Nontraditional Economic Incentives That Benefit Companies, Communities and the Workforce

Economic incentives are becoming more creative as state and local jurisdictions are trying to differentiate themselves in the battle for site selection projects while simultaneously improving their communities and helping their workforce. This article examines how state and local jurisdictions are using creative, nontraditional economic incentives to attract companies while also helping their community and workforce along the way.

Modification of existing economic incentive programs benefit companies

While economic incentives ultimately benefit companies, what happens when existing economic incentive programs are no longer effective? Some state and local jurisdictions have modified existing programs to target specific industries, higher wages or promote certain regions. They have also modified existing economic incentive programs to ensure benefits awarded are fully realized. For example, some jurisdictions have revamped traditional tax credit programs to enable companies without a state income tax liability to utilize a tax credit by making the credits saleable, refundable or transferable to other tax types (e.g., withholding tax). 

Business incubators funded by economic development help startups

The concept of business incubators is by no means a new one, but in recent years it has become an increasingly popular economic incentive tool for local governments and economic development organizations. Public actors may support these programs to foster growth in their small business communities and cultivate underdeveloped industry sectors. The primary function of an incubator is to provide a start-up company with the space and administrative services of a more mature business through the communal resources of the facility. As the firm develops, the eventual goal is for them to “graduate,” after which they fully enter the local economy and generate more tax revenue and new job opportunities for the area. Some, like the North Texas Enterprise Center for Technology in Frisco, take the relationship beyond basic funding of the incubators and provide these companies with direct access to both industry experts and the economic development staff in the hopes of imparting critical professional advice and establishing a network for the young business. Success is chiefly attributed to public sector support, an adoption of best practices by the organization and the availability of financial resources.

Transportation related economic incentives benefit communities and companies

The objective of any economic incentive negotiation should be a win-win for all parties involved. Thus, we are more frequently seeing communities structure awards to enhance benefits for directly impacting a community. Incentives which improve public transportation such as creating a new bus route, providing shuttle service from a metro stop or subsidizing public transportation are all examples. In one instance we have seen an independent third-party staffing agency provide round trip transportation from employees’ homes to work for minimal cost.    

Economic incentives directly linked to residency can directly benefit communities

Other creative packages revolve around an employee’s residency. It is common for a state program to only apply to those employees who are residents of the state; however, local communities have also begun to structure awards to either only incentivize employees who are residents of a particular city or county or to provide enhanced incentives for resident employees.

Rural or geographically undesirable locations leverage incentives to help their community

Many people are familiar with the concept of Enterprise Zones for which a jurisdiction may offer economic incentives for investing and/or creating jobs therein. This concept is often applied by state and local communities even when a site may not have a technical designation. Prior clients willing to locate in remote areas have benefited from free rent and tenant improvements, furniture, fixtures and equipment funded by the community. In exchange, a business with the flexibility to do so, such as a contact center, can make an immediate impact on such a community by creating hundreds of well-paying jobs with benefits. 

Education-based economic incentives can directly help employees

Americans owe over $1.56 trillion in student loan debt and the average 2018 graduate has debt of $30,000. To combat this problem and recruit a future workforce, some jurisdictions are implementing incentives for high school graduates to attend in-state colleges and find employment in-state after graduation. One example is New York’s Tuition Free Degree Program called the Excelsior Scholarship. This program is for families or individuals making less than $125,000 in 2019 when the student takes 30 credits per year at any SUNY/CUNY school. The student must maintain good academic standing, be on track to graduate with an associate’s or bachelor’s degree and commit to remaining in the state for the same duration of time as the degree. This cutting-edge program will enable more students to receive a higher education and help the state retain an educated workforce. Other states can provide a discretionary incentive of automatically allowing new employees to qualify as residents for purposes of in-state tuition.

Loan repayment programs are another example of incentivizing college graduates to locate in specific jurisdictions. These programs are geared to specific industries and sometimes underserved regions. All but four states offer some type of student loan repayment assistance program for their residents. For example, many states offer programs to repay student loans for attorneys who choose to pursue careers in civil legal aid. Other states will offer loan forgiveness for nurses and physicians in areas that have a professional shortage. 

Direct financial economic incentives for employees

State and local jurisdictions are not the only entities capable of luring people to a community. In Tulsa, the George Kaiser Family Foundation, with the city’s support, launched “Tulsa Remote,” a program offering a $10,000 grant and additional benefits to eligible applicants who move to and work remotely from Tulsa, Oklahoma, for a year. This program is targeted to remote or self-employed workers to raise additional sales tax revenue in a market with very low unemployment. 

Some jurisdictions aid first time homebuyers with cash, low-interest loans or home improvement incentives. We have also seen a community offer a set number of free residential lots to a company’s employees in an area in need of development and to promote homeownership.

Conclusions

As mentioned previously, a successful economic incentive negotiation results in mutual benefit. While the examples above are separated to show which party benefits from various incentives, it is worth noting that there is a benefit to all parties involved. State and local jurisdictions need to maintain a degree of flexibility in implementing economic incentive policies so that they may adapt to specific business drivers, community needs and employee assistance.