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Article : The Incentives Game

The incentives offered by a municipality or other governmental entity is a major economic factor to call center owners. As call center operations increase, many firms are seeking centers in various parts of the U.S. and abroad and need to understand and know how to secure municipal, state and provincial incentives.

For example, a call center of 500 seats will probably have two (2) shifts, pay $8-9.00/hour for a 2,080-hour work year and typically negotiate a ten (10) year lease. This means that the general location of the call center will directly benefit that geographic area by as much as $176,800,000 over the term of the lease. This is very strong "leverage" to use in negotiating incentives. (The real estate impact would only be approximately $8,500,000.)

Having worked with numerous call center operators during the past few years, Arledge/Power has found that incentives run the gamut from furnishing tax abatements on both real estate and personal property, to the installation of infrastructure.


Van Power
Founding Principal/President
Arledge/Power Real Estate Group

Everything from new water and sewer lines to new roads, bridges, landscaping, street cuts, even installing new signal lights so employees can easily cross a major thoroughfare.

Most cities and states have standard incentives that are offered. But, call centers are a distinctively different entity. Call centers use relatively small pieces of real estate, but usually hire as many, or even more, local employees than a large manufacturing facility.

In other words, call centers, whether inbound or outbound, are ideal new industries for both large and small municipalities. The United States, Canada and the Caribbean are vigorously pursuing call centers, and are willing to use very creative incentive packages to get them to choose their location.
Some municipalities are attracting call centers by offering to give the first call center to locate there an exclusive on the incentives, thereby discouraging other call centers who would choose that location based solely on the incentives, thus guaranteeing their workforce.

Smaller cities have become much more sophisticated and have developed more creative incentives to lure call centers to their areas – such things as naming a new street for the company, working with the utility companies to secure more favorable rates and, most importantly in this very fast-track call center field, expediting the city's permitting, zoning and approval processes so the call center can open as soon as possible.

To obtain a city's standard incentives, you typically need to fill out an application stating the number of jobs you will generate, what the pay scales will be and any advantages the company envisions for the city in having it as a member. Usually, the city's economic development department, city council and/or planning department have final authority to grant these incentives.

There are other incentives that can be quite advantageous and might demand further negotiations, but these are usually granted on a case-by-case basis for the individual call center, depending on its size, use, specific needs and demands. An example may be the abatement of a state-imposed gross receipt tax, saving millions of dollars over the term of a lease for a call center's operation.

Today, many of our clients are looking for multiple sites in different countries. In these instances, demographics and labor availability are connected to the incentives offered. Additionally, it often pays to "play" your choices "close to the vest." Make the inquiries, but don't let the decision to choose a certain location be known until all options have been weighed. After all, will a city offer incentives if it knows it is the site you have already chosen? This may sound simple, but the media have a way of finding out and announcing the most secret of secrets. Make sure you have the incentives you want "on paper" before you publicly commit to a city or a particular property. Be careful!

Looking at the whole picture, it is interesting to see some of the other incentives that have been offered by some municipalities to our clients and other call center companies. These include Job Development Tax Credits to offset business and occupational taxes, engineering fees, right-of-way costs for certain roadways, waiving of impact fees, abatement for owner association fees and event the establishment of daycare centers.

As an additional example, one client was willing to pay only a certain rental rate for the space it was to occupy. The landowner was demanding a higher rate…the city agreed to pay the difference in the form of a cash subsidy to secure the call center.

Surprisingly, landlords often perceived as adversaries, can be allies. For instance, a certain client desired to develop a facility on land within a floor control district that was subject to higher taxes, but the burden of costs to the client prohibited the property from being competitive. In order to limit the assessments paid over the lease term, Arledge/Power and the landlord jointly convinced the flood district authority to cap the maximum assessment.

Sometimes, incentives are granted on a more personal basis, especially in smaller cities. Cities want a place for their citizens to work, earn a good living, and stay in the community. In smaller cities, a call center can be the "white knight" who offers the local people a good place to work and earn a living (even though the base pay can be less than achieved by working in a larger city). For this reason alone, many towns will give exclusive incentives.

Wherever the call center company chooses to open a new center, there are incentives, and it is becoming easier to research and take advantage of them. Many companies have sought out and utilized real estate firms who specialize in call center site locations and incentive comparison analysis and negotiations. Being able to provide call center incentive experience and expertise, coupled with providing demographic analysis, market and abatement negotiations, programming, space planning, construction management and legal services, offers the call center company the optimum real estate transaction format.

The incentives are there, you just have to know how to go about securing and negotiating them. But, if they are not there, don't forget "incentives can also be created."


About the Author
Van Power, President and Principal of Arledge/Power Real Estate Group, specializes in representing corporate tenants on a local, regional, national and Canadian basis. He combines comprehensive office, industrial and build-to-suit market knowledge with integrity, resourcefulness, tenacity, and twenty-five years of negotiation experience to represent the best interests of his corporate and business clients.

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More Editorial From Arledge/Power Real estate Group

Published: Tuesday, May 13, 2003

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