By Michelle Janowitz
Business Facilities LiveXchange is an invitation-only event for corporate executives responsible for choosing a new location for their companies’ next facility. Delegates meet with senior economic developers from across North America to discuss their locations as potential solutions; attend seminars, workshops, and think tanks led by experts in the field of relocation and expansion; and network with other corporate executives faced with the same corporate growth challenges. We spoke with Mike Hickey, president of Hickey & Associates, about his experience presenting at 2007’s LiveXchange.
BF: Can you give an overview of the think-tank you led at LiveXchange 2007? What did attendees gain from participating in your session?
Mike Hickey: My session was a 90 minute think-tank with corporate executives focusing on public financial incentives. I tried to help the attendees understand how to evaluate the potential benefits of incentives, as well as realize the responsibilities that come with them. I started with a 15 minute PowerPoint presentation that gave an overview of different types of incentives, and then moved on to some interactive case studies.
Public incentives have become a key part of site selection because of two primary factors: The first one is making sure you can find and retain the right kind of talent at the right wages. The second is the cost of doing business, part of which can be reduced through public incentives such as cash grants, training grants, infrastructure support, and property tax reductions.
One PowerPoint slide that the participants were especially interested in dealt with “”clawbacks.”” If an economic development agency provides opportunities to a company that can’t comply with the provisions of the incentives, then the agency is forced to recover, or claw back, some parts of the benefits package. That’s not a good reflection on the company or the agency, and I think participants got a better understanding of this.
The bulk of the session was spent analyzing two case studies. We selected two communities and presented the incentives they offer. We broke up the participants into different parts of a senior leadership team in charge of site selection; we had teams representing finances, human resources, real estate, taxes, and so on. The participants then analyzed the incentives offered and had to choose which they would recommend accepting, and why, to their company’s CEO, who was also a participant of the session. I walked around and helped the different teams understand how this process works since these folks don’t do this every day.
I think the session played out very well. The human resources team dug into their part of it saying, “”OK, they expect us to commit this many jobs at this wage. What happens if we don’t? Or how aggressive do we want to be on our commitment?”” The finance team played their part saying, “”OK, this is a good incentive and this is how much it’s worth, but we have to commit so much in capital investment to achieve it.”” The tax people weighed in saying, “”The way we’re positioned in this state versus that state, the incentives may not be worth as much as they seem. However, the property tax abatements always have a great value because they roll down directly to the bottom line.”” The real estate people were talking about how the incentives influence the whole project in terms of infrastructure support, property tax abatement, etc.
I think the participants understood and focused on what they needed to do to present these offers to the CEO, and the two people we had as CEOs were good at challenging the teams and asking the right questions. It was a real live situation duplicated in a lot of the boardrooms and senior leadership meetings I’ve been in.
I also think the participants walked out with a better sense of how public financial incentives really work. I can stand up there and present and people can take a few notes and forget about it. But, when they’re actually doing it and have to dig into it and offer recommendations, they want more information and knowledge. I think they walked out understanding some key points that could be important to their companies.