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Largest Economic Incentive Deals of Q2 2018

by Kelley Rendziperis, on Jul 23, 2018 3:04:29 PM

To help understand economic incentive trends, this report evaluates economic incentive deals announced during the second quarter of 2018. 

$1.9 billion in economic incentives

As of the date of publication, Site Selection Group identified 538 economic incentive packages offered to companies across the United States during the second quarter of 2018. These economic incentive packages represent an estimated total incentive value of approximately $1.9 billion. To garner these economic incentives, companies are expected to spend $15.5 billion of capital and generate over 68,000 new jobs, resulting in:

  • a total return on investment of approximately 12.2%;
  • an average economic incentive award of $27,846 per new job;
  • an average incentive award of approximately $3.5 million per project; and
  • a median economic incentive award of approximately $410,000.

Based on our review of economic incentive trends since the beginning of 2016 through Q2 2018, the second quarter consistently has the largest number of deals announced.  The number of economic incentive projects announced in the second quarter averaged more than 530 while other quarters averaged approximately 400 projects. 

With this trend in mind, it is not surprising to see the number of projects offered economic incentives increased 46% from 369 to 538 when comparing Q1 2018 to Q2 2018. The total value of the incentives significantly increased from $1.5 billion to $1.9 billion, a 26.5% increase in total incentives offered.  However, when comparing the incentives on an award-per-job ratio, the average incentive per job decreased from $37,792 to $27,846. 

The largest economic incentive package of over $600 million was offered to commercial real estate firm Bedrock Management Services for a $2.1 billion large mixed-use development in Detroit. The largest economic incentive package offered to a non-real estate firm was to Facebook for a new 1 million- square-foot data center in Eagle Mountain, Utah, for over $150 million in economic incentives. Facebook’s project is estimated to invest $850 million in capital and create 50 jobs, giving the company a net benefit of $3 million per position. 

The 538 announced economic incentive packages represented 34 states, led by California with 96 deals, Massachusetts with 91 and Ohio with 56. The states that announced projects with the largest value of economic incentives offered, aside from Michigan and Utah (projects noted above), include California with $183 million due to California Competes award announcements made in the second quarter, New Jersey with $111 million and Connecticut with $101 million.

The following chart depicts the 538 projects broken out by estimated incentive values:

EI Chart

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Approximately 68% or 368 of the 538 announced projects were awarded economic incentive packages valued at $1 million or less and 92% were awarded economic incentive packages valued at $5 million or less. While the average economic incentive package was valued at approximately $3.5 million for all 538 announced projects, the average economic incentive package for the top 25 deals was approximately $55 million.

The top 25 economic incentive packages announced in the second quarter represent approximately $1.37 billion of the total $1.9 billion of estimated incentives, over 72%. These projects in isolation will account for:

  • $7.1 billion of capital investment;
  • 21,680 new jobs;
  • a return on investment of approximately 19.2%; and
  • $63,268 per new job.

Facebook’s $150 million incentive deal is due to the property tax incentives estimated for the first two buildings over the next 40 years.  Should the company decide to expand further, this benefit could be significantly larger. In addition, the $150 million estimate does not include the multimillion-dollar sales tax savings the company will enjoy due to a 2016 legislative change that expanded sales tax exemptions to include data centers. The Utah sales tax exemption is specific for a new operation constructed in Utah after July 1, 2016, with a minimum building size of 150,000 square feet.  Facebook will be the first company to utilize the new sales tax exemption. 

20 of the largest economic incentive packages in the Q2

The following table identifies some of the largest economic incentive deals (removing real estate development incentives) offered in the second quarter of 2018. These projects provide a great way to benchmark what range of economic incentives exist for a variety of project types. However, it is important to understand the values are estimated and typically only reflective of state-level incentives.

Company Location Industry function Incentives Value (USD m) Capex (USD m) Jobs Created
Facebook UT Data Center 150.00 850 50
Green Bay Packaging WI Manufacturing 90.00 500 200
General Dynamics CT Construction & Infra. 83.00 852 1881
Hyundai Motor Co. AL Manufacturing 59.15 388 50
MassMutual MA Headquarters (HQ) 46.00 291 2000
Teva Pharmaceutical Ind. NJ Headquarters (HQ) 40.00 31 843
General Dynamics RI Manufacturing 34.00 792 1300
E-Trade Financial Corp. NJ Business Services 20.08 21 251
Tyson Foods TN Manufacturing 20.00 322 1600
Integra LifeScience NJ Manufacturing 17.81 16 80
Sechler Family Foods PA Manufacturing 15.56 260 1069
Festo OH Manufacturing 12.00 90 350
CVS Health TN Warehousing & Dist. 11.65 12 0
Koninklijke Ahold Delhaize RI Manufacturing 11.38 100 700
IBOD Company OH Business Services 11.10 1 463
LabCorp NC Research, Design & Develop. 10.87 30 422
Union Packaging NJ Manufacturing 10.64 11 65
Slack Technologies CO Headquarters (HQ) 10.50 0 550
UR Holdings CA Manufacturing 10.00 56 648
AmerisourceBergen PA Headquarters (HQ) 9.66 30 550

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

In addition, some notable second-quarter projects garnering economic incentives in the business services and call center industry functions are as follows:

Company Location Industry function Incentives Value (USD m) Capex (USD m) Jobs Created
Confluent CA Business Services 5.90 10 616
MightyHive CA Business Services 5.70 1 162
Deloitte AZ Business Services 5.55 34 2500
BofI Holding CA Business Services 5.00 22 160
Affirm CA Business Services 4.00 4 566
Republic Airways Holdings IN Business Services 4.00 0 600
United Collection Bureau IN Call Center 3.65 2 621
Vincit Group CA Business Services 3.65 1 100
US Bancorp OH Business Services 3.19 15 400
Niantic CA Business Services 3.00 7 255
Centene Corporation PA Call Center 1.49 20 300
Conduent Commercial Solutions CA Call Center 1.00 2 400

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Economic incentives and industry trends

The following chart depicts the breakdown of the 538 announced projects during the second quarter of 2018 by industry sector:

EI Chart 2

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Please note that the analysis above is based on publicly available data at the time of this article.  In addition, the current quarter’s data is compared to the information available at the time of prior quarterly articles.

For additional information about these projects and others, please contact me at krendziperis@siteselectiongroup.com for any questions.

Topics:Economic IncentivesEconomic DevelopmentData CenterSite Selection GroupSite SelectionLocation Advisory

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