Transcript Duff & Phelps

Business Incentives and Site Selection - Private Sector
Perspectives & Experience
Presented to: Kansas Economic Development Alliance
Joseph Pilewski
Duff & Phelps, LLC
October 24, 2012
Presentation
I.
Comparison of Business Incentives
II.
Site Case Studies
III. Lessons Learned
IV. Appendix
I. Website attributes
II. Duff & Phelps/Biography
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Comparison of Major Incentives
Kansas
Colorado
Iowa
Missouri
Research Tax Credit, High
Job Growth Tax Incentive HQJ - Investment Tax Credit
Performance Incentive Program
Credit
Sales & Use Tax
Broad-based exemptions for
qualified projects: M&E, FF&E,
building materials, and
components for a finished
product
Local sales & use tax
rebate, M&E exemption
Sales tax abatement on tangible
HQJ - Refund of sales tax paid
personal property through
during construction
Chapter 100 bonds
Property Tax
M&E Exemption, property tax
abatement
Personal property tax
exemption
Property tax abatement/tax
increment financing (TIF), no
personal property tax
Training
Kansas Industrial Training, Kansas Colorado First (preTraining through local colleges Customized Skills Training and
Industrial Retraining Program
employment training),
and technical schools
Retraining Programs
(flexible)
screening and recruitment
Other
Promoting Employment Across
Kansas (PEAK), Rural Opportunity
Zone, Kansas BioScience
Authority, infrastructure
assistance, various targeted
industry programs (e.g. energy)
Duff & Phelps
Oklahoma
Nebraska Advantage (NA) Quality Jobs Program/ Enhanced
Investment tax credit 3% to
Enterprise Zone Project
10%
Income/Franchise Tax
Strategic Cash Fund
Incentives, Enterprise
Zone Credits,
bioscience/Green
incentives, infrastructure
assistance
Nebraska
Quality Jobs & Investment Tax
Credit ITC of 2% for each of 5
years
M&E used in the
manufacturing process and
Nebraska Adv. - Sales tax
items consumed or
rebates for qualified project
incorporated in new or
expenditures
expanded manufacturing or
distribution facilities
Property tax abatement through Selected personal property
Chapter 100, Enhanced Enterprise tax exemptions for certain
Zone, or Urban Redevelopment expenditures (e.g. IT and
Corporations
computer systems)
Tax increment financing (TIF),
selected property tax
exemptions for aerospace and
other targeted industries
Workforce certification
Nebraska Customized Job
program, recruitment
Training Advantage (flexible) screening, and training
through local technical schools
Quality Jobs Progra - transferrable
High Quality Jobs Program
Rural Development
tax credits, Enhanced Enterprise
(HQJP),Target incentive
Advantage - Refundable tax
Zone Project - Refundable or
programs (energy, bioscience),
credits for job creation in
transferrable tax credits based on
infrastructure assistance
rural counties
economic impact of project
Quality Jobs Program - 5% of
payroll - cash payment for up
to 10 years, infrastructure
assistance,
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Incentive Comparisons - Observations
• Kansas has strong incentives in every major category.
• Kansas’ surrounding competitors also have strong incentives and wellfunded economic development programs.
• Because of the diversity in organizations, incentive flexibility and certainty
will have an important impact on evaluations.
• Being able to outline how projects will move through the approval process
may have an important impact on clients’ perceptions.
• Business incentives are one factor of several, which impact clients’ site
decisions.
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Comparison of Economic Tools in Competing States
• Indiana
» Refundable tax credits
» Non-refundable tax credits
» Training grants
» Infrastructure grants
» Workforce recruitment and screening
» Property tax abatement/TIF
» Low tax/pro-business environment
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Case Study: Pharmaceutical Industry:
Illinois versus Indiana
• Project: An existing pharmaceutical manufacturing facility in Illinois had
outgrown its facility. The Company needed to relocate to an existing facility,
which could receive FDA approval and accommodate current production
and future expansion.
• Steps Taken: Duff & Phelps worked with the Company and its real estate
broker to evaluate an existing facility in northern Illinois and Indiana. Based
on the analysis, the 10-year cost to acquire and operate in the Indiana
facility was over $20 million less than a comparable facility in Illinois
(including state and local incentives).
