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Need an Incentive?

Federal, state, and local governments are providing a variety of incentives to attract businesses to communities in effort to boost local economies. What's good for business, is also good for builders.

Community leaders helped the Marion, Ind., YMCA obtain a financial incentive package that included tax credits, donations, and sponsorship from Star Financial. The package made it possible for them to expand, and increase membership, by renovating an old building. Similar financial incentives helped turn the old YMCA into a boutique hotel, creating revenue for the community, and jobs for local citizens and builders.

Before you begin, you'll need to do some homework, but you don't have to do it all yourself:

  • Understand the appropriate tax credits for a given project. (These can vary by state, county, and city.)
  • Find a community with an active economic development team.
  • Work with knowledgeable consultants.

1. Follow the incentives
Tax credits are available for a wide range of business types. "Grocery stores, community centers, and charter schools commonly receive tax credits," says Matthew Conrad with Krieg Devault, an Indianapolis-based law firm. He says that mixed-use housing, retail, manufacturing, and others project types also rely on these credits.

  • New Markets Tax Credits. Conrad estimates that approximately $3.5 billion worth of credits will be available in 2011. In fact, he recently helped paper plate manufacturer Winterfield, LLC receive credits for its new plant in Marion, Ind. He also helped the city of Indianapolis obtain $35 million in New Markets credits for businesses in that city.
  • Department of Energy Advanced Energy Tax Credit. It can be structured to reduce a company's tax burden for seven years, or can be configured as a no-interest loan in economically challenged areas. This credit was used by another Marion-based company, Vela Gear Systems, a startup wind turbine manufacturer that is in the process of building a 250,000 square foot manufacturing plant that will employ about 160 people.

Sometimes, tax credits can be combined with other incentives. Vela founder and president Noel Davis says the company used "three forms of economic development vehicles," to get off the ground: tax credits, tax increment financing, and Economic Development Revenue Bonds.

2. Look for leaders
It's easier to get tax credits if the city or town has an active economic development team with strong leadership. That's been a big driver of Marion's success. Conrad notes that Marion Mayor Wayne Sebold has traveled around the country to talk with key financiers and strategic partners. The payoff has been many new and expanded businesses, and more than 2,000 jobs have been added in the past seven years, according to Reese.

Marion officials have used incentives to help Earthbound RV relocate their "green" vehicle making operations to Marion, and to help GM expand its production facilities. The city council is now looking to establish a plastics-to-oil refinery. City officials also helped the YMCA secure the old War Memorial Building and get $1 million in economic incentives for the building's $10 million renovation. This helped the facility increase its membership tenfold, from 600 to 6,000. The former YMCA building is now being renovated into a boutique hotel with $2 million in Tax Increment Finance District benefits.

3. Get professional help
Keep yourself up to date on incentive-worthy projects by working with consultants. For instance, Chris Ann Lunghino, a Huntington Beach, Calif.-based consultant has helped businesses and schools work together to get financial incentives for sustainable school building projects, and has helped businesses access "the many local incentives for business development from water companies and utilities," including $10,000 that Southern California Edison will contribute to help fund renovation projects that reduce a building's energy use.

In short, while it's a challenge to stay on top of economic incentives, the effort can be well worth it. A little awareness and the right partners can go a long way toward finding sponsored project opportunities.