With its strong economy, does Idaho still need business incentives?

photo of newcold
The NewCold facility in Burley received a Tax Reimbursement Incentive to bring 80 jobs. Photo courtesy of NewCold

With the strong economy and low unemployment rate, some are suggesting that states no longer need to offer incentives to companies to locate or expand facilities.

photo of steve scranton
Steve Scranton

Steve Scranton, chief investment officer for Washington Trust Bank, told the Treasure Valley Chief Financial Officers Forum earlier this month that Idaho should pause incentives such as the Tax Reimbursement Incentive (TRI) because growth is coming on its own as West Coast companies locate non-customer-facing roles here where it’s cheaper.

Similarly, Spencer Cox, lieutenant governor of Utah and gubernatorial candidate, is calling for Utah to cut back on incentives because it already has low unemployment.

“Incentive programs should look different with 8% unemployment than 3% unemployment,” Cox wrote in a recent opinion piece. “We must be comfortable losing out on some opportunities to other states who offer richer incentives without the same kind of robust performance metrics that we require. At 8%, we claw for every job. At 3%, we need the flexibility to pivot our incentives towards workforce development, infrastructure build-out, and placemaking.”

Other states are also considering cutting back. For example, some suggested Amazon pulled out of New York for its second headquarters because people objected to the $3 billion in incentives the state was offering. On an ideological level, some feel such programs involve having the government pick winners and losers, or help new companies to the detriment of existing companies.

Idaho’s Department of Commerce, which manages the TRI and other state incentive programs, said it doesn’t have any plans to stop or pause the program.

“The Idaho Tax Reimbursement Incentive is structured as a post-performance credit, which means jobs and wage levels must be verified before a reimbursement is issued,” said Taylor Walker, public information specialist. “Incentive activity is contingent on businesses meeting their commitments to create new jobs at higher wage levels. We are happy to see the program benefit rural communities and help existing Idaho businesses expand alongside the new businesses the program has assisted in bringing to Idaho.”

According to the Idaho Tax Reimbursement Incentive FY2018 Annual Report, the TRI created 1,058 jobs among eight companies with a total capital investment of $192 million, resulting in a 448% return on investment.

Some economic development professionals argue that there could be nuance in how incentive programs are applied, in light of economic conditions.

photo of nathan murray
Nathan Murray

“No company is choosing to locate in Idaho solely because of tax incentives,” though they make a difference at the final stage, said Nathan Murray, Twin Falls economic development director. “Idaho should continue to allow for the TRI as an option, but perhaps the governing committee could choose to be a little more selective in times when the economy is growing rapidly and unemployment is low.”

photo of kit kamo
Kit Kamo

While incentives might be less important in cities like Boise, they are critical in smaller communities, said economic development professionals.

“In the counties I work in, we depend on the few incentives the state allows,” said Kit Kamo, executive director of the Snake River Economic Development Association. “These programs are very limited in what type of business can qualify.”

photo of lisa holland
Lisa Holland. Photo by Sharon Fisher.

“If you want to attract manufacturing and professional office jobs, these incentives play a role,” said Lisa Holland, economic development director for Kuna, which she said doesn’t otherwise have many companies offering such jobs.

Others vehemently opposed cutting incentives.

photo of bill connors
Bill Connors

“It would be foolish to limit our tools,” said Bill Connors, president and CEO of the Boise Metro Chamber, noting Idaho was missing out on data centers because it lacked incentives other states offered. “This idea that these companies will come anyway is just false.”

Clark Krause

“It is reckless to suggest or advise us to put the brakes on economic development,” said Clark Krause, executive director at Boise Valley Economic Partnership. “The reality is, companies have lots of choices of where to put their next jobs and investment. We work in a competitive environment where companies go where they are wanted the most.”

Department of Commerce awards two IGEM grants

photo of premier technology
Partnering with Idaho universities, Premier Technology in Blackfoot will have access to almost $300,000 to commercialize manufacturing technology. Photo courtesy of Premier Technology.