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Comparison of Economic Tools in Competing States
• Michigan
» Cash-based incentives
» Workforce recruitment and screening
» Training grants
» Infrastructure grants
» Property tax abatement
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Case Study: Automotive Supplier:
Michigan, Indiana, and Ohio
• Project: An international Tier 1and Tier 2 automotive supplier needed to
identify a location in MI, northern IN, or northwestern OH to accommodate
its future growth. Total investment in the new facility was estimated to
exceed $15 million.
• Steps Taken: Duff & Phelps worked with the Company and its real estate
advisor to evaluate existing facilities in all three states. Based on the
analysis, the 10-year cost to operate in the final two (2) sites in neighboring
states was nearly identical. The final decision focused on workforce
considerations and logistics.
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Comparison of Economic Tools in Competing States
• Wisconsin
» Refundable tax credits
» Non-refundable tax credits
» Forgivable loans
» Training grants
» Infrastructure grants
» Workforce recruitment and screening
» Tax increment financing
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Case Study: Fortune 500 Company
Engineering Center: WI, TX, IL, or Europe
• Project: An Fortune 500 manufacturer needed to identify a location in WI,
TX, IL, or Europe to build a new engineering and product
development/testing center. Total investment in the new facility was
estimated to be $10 million.
• Steps Taken: Duff & Phelps worked with the Company and its real estate
team to evaluate existing facilities in all locations. The final decision
focused on history of operations, workforce productivity, and incentives from
state and local government.
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Case Study: Consumer Product Co.
Lake County vs. Kenosha County
• Project: A high growth consumer product wholesaler and manufacturer
needed to consolidate several existing facilities into a single 100,000+ sq. ft.
location in either Lake County, Illinois or Kenosha County, WI.
• Steps Taken: Duff & Phelps worked with the Company and its real estate
advisor to evaluate existing facilities in Lake County. IL and Kenosha
County, WI. The final decision focused on workforce considerations,
availability of a unique property in Lake County, and state and local
incentives. In particular, the local community established a tax increment
financing district, which helped to equalize the cost disadvantage with
Wisconsin.
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Comparison of Economic Tools in Competing States
• Texas
» Property tax abatement
» Texas Enterprise Fund
» Infrastructure grants
» Various financing programs
» Brand
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Case Study: New Manufacturing Facility in
Houston metropolitan area
• Project: A Fortune 500 manufacturing company needed to identify a
greenfield location to development a new manufacturing facility within one of
two adjacent counties on the Gulf Coast in Texas.
• Steps Taken: The Company’s real estate advisor identified two sites (i.e.
one in each county). One site was undeveloped, but in an ideal location
from a workforce perspective. The other site was in a fully built-out/shovelready industrial park. After several month of effort, the Company gave up
trying to make the undeveloped site work for the project. The Company
acquired the higher cost industrial park site and moved forward with the
project.
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Site Selection – Lessons Learned
• Site selection decisions almost always consider relative geographic costs;
however, cost differentials do not always drive the decision.
• Manufacturers, which utilize skilled labor, will tend to focus on workforce
recruitment, screening, and initial/on-going training.
• Long-term partnerships with state and local governments can pay dividends
in the form of future investment and job creation.
• Incentive programs may play a major role in cross border site selection
decisions.
• Site readiness sometimes wins the project.
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Appendix
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Economic Development Website
Ideal Attributes
• Contact Information for economic development representatives
• Economic, labor market, demographic statistics with sources
• Available sites or search tool
• Incentive policies/recent project information
• Training resources with links to technical schools, colleges, and universities
• Utility information (i.e. gas, electric, telecommunications, water and sewer) with rates, capacity,
• Railroad service, shipping carriers, and intermodal sites
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Duff & Phelps Overview
Key Facts
•
NYSE: DUF since 2007
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Headquartered in New York City
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More than 1,000 employees
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Over 25 offices globally
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Global, independent provider of financial advisory and
investment banking services.
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Duff & Phelps Global Footprint
North America
Europe
Middle East
Asia
Tel Aviv*
Beijing
Atlanta
Morristown
Amsterdam
Austin
New York
London
Hong Kong
Boston
Philadelphia
Munich
Shanghai
Chicago
Plano
Paris
Tokyo
Dallas
San Francisco
Denver
Seattle
Detroit
Silicon Valley
Houston
Toronto
Los Angeles
Washington, D.C.
