reminds me: if a community is not growing, it is dying. With this desire to grow jobs and investment, governments around the world participate in this competition by utilizing incentives to gain an advantage in the marketplace.
Indiana—at the state and local levels—is well known for having solid incentive programs, and certainly IEDC used those incentives well to win nearly 300 deals in 2019. In whatever form they take, incentives represent significant value for companies. Incentives impact the bottom line and free up cash flow that can be used to accelerate growth through additional hiring, capital projects, and innovation. As such, firms failing to explore incentives are ceding an advantage to their competitors. Things like research and development, talent, strategy, and leadership determine which players in an industry succeed and which fail. The same can be said for incentives. The ability of a firm to optimize incentives as part of its growth strategy can generate a significant advantage within the market over competitors who do not integrate incentives into their decision-making processes.
Indiana must continue on its path of smart, yet aggressive programs and policies around economic development incentives in order to remain a leader in the global economy. Likewise, companies should give serious attention to incentives or they may find themselves in the rearview mirror of a competitor. The competition is afoot—as the market charges ahead, it will not wait for public and private sector players that fail to continually evolve, innovate, and optimize better than their competitors.
As part of the Credits & Incentives team at McGuire Sponsel, Jacob Everett advises growing companies on their investment and job creation strategies. He is a Certified Economic Developer (CEcD) by the International Economic Development Council. You can email Jacob here.