Sunday, February 01, 2004
It's a good idea to have a "clawback" provision in a performance-based incentive deal. This feature allows you to recover incentives if the company does not meet certain performance targets.
But when communities extend incentives to financially weak companies, you can open yourself to new risks.
In the case of American Airlines in Kansas City, the company negotiated a parachute so that it could jump out of the clawback provision.
The company does not have to repay incentives in Kansas City if, beginning in 2006, its operating losses during any four-quarter period exceed $750 million and its fleet declines by 5 percent because of adverse conditions in the aviation market.
This escape clause opens Kansas City to major downside risks. Read more.
posted by Ed Morrison |
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The purpose of this weblog is to help economic development professionals -- EDPros -- keep up with the changes sweeping our profession. Strap on your goggles. It's a whole new game. There are no experts any more. The only place to learn about economic development is from other EDPros who are doing it.
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Background on Ed Morrison
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Anatomy of a deal: American Airlines in Kansas City