The Idaho Department of Commerce has awarded two grants, totaling more than a half-million dollars, that will help two Idaho companies bring new technologies to market.

The Idaho Global Entrepreneurial Mission (IGEM) program, through the Department of Commerce, offers grants to Idaho’s three research universities, which partner with local startups. The grants are awarded to the universities, which then partner with the companies on the projects.

The IGEM Council allocated $255,496 to Boise State University to assist industry partner Molecular Testing Labs with research efforts to commercialize a ribonucleic acid home test for early HIV detection.

“Idaho currently spends more than $10 million in drug testing, monitoring and STD testing services out of state,” said Nadia Kuzmenko, media coordinator with Molecular Testing Labs, located in Boise. “Furthermore, many biology graduates are unable to find local jobs in laboratories or laboratory research. Molecular will expand its sales in Idaho and reinvest profits in Idaho to develop new products and services in continued collaboration with Idaho universities.”

The IGEM Council awarded the University of Idaho $274,167 for research and development in optimizing laser metal deposition additive manufacturing techniques with industry partner Premier Technology Inc. This statewide collaborative project leverages skills and expertise from the University of Idaho, Boise State University, the Idaho National Lab and the Center for Advanced Energy Studies.

Premier, which operates a custom manufacturing facility in Blackfoot, expanded the plant by almost 25% a year ago.

This fiscal year, the IGEM Council has awarded $1,016,728 for research to commercialize innovations, according to the department.

New Commerce director raises his profile

Tom Kealey

In his almost six months as director of the Idaho Department of Commerce, Tom Kealey has been surprised by one thing.

“What I have learned is I’m assigned to a lot more commissions and task forces than I ever imagined,” Kealey said. “It’s interesting, because it gets me smarter about overall state activities.”

Kealey said he’s kept a low profile since being sworn in on Jan. 7, the same day as Gov. Brad Little, “so I could get smarter about the scope of the department and the priorities for the governor.”

That’s changing. Kealey was appointed to head the broadband task force, intended to learn just what Idaho’s broadband internet status is and how to improve it, and will be coming out with the department’s annual strategic plan in June.

It’s going to be laid out a little differently than in past years, in terms of description, key objectives and measurement of performance, Kealey said. He explained that the emphasis is the economic outlook and priorities the governor has established.

Kealey – who ran for state treasurer in 2018, losing in the primary to Julie Ellsworth – worked for General Electrical Capital in acquisitions until 1994, when he was recruited to Morrison Knudsen Corp. for a project. Soon after, he was appointed chief financial officer to help the organization work through bankruptcy.

By that time, Kealey and his wife had fallen in love with Idaho.

“When that was over, we didn’t want to leave, so we stayed around,” he said.

There weren’t many large companies he could work for, so instead he purchased the Chicago Connection chain of pizza restaurants. In addition, he was appointed by then-Gov. Dirk Kempthorne in 2002 to the endowment fund investment board, where he met then-Sen. Little.

That led to Kealey to apply for the Commerce position.

“People said I should look into working for Gov. Little,” he said. “So near his election time, I did research on what position could I make the most contribution and have the most fun, and Commerce was the best fit.”

Little’s overarching priority is to keep children and grandchildren in Idaho and, for those who have left, create an atmosphere and opportunity to come back to the state, Kealey said. Other goals include supporting existing businesses and attracting businesses that make sense, diversify the economy, increase wages and preserve the rural Idaho quality of life, he added.

In comparison with previous directors, who had to deal with the recession and its aftermath, Kealey has to tackle problems such as lack of a skilled workforce.

“The economy, technology, and just in general the dynamics of the state are very different from four or five years ago when we were in a recession or coming out,” he said. “That may drive some different priorities.”

While some economists have been predicting a recession, Kealey said none of the forecasts he sees have one on the horizon.

