The Covid-19 pandemic is forcing companies to re-assess their operational footprint. Whether you are considering closing certain offices because of the success of your remote workers logging in from home, or consolidating your real estate footprint because of financial necessity, companies should consider the impacts on their economic development agreement portfolio, so as to not be caught unawares.
1) Review Existing Economic Development Agreements on all Locations
Economic Development Agreements often contain terms for 10+ years. Agreements signed back in the ‘00s may dictate certain employment levels at particular locations must be maintained, otherwise clawback provisions may be triggered. While “Safe at Home”/”Shelter in Place” orders may be a legitimate temporary stay, many incentive agreements are based on , and companies should develop a negotiation strategy if working from home will continue for employees for the mid- and long-term.
Furthermore, if a company is considering consolidating workspace, or closing locations, agreements should be reviewed to determine if the company will be required to pay back benefits received. Otherwise, a company may find themselves attempting to cut costs by shuttering a location, only to unexpectedly be responsible for a large penalty from the governing jurisdiction.
2) Retain Institutional Knowledge
During any assessment, it is prudent to determine with whom knowledge and compliance responsibilities lie, with regards to economic development incentives agreements. Since these agreements are often long-term, but only require attention once or twice a year, often a single employee will hold all the information, and complete the required filings. However, if that individual is released from employment because of downsizing, a company may find themselves in trouble once compliance deadlines roll around.
To ensure knowledge is retained regardless of employment changes, companies should consider:
setting up a shared electronic file and calendar with agreement requirements and compliance deadlines for multiple employees to access, and
having a generic, title-specific email that passes along to the title holder (e.g. HumanResources@Company.com) instead of using the name of an individual.
3) Assess Opportunities
Regardless of the impetus of an operational footprint change, companies may be eligible for economic development incentives. If a company is considering consolidating headcount into a single location, the relevant jurisdictions of all affected locations should be contacted before final decisions are made, to see how incentives may impact the cost of each site. Depending on jurisdiction and project specifics, incentives may include cash grants, tax credits, sales and use tax refunds , property tax abatements, infrastructure assistance, utility discounts, training cost assistance, and more.
If your company is concerned about their current economic development incentives agreement portfolio or would like assistance in assessing operational changes under consideration, Compass Key’s team is ready and available to help you.