So, you’ve found a nice little parcel at a good price where you want to build your new facility or corporate headquarters or regional office. You’re not alone. The local and/or state government wants you to build it, too.

What’s your best strategy? Take a walk around the block. Meet a buddy for a beer. Linger at the Monet exhibit. Whatever you do, play it cool.

“Don’t make any kind of a public announcement, don’t start construction, don’t purchase a building,” warns Christine Bustamante, KPMG’s Ohio-based principal, global location and expansion services, state and local tax.

“Buying the land is a little bit iffy,” she said during KPMG Global Energy Institute’s recent webcast offering guidance on tax developments affecting the oil and gas industries. “Sometimes you can get away with buying the land and still have some leverage relative to the negotiation for incentives, but generally we’re going to suggest that you avoid anything that indicates that you’ve selected your site and you’re moving forward with the project.”

Reticence may not come naturally to hard-charging executives, but it’s a tactical imperative when trying to wrest incentives and credits from government entities that are willing to make them available but typically don’t move quickly.

“Pretty much every state and every country throughout the world can have some type of impact on your project through the use of incentives and credits,” Bustamante said. “I think what most of the jurisdictions are looking for, really, is a win-win situation for both the company and the state and local governments that are involved.”

A developing relationship

Bustamante’s formula for success is a simple one: “Capital spending plus jobs equals an economic development project.”

Everything from the purchase of the property to the purchase of office supplies to the purchase of popcorn by new employees when they go to the local cinema translates into economic development in the eyes of a local government.

In this case, when the government comes after you, let it.

Your strategy begins with your own budget planning. “Obviously, any type of a new investment that’s being planned or new facility that’s being planned should definitely be a trigger for the possibility of incentives and credits,” Bustamante said. “If there’s going to be job creation or in some instances job retention, that’s also something that could signal incentives and credits.”

That includes consolidation or restructuring, she said. A plant closing could be cause for other facilities to expand, which may qualify for credits. Changes at the top often signal opportunity as well. Reshuffling at the CEO, COO or CFO level could foreshadow a company’s move in a different direction, she said. That could mean growth or consolidation.

Opportunities for tax breaks are not limited to companies expanding into a new area. Bustamante suggests a close look at current real estate holdings.

“If you have an obsolete factory or facility and you’re going to need to construct a new one or even make significant improvements to an existing facility, if you’re leasing property and the lease is expiring, that can oftentimes also be a good opportunity to meet with and speak with state and local government officials to see if there’s anything they can do to continue to retain your presence in the area,” she said.

No one-size-fits-all

“When we talk about incentives, these are always going to be prospective,” Bustamante said. “Incentives are designed to encourage investment, job creation and job retention in state and local areas. They are always going to require some type of upfront negotiation with state and local government officials.”

These deals come in a variety of formats, she said. Some are refundable state income tax credits; others are nonrefundable. Governments often dangle training grants or infrastructure grants to attract a new energy industry neighbor. And don’t forget sales tax exemptions, rebates and property tax abatements. On larger-scale projects, Bustamante said she had negotiated with utility companies to secure rate reductions for her clients.

“Oftentimes you’re going to see some kind of a ‘but for’ requirement,” she said. “What that means is, ‘but for the injection of incentives in the project, you would not have moved forward with the investment in the state or local area.’”

Start early

The thing about government incentives is that, until you have them, you can’t really be sure that you have them. The process of applying for and obtaining incentives and credits can require 60 to 90 days and in some states, much longer before a company can move forward with a project, confident that the incentives are a sure thing.

Even the famed Texas Enterprise Fund, which has disbursed about $430 million in incentives since its inception in 2005, can be plodding.

“You’re usually going to have to wait about three months to get an offer from the state of Texas,” said Bustamante. “During that period of time, the state does not want you to do anything associated with moving forward with your project and that actually includes moving forward with securing local incentives.”

Incentives and credits should be an integral part of strategy, not a last-minute detail.

“All incentives are going to be negotiated,” she emphasized. “Make sure that you are doing that before you move forward with the project. It’s very important so that you don’t lose leverage.”