by Kelley Rendziperis, on Aug 22, 2022 1:14:10 PM
There was a large increase in the number of announced projects and economic incentives awarded in the second quarter. To help understand economic incentive trends, this report evaluates economic incentive deals announced during the second quarter of 2022.
$4 billion in economic incentives
As of the date of publication, Site Selection Group identified 580 economic incentive packages offered to companies across the United States during the second quarter of 2022. These economic incentive packages represent an estimated total incentive value of approximately $4 billion. To garner these economic incentives, companies are expected to spend roughly $47.3 billion of capital investment and generate over 102,400 new jobs, resulting in:
- A total return on investment of approximately 8.5%
- An average economic incentive award of $39,234 per new job
- An average incentive award of approximately $6.9 million per project which is heavily skewed by a couple of mega projects announced this quarter
- A median economic incentive award of approximately $500,000
When compared to the second quarter of 2021, Q2 2022 had an increase in the number of projects by roughly 37.1%, from 346 to 580 projects; a 132% increase in the total value of announced economic incentive awards, and a 17.6% increase in the average award per job. Other major metrics saw increases, with capital investment increasing 165.4% and the number of jobs to be created increasing 97%. The average return on investment for Q2 2022 decreased to 8.5% from 11.6% in Q1 2022.
The largest announced economic incentive package this quarter, in excess of $1.4 billion, was offered to Rivian, an electric vehicle manufacturer. The company plans to invest $5 billion to establish a new manufacturing facility near Atlanta. The company will create 7,500 new jobs over a six-year period paying an average annual wage of $56,000. The offer includes $700 million in property tax abatements from Jasper, Morgan, Newton, and Walton counties. The company has also been approved for $280 million in sales tax credits, $200 million in income tax credits, $262.5 million in development incentives, and a $27 million training grant from the state of Georgia to support the project.
The 580 announced projects during the second quarter represented 37 states, led by Ohio with 75 announced projects and Indiana with 53, excluding film or real estate projects. Georgia and California offered the largest amount of announced economic incentive awards totaling $1.49 billion and $336.41 million, respectively. As mentioned above, the most notable project from Georgia is Rivian, and the most notable project from California is Relativity Space, which manufactures orbital rockets. It was awarded $30.71 million in tax credits through the California Competes Tax Credit program. The performance-based incentive is contingent on the company meeting capital investment and job creation targets. Relativity Space plans to invest $100 million to expand its operations in Long Beach and Lompoc, California. The company will create 1,044 new jobs paying an average annual wage of $76,000.
Top 10 States for Number of Announced Incentive Packages*
*Inclusive of all project types, 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 61%, or 356 of the 580 announced projects, were awarded economic incentive packages valued at $1 million or less and 86% were awarded economic incentive packages valued at $5 million or less. While the average economic incentive package was valued at approximately $6.9 million for all 580 announced projects, the average package for the top 25 deals was approximately $115 million.
Economic incentives and industry trends
The following chart depicts the breakdown of the 580 announced projects during the second quarter of 2022 by industry function:
Number of Projects by Industry Function in Q2 2022
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Manufacturing continues to be the top incentivized industry function this quarter. The sector was led by Rivian, detailed above, as well as other automotive investments made by Ford Motor Co. in Ohio and Michigan, and Stellantis in Indiana.
The chart below illustrates the level of capital investment committed by the industry sector this quarter:
CapEx Value by Industry Sector in Q2 2022 (USD M)
Data Source: IncentivesFlow, a service from WAVTEQ Limited
The top industry sectors in terms of projected capital investment were the electronics and automotive sectors, which together account for nearly 42% of all the investments announced during this period. The top five projects in isolation account for $13 billion of planned capital investment.
