5 tips for negotiating government incentives

Every year governments across the country invest billions of dollars to support private projects that create positive economic impacts. Strategies to approach governments for these investments should be developed with as much research and analysis as pitches to private investors. The following tips will allow for an understanding of the financial capabilities and desired return on investment for these public sector investors in order to maximize the results of your next investment.

1. Know your audience

When you negotiate for incentives, you will encounter people that are passionate about topics ranging from poverty to the design of your parking lot. Understanding the issues that are important to the people across the table from you is critical. Open your negotiation by seeking to understand. Listen. Ask questions. Conduct your own research. Time spent understanding your audience will pay dividends as your negotiations develop.

2. Understand the rules of the game

Public employees and elected officials work in an environment that is constrained by rules; often so many that they can’t understand them all. The rules come in the form of legislation, ordinances, policies and administrative codes. Do your homework. Read the rules. Ask for help if you need it. Armed with a thorough understanding of the rules, you will be in a position to challenge ideas or even educate the government officials and maximize the outcome of your negotiation.

3. Sell the benefits

Focus on the benefits that your project brings to a community. Incentives exist because communities and organizations want to encourage something specific to happen. Ask yourself how your project aligns with their goals. Are you adding jobs, improving the environment, adding to their tax base? Review their planning documents, mission statements and websites so that you can articulate how you are helping them achieve their goals.

4. Study the past

When negotiating incentives with public entities, you have better access to information than in any other negotiation environment. Don’t start negotiating until you understand how the finances of the community or incentive program impact their ability to provide incentives and how they have used incentives in the past. Review financial statements, understand how much funding could be available, research past awards, know the circumstances when exceptions have been made to rules, and use this information to craft an agreement that maximizes value for your company.

5. Negotiate before you commit

The leverage that you have in an incentive negotiation rests on your ability walk away or change your project plan. Start discussing potential incentives early in project development. Communities are most able to support your project when you are still evaluating project feasibility.

For more information on this topic, or to learn how Baker Tilly project finance specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.