Securing the right financial incentives is often the most important factor in a business’s decision to build, expand, or relocate. However, most C-suite executives are too focused on day-to-day operations to spend the time necessary to develop and execute a strategy to acquire the funding that serves as the fuel to get most construction projects moving.
Knowing where and how to look for incentives can be complex, and working with an experienced economic development partner who knows how and where to look for grants, tax credits and other incentives is critical. When companies go it alone, they often leave 15 to 25 percent of the value of a construction project on the table.
The right consultants understand the incentives companies need to close the funding gap on construction projects. Successful firms have relationships with state and municipal agencies and officials who support economic development and coordinate with economic development entities. They know where the money is and how to get it.
- Property Assessed Clean Energy (PACE) financing helps finance, among others, energy-efficient construction, efficiency upgrades, renewable energy installations, disaster resiliency improvements and water conservation measures.
- Real Property Tax Abatements encourage construction and economic development,. Property tax abatements are reductions or forgiveness of property taxes for a specified period.
- Deferred Infrastructure Taxes allow contractors to apply for help paying for roads, water, sewers, sidewalks and curbs in a new industrial development or subdivision.
- Private Activity Bonds allow states and cities to borrow on behalf of a company, lowering borrowing cost compared to bank loans or corporate bonds;interest earned may be tax-exempt.
- Tax Increment Financing helps stimulate development in blighted areas. It’s public financing aimed at subsidizing community improvement projects, infrastructure and redevelopment. Cities divert property tax revenue increases from an area or district to support an economic development project or public improvement.
- Job Creation Tax Credits are performance-based, refundable tax credit that support new jobs and are based on the payroll created by a project and applied to a company’s commercial tax liability. In Ohio, companies creating at least 10 jobs over three years paying at least 150 percent of the federal minimum wage and a minimum payroll of $660,000 are eligible. The credit must be approved before hiring begins.
- New Markets Tax Credits encourage economic development investment in lower-income communitiesm, subsidizing investment in historically distressed areas. Projects creating jobs and providing job training and health care are more likely to qualify.
Once you’ve decided you need a new facility, call in experts to take you step by step, starting with whether to seek incentives to construct a new building, expand an existing one, or relocate. Experienced consultants can uncover and secure financing and help negotiate agreements. They follow up to make sure payments are received and that follow-up compliance requirements are handled properly to eliminate the chance of claw backs.
Most funding comes from state or local sources, and there must be benefits for both sides. For the company, it’s the right dollars, the right site and the right timing. For the city or state, it’s the right number of the right kind of jobs and the right timing. ●
Janie Hanna is Director of Economic Development at inSITE Advisory Group
