by Kelley Rendziperis, on Aug 24, 2021 12:15:07 PM
Site Selection Group estimates that in second quarter of 2021 more than $1.73 billion in economic incentives were offered to attract various projects in the United States ranging from office projects, such as headquarters and data centers, to industrial facilities, including manufacturing plants and distribution centers. Incentives are a vital tool for state and local jurisdictions looking for an extra edge to make their communities more attractive and cost-effective for competitive projects.
To help understand economic incentive trends, this report evaluates economic incentive deals announced during the second quarter of 2021.
$1.73 billion in economic incentives
As of the date of publication, Site Selection Group identified 423 economic incentive packages offered to companies across the United States during the second quarter of 2021. These economic incentive packages represent an estimated total incentive value of approximately $1.73 billion. To garner these economic incentives, companies are expected to spend roughly $17.82 billion of capital investment and generate over 51,892 new jobs, resulting in:
- A total return on investment of approximately 9.7%;
- An average economic incentive award of $33,352 per new job;
- An average incentive award of approximately $4.09 million per project; and
- A median economic incentive award of approximately $500,000.
When compared to the second quarter of 2020, Q2 2021 had a significant increase in the number of projects by roughly 38.7%, from 305 to 423 projects. Along with this increase in the total number of projects, the total amount of announced economic incentive awards also saw a massive increase of 249.9% (primarily due to the Apple project described below). Unlike many of the previous quarters, all of the major metrics saw increases, with capital investment increasing by 145.3% and the number of jobs to be created showing an 89.3% total growth.
The largest announced economic incentive package this quarter was offered to Apple by North Carolina to build a new research and development campus in Wake County. The proposal includes $845.8 million in Job Development Investment Grants over a 39-year period. The company plans to invest $1 billion to build the facility, create 3,200 new jobs and retain 1,110 employees in the state.
The 423 announced projects during the second quarter represented 32 states, led by Ohio with 42 announced projects and North Carolina with 39. North Carolina and Texas offered the largest amount of announced economic incentive awards with $907.32 million for 39 projects and $190.5 million for 8 projects, respectively. Some notable projects from these states include Freeport LNG Development, which is investing $2.4 billion toward the construction of a new natural gas liquefication facility in Quintana, Texas, and Intuit’s Credit Karma which is establishing a new East Coast headquarters at its existing facility in Charlotte, North Carolina.
Top 10 States for Number of Announced Incentive Packages
Data Source: IncentivesFlow, a service from WAVTEQ Limited
The following chart depicts the number of projects announced during the second quarter broken out by estimated economic incentive value:
Number of Projects by Incentive Value
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Approximately 67.1%, or 284 of the 423 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 $4.09 million for all 423 announced projects, the average package for the top 25 deals was approximately $55.19 million.
Economic incentives and industry trends
The following chart depicts the breakdown of the 423 announced projects during the second quarter of 2021 by industry function:
Number of Projects by Industry Function in Q2 2021
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Manufacturing continues to be the top incentivized industry this quarter. The sector was led by Alabama Graphite Products, which develops and manufactures advanced battery graphite products. It will invest $124 million to create a new advanced graphite processing facility in Kellyton, Alabama. The project has been offered $29.9 million in tax credits through the Alabama Jobs Act Incentives program, as well as other incentives as part of the overall package.
The chart below illustrates the level of capital investment committed by industry sector this quarter:
CapEx Value by Industry Sector in Q2 2021 (USD M)
Data Source: IncentivesFlow, a service from WAVTEQ Limited
The top industry sectors in terms of projected capital investment were Basic Materials and Food & Drink sectors, which together accounted for nearly 31.67% of all the investment announced during this period.