* Strategic Alliance Partner
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Duff & Phelps Overview
Key Historical Highlights
1932
Duff & Phelps opened to provide investment research; expands services substantially over subsequent decades.
1994
Sold credit rating and investment management business.
2005
Strengthened core valuation capabilities by acquiring Standard & Poor's Corporate Value Consulting (CVC),
which included PWC’s legacy valuation business.
2006
Acquired restructuring specialist Chanin Capital Partners.
2007
Conducted IPO via NYSE; acquired tax experts Rash and Associates.
2008
Acquired dispute and legal management advisors Dubinsky & Company and Lumin Expert Group.
2009
Acquired telecommunications valuation professionals Kane Reece Associates.
2010
Acquired Toronto-based independent financial advisors Cole & Partners.
Strengthened complex financial instruments expertise by acquiring Dynamic Credit Partners' U.S. consulting business.
Acquired legal management advisors June Consulting Group.
2011
Acquired middle market investment banking specialists Growth Capital Partners.
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Duff & Phelps Services
Financial Advisory
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Objective, independent assessment of technical and complex valuation issues
Helps meet financial reporting, taxation and transaction-related requirements
Assists law firms and corporations with matters related to economics, cost savings, litigation and other disputes
Understands legal and regulatory landscape (FASB, IASB, IRS, SEC, etc.)
Alternative Asset Advisory
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Transparent, supportable valuation and modeling for illiquid, complex assets
Portfolio valuation and complex assets solutions where no “active markets” exist
Due diligence and seamless analytics throughout the transaction continuum
Advice for issuers, investors and regulators in the hedge fund and private equity communities
Investment Banking*
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Advises on M&A, financing and transaction opinions
Guides management teams and stakeholders through all transaction stages
Restructuring has deep relationships throughout the distressed community
Helps corporate and investor clients reach strategic goals on optimal terms
* Select investment banking services in the U.S. are provided by Duff & Phelps Securities, LLC.
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Recent Accomplishments
Worked on
over 4,500
engagements
Served over
2,100 clients
globally
Serve more
than 35%
of the S&P 500
Ranked #2
Bankruptcy
Advisory by
The Deal
Published
Definitive Guide
to Hedge Fund
Valuations
Duff & Phelps
Managing Director
co-authored Cost of
Capital: Applications
and Examples,
4th edition
Endowed
Rotterdam
School of
Management
Valuation
Professor
Established
presence in
Canada
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Joe Pilewski
Director, Specialty Tax Services
Joseph Pilewski is a director in the Chicago office and part of the Specialty Tax service line. He has more than
25 years of governmental and private sector experience in assisting clients identify, negotiate and implement
site selection and business incentives in conjunction with capital investments, construction of new facilities,
consolidations and major training initiatives.
Joe’s engagement highlights include performing incentives negotiations for a major corporate headquarters
relocations, which generated more than $50 million in benefits and required the development and passage of
state legislation; providing tax increment financing (TIF) services to clients in more than 60 TIF districts;
providing incentives to manufacturing, distribution, technology, financial services and retail projects; identifying
and recovering overlooked tax credits, which provided refund opportunities for clients; and providing fiscal
impact services to justify requested business incentives from state and local governments.
Duff & Phelps, LLC
Chicago
+1 312 697 4600
[email protected]
Joe’s other experience includes preparation of financial feasibility reports for tax exempt bond issues and
coordination of tax exempt industrial development bonds and solid waste recycling bonds. He has also spoken
on a wide variety of business incentive topics at the Tax Executive Institute, the Brookings Institution, the U.S.
Conference of Mayors, the Illinois Chamber of Commerce’s Annual Economic Development and Tax Policy
Conference and the University of Illinois Graduate School of Urban and Regional Planning.
Joe received his B.S. in economics, cum laude, and his M.A.P.A. in urban planning and development from
Northern Illinois University. Joe also earned a Master of Management degree in finance, marketing and
management from the J. L. Kellogg Graduate School of Management at Northwestern University. He is a past
board member of the Illinois Chamber of Commerce, past Chair of the Riverside Economic Development
Commission, and current board member of the Illinois Tax Increment Association.
Duff & Phelps
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