United States

Middle-market food distributor bundles incentives to support investment

Proactive incentive planning helps with strategic business decision

CASE STUDY

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Overview

A national food producer and distributor seeking to open a new facility was considering multiple locations, including an older, vacant building that would require extensive renovations. The project included a $5 million investment and the creation of new full-time employees. To increase the cost-effectiveness of the project, the distributor wanted to identify opportunities for business incentives related to the locations under consideration, including the vacant property in Indiana.

Project

After taking time to understand the project and the related business goals, RSM approached the Indiana Economic Development Corporation—the state's lead economic development agency—to negotiate an incentive package in return for bringing new life and new jobs to the vacant property.

The state provided two alternatives for incentive packages – one tied to infrastructure grants to help secure new municipal services to the building, and one tied to job growth. In addition, RSM approached the local property tax board to request abatements on the building and new equipment.

RSM helped the company explore similar incentives, with respect to the other locations under consideration. With multiple incentive opportunities in hand, RSM performed additional analyses around the state-to-state credit utilization to identify which options provided the strongest tax and business benefit for the family-owned company, whose partners reside and pay taxes in Illinois.

Outcomes

At the close of the negotiations, RSM secured a 66 percent abatement of personal property tax and a 50 percent abatement of real property tax liabilities, with a combined value of $182,000. In addition, the team determined that the Indiana EDGE credit offer of $600,000 provided the greatest overall value to the stakeholders, compared to the infrastructure grant. In total, the company received nearly $800,000 in tax credits, or 15% of the overall project investment.

When renovations are complete, the company expects to add approximately 80 new employees and, with the help of RSM, expects to capitalize on additional income tax credits of approximately $28,000 through the federal Work Opportunity Tax Credit program.

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