“Everywhere I go, people are preparing for continued growth, though perhaps at slower paces because of constraints like workforce or housing,” he said, noting Idaho still shows a lot of inbound immigration, as well as high rankings on lists such as innovation and dollars spent on travel.

As part of Commerce, Kealey is also involved with organizations such as the Economic Advisory Council, the Idaho Travel Council, the Idaho Rural Partnership, the Workforce Development Task Force, and a number of other education and workforce initiatives, as well as promoting international trade.

In addition, the department is involved with developing “responsible incentives” and using the ones that have already been developed, such as the Tax Reimbursement Incentive.

“There’s nothing on the horizon to change on that front,” he said.

Tourism is now the third-largest industry in the state, and Kealey said it is “growing at a healthy pace.”

“We’ve been discovered,” he added.

Idaho’s aerospace industry taking off

photo of aeroleds
AeroLEDs, a Boise company, will be taking its low-power, high-intensity light aircraft to the AVALON aerospace show in Australia. Photo courtesy of the Department of Commerce.

When you think of states with a burgeoning aerospace industry, Idaho might not be the first one that springs to mind. But the state is working to change that.

Admittedly, Idaho only ranks 38th in the PwC 2018 Aerospace Manufacturing Attractiveness Rankings. While the state does well in cost, ranking third, it ranks 42nd in labor, 39th in infrastructure and industry, 33rd in economy and 30th in tax policy.

photo of sarah massie
Sarah Massie

That said, there’s plenty of room in Idaho for small suppliers to the aerospace industry, according to Sarah Massie, senior international trade specialist, who also serves as secretary for the board of the Idaho Aerospace Alliance.

While many companies used to be located along the Interstate-90 “aerospace and aeronautical” corridor — due to its proximity to Seattle and Boeing, which has 37 Idaho business partners — there are now more than 160 aerospace companies all over the state.

This week, the Department of Commerce is taking eight Idaho aerospace companies, as well as the Idaho Aerospace Alliance, to AVALON, the Australian International Aerospace and Defense Exposition. The show attracts more than 650 companies and 200,000 visitors, according to the department. Two of the companies produce unmanned aerial systems, while the other six are in materials and equipment.

In addition, Idaho aerospace vendors participate with the Inland Northwest Aerospace Consortium, a regional alliance of aerospace manufacturers located along the I-90 corridor from central Washington to central Montana. That organization holds an annual conference at the end of May that typically alternates between Spokane and Coeur d’Alene.

“We really collaborate pretty well with Washington,” said Massie.

Washington scored first in the PwC study. Idaho has different tax and unemployment rates, plus there are quality of life benefits to living in Idaho, she said. “People are happy being located here,” she said. “They don’t feel the need to be closer.”

In addition, Idaho has a lot of easily accessible open airspace, a lack of rules and regulations and a testbed at Idaho National Laboratory for unmanned aerial vehicles, she said.

Other international air shows where Commerce has taken Idaho companies have been held in Taipei, Singapore, Paris and Farnborough, outside London. The eight companies that attended Farnborough one year reported more than $8 million in sales from the show, Massie said. Attendance at the international shows is partially funded by a State Trade Expansion Program grant from the U.S. Small Business Administration.

“International expansion is not a cheap process,” she said.

Over the next decade, the aerospace industry is projected to grow 41 percent, according to the Department of Commerce. Since 2001, employment in the field has grown by 45 percent, and the aircraft and parts manufacturing industry has grown by 300 percent.

When you consider supporting industries that sell into the sector, such as services and freight, aerospace has considerably more impact, Massie said. While Massie said there are roughly 2,500 aerospace jobs in the state, when you add in supporting industries, the total adds up to 50,000 jobs.

Aerospace jobs also pay well, with an average wage of $66,200.

Companies in the Idaho Aerospace Alliance range from Titan Spring, a Hayden company that makes springs and other component parts, to Quest Aircraft, a Sandpoint company that makes an airplane, the Kodiak.

PKG Inc., which designs and manufactures a pilot keyboard for the French-built Airbus 380, is taking in well over $1 million in business, according to Jon Frank, director of sales for the Meridian company.

