ig incentive packages have received a lot of media attention recently, and have been a major discussion topic around the water cooler in the economic development community. But, in the big picture, are incentives good or bad? The axiom, "Incentives never made a bad deal good, only a good deal better," is absolutely correct.
      Incentives have their place in location decisions. Often, we in the economic development profession lose sight of the fact that incentives really are used to decide between two "equal" locations. While incentives recently ranked No. 1 in a survey of site location factors, their importance comes into play only if the locations already have the building or site, labor, transportation, utilities and quality of life that meet the company's needs. If a community doesn't have these things, the incentive offering is worth nothing. It goes back to this adage: you really can't "buy" a project if it doesn't make a good business case.
      So why all the buzz about incentives? It is because of the sheer dollar value that some companies have received, and the huge press it generates. Certainly, these are large sums, but look at what it means to the state and community that is successful in locating the project. All of these entities will tell you that they would do it again; that every dollar spent has been worth it; that they have reaped and will continue to reap the benefits of the company's location to their area.
      When you look at the amounts paid per job at recent automotive assembly plant locations, they vary upward and downward -- they don't just continue to increase. The point is that these states and communities have figured out the value to them of having the company present and what it would mean to them long-term (15 to 20 years out). This allowed them to determine if this was a good investment based on their return (increases in taxes of various kinds to the state and community). Some of the return comes from the primary project, and the rest from suppliers and other spin-offs that locate in the area because of the assembly facility. Good analysis will determine what is "good business" for a state and community to include in their incentive package. And because of this, each package is tailored to meet the specific needs of the company.
      So what do you do? You make smart decisions about incentive offerings. You decide what you want to get in return for your incentives. One-size-fits-all incentive packages seldom do the trick. Incentives need to be tailored to the industry segment. A set of statutory incentives around which to build the tailored or discretionary incentives is one good solution. Having the incentives designed for the targeted industry adds credibility to your recruitment efforts. It also meets the needs of the companies you're trying to locate to your area.
      If you have more than one target industry, then have an incentive package for each target. Be sure to engage experts in your target industries to help you establish your incentives tools. These experts may be executives in the industry in your state or community, or they could be consultants to this industry. Another decision you must make is the split between what is available at the state level and what is available at the community or area level. The state and its communities need to be on the same page when it comes to targeted industries and associated incentives, and the authority to offer the incentives must be legally provided.
      It is also important to remember that incentives are not just money. Many things that you provide can be very low cost and extremely effective, while others do cost money, either in preparation or at the time of the deal. Having ready sites with the proper infrastructure in place and buildings that are already constructed to the criteria of your target industry (lab space, for instance) are examples of incentives for which you have already covered as well as costs the prospective company does not have to worry about.
      Others low-cost incentives include ease in all permitting applications -- environmental, business and construction. Creating one point of contact for monetary incentives, training and education, environmental permitting and local permitting are all steps you can take where the costs are minimal but yield great benefits to the company by saving them time and money. When the time is right, you can then focus on the monetary incentives that are meaningful, such as payroll tax credits, sales tax exemptions, property tax abatements, relocation cost offsets, financial assistance and others.
      You will always be saddled with determining the "right" amount of incentives for the projects you work. For this, there is no magic formula or book of answers. Developing a good relationship with the company representatives and any consultants involved will do more for you in making this determination than anything else you may do. Listen carefully, answer the questions being asked, and do this in a professional, prompt, concise and accurate manner. Doing your best and respecting the client will give you a real understanding of what is important and required by the company. And putting your best effort into creating an incentive package will sometimes overcome any shortfall in your monetary incentives.
      Economic development has been and always will be about relationships. And the ability to establish good relationships is the best tool for both the economic development professional and the company decision-maker to possess. It will help make the outcome of incentive negotiations a win-win for all concerned.