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Largest Economic Incentive Deals of Third Quarter 2017

by Kelley Rendziperis, on Oct 24, 2017 1:48:23 PM

During the third quarter of 2017, the value of incentives offered increased 309% from $1.02 billion to $4.2 billion and total investment increased 59% from $10.5 billion to $25.9 billion from the prior quarter, even though the number of projects offered economic incentives decreased 43.4% from 581 to 329. 

The average award per job increased by 287% from $15,373 to $59,497 from the prior quarter. The increases in the value of incentives offered and the average award per job were primarily due to the top two largest incentive packages, which were $3 billion in incentives offered to Foxconn Technology Co. and $207.9 million in incentives offered to Apple.

As widely reported, Foxconn Technology was offered $3 billion in incentives over the next 15 years from the state of Wisconsin to establish a 20 million-square-foot manufacturing and campus facility. The company plans to invest $10 billion and create 13,000 direct jobs paying an average wage of $54,000 and 22,000 indirect and induced jobs. For additional information on the Foxconn project, see my article at: https://info.siteselectiongroup.com/blog/foxconn.

The next largest incentive package of $207.9 million during the third quarter was offered to Apple, which plans to invest $1.37 billion to build two new data centers totaling 400,000 square feet in Waukee, Iowa. The project will create 50 new jobs and 550 construction jobs.

Kentucky had the most announced economic incentive projects during the quarter with 47 deals valued at approximately $20 million through the Kentucky Business Investment (KBI), Kentucky Enterprise Initiative Act (KEIA) and Kentucky Small Business Tax Credit (KSBTC) programs. 

To help understand economic incentive trends, Site Selection Group has evaluated the economic incentive deals announced during the third quarter of 2017.

More than $4.2 billion in economic incentives
As of the date of publication, Site Selection Group identified 329 economic incentive packages offered to companies across the United States during the Q3 2017. These economic incentive packages represent an estimated total incentive value of more than $4.2 billion. To garner these economic incentives, companies are expected to spend more than $25.9 billion of capital and generate over 70,700 new jobs, resulting in:

  • A total return on investment of approximately 16.2%;
  • An average economic incentive award of $59,497 per new job;
  • An average incentive award of approximately $12.7 million per project; and
  • A median economic incentive award of approximately $500,000.

The 329 announced economic incentive packages represented 34 states, led by Kentucky with 47 deals, Michigan and Ohio with 26 and North Carolina with 23. The states that included projects with the largest amount of incentives offered include Wisconsin with $3.04 billion (Foxconn), Iowa with $212 million (Apple), New Jersey with $174 million, Michigan with $142 million and Ohio with $104 million. 

The following chart depicts the 329 projects broken out by estimated incentive values:

Number of Projects by Incentive Value

Number of Porjects by Incentive Value-1.jpg

Approximately 64.4% or 212 of the 329 announced projects were awarded economic incentive packages of $1 million or less and 88.1% were awarded economic incentive packages valued at $5 million or less. While the average incentive package was valued at $12.7 million for all announced projects, the average incentive package for the top 25 deals was $153.5 million.

The top 25 economic incentive packages announced in the third quarter represent approximately $3.83 billion of the total $4.2 billion of estimated incentives, over 91%. These projects in isolation will account for:

  • $15.9 billion of capital investment;
  • Over 31,600 new jobs;
  • A return on investment of approximately 24.1%; and
  • $121,000 per new job.

The following graph reflects the top 25 projects by industry function:

Number of Projects by Industry Function

Number of Projects by Industry Function-2.jpg

20 of the largest economic incentive packages in the third quarter
The following table identifies some of the largest economic incentive deals offered, in various industry functions, in the third quarter of 2017. 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 Incentive Value
($M)
Capex ($M) Jobs Created
Foxconn Technology Co. WI Manufacturing 3,000.00 10,000 13,000
Apple IA Data Center 207.9 1,375 50
EmberClear IL Manufacturing 50 1,000 30
Digi-Key Corp. MN Warehousing & Distribution 40 200 1,000
Sanofi NJ Headquarters 39.94 40 0
Facebook OH Data Center 37.1 750 100
Sidecat OH Data Center 37.08 750 50
Modern Meadow NJ Manufacturing 32.22 21 263
Infosys NC Research, Design & Development 29.9 9 2,000
Nokian Renkaat TN Manufacturing 28.4 360 400
Wal-Mart (Jet.com) NJ Headquarters 25.76 5 322
Adobe Systems UT Business Services 25.75 90 1,260
The Allstate Corp. NC Business Services 23.75 22 2,250
Recruit Holdings CT Business Services 22 27 500
Pluralsight UT Headquarters 21.55 372 2,400
Haribo WI Manufacturing 21 220 385
Amazon NY Business Services 20 55 2,000
Amazon NY Warehousing & Distribution 18 100 2,250
Paychex NY Business Services 14 58 625
Catamount Dairy Holdings NY Manufacturing 14 200 230

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

Company Location Industry Function Incentive Value
($M)
Capex ($M) Jobs Created
Berkshire Hathaway FL Business Services 2.74 12 500
Magellan Health RI Business Services 2.1 0 100
eHealth Technologies NY Business Services 2 0 160
Optomi AL Business Services 1.5 7 300
Cheetah Digital IN Business Services 1.15 1 50
Anthem NV Call Center 0.83 5 400
Tenneco MI Call Center 0.75 23 95
PRA Group NV Call Center 0.27 1 150
Empereon Marketing TX Call Center 0.2 2 750

Economic incentives and industry trends
To no surprise, based on Foxconn and Apple, the electronics industry sector had the two largest incentive packages reported during the third quarter of 2017 and accounted for 15 of the 329 total number of projects during the quarter. The following chart depicts the breakdown of the 329 projects during Q3 2017 by industry sector:

                                                     Number of Projects by Industry Sector During Q3 2017

Projects by Industry Sector.jpg

Between 2010 and 2016, the number of projects in the information technology & telecom industry grew from 166 deals in 2010 to 466 deals in 2016, an increase of 181%.  The industry sector with the largest percentage growth between 2010 and 2016 was in creative industries which grew 347%, from 100 in 2010 to 447 deals in 2016.

Number of Projects by Industry Sector, Between 2010 and 2016

Number of Projects by Industry Sector.jpg

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.

SSG-Incentivemonitor.com.jpg

Topics:Economic Incentives

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