A common misperception is that a big bag of tax incentives is the key to communities gaining large scale corporate site location projects. Incentives matter but they are the “icing and not the cake.” Successful corporate site location projects often begin with the development of a site built through a Public-Private-Partnership (PPP).
Site development projects are accomplished through four critical steps that include:
- Understanding the highest and best use for the site through land use planning and industry cluster analysis;
- Aligning the zoning for the site to the highest and best use;
- Utilizing public finance, state and federal government programs to provide the infrastructure needed for the site to develop; and
- Gaining the tax abatement, tax credits and sales tax exemptions that make the site attractive to end users.
A solid land use master plan that engages the public, understands the infrastructure and uses of surrounding properties, and recommends the highest and best use for targeted sites in a community is the natural beginning place for successful site development efforts. Community engagement matters as the residents of the area need to embrace land use changes that can create jobs. In addition, research of the industries likely to locate in the region and their site need are an important planning tool. Defining the transportation and infrastructure costs for the site are the final essential planning step for site development strategies.
No corporate site location project happens without the site being zoned for the intended use of the company. All sorts of corporate site location projects happen without tax incentives but few companies will consider sites that do not have the zoning established. Zoning is a volatile process where angry neighbors get their chance to vent about potential land use changes. Local government officials need to make some tough decisions that benefit the larger community over the opposition from nearby property owners.
Financing public infrastructure is the next step in site development efforts. 49 states utilize Tax Increment Financing (TIF) programs that generally create a tool to capture the future growth of taxes generated by planned investment at the site. TIFs often require not just the approval of the local government officials but also involve complex negotiations with local school districts who live off the growth of property tax that are lifeblood of school finance. Many states permit the capture of other local government taxes through joint governmental programs such as Joint Economic Development Districts that can be used for public infrastructure needs. Finally, many states offer infrastructure grants programs tied to job creation which provides funding when an end user decides to locate at the site.
Finally, tax incentives, generally tax abatements, tax credits or tax exemptions, provide the final impetus for companies to locate at a site and many of these tax incentives can be negotiated at the site prior to a company considering the site for a corporate site location project. Tax abatements in particular and how they interact with state TIF programs is critical to understand. Infrastructure finance programs and tax abatements can attempt to capture the same growth in property tax. Often developers will provide TIF payments through tax growth or small assessments on the land tied to future use to create a revenue stream for local school districts.
Let’s look at Ohio as to how all this site development work happens. Pickaway County is connected to the highly successful Rickenbacker Intermodel in Central Ohio tied to the Rickenbacker Airport and the Norfolk Southern Intermodel facility. To capture the potential economic growth outside the fence of the airport, Harrison Township in Pickaway County undertook a land use plan that identified substantial acreages of farm land that should become logistics and industrial development and a Rickenbacker Industrial zoning standards and category were created. Next, a national developer purchased 122 acres of land in Harrison Township for the purposes of developing industrial and logistics projects. Through a confrontational process with local neighbors, the developer successfully gained the Rickenbacker Industrial zoning status with the support of the Harrison Township Trustees. Following the infrastructure and transportation study, a TIF agreement was negotiated with the Pickaway County Commissioners and the local school districts that provided a funding stream for the school district through the use of a Community Reinvestment Area (CRA) tax abatement. In addition, infrastructure funding for the local governments and the developer was funding through a JEDD set up years before in anticipation of the development that captured the income tax that would be generated by the companies and employees locating at the site. Finally, three speculative buildings were built and three companies, after the award of state tax incentives, brought over 1000 jobs to this 122 acre site within a couple years of the start of the project. Building the PPP involved experienced counsel, a patient developer and local government and school district leaders committed to attracting jobs to the region.