The PKG keyboard pulls out on rails, upward, and is adjustable like a standing desk and coupled with a writing surface.

PKG was approached by Rockwell Collins, now Collins Aerospace, a Cedar Rapids, Iowa, company that was producing much of the cockpit avionics.

“They didn’t have the bandwidth or partners that would tackle the problem in the timeframe they needed it,” Frank said.

Gov. Little planning broadband task force

photo of emmett fiber optic trench
In Emmett, fiber optic cable is installed whenever the streets are dug up. Photo courtesy of city of Emmett.

Gov. Brad Little is forming a task force to improve broadband internet access in Idaho, a goal he set out in the State of the State speech.

“The new administration is beginning work on this important issue,” said Marissa Morrison, press secretary. “The first step will be to develop a task force or working group to best determine how to proceed.”

While major metropolitan areas in Idaho, such as Boise, have some degree of high-speed internet service, some rural areas don’t have it at all, or have it at a high price. Regions ranging from McCall to Ammon to Northern Idaho have been taking the matter into their own hands.

photo of dylan baker
Dylan Baker

Citing the annual 2018 Speedtest U.S. Fixed Broadband Performance Report by Ookla, released on Dec. 12 for Q2-Q3 2018, “Idaho ranked 47th out of the 50 states for mean download speeds (with Montana, Wyoming, and Maine trailing behind us),” said Dylan Baker, broadband consultant for the Idaho Commission for Libraries, in Boise.

photo of brad little
Brad Little

That perception hurts Idaho, Little has been telling business audiences.

“I constantly hear how the absence of adequate broadband infrastructure is a deterrent to growth and economic development,” Little said during the State of the State. “To ensure Idaho can adapt to the rapidly evolving digital world, we must actively work to improve Idaho’s broadband access, pursuing all options to increase broadband connectivity. I will work with the Legislature to ensure both rural and urban Idaho are connected and well positioned to attract and create maximum success.”

Part of the challenge is, first, figuring out just what sort of broadband access Idaho has. Available state maps date from 2014, when Idaho received a federal grant to map broadband access. In addition, the Federal Communications Commission announced in December that it would be investigating violations of rules that are leading to incorrect maps nationwide.

Little has indicated in a couple of venues that the Department of Commerce has been researching the issue, but a spokeswoman said the department wasn’t ready to talk about it yet.

“We’re still working with Gov. Little’s office on a proposal for the department’s ideas, and it’s premature to comment on anything,” said Taylor Walker, public information specialist for the department. “At this time, there is not a formal analysis document to be published or shared.”

Wyoming governor Mark Gordon also pledged in his State of the State to improve broadband access.

Idaho hotel room rates outpace neighboring states

The Hampton Inn & Suites (left), the Grove Hotel, Marriott Residence Inn Boise Downtown/City Center and Inn at 500 Capitol make up Idaho’s largest cluster of hotels. Photo by Teya Vitu.

Idaho hotels lead the northwestern states in increases in the average daily rate at hotels but also had the largest decrease in room occupancy over the past year, according to a hospitality research report.

The Marcus & Millichap Hospitality Research Report noted that average daily rates (ADR) at Idaho hotels increased 4.5 percent to $101.96 from July 2017 to July 2018, the largest increase among Oregon, Washington, Idaho, Montana and Wyoming.

Specifically in Boise, ADR increased 5.2 percent from $102.61 to $108.02, according to Greater Boise Auditorium District statistics.

The Marcus & Millichap report also cautioned that Idaho room occupancy “plummeted” 1.9 percentage points to 63.2 percent compared to a .3 percentage point increase to 64.2 percent across the five states. GBAD notes Boise occupancy dropped 2.7 percentage points to 72.0 percent.

The occupancy rate is moot because Idaho has added some 3,000 new rooms at about 40 new hotels in the past couple years, said Pat Rice, executive director at GBAD, which is funded by transient occupancy taxes charged at hotels.

