Tax breaks and training incentives for big employers usually grab headlines. But they shouldn't grab too much attention when it comes to site selection, experts say. "We tell our clients to look at incentives last, but there are an awful lot of companies that look at it first," said Clint Hoch, director of location advisory services for DCG Corplan LLC in West Orange, N.J.
Common incentive packages include tax credits, labor training funds and grant money to help with infrastructure improvements, said John Boyd, president of Princeton, N.J., site-selection firm Boyd Co. Inc. Labor training funds probably are the largest conduit of public money to private companies, he said.
"Most of these programs are replicated in a vast number of states now, so that we can negotiate similar packages in all 50 states," Boyd said. "Tax incentives have a limited return. Once these tax incentives go away, you better be in the right location."
Mack Molding Co. Inc. does not give incentives much weight, said Jeff Somple, vice president of sales and engineering at the Arlington, Vt., injection molder.
Besides being where the customer wants them — which sometimes precludes being in the lowest-cost area — the company puts much more weight on ongoing costs like labor and utility rates.
"Sometimes you can get seduced by cheap land and incentives," he said. "If you are going to be somewhere for 20 or 30 years, no one is going to remember the great deal you got in 1999 when you can't hire workers."
Companies also have to be careful to uphold the terms of the incentives, which are sometimes linked to hiring a certain number of workers or paying them a certain wage, said Hoch. If not, then incentives must be repaid, which is known as a "clawback," he said.
Injection and dip molder Protective Closures Co. Inc. has to employ 50 within three years as a result of an expansion at its Buffalo, N.Y., factory, or pay back some of more than $3 million in grants, tax abatements and low-interest loans.
So far, Protective is on track for those hiring goals for the $8 million, 74,000-square-foot expansion of its molding capability, said Susan De Wald, vice president of finance.
Protective looked at places in New York outside the Buffalo area, and had space available in the South in buildings owned by its parent, Mark IV Industries Inc. of Amherst, N.Y., she said. But the company preferred to remain in Buffalo, and got a very attractive offer from the city and other local officials, she said.
"They were very aggressive," De Wald said. "Buffalo is not a depressed area, but it is a depressed area for manufacturing."
Protective got $1.3 million in property tax abatement, $260,000 in sales tax abatement, $1.1 million in loans and grants for equipment and parking, and $500,000 in loans and grants for road improvements, she said.
De Wald recommends not taking a heavy-handed approach with economic development officials because a good relationship carries other benefits. State officials steered her to $50,000 in worker training grants she was not aware of, and unilaterally increased the size of the road improvement package from what the firm had requested, De Wald said.
Incentives should be considered only when a company has its search down to three or four good sites, said Dennis Donovan, a principal with Wadley Donovan Group in Morristown, N.J.
"With labor the way it is, don't worry about incentives," Donovan said. "There is no way an incentive package will make a poor area a good one for plastics."