Impact models can help economic development organizations evaluate projects and make smart incentive decisions. Today’s guest blogger Paul Scheuren of Impact DataSource explains how these models can also help with incentive negotiations.

Recently, Impact DataSource assisted one of our local economic development organization (EDO) clients who licenses a custom Total Impact model. The EDO was working with a business seeking a location for its planned manufacturing facility – a $300 million capital investment.

The business seemed like a match for the community – a manufacturer expecting to create 300+ primary jobs in the area and seeking to invest substantially in new taxable property and equipment. These attributes were in line with our client’s targeted industries, so it looked like the stars had aligned and economic development success was in the making.

But not so fast…

The business had a fixed incentive amount in mind; they were convinced that the local EDO should recognize the great value the company represented and more-or-less write a check for that specific amount. I won’t say the number, but think of a number bigger than $5 million. Now triple it…you’re probably still low.

By using the Total Impact model, our EDO client was able to clearly determine the total jobs to be created in the community, including spin-off employment and other economic impacts, as well as estimated tax revenues the business would generate for the local community. While the company had a gut feeling, the EDO had hard numbers. Our EDO client even asked for confirmation from us – “We’re really far apart on these negotiations, which one of us is crazy?”

The company made it past the EDO’s first few funnels to even be considered for an incentive, but ultimately it came down to understanding the value the company represented to the local community. The EDO was willing to consider some economic development incentives, but not with as many zeros as the business had hoped.

 

This post is part of a series prepared by Impact DataSource on the many uses of an economic impact study. Others include:

State-level Economic Development Incentive Program – California Competes Tax Credit

Economic Development Organization (EDO) Performance Report

Public Four-Year College Impact Analysis

Publicly Funded Business Incubator

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