Deal-Closing Economic Incentive Funds from States Lure Big Corporate Investments
by Kelley Rendziperis, on May 15, 2018 9:23:50 AM
When a company is evaluating whether to make an investment during the site selection process, there is often a cost gap that needs to be bridged to make a state and/or community more competitive. This gap may be wide or narrow, but either way, it is imperative for a jurisdiction to have the tools necessary to compete for high profile projects. After considering all statutory and quasi-discretionary economic incentive programs available, the primary means to bridge any remaining cost gap is with deal-closing funds. This article summarizes a few state deal-closing funds and projects which were awarded such funds.
Arkansas*
The Governor’s Quick Action Closing Fund allows Arkansas to provide cash grants to attract new business or economic development to the state or to keep existing business in the state. Historically, Arkansas’ Quick Action Closing Fund has been offered with few restrictions. The following chart depicts projects which benefited from Arkansas’ deal-closing fund, which has disbursed in excess of $150 million since its inception.
| Company | AR Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| DBG Group | Conway | Headquarters | 0.65 | 0 | 200 |
| Envoy Air | Little Rock | R&D | 0.5 | 2 | 60 |
| Remington Outdoor | Jonesboro | Manufacturing | 1 | 13 | 110 |
| FMH Conveyors | Lonoke | Manufacturing | 2.5 | 0 | 84 |
| SIG Sauer | Jacksonville | Manufacturing | 0.8 | 0 | 50 |
Florida*
Like Arkansas, and many other states, Florida’s deal-closing fund is also named the Quick Action Closing Fund. This fund, as well as the rest of Florida’s incentive programs, has been the subject of controversy over the past two legislative sessions and currently remains unfunded, despite Gov. Rick Scott’s pleas for $200 million. Since Florida’s deal-closing fund has been unfunded over the past two years, the following sampling of projects represent incentives awarded in 2016.
| Company | FL Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| KLX Aerospace Solutions | Hialeah | Headquarters | 1.70 | 48 | 400 |
| Thales | Orlando | Manufacturing | 3.50 | 23 | 500 |
| KLS Martin Group | Jacksonville | Manufacturing | 0.42 | 5 | 25 |
| Arthrex | Naples | Manufacturing | 5.90 | 63 | 560 |
| Abel Ribeiro da Silva | White Springs | Manufacturing | 0.69 | 60 | 45 |
Georgia*
To close the deal, Georgia utilizes its Regional Economic Business Assistance (REBA) Program. REBA funds may be used to finance various fixed-asset needs of a company including infrastructure, real estate acquisition, construction, or machinery and equipment.
| Company | GR Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| Assurant | Duluth | IT Support Center | 0.34 | 2 | 335 |
| Amazon | Macon | Distribution Center | 1.56 | 0 | 500 |
| S&S Activewear | McDonough | Distribution Center | 0.25 | 0 | 300 |
| Meggitt | Rockmart | Manufacturing | 0.80 | 30 | 211 |
| Irving Group Moncton | Macon | Manufacturing | 1.00 | 400 | 200 |
Nevada*
Nevada’s Catalyst Fund was created in 2011 and to date was awarded to 19 companies, totaling approximately $10M. The fund incentivizes the expansion or relocation of businesses that will quickly result in the creation of high-quality, primary jobs in Nevada. Recent projects awarded grants from the Catalyst Fund are:
| Company | NV Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| Mary's Gone Crackers | Reno | Manufacturing | 2.23 | 19 | 220 |
| Hyperloop Tech, | Las Vegas | Infrastructure | 9.92 | 121 | 89 |
| Bently Heritage | Minden | Infrastructure | 0.10 | 10 | 12 |
| Barclays | Henderson | Business Services | 1.13 | 8 | 150 |
| Grand Rounds | Reno | Business Services | 0.15 | 1 | 70 |
New Mexico*
LEDA, the Local Economic Development Act, is a law that established New Mexico’s deal-closing fund. The program is administered at the city or county level and its goal is to reward projects which reflect a ratio of 10:1 private investment to LEDA funds. Some recent LEDA recipients of the $45 million-dollar fund are as follows:
| Company | NM Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| Leprino Foods Co. | Roswell | Manufacturing | 0.20 | 15 | 5 |
| Carenet Healthcare Services | Albuquerque | Business Services | 0.79 | 3 | 244 |
| Vitality Works | Albuquerque | Manufacturing | 0.55 | 0 | 80 |
| PreCheck | Alamogordo | Business Services | 0.15 | 0 | 30 |
| UbiQD | Los Alamos | Headquarters | 0.65 | 1 | 20 |
Texas*
The Texas Enterprise Fund (TEF) is known as the largest deal-closing fund in the nation. After calls for transparency and more reporting, the program has set guidelines upon which the funds can be awarded. At a high level, the TEF requires a local match, a minimum number of jobs and wages that exceed the country average wage of the desired location. Recent TEF awards include the following:
| Company | TX Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| JSW Steel | Baytown | Manufacturing | 3.40 | 500 | 500 |
| Smith & Nephew | Ft. Worth | Manufacturing | 0.73 | 29 | 100 |
| Gartner | Irving | Business Services | 4.30 | 12 | 800 |
| Golden State Foods | Burleson | Manufacturing | 2.70 | 70 | 150 |
| Cognizant Tech Solutions | Irving | IT Support Center | 2.11 | 8 | 1,090 |
Virginia*
The Commonwealth’s Opportunity Fund is a discretionary incentive available to secure a business location or expansion project for Virginia. The level of capital investment and job creation required is dependent upon the location, as well as a local match.
| Company | VA Location | Industry Function | Incentive Value ($M) | Capex ($M) | Jobs Created |
|---|---|---|---|---|---|
| Nestle | Rosslyn | Headquarters | 1.73 | 5 | 150 |
| Appian Corp. | Tyson Corner | Headquarters | 4.00 | 28 | 600 |
| Tessy Plastics | Lynchburg | Manufacturing | 0.20 | 9 | 34 |
| MicroStrategy | Tysons Corner | Headquarters | 1.00 | 6 | 300 |
| Panacea BioMatx | Danville | Manufacturing | 0.51 | 6 | 70 |
Conclusions
In addition to state deal-closing funds, local communities frequently have funds available to make grants for infrastructure, capital investment or training. In our experience, even if it is used infrequently, establishing a deal-closing fund is necessary to quickly compete for desired high impact projects.
Note that the incentive values reflected in the charts above oftentimes include other economic incentive programs and are not solely from deal-closing funds. If you have any questions about these projects or deal-closing funds, please contact me at krendziperis@siteselectiongroup.com.
* Data Source: IncentivesMonitor, a service from WAVTEQ Limited.
