By Jenny Massey
As we navigate through this time of high inflation and potential looming recession, economic development incentives have become increasingly valuable for businesses looking to thrive in this uncertain economic climate. By economic development incentives, I am referring to numerous benefits and supports provided by local and state governments or private economic development organizations to encourage economic growth in a particular region or industry. These incentives can take many forms, such as tax breaks through abatements or credits, grants, or other cost offsets.
One of the key benefits is that incentives can help businesses reduce costs and improve their bottom line. For example, if a company is struggling to cover its operating expenses due to rising costs of raw materials or labor, a tax break can provide much-needed relief and allow the company to continue operating and investing in its business.
Oliver Winery, located in Bloomington, IN, started from modest roots back in the 1960s and today it is the 28th largest winery in the United States. In early 2021 Oliver started a new partnership with NexPhase Capital to continue to scale up and accelerate the company’s growth. Decisions needed to be made with regards to expansion location and investment including the consideration of out-of-state contract manufacturing potential cost savings.
Based on the company’s plans to hire 21 employees and invest over $5 million, incentives became available in the state of Indiana worth approximately $375,000 in tax abatement and investment tax credits — and this made all the difference as to where the company decided to expand.
“Local and state incentives helped us move faster to scale up and make investments that are important to supporting growth. We can pursue growth knowing we get to a breakeven on the investment in a shorter time frame,” stated Jon Black, Oliver Winery CFO. “Even the extra step of reporting holds us accountable to closely analyzing our investments and adhere to the project plan and budget.”
Job Creation Spurred By Incentives
Moreover, incentives can stimulate job creation and boost economic growth, which are especially important during times of recession. By encouraging companies to expand or relocate to a particular area, these incentives can create new job opportunities and increase demand for local goods and services. This not only benefits individual businesses but also contributes to the region’s overall economic health.
In addition, incentives can help attract and retain top talent, which can be crucial for companies looking to stay competitive in today’s fast-paced and increasingly globalized economy. By providing training programs, and education assistance, businesses can attract and keep trained highly skilled workers who can bring fresh ideas and innovative solutions to their organization, giving them an edge over the competition.
Modular Devices is a leading provider of mobile and modular medical imaging equipment labs and cleanroom solutions throughout the United States. It is a long-time driver of innovation in the mobile cath lab industry. They recently announced the acquisition of Cardiac Services Mobile, Inc. (Cardiac Services Mobile), a mobile cath lab company out of Nashville, TN. The company opened the discussion with regards to the expansion opportunities and considerations. Based on the company’s plans to hire 52 new employees, the Indiana Economic Development Corporation (IEDC) committed an investment of up to $475,000 in the form of incentive-based tax credits and up to $50,000 in conditional training grants.
“Attracting top talent is key to the success of any organization and offering compelling training opportunities is an important part of that equation. It’s incredibly valuable when the state you’re located in can assist with growing the talent pool and offers grants to offset training costs! By investing in employees’ professional development, you’re not only helping them grow and improve their skills, but you’re demonstrating commitment to their success, well-being and attracting/retaining valuable talent,” stated Modular Devices CFO Sarah Robison.
Economic development incentives are not a silver bullet and should be used with other site selection and business strategies. While incentives can certainly provide a boost to a company’s bottom line, they should be seen as one part of a larger strategy that includes sound fiscal management, smart investments, and strong partnerships with local and state stakeholders.
Incentives can be a valuable tool for businesses looking to navigate the challenges of high inflation and potential recession climates. By reducing costs, spurring job creation, and attracting top talent, economic development incentives can help businesses thrive in an uncertain economic climate.
Tax breaks through abatements or credits, grants, or other cost offsets may be available to your company — it would be wise to seek the advice of a site selection and incentives consultant to investigate the possibilities.
Massey is Director of Site Selection & Incentives at Sikich LLP, where she leads a team committed to delivering exceptional service and results for their clients. With two decades of experience, Massey is a dedicated and accomplished business professional who has made significant contributions to the site selection industry as an experienced consultant, project manager, and advisor throughout her career. Her keen insight and innovative approach have helped many organizations across a range of industries and sizes achieve their goals and grow their businesses. Massey is a panelist at Business Facilities LiveXchange event in Myrtle Beach, SC taking place April 24-26, 2023.