Site Selection Incentives
Across industries, economic incentives, including tax credits and rebates, tax abatement, grants, and tax-free zones and fee waivers are the incentives that persuade site selection managers or companies to locate in a city or region, according to WDG Consulting, Site Selection Group, and others. However, for large manufacturing companies, they consider labor and real estate availability before considering available incentives when locating a company's facilities. On the other hand, incentives most attractive to site selection managers at IT companies, after talent and the right ecosystem availability, are those rewarding them cash for creating jobs, like five or ten-year payroll tax rebates.
TAX CREDITS AND REBATES
- Tax credits are incentives in the form of income tax credits depending on job creation or investments a company would make. When considering this incentive, site selection managers consider locations where the offered credit is realizable, refundable, or transferable.
- Companies or site selection managers get persuaded by tax rebates offered by an area based on their organization's expected increased payroll, sales, or property tax, which incentivize a company based on its performance.
- Other tax incentives considered by companies when deciding where to locate a new facility are transferable and refundable tax credits. Transferable tax credits can be utilized in another location of the company in the same state while refundable tax guarantees direct cash benefits to offset some liabilities.
- Tax abatements can help companies reduce building, machinery, and equipment taxes from 25% to 100% between five to 10 years, creating value that can add up to reduce its yearly operating expenses. As such, property tax abatement is a significant incentive that can influence if a company would choose a site.
- Locations that provide sales tax abatement, where company expenditures like manufacturing equipment get exempted from sales tax persuade companies to consider locating their company at a site under its jurisdiction.
- Sites located in places that offer discounted utility rebates for companies with heavy power consumption like manufacturing plants or data centers helps to influence site selection managers to locate a business in such areas.
- Some communities offer free buildings or lands, called infrastructure or real estate grants, to companies in exchange for capital investments and job creation. According to Site Selection Group, this is one of the most common incentive influencing companies to locate in a city or region.
- Companies and site selection managers prefer locations offering training grant incentives, based on either training expenses provided to people (usually employees or interns) or for the jobs created by situating their companies in the area.
- Site managers consider forgivable loans and cash grant incentives very seriously when deciding on a new location; they look out for such incentives when they have to make substantial upfront capital investments for facilities, new infrastructure, or other costly equipment.
TAX-FREE ZONES AND FEE WAIVERS
- Site selection managers prioritize areas that offer fee waivers or fee reductions to avoid getting and paying for permits related to zoning or other regulatory bodies. They consider areas that provide this incentive to expedite their projects.
- Companies or site selection managers opt for tax-free zones, where they can avoid paying part or all of the required tax burdens normally expected to site a company's facility.
MOST INFLUENTIAL INCENTIVES AND HOW THEY DIFFER BY INDUSTRY
- Some critical influencing factors that persuade site selection managers to choose a location for relocation or expansion include the availability of labor, real estate, and the incentives offered by the government of that area.
- For large manufacturing companies in need of massive lands to build out their facilities, the availability of real estate and labor are the first things they look for before considering incentives offered by the government of that region.
- For example, while looking for a place to expand in the US, a site selection consultant working with Toyota and Mazda said: "One of the major reasons Huntsville, Alabama, ended up winning this historic prize was its rare combination of skilled manufacturing and knowledge workers; but we didn’t just take the numbers at face value."
- Site managers at IT companies critically consider talent availability and the presence of a suitable industry ecosystem before looking at taxation policies or financial incentives available in that location. For such companies, site selection managers mostly consider incentives as a tip in the scale if two or more locations have similar long-term attractiveness.
- Incentives most attractive to site selection managers at IT companies are those rewarding them cash for creating jobs, like five or ten-year payroll tax rebates.
The research team began by investigating relevant construction and media portals in search of insights into incentives most effective in persuading companies or site selection managers to locate a business in a specific city or region. For this, we found reports by Trade & Industry Development, Expansion Solutions Magazine, and others, which highlighted the most significant and influential incentives for locating a business in the US. However, none of these reports provided information on how these incentives vary by industry.
Therefore, we proceeded to examine articles and news by companies providing site selection consultancy, regarding incentives most effective in persuading companies or site selection managers to locate a business in an area and how it differs by industry. Here, we discovered reports by Ezra Company, WDG Consulting, Site Selection Group, and others listing the top incentives for companies and site selection managers. Again, there were no details specific to how these incentives vary by industries; instead, these reports discussed these incentives on a general scale.
Finally, we switched strategies, looking for information on incentives that persuaded companies in some industries to choose a location over others. This time, we conducted general research on news sites and company domains in the manufacturing, tech, and consumer industries. Here, we hoped to locate press releases or case studies by companies documenting the incentives that persuaded them to site a new facility or expand to a specific location. While this investigation did not yield relevant press releases or case studies on the most influential incentives by industries, we located reports by Expansion Solutions and Area Development, which revealed what was most influential for persuading site selection managers or companies in the manufacturing and tech industries.