Use Incentives To Reduce Expansion Costs

By Lynn Tokarczyk/ Business Development
Tuesday, November 1, 2005

Whether you are planning on expanding onsite, purchasing new machinery and equipment, looking for a new facility, hiring more employees or searching for that ideal parcel of land, there are many state and local resources that can help reduce the company's overall project costs.

Knowing where and how to search is the key to unlocking a variety of state and local incentives.

For example, did you know that the Massachusetts Economic Development Incentive Program helps new and existing businesses expand? In partnership with the Commonwealth, city and town officials work to develop economic growth plans for their future through a three-step process:•

First, a community must be located within an economic target area (ETA) in order to access business incentives. Currently, there are more than 190 communities from Pittsfield to Truro that are part of the 46 ETAs in Massachusetts.

Once an ETA is defined, community planners designate specific economic opportunity areas (EOAs) for priority projects that meet established criteria.

Finally, expanding businesses or certified projects are eligible if they create new full-time jobs and invest in private real estate.Although it's a lengthy process, the benefits can be significant. Many companies, for instance, have yielded tax savings of $300,000 to $500,000 over several years.Other benefits include:

A 5-percent state EOA investment tax credit for qualifying, depreciable, tangible assets. Department of Revenue rules exist that limit the credit. Companies are not allowed to use the credit to reduce state tax liability by more than 50 percent for any one year;

A 10-percent state abandoned building tax deduction for costs associated with renovating an abandoned building (building must be at least 75-percent vacant for two or more years);

Tax Increment Financing (TIF) – a five- to 20-year property tax exemption based on the increased value of the project property due to new construction or other significant improvements (TIFs can be accessed in non ETAs under the state's Exceptional Opportunity program);

A 100-percent local personal property exemption with all TIFs; or

A special tax assessment – a five- to 20-year property tax exemption based on the total base value of the project property.

To find the programs that best fit your business, it's important to first identify the available incentives. Navigating through the maze of bureaucracy in state and local governments is challenging, but help is available.

A private government incentives consultant can help businesses identify appropriate resources, strategically map and manage the entire process, prepare the necessary paperwork, and secure local and state approvals. There are also annual compliance reports based on the business commitments of the real estate expansion that are required in order to maintain such incentives.

Accessing benefits requires solid and diplomatic negotiating skills. At the local level, moving your project forward requires that you interact and receive approval from various town and city boards and eventually the state. The intent of this program is to create a win-win-win of new jobs, new taxes and business growth.

There are many other business development tools available, including a database of available land and buildings, creative financing programs, state and local permitting and infrastructure streamlining, work force training cash grants and residential TIFs.

Learning more about the incentives can help your business grow even faster.

Lynn Tokarczyk is president of Business Development Strategies, Medway, and helps clients secure business incentives and provides assistance with site selection, financing alternatives, utility providers and work force development programs.

© 2005 Boston Herald