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What you Should Consider When Seeking Business Incentives for Your Next Expansion

Missouri Partnership CEO, Subash Alias, recently wrote an article for Chief Executive that outlined incentive programs and the due diligence companies should complete prior to exploring incentive options. Find the full article here.

Headshot of Subash Alias

Here’s a snapshot of the article:

To encourage economic development, state and local governments invest in incentives to attract and retain businesses. Of course, these incentives aren’t the sole reason you should consider expanding or relocating, but they can help tip the scales after you narrow down final locations based on real estate, workforce, logistics, quality of life, and other factors. In the U.S., the estimated total annual value of fiscal incentives (such as grants, rebates, subsidies, and tax credits) is about $45 billion to $90 billion.

Regardless of where the numbers fall for the future of economic development incentives, there have been some recent conversations about their direction. Traditionally, state and local governments anchor their definition of “economic development” in how many jobs are created. Currently, it’s one of the main metrics and the reason many incentives favor projects with large head counts.

But because of recent events—such as a global pandemic and the Great Resignation—a jobs-only metric might not be the best way to measure a business’s economic development impact. After narrowing down your location options, you should consider which business incentives will be the most relevant moving forward.

Understanding Incentive Metrics: Jobs, Capital Expenditure and Payroll

During my career, I have had experience working either with or in competition with multiple states. It has been fascinating to see the evolution of financial incentives over the past 25 years. A traditional job centric metric is really only telling one part of the story. You might be creating a lot of jobs, but there are other factors that might come into play. Some large head count operations might not pay as well, so they may not qualify for some state and local incentives regardless of how many jobs are at stake. For example, some distribution centers and call centers tend to pay lower average wages than manufacturing or front office positions.

Choosing a Location and Applying for Economic Development Incentives

The jobs metric is still tied to a lot of economic development incentives. However, as companies continue to increase wages, improve employee benefits, and invest in new technologies, capital expenditure and payroll will become bigger factors in government incentives for businesses.

Check out the full article from our CEO here.

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