MANAGEMENT STRATEGY -- Site Selection magazine, November 2004

So if refining the process will lead to a win-win result for everyone involved, then what are recommended process guidelines for the corporate sector?
Require a coordinated and process-driven incentive program. Historically, incentives have crossed many functional lines and, as such, the processes for obtaining incentives have grown from practice. It is now time to document your incentive processes, in order to see where the process may work better and where additional value may be added to the corporation.
Recognize activities the development community seeks to motivate. Companies need to understand the political and business priorities of the target location. Only then can you be certain that incentive opportunities are not missed.
Use an economic impact study to understand an appropriate level of benefits. Communities cited their dissatisfaction with the incentive process when a company could not adhere to its commitments or had over-promised results. An economic impact study that both parties agree to will help you come to a level of incentive that is appropriate and sustainable.
Recognize what activities development professionals are looking for in order to pass special legislation.You've read in the paper about companies that succeeded in having legislation passed for their projects. Yes, maybe there is not something on the incentive rosters that accomplishes your goals. Therefore, passing special legislation may be the answer. In addition to job and investment creation, special legislation may work for you if your company demonstrates high job quality and/or if your company is working on job retention.
In addition to the traditional incentive proposal, ask the development community to document the actual steps necessary to receive incentive benefits. The traditional incentive proposal is in the form of an offer letter, which includes a benefit estimate based on company-provided assumptions and a written definition of each program. In today's environment of risk management, it is imperative to mitigate risk early. In the incentive offer letter, request that the community provide steps to implement each separate incentive program and that the language related to confidentiality, disclosure, reporting and filing deadlines be discussed up front and be part of the negotiation.
The process isn't finished until all parties are comfortable with and supportive of the contractual language. In the past, the incentive process was over at the "handshake" and details were worked out as the project progressed. No longer. The deal isn't over until all parties are supportive of the contractual language. There is more disagreement now than in the past with what are appropriate requests to make of each other. Generally, the corporate sector needs to see language in the contracts that allows for flexibility with the clawback provision. This flexibility can come in the form of the ability to renegotiate the terms if business conditions change or a "good faith" clause that correlates to the companies' attempt to comply with the language.
Focusing on the incentive process, in addition to the actual package, may prove to be a competitive advantage for certain economic development agencies. For those agencies that address and respect the companies' risk issues up front in the negotiation, a competitive advantage of promoting a positive business environment can be created.

The leader of taxadvantagegroup, Greenville, S.C., Tammy C. Propst's 15 years of incentive and economic development experience include serving as Partner-in-Charge of KPMG's Business Incentive Group.