Downtown Boise alone has added four new hotels with 580 rooms in less than two years.

“I would say nothing plummeted,” Rice said. “The occupancy rate is driven purely by supply. You add that kind of supply to the market, you might have more occupancy.”

But Rice said Boise has absorbed nearly all the new rooms, considering the vacancy rate is similar with more than 600 new rooms across the city. He noted that room nights increased by 66,925 to 1.56 million rooms filled over the course of a year.

“We’re up simply because of the number of conventions we can do,” Rice said.

Boise Centre events and conventions spiked following the August 2017 opening of the 36,000-square-foot Boise Centre East expansion. The number of total events at Boise Centre increased from 270 in 2016 to a projected 368 for 2018, bringing 42,000 more people to the convention center, and the number of conventions grew from 47 to 68, Rice said.

Room revenue also increased 7.3 percent to $170.4 million in July 2018 in the GBAD area, which is generally east of Eagle Road, Rice said.

Jared S. Barr built the largest hotel among the current generation of new hotels, the 185-room Marriott Residence Inn Boise Downtown/City Center. He is also building a 108-room Marriott TownePlace Suites in Twin Falls that is expected to open in June next to his 92-room Marriott Fairfield Inn.

“We put a massive amount of supply on the market,” Smith said. “We all need time to understand how it will affect all of us.”

New hotels aren’t the only factor taking a bite out of occupancy rates. Airbnb’s presence in Idaho more than tripled from 7,300 vacation home rentals in 2016 to 24,000 in 2018, according to the Idaho Department of Commerce.

“The vacation rental element made a much bigger impact,” said Matt Borud, Commerce’s chief marketing and innovation officer.

Borud said he has watched hotel room rates climb over the past two to three years.

“New high-end properties coming online is a driver of that,” Borud said.

Unlike neighboring states, where a lion’s share of tourism generally focuses on one or two general areas, Idaho has seen hotel construction all over the state in nearly all significant population centers. Idaho visitation is up 4 percent from 2015, according to Borud.

“Visitation is up across the state,” Borud said. “The growth is not limited to one or two pockets. Every area around the state has a unique travel opportunity.”

Marcus & Millichap also mentioned that “more flights are being added to and from Boise, giving visitors more flexibility to visit the state from some of the nation’s largest markets.”

Since June 2017, Boise Airport has seen several airlines launch service to new cities — Southwest Airlines offers flights to San Diego and San Jose, American Airlines to Chicago O’Hare and Allegiant to Phoenix-Mesa Gateway Airport. Frontier entered the market with service to Denver. American added a flight to Dallas, and Alaska Airlines increased plane size on some flights to Seattle, airport spokesman Sean Briggs said.

Passenger traffic increased 11 percent through July 2018 to 3.69 million.

“Last year was a record year, and we’re blowing it out of the water this year,” Briggs said.

Tourism grants up more than 11 percent

Boats and tourists at Payette Lake in McCal this summer. Seven regions of the state received travel grants from the Idaho Travel Council for tourism marketing. Photo by Fiona Montagne.

The Idaho Travel Council distributed more than $5 million in grants this summer to nonprofits in seven regions, as well as statewide, to help further promote travel and tourism in Idaho.

Grants ranged from more than $1 million to the Boise Metro Chamber of Commerce, including the Boise Convention and Visitors Bureau, to $26,000 for the Lemhi County Economic Development Association. Statewide grants, amounting to almost $300,000, were awarded to the Idaho Lodging & Restaurant Association, the Idaho Outfitters & Guides Association, the Idaho RV Campgrounds Association, and the Idaho Ski Areas Association. The Boise award was the first ever over $1 million, said Matt Borud, chief marketing and innovation officer for the Commerce Department.

