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TAXES & INCENTIVES
Putting Your Best Foot Forward Make sure the media gets it right when reporting on your company’s incentives. By Scott J. Ziance, Partner; and Jonathan K. Stock, Of Counsel; Vorys, Sater, Seymour and Pease LLP
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ompanies receiving economic development incentives often have a great story to tell. The projects championed by those companies bring much needed jobs and investment to a local community. In exchange, the companies may receive various forms of economic development incentives, such as grants, tax credits, or loans. However, these incentives are not giveaways. Instead, the incentives are typically awarded on the condition that companies receiving them achieve certain metric commitments (i.e., jobs, payroll, and investment) to benefit the local community. For the media, the coverage of an economic development incentive should make for an easy “win-win” story since both the company and local community are benefiting. But what happens when the media gets it wrong? Media members regularly report on the values of incentives that are provided at the state and local level to facilitate economic development. Frequently, articles are well-researched, well-written, and balanced. Sometimes, however, media members make mistakes — whether because of tight deadlines, the complexity of transactions,
or bias. These stories may even contribute to projects being withdrawn. You may recall the portion of the Amazon HQ2 project that was planned for New York. In 2018, Amazon announced that it would be constructing a new 25,000-employee corporate campus in the Long Island City neighborhood of Queens, N.Y. Shortly after the announcement, negative news stories started appearing. Some of these stories emphasized the amount of the proposed tax incentives without mentioning the corresponding benefits to the local community. Others included embellishments and caricatures, such as the famous New York Post cover, which read “Queen’s Ransom: Amazon gets 2.5B tax break — and the right to a helipad — to move to New York.”1 While it is difficult to measure the impact of such stories, the same cannot be said of the ultimate outcome. Amazon pulled the plug on the New York portion of the HQ2 project. The purpose of this article is to help companies identify, and hopefully avoid, the types of media mistakes that commonly undermine economic development projects. We have described below five of the most common media mistakes related to incentives. At the end of the article, we have also offered a prescription to help companies avoid these common pitfalls.
istake #1 — Not Understanding the Types •• M
of Economic Development Incentives At a high-level, there are five common types of incentives provided to companies at the state and local level — tax exemptions, tax credits, grants, loans, and in-kind assistance. One significant mistake reporters make is in not considering the types of incentives being provided. When a story does not correctly distinguish among the types of incentives awarded, it can be misleading. For example, a $10 million grant and $10 million loan are not alike, and do not provide the same benefit to a company. Another example involves infrastructure. It may cost a community $5 million to widen a road and AREA DEVELOPMENT | Q2 2022
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