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State Governments Entice Unmanned Systems Businesses with Tax Breaks, Perks
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| UNMANNED SYSTEMS | JANUARY 2017
Jackie Lorentz and University of North Dakota
By Lee Ewing
Jerris Tagavilla, a student at the University of North Dakota, flies her hand-crafted UAS.
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n the United States, all state governments are dangling an enticing array of economic incentives designed to lure unmanned aerial systems companies and other businesses to locate within their borders. Economic incentives can be alluring, but other factors such as the availability and cost of skilled labor and highway accessibility often are even more important in choosing sites. UAS companies can benefit from some of the economic incentives available to a broad range of industries, and several states also offer economic incentives and other inducements that are specifically designed to attract UAS business. Among the states zeroing in on the UAS industry are New York, Alaska, Nevada, New Mexico and North Dakota, all of which already have substantial UAS operations and infrastructure. In Rome, N.Y., where Griffiss International Airport has been designated as a UAS testing site by the Federal Aviation Administration, the state government has earmarked $250 million in economic development money to support and develop the UAS industry. The focus in New York is on fostering commercial use of UAS which can aid regional businesses through applications such as precision agriculture, construction and development, news media and telecommunications, insurance estimates and appraisals, real estate evaluations and inspections, aerial video and photography, search and rescue and law enforcement and emergency services. Adding or expanding UAS industry sites can mean more jobs and investments, boosting a state’s economy.
The Nuair Alliance headquartered at Griffiss is a non-profit coalition of private and public entities and academic institutions that operate and oversee UAS test ranges in New York, Massachusetts and Michigan. At Griffiss, where there is a special emphasis on UAS traffic management, Nuair is installing a ground-based sense and avoid system to provide range instrumentation that can track UAS in the air and provide a new testing capability. On the other side of the country, Alaska, with its 663,300 square miles of airspace, is bigger than Texas, California and Montana combined. As the home of the Pan-Pacific UAS Test Range Complex, the state’s involvement in unmanned systems testing extends far beyond its borders, encompassing seven climate zones ranging from arctic to tropical. The Alaska Center for Unmanned Aircraft Systems Integration at the University of Alaska Fairbanks collaborates with Oregon State University, the University of Hawaii, and Mississippi State University (the organization also has facilities in faroff Iceland). Economic incentives Alaska offers include research and development tax credits, hiring and job creation tax credits and grants, manufacturing tax credits, and, at the municipal and borough levels, property tax and sales tax abatements. The state also may provide gap loans, equity financing, venture capital assistance, energy discounts, technical assistance and sometimes even free or discounted land. Nevada offers several tax advantages, such as no personal income tax or corporate income tax along with tax abatements for job creation, capital investment and intellectual property development,
and workforce development training grants. Other economic incentives available are tax abatements on sales and use tax, modified business tax, personal and real property, data centers, employee training and hiring and aviation parts. Nevada’s non-financial incentives can be even more compelling factors in selecting a site. In conjunction with the Governor’s Office of Economic Development, the nonprofit Nevada Institute for Autonomous Systems aids UAS development by providing such services as air and ground mission management, bid and opportunity management, consultation training and educational outreach, FAA documentation and reporting, national airspace management, research and development, and traffic management systems. New Mexico, too, has a wide spectrum of economic incentives, such as tax benefits for corporate income; aircraft manufacturing, maintenance and remodeling; highwage jobs and technology jobs; job training grants and investment tax credits. In addition, municipalities may offer cash grants for local economic development. These incentives are attractive to UAS companies, but the most powerful inducements likely are the state’s skilled workforce, the testing capabilities at White Sands Missile Range, and the excellent flying weather, says Eric CdeBaca, vice president for business development for the New Mexico Partnership and Savannah Jermance, the partnership’s business development director. New Mexico highlights its existing technical talent pool, including skilled workers at three Air Force bases, the White Sands Missile Range, two Air Force research laboratories, Spaceport America, JANUARY 2017 | UNMANNED SYSTEMS
