Economic Development:

Attracting and Negotiating with Developers

This is the second article in a series of articles on economic development.

When communities are attracting new businesses, it is important to take a proactive approach in preparing for negotiations.

• Make your community attractive. When a business prospect comes to visit, it is likely that a member of their team will be looking to relocate their family to your community; therefore, quality of life is important. This includes schools, parks, recreation, entertainment, shopping, technology, healthcare, crime rates and housing.
   
• Meet different needs. Know the developers' needs by researching its typical types and dollar value of projects.  Prepare for the initial meeting by developing intelligent questions to attract projects that best fit your community.

• Incentives. Local incentives are tools to reduce overall site and business costs, and may be the tie breaker between site locations. Know what your community is willing to offer the developer before the initial meeting. Tax credits, tax abatements and tax increment financing are just a few local incentive options. Some communities establish tax abatement criteria based on type of business, size of investment, job creation, location, etc.

• Don't rush to make the announcement. The party under the greatest time pressure will generally lose in negotiations. Resist the temptation to give the developer a date range when you plan to make a final decision. Do not even set an announcement date until a written agreement is in hand. Municipalities can maintain a strong negotiating position with developers only as long as they have credible options with other developers or are willing to wait for something better.

• Avoid narrowing issues. Negotiations should not be narrowed down to a single issue, which creates a winner and a loser. By keeping two or more issues open, parties have more opportunity to create a compromise that allows each party to gain on some issues in response to making concessions on others. In this way, both sides feel they have gained something as they compromise on items of relatively lower value.

• Finalize the development agreement. This document identifies potential hazards and how they will be handled, while solidifying and protecting negotiated benefits. Specific topics include: a description of the project scope and timing; employment created and timing; handling of property; public infrastructure required; participation in financing through guarantee, purchase, or security; and identification of the risks of delay or non-performance, who assumes those risks, and how they will be handled.

Umbaugh assists many Indiana counties and communities with an entire range of services to support, attract and retain high quality development. For additional information, contact us at Umbaugh at footnotes@umbaugh.com.