COVID-19 is impacting economic development budgets across the country and influencing how economic development entities allocate and manage incentive funds.
Newmark’s Global Corporate Services (GCS) Economic Incentives Advisory (EIA) team is seeing trends emerge around incentives that vary drastically from market to market and state to state. The EIA team helps clients keep, monetize and secure economic development incentives for their projects. We have been actively renegotiating incentive agreements for clients that were impacted by COVID-19 and welcome the opportunity to help your clients as well.
Below are five trends the EIA team has encountered recently in the United States. If any of your clients have existing, active incentives agreements or are looking to pursue incentives as a cost mitigation tool, please reach out to us for consultation on your specific circumstance.
1. WORK FROM HOME
In the past, government agencies, including the agencies that award economic incentives, have been reluctant to allow telework positions to qualify for incentives since this was considered an atypical work arrangement. The transition from office building to home office has forced governments and economic developers to rethink this policy and adapt to the new reality of employment during COVID-19 by allowing firms with teleworking employees to qualify for incentives.
2. INCENTIVES COMPLIANCE
The mandatory reporting after an incentives award is granted is another area where government agencies are adapting due to COVID-19. Some states made sweeping changes, and some address compliance concerns on a project-by-project basis. Our team is seeing states relaxing requirements in unique ways for companies that will not meet their job creation or investment commitments in 2020. For example, a local government in Texas permitted an EIA team client to shift the company’s 2020 capital investment requirement into 2021, allowing the client to remain in compliance with their incentives contract. Staying in compliance with their incentives agreement qualified the company for the entire value of their original incentive award instead of receiving none or a lesser value as they would have pre-COVID-19. Under normal circumstances, this type of accommodation is typically not granted, but the EIA team is seeing flexibility and support for clients from local governments. If you have a client that is currently receiving incentives and is concerned they may not meet their contractual agreements, please reach out to the EIA team to take the steps necessary to protect and save the benefits they secured.
3. WORKFORCE TRAINING
The EIA team is seeing programs emerge at both state and local levels that provide free or subsidized training for those unemployed due to COVID-19 as well as opportunities for upskilling, which focuses on learning new skills. One example is Arizona’s “Return Stronger” program, which connects individuals and businesses with training and professional development tools to facilitate a successful return to the workforce. These new programs target the recently unemployed population, and most existing workforce training programs remain in place.
4. NEW INCENTIVES PROGRAMS
The federal government issued a number of business support programs in the early days of COVID-19, most of which focused on small businesses. Since then, states and local governments began incentivizing specific industries related to pandemic needs, like Personal Protection Equipment (PPE) manufacturing. Distilleries are producing hand sanitizer, a major footwear brand is making medical masks, and a greeting card shop and a toy manufacturing giant are producing face shields. Many states have pivoted to incentivize these activities in creative ways, such as awarding funds to purchase new machinery needed to manufacture PPE.
5. DIVERSITY AND INCLUSION
The EIA team expects diversity and inclusion to be an ongoing trend when considering incentives, and COVID-19 has shone a spotlight on the necessity of having a diverse talent pool. Our team currently fields questions on this topic at every step in the incentives timeline - from applications to public approval meetings to back-end compliance reporting. As diversity and inclusion move to the forefront of public discourse, government and policy, the EIA team anticipates this topic to further contribute as a variable related to incentives qualification. Businesses applying for incentives should be prepared to address their policies on this topic with actionable initiatives to recruit and retain a diverse workforce. Connect with the EIA team to help your client prepare for this critical component if considering incentives.
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