Notable economic incentive packages in the second quarter
The top 25 economic incentive packages announced in the second quarter represent approximately $2.9 billion of the total $4 billion of estimated incentives for all projects or approximately 72%. These projects in isolation will account for:
- $27.6 billion of capital investment
- 47,884 new jobs
- A return on investment of approximately 10.4%
- An average award per new job of $60,186
The following table identifies some of the largest economic incentive deals (removing real estate development and film incentives) offered in Q2 2022. 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) | Jobs Created |
| Rivian | Unspecified (GA) | Manufacturing | $1,469.5 | $5,000.0 | 7,500 |
| Ford Motor Company | Avon Lake (OH) | Manufacturing | $205.0 | $1,500.0 | 1,800 |
| Stellantis | Kokomo (IN) | Manufacturing | $186.5 | $2,500.0 | 1,400 |
| Ford Motor Company | Multiple locations (MI) | Manufacturing | $135.2 | $2,000.0 | 3,200 |
| Envision Group | Bowling Green (KY) | Manufacturing | $121.8 | $2,000.0 | 2,000 |
| Syrah Resources | Vidalia (LA) | Electricity & Extraction | $107.0 | $176.0 | 98 |
| Lockheed Martin | Stratford (CT) | Manufacturing | $75.0 | $84.0 | 7,750 |
| Electric Power Systems (EP Systems) | North Logan (UT) | Headquarters (HQ) | $69.9 | $0.0 | 3,130 |
| Lego | Chesterfield (VA) | Manufacturing | $56.0 | $1,000.0 | 1,760 |
| Sino-American Silicon Products | Sherman (TX) | Manufacturing | $49.0 | $5,000.0 | 1,500 |
| Catalent | Bloomington (IN) | Manufacturing | $44.0 | $350.0 | 1,000 |
| Amazon | Unspecified (KY) | Warehousing and Distrib. | $40.0 | $2,064.0 | 600 |
| Vistra | Metropolis (IL) | Manufacturing | $40.0 | $50.0 | 0 |
| Relativity Space | Multiple locations (CA) | RDD | $30.7 | $100.0 | 1,044 |
| Applied Materials | Multiple locations (CA) | Manufacturing | $30.0 | $2,000.0 | 683 |
| Discord | San Francisco (CA) | Business Services | $27.9 | $85.0 | 1,434 |
| Microsoft | Multiple locations (CA) | Business Services | $25.7 | $400.0 | 1,789 |
| Astra Space Operations | Multiple locations (CA) | Manufacturing | $25.0 | $300.0 | 664 |
| Intuitive Surgical | Sunnyvale (CA) | Manufacturing | $24.0 | $260.0 | 2,000 |
| CVMR Corporation | Amarillo (TX) | Manufacturing | $24.0 | $1,500.0 | 2,500 |
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 industry:
| Company | Location | Industry function | Incentives Value (USD m) | Capex (USD m) | Jobs Created |
| Discord | California | Business Services | 27.90 | 85.0 | 1,434 |
| Microsoft | California | Business Services | 25.65 | 400.0 | 1,789 |
| Goldman Sachs Group | Texas | Business Services | 18.02 | 480.0 | 2,500 |
| System1 OpCo | California | Business Services | 5.50 | 7.0 | 197 |
| American Financial Group | Ohio | Business Services | 5.07 | 8.0 | 150 |
| Acadia Healthcare | Illinois | Business Services | 4.60 | 76.0 | 500 |
| Braze | Illinois | Business Services | 2.84 | - | 75 |
| Sondhi Solutions | Indiana | Business Services | 2.75 | 4.2 | 175 |
| Kronos | Indiana | Business Services | 2.50 | 1.0 | 200 |
| Ultimate Kronos Group (UKG) | Indiana | Business Services | 2.50 | - | 200 |
Data Source: IncentivesFlow, a service from WAVTEQ Limited
Note there were no announced call center projects awarded incentives in the second quarter of 2022.
Conclusion
The metrics of Q2 2022, with approximately $4 billion of economic incentives awarded in exchange for $47.3 billion of capital investment and the creation of 102,438 new jobs, are significantly higher than we have seen in a long time. While this is encouraging for the economy, increasing inflation and supply chain issues may drastically affect future economic activity and economic incentive awards. We will continue to analyze these changes on a quarterly basis.
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 Matthew Kahn.
