Most every business person knows that state and local jurisdictions across the United States have to compete for businesses, their capital investment, their jobs and their payroll. And most everyone understands that often in a competitive process governments use financial incentives to make themselves more attractive to win deals. States are ranked annually and recognized with awards for things like the most deals announced, the most capital investment, etc. Ohio was a top state in 2020, for the second year in a row, in total number of incentives projects per capita, according to Site Selection. And Ohio consistently ranks in the top 10 states overall for business, with Georgia in first place in 2021 for the ninth year in a row. This is indeed big business with various federal, state and local incentives offered to businesses for the purpose of job creation and attracting capital investment each year totaling in excess of $45 billion.
For companies expanding in this region or considering moving here, there are a couple of important things to keep in mind. First, JobsOhio — along with its regional partner REDI Cincinnati — is easily in the top four state economic development organizations in the United States based on KMK Consulting's personal experience in negotiating numerous incentive deals nationwide. Its leadership, staff, financial resources and creative attitude to win, along with its customer focus make JobsOhio a fabulous asset for the state. In the Cincinnati region, the advantages are even stronger because of the working partnership between REDI Cincinnati and Northern Kentucky Tri-Ed. Whether it's for the new mega-deal with Intel or a 50-person expansion in Mason, never underestimate the impact of JobsOhio in the economic vitality of this region and the state.
Second, and more importantly, companies owe it to their ownership to pay more attention to incentive opportunities from the state as well as local jurisdictions. Too much is missed, ignored, or not negotiated when businesses accept whatever governments offer. Worse, many fail to fully use these incentives after they are awarded. Surprisingly, fewer than half of incentives offered are ever collected by the companies that have secured them. In a recent study by the Brookings Institute that examined incentives awarded versus incentives taken by companies, the research found during the past 10 years, the maximum amount of incentives realized was only 40%.
Takeaways for companies looking to grow
So here are five important takeaways for companies strategizing growth opportunities now or in the future.
1) Appreciate the tremendous importance and work of JobsOhio, REDI Cincinnati and Northern Kentucky Tri-ED to business growth and quality of life improvement. One way to do this is for more businesses to financially invest in the local public-private partnership models of REDI and Tri-ED. These are not just government entities. These are teams which we are all a part of, or should be, as business leaders.
2) The incentive process is a professional business. The people who live in this space daily know what they are doing. Don't ignore the incentive process because it is complicated, and never do it on your own. If you do, you will always, leave money on the table which will otherwise make your project more successful and more cost efficient.
3) Be certain your incentives consultant is part of your strategy team, and bring them on board your internal process early. Mistakes are made often and can sometimes be impossible to correct. And appreciate that your incentives consultant is a profit center, not a cost center.
4) Incentives negotiation is a multi-step process. Strategy, expertise, timing of every move, creativity and honesty are underpinnings to success. The strength of this negotiation is in your incentives consultant. Avoid the mistaken perception that the business exec can do this negotiation themselves because the government groups such as JobsOhio are so helpful. These folks have clients, and they are not the companies seeking the incentives.
5) Respect the importance of compliance and annual reporting in meeting your commitments to new jobs, payroll and capital investment. Always realize the financial benefits you have secured. Missing these benefits can be a huge detriment, which can often be avoided.
When you are planning a company project to move into newly leased space or build a new headquarters, to grow jobs or even to consolidate existing workforce, think about government incentives. They can provide a significant positive impact on your project's budget.
Originally published in Cincinnati Business Courier
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
