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Commerce’s new incentives are modeled on Utah’s, but could benefit Boise

Idaho Capitol-Building_DSCN9055_WEBNew incentives proposed by the Idaho Department of Commerce are aimed at adding high-paying jobs and could help the state attract more technology and service companies.

The incentives, proposed by Commerce Director Jeff Sayer and approved by a House committee Feb. 28, are different from existing incentives that help offset high infrastructure costs. They’re based on similar enticements in Utah that have been around since 2005 and have led to almost 12,000 new jobs in that state.

The new incentive package, called the Idaho Reimbursement Incentive Act, gives companies back a share of their payroll, corporate income and sales taxes if they add jobs that pay at least average county wages. Companies must add at least 50 jobs in cities with more than 25,000 people, which includes Boise, Nampa, Meridian and Caldwell. They must add at least 20 jobs in less populated cities, which includes Kuna and smaller cities.

As in Utah, companies can get up to 30 percent of their taxes back, though companies must negotiate with the government on what their tax rebate will be.

Sayer said the new incentives are needed to help the state attract more high paying jobs. Existing incentives, including the Idaho Opportunity Fund, local government urban renewal districts, and the state’s share of community development block grant funds, typically can only fund infrastructure, including roads, water treatment and other utilities.

“When it comes to recruiting a software firm, a technology firm or an engineering services firm, they don’t need infrastructure, so we’re left short-handed trying to increase the very jobs that could increase our wages,” Sayer said.

Sayer said that the nature of the infrastructure incentives, as well as strong community leadership, are a big reason why the Twin Falls area has landed several large companies in recent years, including Chobani, Clif Bar, Frulact and others.

“They’ve done everything right, but that is a key part of their success, is that they’ve had the financing tools to back those deals,” he said.

Utah’s version of the tax credits, called Economic Development Tax Increment Financing Tax Credit, has led a range of companies, including Adobe, Oracle, eBay, Procter and Gamble, Family Dollar and Goldman Sachs to add jobs in Utah.

The tax rebates in Sayer’s legislation would help manufacturing and food processing companies that pay high wages, but would also help companies that don’t need large improvements.

“If you’ve got a bunch of software developers, you don’t need a lot of roadways and that kind of stuff,” said Bill Connors, executive director of the Boise Metro Chamber of Commerce. He supports the legislation. “It makes the possibilities broader. We like it for a lot of different reasons.”

The Treasure Valley has added companies that need infrastructure improvements—applesauce maker GoGo squeeZ and Cascade Aircraft Management both are set to receive Idaho Opportunity Fund dollars—but the area is also trying to attract technology and professional services companies.

“I truly believe, not only for the Boise metro but for the whole state of Idaho, it would be a game changer for turning opportunity into success.”  said Clark Krause, executive director of the Boise Valley Economic Partnership, the Treasure Valley’s economic development agency. Krause said the new incentives won’t target any particular industries, but could be useful in attracting technology companies.

“They don’t require a lot of capital investment. What they’re investing in is the people. This is designed to reward the type of jobs that you’re targeting, which is higher wage jobs with skills,” he said.

Both Sayer and Krause said that last year, the Treasure Valley was a target for a unnamed tech company that wanted to add 400 high-paying jobs, but decided to hold off on making a decision, in part because the Boise area couldn’t put together a competitive incentive package.

“Our ability to provide incentives was limited, because they didn’t need infrastructure,” Sayer said. “We essentially couldn’t touch it.” He said if the law is passed, one of his first calls will be to that company, letting them know a better deal may be on the table.

The Idaho House Revenue and Taxation Committee approved the bill on Feb. 28, sending it the the full House for a vote. The bill is co-sponsored by more than 20 House members and seven senators. Many of those lawmakers serve on either the House or Senate’s tax committee, where the legislation must receive approval before it could become a law.

Senate President Pro Tem Brent Hill, R-Rexburg, a member and former chair of the Senate and Local Government Tax Committee, said Feb. 24 he doesn’t favor incentives in principle, but that Idaho needs to compete against other states.