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Sandia National Laboratories, and Los Alamos National Laboratories. Programs aimed at growing the hightech workforce include a lotteryfunded scholarship that covers college tuition. The New Mexico Job Training Incentive Program provides cash reimbursement for 50 to 75 percent of wages during on the job training and classroom instruction at New Mexico State University and a network of other colleges and universities. A $50 million Local Economic Development Fund supports investments in land, buildings and other infrastructure. North Dakota is among the states that are aggressively courting UAS companies by touting economic incentives and other assets. The North Dakota Development Fund provides gap financing and equity investment, and the New Venture Capital Investment Program can help new or expanding North Dakota businesses by providing up to $300,000 through the stateowned Bank of North Dakota. 26
| UNMANNED SYSTEMS | JANUARY 2017
In addition to a portfolio of tax breaks and workforce development assistance, “we have some unique things that really appeal to companies in the UAS space,” says Brian Opp, manager of aerospace business development for the North Dakota Department of Commerce. One unique asset for the UAS industry, he says, is Research North Dakota, which creates publicprivate partnerships with the state’s universities on applied research with commercial potential. No single program is the most powerful inducement for UAS industry to locate in North Dakota, Opp says. “I think it’s the intersection of a variety of factors,” he says. “So, we have these economic incentives, … but we also have one of the FAA-approved test sites. We have these universities doing all this collaborative, innovative research with industry. And then we’ve got a growing cluster of private sector companies doing business in this
space coming at it from different angles and they all seem to be collaborating.” Beyond the more tangible inducements, Opp says, is a UAS-friendly “ecosystem” with top-to-bottom government support. North Dakota’s longstanding push for UAS assets led to the test site, the RQ-4 Global Hawk aerial surveillance mission at Grand Forks Air Force Base, and creation of the UAS-focused Grand Sky business park on the base. Tenants, including Northrop Grumman and General Atomics, have access to the base’s runways and airspace. Economic incentives are best viewed as one of several factors in choosing a site, says Michelle Comerford, industrial and supply chain practice leader for the Biggins Lacy Shapiro Co., which lists state economic incentives on its website (www.BLSstrategies.com). She also is a member of and a special advisor for the Site Selectors Guild, a group of site selection consultants.
Top Left Photo: NMSU Right Photo: North Dakota Department of Commerce
Flight testing at New Mexico State University's Flight Test Center.
The Northern Plains UAS Test Site has certificate of authorizations for a variety of testing.
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To sift through incentives for expansion or relocation, websites such as StateBookInternational (statebook.com) and the State Business Incentives database (http://www.stateincentives.org) can be useful as a starting point, Comerford says, although they may not always be current and complete. For more definitive information on state incentives, she suggests reaching out to state economic development organizations and site selection consultants.
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Photo: NMSU
New Mexico State University's airspace map.
other factors to draft a short list of states and communities within them that appear most likely to be suitable for a UAS company’s expansion or relocation, Comerford says. “There are all kinds of different incentive programs,” she says. “Some are designed as tax credits.”
While those can be valuable, they may be less attractive in states where taxes are low. Often companies are drawn to states that also provide incentives other than tax credits, such as grants to offset costs of site development and workforce training.
Photo: Nuair Alliance
Understanding the operating requirements for a company well in advance of starting to look at the incentive options is essential, Comerford says. The existence of a suitable workforce is critical. “Labor force is a big component of what we would look at,” and for a UAS company, in addition to essential ground transportation infrastructure, the availability of “aerial infrastructure” to support testing is “a big one to consider.” Reviewing air traffic regulations on a state basis could then narrow the list of prospective states, which would lead to evaluating specific communities and properties, checking for any codes or regulations that might could affect airspace use and any potential issues with other organizations. States with existing aerospace and defense industries tend to be more open-minded than others about unmanned system operations, Comerford says. Accordingly, she adds, states with FAA designated UAS test sites “absolutely” have significant advantages in attracting more UAS business. Typically, site selectors focus on economic incentives after using
A small drone flies at the Nuair Alliance facility as part of an air traffic management demonstration.
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