Failure to Create Life Sciences Jobs puts Spotlight on Incentive Programs

March 2011
T3 Advisors

The Mass Life Sciences Center recently announced that 14 of the 26 companies that received tax incentives in 2009 failed to create the promised jobs. In response, the Patrick administration announced this week that were tightening the rules on “claw backs” for other programs, insuring that the state can recoup funds provided to these companies. Some states require companies to “earn” the incentive benefits as they create the jobs. With Massachusetts and many states facing budget deficits, one must be concerned about future impacts on these incentive programs.

When we work with companies looking at incentives, we are careful to caution them about unrealistic job creation expectations. Understanding job growth projections is critical to space planning needs as well, so it is a delicate balancing act. In the end there is no downside to promising fewer jobs than you build- out in the expansion
classifieds-resized-600program. Also, many programs- like the Mass Life Sciences Center- will offer a threshold achievement. In their case a company must produce 70% of the promised jobs. Other states will equate the benefit with a per job value.

Despite political cries and economic arguments that government incentives are counter- productive and inefficient, my sense is that they will remain an integral part of the competitive landscape to attract companies. Rather than be deterred, life sciences companies looking to expand, should continue to explore these programs and carefully evaluate their goals.