Economic incentives continue to play a critical role in the corporate site selection process. Economic incentives such as tax abatements, tax credits, cash grants, training grants and infrastructure grants can prove to be extremely valuable when determining the optimal location for a company. To help understand economic incentive trends in the U.S., Site Selection Group evaluated economic incentive deals announced during the third quarter of 2018 to help you better understand the economic incentive climate. 

$1.5 billion in economic incentives

As of the date of publication, Site Selection Group identified 489 economic incentive packages offered to companies across the United States during the third quarter of 2018. These economic incentive packages represent an estimated total incentive value of approximately $1.5 billion. To garner these economic incentives, companies are expected to spend $23 billion of capital and generate over 50,000 new jobs, resulting in:

  • a total return on investment of approximately 6.4%;
  • an average economic incentive award of $29,355 per new job;
  • an average incentive award of approximately $3 million per project; and
  • a median economic incentive award of approximately $440,000.

When comparing the third quarter of 2018 with Q3 2017, this quarter had significantly less incentives in terms of the overall value with $1.5 billion compared to $4.2 billion. The differential is due to two major announcements last year, Foxconn Technology garnering $3 billion in incentives from Wisconsin and Apple securing $208 million from Iowa.

In comparing Q2 2018 to Q3, the number of announced projects offered economic incentives decreased from 538 to 489, or 9.1%. This is an annual trend because we tend to see the largest number of deals announced in the second quarter each year. While the number of deals decreased, the average incentive award per new job increased from $27,846 to $29,355.

The 489 announced economic incentive packages represented 40 states, led by Iowa with 86 deals and Kentucky with 54. The number of announced projects in the third quarter in Iowa was higher than usual based on the multitude of announced U.S. Small Business Administration loans. New York and Nevada offered the largest value of economic incentives with $215 million and $182 million, respectively.  

The following chart depicts the 489 projects broken out by estimated incentive values:

Picture1 EI-753518-edited

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Approximately 66%, or 323 of the 489 announced projects, were awarded economic incentive packages valued at $1 million or less and 90% were awarded economic incentive packages valued at $5 million or less. While the average economic incentive package was valued at approximately $3 million for all 489 announced projects, the average economic incentive package for the top 25 deals was approximately $40 million.

The top 25 economic incentive packages announced in the third quarter represent approximately $1 billion of the total $1.5 billion of estimated incentives, almost 68%.  These projects in isolation will account for:

  • $14 billion of capital investment;
  • 10,855 new jobs;
  • a return on investment of approximately 7%; and
  • $91,679 per new job.

20 of the largest economic incentive packages in the third quarter

The following table identifies some of the largest economic incentive deals (removing real estate development and film incentives) offered in the third 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
Bigelow Aerospace NV Research, Design & Devel. 158.72 6,566 5
Regeneron Pharmaceuticals NY Manufacturing 140.00 800 1,500
Komatsu WI Headquarters (HQ) 84.50 285 443
McKesson OH Headquarters (HQ) 83.00 225 1,032
Micron Technology VA Research, Design & Devel. 70.00 3,000 1,100
Publix Super Markets NC Warehousing and Dist. 51.62 300 1,000
US Steel Corp. IN Manufacturing 47.00 750 0
Haier Group Corp. KY Manufacturing 40.00 277 0
The RealReal NJ Warehousing and Dist. 38.85 14 777
Suuchi NJ Manufacturing 37.17 11 410
Michigan Spartan MI Manufacturing 27.60 425 300
Project Cardinal CO Headquarters (HQ) 27.00 100 800
Global Win KY Manufacturing 25.00 150 500
ADAC Automotive MI Headquarters (HQ) 23.20 24 50
Swagelok OH Headquarters (HQ) 13.00 30 1,000
Pfizer MI Manufacturing 11.50 465 450
Corelle Brands Holdings NY Manufacturing 11.05 50 25
Global Payments OK Headquarters (HQ) 10.80 40 345
Hormel Foods Corp. IA Manufacturing 10.50 150 210
Unique Designs NJ Manufacturing 10.05 4 134

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Each of the two largest announced economic incentive awards received over $100 million of estimated incentive value. In Nevada, Bigelow Aerospace was awarded sales tax and personal property tax abatements with a combined estimated value of $159 million, which is valued based on its sizable investment of $6.5 billion to develop and manufacture the company’s spacecraft. The second largest package was awarded by New York in the amount of $140 million to Regeneron Pharmaceuticals, consisting of $70 million through the New York Excelsior Jobs Program and $70 million from Empire State Development. 

An interesting variation when comparing the top 20 projects by quarter is that there is a greater representation of states offering economic incentives this quarter. For example, Michigan and Oklahoma had sizable non-real estate announced projects in the top 20. Other states, such as New Jersey, which we see represented often in the top 20, is only listed three times.  

There were also quite a few announced headquarters projects, of which five of the six in the top 20 deals were for plans to relocate within the same city or state, or both. The anomaly was “Project Cardinal” now known to be VF Corp., The North Face’s parent company, to relocate their global headquarters from Greensboro, North Carolina, to Denver. The company was awarded $27 million in performance-based tax credits through the Colorado Job Growth Incentives Tax Credit program for creating 800 new jobs and investing $100 million.

Notable awards in the business services industry during the third quarter

Not all projects are mammoth. Thus, we like to share notable third-quarter projects garnering economic incentives in the business services industry:

Company Location Incentives Value (USD m) Capex (USD m) Jobs Created
Arch Capital Group NC 6.81 13 365
National General Holdings Corp NC 6.34 12 626
KPMG International CT 3.00 0 110
TaskUs NM 3.00 9 695
Experian IN 2.60 2 100
Equipment and Engineering Corp. IA 2.35 0 17
Morley Cos. MI 2.00 5 525
Booz Allen Hamilton Holding Corp. NC 1.98 5 208
RJ Lawn Service IA 1.80 0 10
Mountaintop IA 1.73 0 1
William V. Jorgensen IA 1.70 0 1
Collette Travel Service RI 1.50 0 75

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

Economic incentives and industry trends

The following chart depicts the breakdown of the 489 announced projects during the third quarter of 2018 by industry sector:

Picture EI-871831-edited

Data Source: IncentivesMonitor, a service from WAVTEQ Limited. 

We continue to routinely monitor announced projects to help companies estimate the level and kind of economic incentives that may be applicable to future projects. 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.

Source: IncentivesMonitor, a service from WAVTEQ Limited. 

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