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April 2015 Featured Article
Using Grant Funding to Promote Win-Win Developer Scenarios
In this increasingly litigious environment and considering the uncertainty that exists in program administration and policy at all levels of government, it is more important than ever that municipal officials seek “win-win” solutions to meet the challenges they face.
Consider this: Suppose your municipality is facing a plant closure by a company seeking to move to another part of the country. This closure will result in the loss of jobs and the possible reduction in a significant ratable for the community. You are trying to find a way to solve this problem and mitigate its impact. Your advisers have suggested that you challenge the plant closure through legal and political channels. This seems like a good option since it places you squarely on the side of your constituents, but you recognize that the chances for success are slim. It also places you in a position where there is precious little middle ground. Either you will be successful in preventing or delaying the plant’s closure or the company officials will be successful in relocating the firm. It is the classic “win-lose” scenario, and it places you immediately in an adversarial position with a company that – for the sake of this article – has always been a good corporate citizen. So, what can you do?
Let us take a look at another option. Given that the company is very likely to be successful in facilitating its move, what might you be able to do in concert with company officials to help promote a constructive outcome? Here’s one idea. Perhaps the company would be willing to partner with your community to fund a feasibility study on the reuse of the plant. This is not a far-fetched option. It has in fact happened in real-life situations; companies abandoning their real estate interests in an area are very willing to advance an obvious vested interest in seeing that something constructive happens with the abandoned facility. A market analysis could be developed that provides the company and the community with some constructive outcomes. These outcomes would not need to be limited to corporate alternatives. Perhaps, depending on the size of the facility, a non-profit use might be feasible. Perhaps there may even be possible municipal uses of the facility that would make sense.
At the point that alternative use concepts become evident, this is where grant funding can play a key role in advancing a constructive solution. The U.S. Economic Development Administration (EDA), for example, has funding through its Economic Adjustment Assistance Program that is aimed precisely at mitigating sudden and severe economic dislocation in eligible communities. EDA programs can also provide planning assistance and funding for public improvements that may be necessary to enhance the site’s marketability.
The U.S. Rural Development Administration (RDA) is another source of funding, depending on the location and eligibility of your community. RDA can also fund public improvements, assist in equipment upgrades and provide other types of financing that sweetens the potential reuse of the property. The New Jersey Economic Development Authority (NJEDA) also has a wide range of business and other programs that support job creation, facility development and redevelopment and other investment alternatives.
There are also some tax credit programs, such as the Federal New Markets Tax Credit or other creative tax financing that might assist you in finding a viable buyer for the facility. The relatively recent ERG and GROW Programs at (NJEDA) also offer opportunities to augment private sector funding to implement a solution.
The point is that it is often more productive in the long-term to take the steps necessary to create a win-win scenario that can pay dividends to the community over time. This may not be the most popular short-term action and its applicability certainly depends on a willing and constructive corporate partner. But, there are ways out of such a dilemma that can create face saving and revenue saving solutions for both the departing firm and the affected community.
Public sector grant funding and/or a combination of grant, tax and loan programs can often provide the leverage needed to create good solutions to complex municipal problems.
Published April 2015.