Monday, December 27, 2010

What Are ECONOMIC DEVELOPMENT INCENTIVES?

As I start this blog, I will not take for granted that everyone knows what economic development incentives are.  So, this is where I will start.

An economic development incentive (incentive) is a tool used to woo businesses to grow or relocate from one State to another in order to stimulate economic growth in a local economy.  As the downturn in the economy plummeted, competition for jobs increased tremendously.  Economic development agencies in each state and local economic development agencies within each state pushed why growing a business in their community was more beneficial to businesses.

Interest in incentives was very noticeable during the1980s and 1990s.  At that time public bidding wars were popular among local governments to encourage businesses to their communities.  Over the years, incentive packages became a big part of state and local governments’ efforts to stimulate growth in their local economy.  In an essay written by Melvin L. Burstein and Arthur J. Rolnick the authors indicated that competition among states for new and existing businesses has become the rule rather than the exception. 

In the 1990s, economists Alan H. Peters and Peter S. Fisher identified the following categories of incentives:
·         One-time deals negotiated with individual firms,
·         Grants and loans provided under programs that receive annual state appropriations,
·         Programs establishing parameters and limits but allowing some degree of local government discretion,
·         Incentives that function as entitlements, whereby a firm receives the benefit automatically, provided its investment is in an eligible sector and the size of the investment or number of new jobs created exceeds some threshold, and
·         Code features that apply to all firms, but benefit some more than others and are often advertised by economic development agencies as reasons to locate in a state.

Today, economic development incentives have their share of supporters and opponents.  On one hand, many consider economic development incentives as “business welfare”.  According to an article written by Brian Gongol, incentives create a good environment only for some businesses, at the expense of all other businesses. 
On the other hand, many believe that these incentives are required in order to compete for jobs.  For example, if a local business is considering a consolidation project (i.e. it is considering joining two of its business units into one location), it has to make a decision as to which one of two locations it would like to remain in.  If the two locations are in Florida and North Carolina, the business has to determine which of these states would be beneficial for its growth.  The business would look at what each location offers, in terms of access to railways, ports, suppliers, quality and quantity of jobs, etc.  The incentive package becomes an added bonus as it helps reduce the business’ costs for the consolidation.
Regardless of our opinions of economic development incentives, I believe they will be around for a long time.  For businesses either participating in these incentive programs or looking to participate in these incentive programs, my suggestion is to become very knowledgeable of the individual incentive packages that are available to you.  Once you determine a package that may benefit you, be realistic about your commitments because those commitments are what determine whether you will receive the ‘true’ benefits of these incentives – actual payments.

Thursday, December 23, 2010

Welcome to my Economic Development Incentive Blog!

When it was suggested that I write this blog, I was a little intimidated as this is very new to me.  I did some research to see if any other economic development incentive blogs exist.  Since I couldn’t find one, I would like to introduction you to the wonderful world of economic development incentives.  Now, before I get into the details, you are probably wondering what qualifies me to discuss these incentives. 

So Here’s My Story:
For the past nine years, I had the awesome responsibility of analyzing companies’ compliance requirements for some of the State of Florida’s major economic development incentives programs, like Qualified Tax Industry (QTI), Quick Action Closing Fund (Closing Fund), Brownfield Redevelopment (BFR), Capital Investment Tax Credit (CITC), to name a few.  I will discuss the individual programs in a later post.  At the beginning, I had no clue what economic development incentives were and how they benefitted Florida businesses.  However, after years of working with these programs, I developed the expertise needed to effectively guide businesses through the compliance process.  Over the years, I have helped to verify compliance requirements for over 600 companies, resulting in confirmation of over 50,000 Florida jobs.

I realized though, that many businesses leave money on the table each year due to lack of proper documentation and failure to monitor their compliance goals throughout the year.  I developed a passion for economic development and a desire to see companies succeed with these programs.  To me, it is a waste for a business to go through the process of applying and negotiating an incentive award if it does not actively pursue the scheduled payments.  As a result, I began Marlynn Consulting Group, LLC.

My purpose for developing this blog is to educate you about economic development incentives and how they can be beneficial to your business.  The following are my goals for this blog:

· To introduce you to economic development incentives
· To educate you about available incentives
· To teach you about the incentive process
· To teach you about the compliance management process
· To provide you with tools to help you through the incentives process
· To assist you with maximizing your incentive payments

Again, I welcome you to my blog and hope that I can provide enough information for you to get the maximum benefit from economic development incentives.