Location Advisory FAQs

Answers to Your Location Advisory Questions

What are my risks?

McGuire Sponsel’s Location Advisory team works diligently to identify and reduce any risks to the client. Risks primarily come in the form of “non-performance” of incentive growth goals. These typically revolve around not achieving target investment and/or job goals as outlined in the initial phases of the incentive project. Most incentives are performance based, meaning that once performance to a set standard is achieved, the client can receive the benefit of incentives. However, if a project does not perform or performs and then reduces incentive goals below expectations, there may be the risk of “clawback” or repayment of the incentive value received to date. Additionally, if a client never performs then there is a risk of not receiving any incentives, which can be detrimental if the project anticipated the incentive value into its pro formas. McGuire Sponsel identifies these potential risks early in our process and advises clients prior to taking next steps that may obligate a client to repayment situations.

When do I need to talk about location decisions or growth projects?

It is never too early to begin the location advisory or incentive discussion. It can be too late, however… Typically, the incentive process takes between 60-90 days in advance of any “final decisions” (permits being pulled, land or building purchases, shovels going in the ground, job hirings, etc.). The process involves data collection on the project, application filings, review of project parameters with economic development decision makers, public meetings, and final award agreements. Some incentive processes may take less time and others may take more. When clients start to think about growth or expansion plans, trusted advisors should integrate incentives into those early planning stages to maximize value.

Can I get incentives for a project that has already happened?

In most cases, no… Incentives are an inducement to making a project happen. Once a project has already started or been completed, it becomes more challenging for a community to justify offering incentives. In many states, there is a “but for…” clause associated with incentives. This typically means that projects must show that, “But for the offer of incentives, the project would not take place…” In other words, “the offer of incentives by the community was the deciding factor for the project to take place within that community…” If a project has started, there may be an option to discuss growth beyond what has taken place to date. A call is always a good idea to review what may still be available from state and local economic development decision makers.

What industries are most commonly supported with incentives?

Manufacturing has always been the darling child of economic development incentives. When a “widget” is stamped with a community’s name and sent out beyond the community, “new money” flows back into the community. In this same vein, Logistics, Distribution, E-commerce, and Technology are all good options for economic credits and incentives. Headquarters operations also bring a significant amount of attention to an area and are typically supported. Additionally, major real estate development can benefit from economic incentives, such as the development of a multi-use commercial/housing block. Retail or small business operations are almost never supported.

What kind of “value” do incentives generate?

The value of economic incentives varies based on the specific program and project. In most cases, eligible projects can generate between $3,000 and $5,000 per net new job, typically disbursed over a period of 3 to 10 years. Additionally, net new investments may qualify for tax savings ranging from 3% to 10% of the eligible investment amount.

For example, a project creating 20 new jobs and investing $2 million in qualifying assets could receive between $60,000 and $100,000 in job-related tax benefits, along with $60,000 to $200,000 in investment-related tax savings over a 3- to 10-year period.

What size should my project be for incentive consideration?

All programs have their own thresholds for qualification. Typically, growth projects need to add 15 or more jobs and $1M+ in qualifying investments to receive economic incentive support. New jobs and/or investments should be created within 24-36 months of the incentive agreement signing. However, some programs require much higher thresholds, such as 50 net new jobs and $10M+ in new investments. We use the Discovery and Research phases of our Location Advisory process to identify project growth goals and which programs align with these goals.

When do I need to get your incentive team involved in the conversation about growth?

It is never too soon to have a discussion on potential incentives! It can be too late though, so the earlier the better!

How does McGuire Sponsel support incentive compliance reporting?

McGuire Sponsel’s Location Advisory team takes on compliance reporting requirements so that you don’t have to worry about deadlines, filing requirements, etc. Our team supports your growth project by keeping track of filing deadlines, coordinating specific reporting templates, and communications with economic development and state tax departments to receive benefit in a timely manner. It is often important for our team to connect with a client’s HR and Accounting departments to ensure accurate information processing.

How does McGuire Sponsel charge for services?

McGuire Sponsel structures our fee based on the individual needs of each client. A majority of our fees are success based, meaning that the client is not responsible for a fee until they receive a benefit.