The secondary and tertiary benefits are
likely to be of even greater value. Some can
be measured readily but many are difficult
to qualify. A new facility is likely to lure
suppliers and their employees to the area.
Spouses bring their own businesses and
skillsets to the host community, where they
are absorbed by the market as start-ups or
sustainable additions to existing employers.
The correlation between a vibrantly diverse
economy and lower rates of violent crime
and chronic disease is so high that mutual
causation is indisputable. It may be hard
to quantify these benefits, but they sure
are valuable. Communities, and states to a
lesser extent, will frequently pay for them
through economic incentives. The advocate's
skill in reducing those benefits to economic
value and identifying their intangible value
for decision makers can make or break an
incentives package and where the recruited
company locates its project.
The importance of the real estate to the
success of a project frequently transcends
its economic value. Location has, of course,
great symbolic value. Companies accept
certain costs to be located where economic
benefits can be derived, especially where the
location itself communicates the mission,
the ethos and future of the company. If a
community already has the desired cachet,
then it will probably have to pay less to
land the project. Communities lacking it
will have to pay more for the project and
the cachet that they covet. This factor is
akin to good will on a balance sheet. Much
like good will, it can be easily overstated,
resulting in a company overspending on its
real estate or in a community overpaying
for a project. This is, however, just the top
line of how real estate and the application of
local law regarding real estate and economic
development can affect a project.
The availability of the real estate
necessary for the project may be critical
to where the project goes and how it is
valued. Its readiness may help to satisfy
demand for the most valuable resource of
all, time (I admit that I took that from Wall
Street: Money Never Sleeps, but that does not
diminish its accuracy). A community that
owns its best sites for economic development
has a competitive advantage. In fact, this
advantage has become so valued that site
in a project may be necessary to qualify
for consideration. A lawyer's ability to help
the parties obtain site control and assess
its security will probably become critical at
some point in the process.
A lawyer's ability to apply the subset of
real estate laws which apply to acquisition
and disposition by public agencies for
purposes of economic development can
directly impact the bottom lines on the
spreadsheet and on the schedule. For
example, public agencies may have greater
flexibility in how they buy, sell or otherwise
convey real property when it is for economic
development, but that flexibility frequently
calls for greater disclosure to the public
and an economic justification on the part of
public decision-makers. For example, the
local government may be able to contract
with whomever it wishes for a discretionary
price instead of having to convey the
property for market value as determined
by public bidding. However, the local
government may be obligated to disclose
the market value of the property and to find
specifically that its conveyance will result
in the creation of jobs paying more than the
local average.
In these cases real estate is a field of
opportunity fraught with potential pitfalls.
An economic development lawyer's ability
to envision and then to plot a course
through that field, and that lawyer's ability
to communicate the merits and the risks
of that course, may determine the nature
of the relationship between the company
representing an opportunity and the
communities which want to make that
opportunity their own. A close friend
recently asked me why someone would hire
me to work on an economic development
project with a real estate component. I told
her that I can make these things happen
without bringing out the opposition, or at
least without enraging it. If it satisfied her,
then it will probably satisfy most clients.
It does not always work out according
to plan. This could mean fewer hires than
projected, a lower capital investment than
promised, the relocation of the company or
the failure of the business. None of this is
good, but an effective economic development
lawyer can mitigate the damage proactively
and, to a lesser extent, reactively. This may
up fees, or later by the transfer of property,
the renegotiation of economic development
agreements or the dreaded refinancing of
incentives. The best defensive course will
probably depend on what the law allows,
the terms of the initial agreements, and the
negotiating positions that the parties hold,
like most other contracts "in turnaround."
Structuring the deals so that recoupment
of the public investment is not the only
remedy is savvy and artful, because it is
frequently something easy to provide for
but hard to enforce. Finding an alternative
means such as payments-in-kind of real
property or devising the incentives so that
they are paid out as public benefits are
derived is generally a wiser course. These
projects generally involve the passage of
time, relatively high reward and some level
of risk, so an effective lawyer will help to
manage the downside for clients proactively
with those factors in mind. Skillfully applied
knowledge of the laws and contractual terms
regarding these unfortunate events can result
in effectively managing them as well as the
expectations and relationships which hinge
upon them. If you are good, then you will get
to do it again.
The importance of economic incentives
to a company's decision on where to land
varies significantly based on the industry,
the kind of workforce it requires, the
portability of the project and the value
of the incentives that a community, or a
competing community, is willing to provide
in exchange for the project. Incentives may
serve as the "ante" one pays at the start
of the selection process, or they may be
what puts one location over the top after
the field is narrowed. The high likelihood
that incentives, the laws of economic
development and the skill with which those
laws are applied will come into play at one
stage or another mean that companies and
agencies should keep those factors and their
economic development lawyers in mind
throughout the process. Their importance
will require at least one lawyer who can
analyze the value of the project in relation
to the law and communicate that particular
value to decision makers including the
general public, elected officials and C-level
executives in the public and private sectors.