Behind the Numbers: How to Calculate the True Value of Incentives

When negotiating incentives, it is easy to focus on headline numbers. A 10-year property tax abatement worth millions may sound impressive, but the real question is: what is the actual value to the company?

Key Considerations

• Net Present Value: A dollar today is worth more than a dollar 10 years from now.
• Compliance Costs: Reporting and performance obligations can reduce the net benefit.
• Stacking with Other Incentives: Combining multiple programs may deliver more value than a single large award.
• Impact on Cash Flow: The timing of benefits matters as much as the total amount.

An Example

A company promised $5 million in abatements over 15 years realized the net present value was closer to $3 million. However, the addition of workforce training and infrastructure support raised the overall benefit to more than $6 million.

The Takeaway

Evaluating incentives requires more than looking at face value. A disciplined financial analysis ensures companies capture the true return on their negotiations.