Notable economic incentive packages in the second quarter
The top 25 economic incentive packages announced in the second quarter represent approximately $1.38 billion of the total $1.73 billion of estimated incentives for all projects, or approximately 79.7%. These projects in isolation will account for:
- $7.18 billion of capital investment
- 16,418 new jobs
- A return on investment of approximately 19.2%
- $84,043 average award per new job
The following table identifies some of the largest economic incentive deals (removing real estate development and film incentives) offered in Q2 2021. These projects provide a great way to benchmark the potential range of economic incentives for a variety of project types. However, it is important to understand these values are estimated and typically only reflect state level incentives.
| Company | Location | Industry function | Incentives Value (USD m) | Capex (USD m) | New Jobs |
| Apple | Raleigh-Durham (NC) | RDD | $845.80 | $1,000.00 | 3,000 |
| Freeport LNG | Quintana (TX) | Warehouse & Dist. | $178.00 | $2,400.00 | 55 |
| Westwater Resources | Kellyton (AL) | Manufacturing | $35.50 | $124.00 | 100 |
| Microsoft | Multiple locations (CA) | Business Services | $35.00 | $175.00 | 2,085 |
| Relativity Space | Multiple locations (CA) | RDD | $30.00 | $319.00 | 964 |
| Torch.AI | Leawood (KS) | Business Services | $27.00 | $45.00 | 500 |
| Star Parent | Jacksonville (FL) | Headquarters | $25.00 | $75.00 | 500 |
| Intuit | Charlotte (NC) | Headquarters | $20.30 | $13.00 | 600 |
| Cue Health | San Diego (CA) | Manufacturing | $20.00 | $150.00 | 1,667 |
| Kimberly-Clark | Chicago (IL) | Manufacturing | $19.50 | $0.00 | 250 |
| WuXi AppTec Co. | Middletown (DE) | Manufacturing | $19.00 | $0.00 | 500 |
| E & J Gallo Winery | Fort Lawn (SC) | Warehouse & Dist. | $16.00 | $423.00 | 496 |
| Toyota Motor | Princeton (IN) | Manufacturing | $15.00 | $803.00 | 1,400 |
| Zoom Video Communications | San Jose (CA) | Business Services | $12.50 | $5.00 | 1,222 |
| Bay Grove | New Orleans (LA) | Warehouse & Dist. | $12.00 | $42.00 | 50 |
| The Lion Electric Co. | Joliet (IL) | Manufacturing | $7.90 | $70.00 | 745 |
| Strive Health | Denver (CO) | Headquarters | $7.50 | $0.00 | 250 |
| In-N-Out Burger | Multiple locations (CA) | Const. & Infrast. | $7.00 | $200.00 | 224 |
| Abzena | Sanford (NC) | Manufacturing | $6.90 | $213.00 | 325 |
| Firestone Industrial Products Co. | Williamsburg (KY) | Manufacturing | $6.90 | $50.90 | 250 |
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Notable awards in the business services industry during the second quarter
Most projects are not nearly as sizable in terms of incentives offered as the top 20 highlighted above. Thus, we like to share notable Q2 projects garnering economic incentives in the business services and call center industries:
| Company | Destination State | Industry function | Incentives Value (USD m) | Capex (USD m) | New Jobs |
| Melio | Denver (CO) | Business Services | $5.60 | $0.00 | 250 |
| Datadog | Denver (CO) | Business Services | $5.40 | $0.00 | 433 |
| Master Your Network (Kennected) | Indianapolis (IN) | Business Services | $4.25 | $2.00 | 405 |
| Breeze Airways | New Orleans (LA) | Business Services | $2.30 | $6.60 | 261 |
| Milliman | Indianapolis (IN) | Business Services | $2.00 | $6.00 | 95 |
| Civic Financial Services | Unspecified (CA) | Business Services | $1.80 | $0.50 | 211 |
| Technical Education Services | Chicago (IL) | Business Services | $1.52 | $0.00 | 75 |
| Mercury Broadband | Topeka (KS) | Call Centers | $0.85 | $0.00 | 168 |
| Kemper Corporation | Unspecified (NV) | Call Centers | $0.51 | $3.00 | 600 |
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Conclusion
As noted above, the overall metrics of Q2 2021 are significantly higher than the previous year. While this growth is a welcome change from the last several quarters, it is pertinent to take into consideration the changing influences of the pandemic, with variants and ongoing supply-shortages still impacting the pace of recovery. As the year progresses, we will continue to analyze these changes.
Please note that the analysis above is based on publicly available data at the time of this blog. In addition, the current quarter’s data is compared to the information available at the time of prior quarterly blogs.
For additional information about these projects and others, please contact me at krendziperis@siteselectiongroup.com with any questions.
Contributions by Nancy O’Brien Ellis and Cody Gibbs.