“I don’t like playing these games. If I had my way, I’d provide an even, business-friendly environment where we have good resources, a good workforce and everybody on an equal playing field. But we can’t do that and compete with other states that are providing these incentives for important businesses that are coming in with a lot of jobs and a lot of investment in the state,” he said.

The Senate committee has been skeptical of tax breaks in the past, but Hill said he was eventually convinced that this legislation is a good plan, in part because companies won’t see any money from the state until they add jobs and start paying taxes.

“I’ve seen a lot of those grants given, including to places in my side of the state, where the money was poured out and the business failed and everybody loses. I like the way this is structured, so businesses have to earn the credits before they’re granted the credits,” Hill said.

Sidebar: Utah’s incentives

Utah’s version of the tax rebate was created in 2005 by then-governor Jon Huntsman. According to the Utah Governor’s Office of Economic Development, more than 100 companies have agreed to incentives packages and promised to create 19,100 jobs. So far, companies have hired close to two-thirds of those promised jobs — 11,933 jobs. In turn, the state has given $58 million in incentives, a small fraction of the $810 million in tax rebates that companies could get.

Michael Sullivan, a spokesman for the Office of Economic Development, said that Utah rarely offers to give companies back the maximum 30 percent of their taxes, reserving that for large projects like Procter & Gamble, which was promised incentives of $85 million in 2007 for a $300 million plant. Most companies get 20 percent to 25 percent of their taxes over a period ranging from five to 20 years.

Sullivan said one policy for awarding incentives in Utah is that companies create above average jobs – unlike Idaho’s proposal, jobs in urban areas must pay 25 percent above average wages and have benefits. Utah also doesn’t offer incentives for retail projects, since high-profile retail locations could pit neighboring communities against one another. Idaho doesn’t exclude retail, though Idaho Department of Commerce Director Jeff Sayer said the average wage requirement could limit many retailers from seeking the tax rebates.

Utah has lured Idaho companies to the Beehive State. Litehouse Foods in Sandpoint opted to build a $10 million facility in southern Utah in part because it received better tax incentives. A Micron Technology Co. and Intel Corp. partnership called IM Flash Technologies received a promised $45 million in tax breaks for a $1.5 billion plant in Lehi in 2011.

“That doesn’t even form a rounding area. It’s significant money. No one’s demeaning that … but it’s not the reason you make a decision,” he said. Sullivan said state program helps Utah compete with other states’ incentives, but having a good work force, available land and low operating costs get companies to create jobs in the state.

“Incentives are generally a ‘thank you’ for doing the right thing,” he said.

Micron spokesman Dan Francisco said the incentive wasn’t the lone reason IM Flash chose Utah. Micron had a fabrication plant in place, and the region offered many local college graduates who could fill the jobs needed.

“Utah’s always been a supportive, business-friendly environment,” he said.

Sayer said he worked for a year adapting Utah’s law to Idaho and consulted frequently with lawmakers before formally unveiling the legislation. Changes included making sure that the tax breaks have sufficient oversight and protections for state money.

“We studied all the models we could find, and created what we think could be a long-lasting tool that could serve Idaho well,” he said.

About Brad Iverson-Long

Brad Iverson-Long is a reporter for the Idaho Business Review, covering banks, financial services, technology and new business.

One comment

  1. pattiperkins15@yahoo.com

    This is an excellent step toward stronger economic development in the Treasure Valley and for the State. I applaud the Legislature and the Commerce Department for finally updating and increasing the incentive tool belt!

    The article recently about the explosion in home offices just validates that one has to essentially work “outside” Idaho to maintain a higher wage. Some are lucky to work for firms that allow telecommuting, as I was for nearly 10 years. My only options for staying closer to home (traveling much less) involved taking a big pay reduction. We shouldn’t be forced to make that choice.

    These incentives should help attract bigger jobs and with a continued focus also on educating the workforce, we should get our fair share of the tech and other companies that bring better wages to our State. Thank you!