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Joseph Pilewski Duff & Phelps, LLC

Business Incentives and Site Selection - Private Sector Perspectives & Experience Presented to: Kansas Economic Development Alliance. October 24, 2012. Joseph Pilewski Duff & Phelps, LLC. Presentation. Comparison of Business Incentives Site Case Studies Lessons Learned Appendix

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Joseph Pilewski Duff & Phelps, LLC

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  1. Business Incentives and Site Selection - Private Sector Perspectives & ExperiencePresented to: Kansas Economic Development Alliance October 24, 2012 Joseph Pilewski Duff & Phelps, LLC

  2. Presentation • Comparison of Business Incentives • Site Case Studies • Lessons Learned • Appendix • Website attributes • Duff & Phelps/Biography Duff & Phelps

  3. Comparison of Major Incentives Duff & Phelps

  4. Incentive Comparisons - Observations • Kansas has strong incentives in every major category. • Kansas’ surrounding competitors also have strong incentives and well-funded 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. Duff & Phelps

  5. 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 Duff & Phelps

  6. 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). Duff & Phelps

  7. Comparison of Economic Tools in Competing States • Michigan • Cash-based incentives • Workforce recruitment and screening • Training grants • Infrastructure grants • Property tax abatement Duff & Phelps

  8. 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. Duff & Phelps

  9. 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 Duff & Phelps

  10. Case Study: Fortune 500 CompanyEngineering 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. Duff & Phelps

  11. 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. Duff & Phelps

  12. Comparison of Economic Tools in Competing States • Texas • Property tax abatement • Texas Enterprise Fund • Infrastructure grants • Various financing programs • Brand Duff & Phelps

  13. 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/shovel-ready 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. Duff & Phelps

  14. 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. Duff & Phelps

  15. Appendix Duff & Phelps

  16. 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 Duff & Phelps

  17. Duff & Phelps Overview Key Facts • NYSE: DUF since 2007 • Headquartered in New York City • More than 1,000 employees • Over 25 offices globally • Global, independent provider of financial advisory and investment banking services. Duff & Phelps

  18. Duff & Phelps Global Footprint North America Atlanta  Austin  Boston  Chicago  Dallas  Denver  Detroit  Houston  Los Angeles  Europe Amsterdam London Munich Paris Middle East Tel Aviv* Asia Beijing Hong Kong Shanghai Tokyo Morristown New York Philadelphia  Plano  San Francisco  Seattle  Silicon Valley    Toronto    Washington, D.C. * Strategic Alliance Partner Duff & Phelps

  19. 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. Duff & Phelps

  20. Duff & Phelps Services * Select investment banking services in the U.S. are provided by Duff & Phelps Securities, LLC.

  21. 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 Duff & Phelps

  22. Joe Pilewski 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. 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, LLC Director, Specialty Tax Services Chicago +1 312 697 4600 Joe.Pilewski@duffandphelps.com Duff & Phelps

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