photo of matt borud
Matt Borud

The Travel Council received 28 applications and gave out 27, Borud said. The only applicant that didn’t receive a grant was the Meridian Chamber of Commerce, which instead was funded through the Southwest Idaho Travel Association, he said. Each of the state’s tourism regions except Region 7, which includes Sun Valley, have a regional travel organization to help promote the region, and sometimes it is easier for a nonprofit to work with a regional entity, he said.

photo of carrie westergard
Carrie Westergard

Tourism brings in more than $4 billion annually, making it Idaho’s third-largest industry, said Carrie Westergard, executive director of the Boise Convention and Visitors Bureau. Westergard said tourism employs more than 14,000 people in the Boise area alone. State Tourism development activities are paid for by a 2 percent tax paid by travelers, collected by hotel, motel, vacation rental, and private campground owners, according to the Commerce Department. For fiscal year 2018, which ended July 1, that amounted to $12.4 million, an increase of 11.22 percent over the previous year, Commerce said.

Of that amount, 45 percent is used for statewide programs targeted to international and domestic consumers, tour operators, travel agents, and travel journalists, while another 45 percent is distributed to communities through the grant program. The remaining 10 percent pays for administration of the Tourism Development division, Commerce said.

Grant awards for each of the seven regions in Idaho are based on how much lodging money is collected in each region. Region 3, stretching from Nampa to McCall and including Boise, collected $4.6 million, Westergard said. The $1,037,685 that Boise received, a 12 percent increase over the previous year, was actually less than the organization requested, she said.

The Boise bureau will use the money for items such as attending trade shows to attract meeting planners, advertising the city to business and leisure travelers, and digital advertising to all 20 nonstop flight destinations from the Boise Airport, Westergard said. The group has also been working with about 30 travel journalists around the country, annually visiting cities such as Seattle, Chicago, Denver, and New York to meet with journalists there. “That sometimes takes a few years to have results,” she said. Sporting events also have a big economic impact — up to $15 million in the case of the National Collegiate Athletic Association basketball tournament, she said.

The state division is particularly interested in tourism efforts that drive greater national awareness around Idaho, Borud said. “We’re at a pretty significant disadvantage from a budget perspective,” he said. “Oregon and Utah run very big programs.” Tourism in Oregon brings in $11.8 billion, while tourism in Utah brought in $8.4 billion in 2016, according to the states’ respective tourism departments. “When people are exposed to Idaho, they are much more inclined to want to visit,” he said.

Idaho, particularly Boise, has been on a long list of best-of tourism destinations recently, Borud said. “’Northwest’s best-kept secret,’ ‘the West’s best-kept secret’ – that theme just keeps emerging,” he said. “We’re pleasantly surprised by the continual very positive, very authentic stories and representation of the state.”

That includes recent stories in the national news after a herd of 118 goats wandered through a Boise neighborhood. “That was hilarious,” Borud said. “Maybe it’s something we should do something with.”

Idaho’s biggest incentive program creates jobs

The Idaho Statehouse. Idaho’s Tax Reimbursement Program completes its fourth year at the end of June. Photo by Anne Wallace Allen.

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.

photo of alex labeau
Alex LaBeau

“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.”

Idaho to lead nation in application economy

Aerial shot of yellow harvesters working on wheat field.
Farm machinery in a field of wheat. Idaho’s agricultural economy offers potential for many new applications, according to Morgan Reed, president of a national association that encourages development of apps.  Reed noted modern farmers use satellite radio, global positioning system, connections to databases, and commodity price monitors. File photo.

The state projected to lead the nation in app economy job growth by 2024 is…Idaho?

That’s the finding of the sixth edition of the State of the App Economy study, from ACT | The App Association, released on April 16, which showed Idaho with 52.24 percent growth.

“It was an interesting and surprising finding,” said Morgan Reed, president of the Washington, D.C. organization. “Idaho was really in a position that a lot of readers around the country wouldn’t expect.”

