In May of this year, Impact DataSource had the opportunity to prepare an economic and fiscal cost benefit analysis for a client applying for an incentive from the California Competes Tax Credit (CCC) program. This marked the second such impact analysis our firm has prepared for a business seeking assistance from the CCC program. Last year, Impact DataSource prepared the analysis for a client’s successful application to the program.
As is the case for each analysis we prepare, this impact study was designed to address the unique requirements of the client—including, in this case, the requirements of the CCC program. In all cases, it is important that the commissioned impact analysis is specifically tailored to the program or circumstances at hand. In some instances, as is the case with the California Competes Tax Program, it is absolutely critical that the impact analysis address specific topics in a direct way.
Based on a thorough review of the state’s evaluation criteria, our analysis addressed the following 11 elements vital to a successful application:
- The number of employment positions applicant will create or retain in this state;
- The compensation paid or proposed to be paid by the applicant to its employees, including wages, benefits, and fringe benefits;
- The amount of investment in this state by the applicant;
- The extent of unemployment or poverty in the area according to the United States Census in which the applicant’s project or business is proposed or located;
- The incentives available to the applicant in this state, including incentives from the state, local government, and other entities;
- The incentives available to the applicant in other states;
- The duration of the proposed project and the duration the applicant commits to remain in this state;
- The economic impact in the state of the applicant’s project or business;
- The strategic importance of the applicant’s project or business to the state, region, or locality;
- The opportunity for future growth and expansion in this state by the applicant’s business;
- The extent to which the anticipated benefit to the state exceeds the projected benefit to the applicant from the tax credit.
The CCC program began in April of 2014 as California’s first tax incentive program designed around the negotiation of those incentives. The goal of the program, as is most tax incentive programs, is of course to attract and retain business. The program is currently in its second annual cycle of applications, and involves a multi-phase process:
- Application Phase
- Phase I application submission to Go-Biz for automated computer review and ranking.
- Evaluation Phase
- Phase I application review and screening;
- Phase II Go-Biz evaluation based on quantitative and qualitative factors, and collection of evidence.
- Negotiation Phase
- Contract terms and conditions agreed to in a contract.
- Award Phase
- The Committee either approves or rejects the CCC agreement recommended by Go-Biz.
- Compliance Phase
- Utilization of the CCC based on the terms of the CCC agreement;
- Annual review of employment, wages, investment and other terms for compliance with the terms of the contract;
- Franchise Tax Board review of books and records.
For more information on the California Competes Tax Credit Program, see “California Competes Credit, Gold Rush Redux?” http://www.thinkllp.com/site-media/uploads/article/California_Competes_Credit_Article_Final.pdf
The many uses of an economic and fiscal impact analysis
This post is part of a series on the many uses of an economic impact study. These stories represent just a few of our clients and illustrate how they have used our analyses to communicate the value of businesses and/or other organizations in their community. Here’s the full list:
- State-level Economic Development Incentive Program – California Competes Tax Credit
- Local ED Incentive Negotiations
- Economic Development Organization (EDO) Performance Report
- A Manufacturer Faced with Possible New Water Restrictions
- Public Four-Year College Impact Analysis
- Publicly Funded Business Incubator