3 TRENDS IMPACTING THE FUTURE OF ECONOMIC INCENTIVES 8TH ANNUAL WOMEN IN ECONOMIC DEVELOPMENT FORUM

Transcription

1 3 TRENDS IMPACTING THE FUTURE OF ECONOMIC INCENTIVES 8TH ANNUAL WOMEN IN ECONOMIC DEVELOPMENT FORUM SEPTEMBER 2017

2 AGENDA 1 Site Selection Group Update 2 Economic Trends 3 The 3 Big Trends 4 5 Ways to Prepare 5 Q & A SITE SELECTION GROUP PAGE 2

3 SSG UPDATE

4 SITE SELECTION GROUP 100+ PROJECTS completed per year 100% REVENUE GROWTH In last 3 years 30+ EMPLOYEES and GROWING $2.0B+ ECONOMIC INCENTIVES secured 25 FORTUNE 100 companies represented 1,253 GLOBAL LABOR MARKETS proactively researched 4

5 CORE SERVICES LOCATION ADVISORY ECONOMIC INCENTIVE SERVICES CORPORATE REAL ESTATE SERVICES ECONOMIC DEVELOPMENT CONSULTING Consulting Services Identification & Evaluation Market Research Consulting Services Demographic analysis Workforce assessment Labor cost analysis Labor supply-demand forecasting Occupational demand analysis College/university assessment Commuter analysis Segmentation analysis LOCATION ADVISORY Infrastructure assessment Logistics analysis Utility cost analysis Employer interviews Competition saturation analysis Operating cost comparison Location optimization analysis Customized GIS mapping State and local tax evaluation Program research and evaluation Request for proposals Economic incentive comparison Financial analysis Economic impact modeling Market comparables Negotiation strategy Negotiations Tax credits and abatements Sales and use tax rebates Cash grants Real estate grants Enterprise zones, TIF s, PID, etc. Employee training subsidies/grants Special public/private financing Site Infrastructure grants/rebates Competition restrictions Market research Site/building tours Site/building inspections Negotiations Acquisitions Dispositions Sale lease-backs Developer bidding Lease Renewals Lease restructuring Subleases Construction Management Site visits/assessment Vendor bidding and supervision Budgeting and scheduling Telecom and IT interface FF&E management Move coordination Economic analysis Demographic analysis Competitive benchmarking Industry cluster analysis Target industry analysis Economic impact analysis Underemployment studies Commuter studies Site certifications Economic incentive design Organizational planning Marketing plans Real estate development plans Real estate re-use plans Administration & Compliance Application preparation Contract review Documentation administration Annual compliance Financial reporting Portfolio Management Strategic portfolio planning Lease database management Lease audits Vendor management Occupancy forecasts Organization planning 5

6 GLOBAL LOCATION INTELLIGENCE 10,000+ LOCATION VARIABLES 25,000+ ECONOMIC INCENTIVE COMPS 1,253 METRO AREAS 70 COUNTRIES 6

7 DIVERSE INDUSTRY EXPERIENCE 7

8 ECONOMIC TRENDS

9 WHAT ECONOMIC TRENDS WILL IMPACT THE FUTURE OF ECONOMIC INCENTIVES?

10 THE INDUSTRIAL RENAISSANCE 10

11 CHANGING VALUE PROPOSITION 11

12 AUTOMATION VS OFFSHORING 12

13 INDUSTRY CYCLES 13

14 PROJECTIONS VS REALITY 14

15 RISK OF SITE CLOSURES Company problems Industry challenges Labor arbitrage Automation Skills gap 15

16 RESHORING TRENDS Government Incentives Image/brand (made in America) Logistics: Shorter lead time / time to market Ecosystem Synergies / localization Proximity to customers Lower cost gap *Compiled by the Reshoring Initiative 16

