‘Incent me’
By: J. David Chapman/January 16, 2020
“Incent me” is the reply often heard by economic development organizations in response to asking companies to consider relocating to their city. If you want to start a controversial conversation in your local coffee shop, talk about providing incentives to companies to relocate to a certain area.
Real estate developers, investors, property managers, and building owners clearly benefit when new companies move into their areas, increasing demand for space and helping decrease vacancies. Cities, schools and citizens also generally benefit when companies move to their area or expand current operations.
Some citizen groups see the rush to recruit companies as an arms race between cities and states, forcing very high cost-per-job economic development schemes to be used. The recent pushback from the Amazon headquarters fiasco has inspired more cities and states to do rigorous analyses of the impact of these incentives.
Corporate site selection is complicated; however, there is a list of positive attributes that tend to be pretty consistent: labor availability, reasonable labor costs, a good education system, workforce development initiatives, low personal and corporate taxes, employer-friendly labor laws, a minimal union presence, accessibility, economic incentives, reasonable real estate costs, reasonable utility costs, good local government, and quality of life for employees.
The relocation requirements have not changed much over the years; however, the selection analytics to help support local, regional and international location decisions is much more sophisticated and complex. Economic development organizations have been forced to not only understand the site selection analytics, but also use them in their own analysis.
One of the complicating issues of economic development is that providing incentives to new companies to relocate to your area can sometimes alienate current companies that have not received any incentive package. It is especially difficult when existing businesses feel like they are competing with the new companies for customers or employees.
The incentive game has expanded to incentivize the amenities that incentivize the companies to relocate. Knowing that companies are concerned about talent, Tulsa recently announced a scheme that pays young talent to relocate to the city. Arenas and stadiums are being built all over the country to incentivize professional teams as a necessary ingredient to attracting companies. It’s complicated, it’s controversial, and it’s unfortunately necessary. Welcome to the world of economic development and incentivizing companies to relocate to your hometown.
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).