Bradley attorney Tom Trent was quoted by the Tennessee Municipal League on how municipalities can balance the pluses and pitfalls of tax incentives. As a state, Tennessee offers the fourth highest amount of incentives in the nation, providing more than $2.5 billion worth of incentives annually, including property tax breaks, grants, and other subsidies.
Trent said the impact incentives can have and how companies choose where to locate have changed rapidly in the past decade.
“With the analytics available on the internet, software programs, and subscription services, site-selection consultants are now not site selectors but site eliminators,” Trent said. “Their job is to eliminate their site, and if you have gotten to the point that a site selector has called you, it means you’ve made it past the first several rounds. You won’t even know it if you have been eliminated before that.”
Additionally, Trent said recruiting business has gotten much more competitive even before incentives come into play.
“There are also many more states playing this game than there were 10 or 20 years ago. The competition is bigger,” he said. “TVA used to be the main power company that was driving economic development, but now many utility companies are working on economic development. Some of the things that were advantages in our region are not as much of an advantage anymore.”
Trent said other considerations – such as having a ready site with utilities – are much more important to companies than incentives. However, incentives can still sweeten the pot.
“Speed is critical and having a site ready is critical,” he said. “You need to have an inventory of land. Incentives alone will not get you a deal. It used to be true, but it isn’t any more. However, they can help by lowering the cost of infrastructure. Once they have narrowed it down to a few sites incentives can make the difference. Once they’ve gotten to that site selection level, developers will also tell you that if you don’t put any incentives in, you’re no longer in the game. Incentives are a way to stay in the game.”
The complete article, “Weighing the costs: Making smart choices with business incentives,” appeared on the Tennessee Municipal League website on August 20, 2018.