17 THE 3 BIG TRENDS IMPACTING ECONOMIC INCENTIVES The Media Tax Reform Reporting 17

18 THE MEDIA

19 WHEN IS THE MEDIA EXPOSURE RISK GREATER THAN THE FINANCIAL REWARD?

20 WHO IS IMPACTED BY MEDIA? Corporate Executives Elected Officials Appointed Officials Economic Developers 20

21 THE POSITIVE IMPACT 21

22 THE NEGATIVE IMPACT 22

23 STATE TAX REFORM

24 IS THE SHORT TERM WIN MORE IMPORTANT THAN THE LONG TERM FINANCIAL RISKS?

25 COMPETING TAX STRUCTURES Medical Manufacturer Machinery & Equipment $32.000,000 Building Costs: $3,000,000 New Jobs: 195 Retain OH Jobs: 97 Program Type Ohio Texas Job Creation Tax Credit (Payroll Rebate) $1,200,000 N/A JobsOhio Workforce Grant $500,000 N/A JobsOhio Revitalization Grant $ 250,000 N/A Texas Enterprise Fund N/A $1,250,000 In Kind Training Assistance Value N/A $415,000 City/County Grants $350,000 $1,000,000 Local Income Tax Rebate $550,000 N/A Forgivable Loan/Local Econ Dev Fund $100,000 N/A Property Tax Abatement/Rebates $1,100,000 $750,000 DP&L Economic Development Grant $75,000 N/A TOTAL $4,125,000 $3,415,000 Return on Investment 12% 10% Property Tax Avoidance Personal Property $5,000,000 N/A TOTAL $9,125,000 $3,415,000 Return on Investment 26% 10%

26 EFFECTS OF APPORTIONMENT Michigan (SBT) State A State B State C Financial Services Company Pre-Apportioned Taxable Income $50,000,000 Total Property: $15,000,000 Total Payroll: $30,000,000 Total Sales $250,000,000 Property $13,500,000 $450,000 $300,000 $750,000 Sales - Market Based Sales - Cost of Performance Sourcing Methodology Payroll $27,000,000 $ - $2,400,000 $600,000 $62,500,000 $37,500,000 $12,500,000 $75,000,000 $225,000,000 $ - $20,000,000 $5,000,000 COP COP Market Market Property Factor 90% 3% 2% 5% Payroll Factor 90% 0% 8% 2% Sales Factor 90% 0% 5% 30% Factor Weights 5%, 5%, 90% Equally Double Sales Single Sales Apportionment Factor Apportioned Taxable Income 90% 1% 5% 30% 126% $45,000,000 $500,000 $2,500,000 $15,000,000 Tax Rate 2% 5% 4.50% 7% Tax $900,000 $25,000 $112,500 $1,050,000 $2,087,500 Single Sales Factor Apportionment 25% 15% 5% 30% 75% 26

27 SPECIAL LEGISLATION 27

28 REPORTING

29 WHEN DOES THE COMPLIANCE BURDEN BECOME GREATER THAN THE REWARD?

30 GOVERNMENTAL REPORTING GASB Statement No. 77, Tax Abatement Disclosures o Effective for periods beginning after 12/31/15, GASB 77 requires disclosure of tax abatement information about 1) a reporting government s own tax abatement agreements and 2) agreements that are entered into by other governments that reduce the reporting government s tax revenues. What is a tax abatement? o Reduction in tax revenue that has the following characteristics: o An agreement between one or more governments and an individual or entity in which: one or more governments promise to forgo tax revenues to which they are otherwise entitled and; the individual or entity promises to take specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments. 30

31 GOVERNMENTAL REPORTING (cont d) Consultant fees arrangements Accountability & transparency o Economic incentive data vs project data o Auditing Reporting methods o PDF, Excel, Interactive? 31

32 CORPORATE REPORTING Internal reporting o Provisions and valuation allowances o FASB? Compliance requirements o Increase in detailed reporting o Change in requirements o Increased financial disclosures o Varied timelines o Multiple departments Clawback triggers & considerations o M&A o Bankruptcies o Private equity transactions o Change in management o Highly cyclical industries (energy) o Force Majeure 32

33 COMPLIANCE & REPORTING TOOLS Project Management Reporting Market Research Document Storage Incentive Compliance Job & Capex Tracking 33

34 5 WAYS TO PREPARE

35 1 Control communication 2 Identify business cycles 3 Evaluate the project risks 4 Understand your limitations 5 Develop a compliance strategy

36 Q&A

37 SITE (7483)