Idaho’s biggest incentive program creates jobs

At the end of June, Idaho’s Tax Reimbursement Incentive (TRI) program, intended to help encourage more companies to come to and expand in Idaho, will be completing its fourth year, and it remains one of the Idaho Department of Commerce’s biggest incentive programs.

TRI reimburses new or existing Idaho companies for a portion of their taxes based on creating new jobs at a particular salary level. In urban areas, that’s 50 new jobs above the average county wage, while in rural areas – defined as fewer than 25,000 people – that’s 20 new jobs. By that definition, “most of Idaho is rural,” said Bobbi-Jo Meuleman, director of commerce (see box). Once companies meet the qualification, they are eligible for a tax credit of up to 30 percent on income, payroll, and sales taxes for up to 15 years.

Meuleman’s priority is existing Idaho businesses, particularly in the rural area. “We’re seeing a lot of growth in urban, but we’re not seeing it in rural,” she said. “How do we use our resources to jumpstart that growth?”

Since the TRI legislation was passed in 2014, Commerce has approved 46 projects, split fairly evenly between new and existing Idaho companies and urban and rural. More than half the rural projects were existing Idaho companies, creating more than 1,700 jobs, said Matt Borud, chief marketing and innovation officer.

“We are strong supporters of the program,” said Alex LaBeau, president of the Idaho Association of Commerce & Industry, a Boise-based business lobbying organization. “We have been pleased that existing Idaho businesses have had the opportunity to take advantage of the program to help them grow.  In addition, we are happy to see how well it is working for rural Idaho where, many times, it is more difficult to recruit business expansions.”

Not everyone is happy with the program. Organizations such as the Urban Institute and the Brookings Institution say that spending taxpayer money on incentives can actually make it harder to fund efforts that provide infrastructure and a skilled workforce. And some existing Idaho companies said the program gives an unfair advantage to their competitors.

The owner of a Boise human resource company, Employers Resource Management Company, sued the Idaho Department of Commerce on that basis for a TRI it provided to Paylocity. The case is scheduled to go to trial in December, though it might be resolved before that, said CEO George Gersema. The program favors large, out-of-state companies over small local businesses, isn’t the proper role of government, and is unconstitutional because it doesn’t allow for redress through the courts, he said.

TRI projects have now started coming in for reimbursements, said Jake Reynolds, business development and operations administrator. Projects awarded in 2017 could be eligible for up to $25.5 million in reimbursements, and projects awarded before that time could be eligible for up to $77 million. In 2016, the state issued $973,390 in reimbursements to seven companies. “If a company doesn’t hit its benchmarks, there’s no reimbursements,” he said, adding that this has happened to a couple of companies. Thresholds are on a year-to-year basis, so the companies could get their reimbursements in later years, he said.

Although the program operates on a fiscal year calendar, which means the year ends on June 30, participating companies have until October to report their progress, and the department issues its annual report in January.

Proponents of programs like the TRI say Idaho’s at a disadvantage to neighboring states, because it doesn’t offer the incentives they do to attract new companies. “Idaho is not a state where we throw money at projects,” Meuleman said. “I don’t ever see us operating that way. If we can get those projects here, we can sell them on quality of life and access to leadership.”

Instead, incentives the state can offer typically improve infrastructure, and require that the company also partner with the community it wants to join. Until two years ago, the threshold for such projects was $3 million and limited to the manufacturing industry, Reynolds said. Now, the threshold is $500,000 and isn’t limited to manufacturing, he said.

The next legislative session may also see Meuleman extending the sunset date for the Business Advantage incentive, which provides a number of tax credits for companies that create at least 10 jobs paying at least $40,000. That program is slated to end in 2020, she said.

Meuleman may also make another try at a bill for a tax break on equipment used in data centers, with the goal of attracting more such projects to Idaho, such as the Facebook data center just announced by Utah. Washington, Nevada, and Wyoming all have such an exemption, while Oregon and Montana have no sales tax, she said. However, Idaho legislators have been loath to grant additional tax exemptions; the data center exemption lost in 2017 and didn’t even get a print hearing in 2018. The next such effort might come from industry itself, she said.

Idaho is also said to operate at a disadvantage based on what some say are higher corporate income tax rates, but Meuleman isn’t planning to address that. “We’re not tax policy experts,” she said. “We leave that up to the Legislature.”

New Commerce director ‘hit the ground running’

Six months after taking over as Director of Commerce, Bobbi Jo Meuleman has restructured the organization.

Meuleman was serving as chief operating officer of the department, after Megan Ronk had hired her out of Gov. C. L. “Butch” Otter’s office in 2016, when Ronk joined Idaho Power as director of business innovation and development. Because the legislative session was just starting and Meuleman had been doing the legislative work, she “hit the ground running,” she said.

Since then, Meuleman has restructured the department. Instead of replacing herself as chief operating officer, she promoted Jake Reynolds to business development and operations administrator, adding him to her staff of Matt Borud, chief marketing and innovation officer. She’s particularly interested in broadband access and affordable housing – policy areas for which she hired George Lynch as senior economic development advisor.

Meuleman’s job could be over by the end of the year, when a new governor might want to bring in his own commerce director. “We’re just focused on the job at hand right now, finishing strong for Gov. Otter in his last year,” she said. “We have a great team doing some good things, and that’s going to continue regardless. Directors come and go – that’s the nature of politics.”