Idaho’s not alone. “People are surprised to see states like Idaho and Kentucky and Louisiana as areas where we’re seeing a lot of opportunity,” said Roya Stephens, director of communications at ACT | The App Association. The organization is reaching out to economic development offices to encourage them to dedicate resources to help develop this market, she said.

photo of bobbi jo meuleman
Bobbi-Jo Meuleman

“The information in the ACT report illustrates the exciting opportunity ahead for Idaho’s fast-growing technology and software industries and workforce,” said Bobbi-Jo Meuleman, director of the Idaho Department of Commerce, which was briefed on the contents of the report.  “Idaho has long been home to a number of global technology leaders. As this industry continues its rapid evolution, partners all across Idaho will continue to focus on developing a skilled workforce to support employers and entrepreneurs in developing next generation technology whether software, semiconductors or the app industry.”

photo of roya stephens
Roya Stephens

The organization compiled the numbers by looking at the codes used by the Bureau of Labor Statistics from its 2016, 2018, and 2024 data, Stephens said. “We specifically looked at occupations that contribute to the app economy.”

The growth rate reflects Idaho’s size, where even a small numerical increase can result in a large percentage change. But some of the raw numbers are perfectly respectable as well, Reed said. “For the number of direct application developers, growth is scheduled to move from 1,770 in 2018 to 3,220 in 2024,” he said. In addition, for every coder, there is an infrastructure that supports them, including managers and the sales team. “When you see these numbers, all the workers that go around this are critical,” he said.

Another number Reed found significant was that of information security analysts. “That goes from frankly fairly low, 170 in 2018, to a more reasonable 540 in 2024,” he said. “For your population, that’s not a terrible number. These are very specific, very highly trained jobs that end up being an engine for a lot of other work.” The web developer workforce is projected to grow from 800 in 2018 to 1,470 in 2024.

Jobs in the app economy tend to be higher paying than the average Idaho salary. The Bureau of Labor Statistics lists the average salary in this field as $73,538, Reed said.

photo of morgan reed
Morgan Reed

While Idaho has been criticized for the lack of broadband access in its rural area, the upside is that the expansion of broadband will give the industry more potential as those areas gain access, Reed said. “The ability for your state to grow is real because you have a significant one-third of the population that’s under- or un-served,” he said.

Idaho’s agricultural economy offers potential for applications, Reed said. “If you talk to the modern-day farmer, the connections in the cab of the combine are insane,” he said, such as satellite radio, global positioning system, connections to databases, and commodity price monitors. “The connected farmer isn’t a joke. It’s the norm for a lot of these communities.” Developers could write applications to improve outcomes in shipping, or delivering supplies such as fertilizer. “It becomes really valuable for the farmer to get his product to market at the right time at the right price.”

Another potential is drone applications, Reed said. “Drones are becoming very valuable to other industries you have,” such as forestry, land management, and first responders for fighting forest fires. “Those are the kinds of jobs where Idaho already has key knowledge,” he said. “It can grow what you already know very well, and make it mobile.”

Idaho’s efforts to attract firearms, ammunition makers have paid off

Gun range photo courtesy of KTVB-TV.
Gun range photo courtesy of KTVB-TV.

A recent survey ranked Idaho as the state most dependent on the firearms industry.

According to WalletHub, Idaho ranked first in the firearms industry, 10th in “gun prevalence,” and third in “gun politics.” Other states rounding out the top five were Montana, Alaska, South Dakota, and Wyoming. The study ranked Idaho as having the most firearms industry jobs per capita, and the highest total firearms-industry output per capita, tied with New Hampshire. The state did not rank in the top five for the highest average wages and benefits nor in the total taxes paid per capita.

The National Shooting Sports Foundation, one of the sources for the WalletHub study, noted in its Firearms and Ammunition Industry Economic Impact Report 2018 that the Idaho firearm and ammunition industry was responsible for 3,219 jobs with wages of $129 million and output of $556 million. Suppliers were responsible for an additional 1,500 jobs, $77 million in wages, and $300 million in output, while there were 1,371 induced jobs at $53 million in wages and $180 million in output, for a total of 6,090 jobs, $259 million in wages, and more than $1 billion in output, the report continued. Average wages were $42,600, while the federal excise tax collected was almost $10 million.

In 2008, the Idaho Department of Commerce started targeting the firearms industry, touting the state’s low wages, gun-friendly culture, and business-friendly environment. A June 2016 brochure encouraged firearms companies. “Idaho’s average workforce costs are 84 percent below the national average,” the flyer noted. “Recognized as a gun-friendly state by the National Rifle Association. Among the least restrictive gun laws in the nation.”

The program was successful. Idaho’s firearms and ammunition industry employment grew by nearly 40 percent from 2012 to 2017, said Megan Hill, a public information specialist for the Department of Commerce, citing EMSI figures. “Over this same period, the industry in the US as whole grew by 20 percent,” she said. “In 2017, Idaho had approximately 1,600 firearms and ammunition jobs.”

Several firearms companies moved to Idaho including Next Generation Arms in 2010, Caracal USA in 2014, Advantage Arms in 2015, and Nemo Arms in 2016, Hill said. “None of these companies received any incentives,” Hill pointed out. Vista Outdoors – formerly ATK — was awarded a tax reimbursement incentive for the expansion of its facility in Lewiston in 2016, but the company does not manufacture firearms there, Hill said.

But both nationally and statewide, the industry has been slowing down. Vista cited a reorganization involving severance, as well as a goodwill writeoff of $354 million, in its most recent earnings report. “A challenging retail environment and other market pressures resulted in deeper discounting of Vista Outdoor’s accessories products during the quarter ended January 1, 2017,” the company noted.

Published reports indicated that Howell Munitions & Technology also had layoffs, and that PNW Arms – quoted in the Commerce brochure – had filed for bankruptcy in July 2016. Attempts to reach the companies were unsuccessful. In addition, according to the Associated Press, Boise Gun Co. has closed. The Idaho Firearms and Accessories Manufacturers Association Inc. no longer exists.

“We did see a downtick with the most recent presidential election,” said Jeff Hoskinson, director of sales & marketing for MGM Targets, in Caldwell, though he said his company’s business remains good. “We are very heavily tied to the political undertones of the country” and there was no longer such a sense of urgency, he said. (A 2013 City Club program on Idaho’s firearms industry asked, presciently, what would happen to the industry should Republicans regain control of the presidency.)

Nationally, gun manufacturer Remington has filed for bankruptcy, while a number of retailers, including Dick’s and Fred Meyer, have changed their policies regarding selling firearms.  FBI background checks dropped in 2017 for the first time, while the first two months of 2018 were lower than those of 2017.

“As a whole, the firearms industry suffered a decline in sales mid- to late 2017,” said JR Shepard, CEO of Lone Wolf Distributors, in Priest River. “This was caused in part by overall confidence in the president’s firm pro-gun, pro-Second Amendment stance. The buying public was lethargic; there was no sense of urgency to purchase firearms, magazines or ammunition.” But things are changing, he said. “Although January 2018 sales reflected a stabilized 2017, February and March both showed 23 percent to 25 percent increases! Recent renewed attacks on the Second Amendment have once again bolstered sales. 2018 is looking healthy indeed.”

photo of doug mattoon
Doug Mattoon

“Overall, the industry remains a strong employer in this region,” said Doug Mattoon, president and CEO of Valley Vision, an economic development organization for the Lewis-Clark Valley, home to many of the state’s firearms manufacturers. “Vista Outdoor did reduce work force some through attrition.  Howell did do a layoff last year, but appears to be pretty steady during recent months. Our firearms and accessories manufacturers all appear to be doing well.”

Idaho business development team heads to Japan

photo of sakae casting
Sakae Casting’s Idaho Falls office. The company is hosting an Idaho delegation to Tokyo.

Idaho will send five representatives to Japan later this month to encourage foreign direct investment by Japanese companies in the state.

Participants include Kelly Anthon, Rupert city administrator and state senator; Jan Rogers, CEO of Regional Economic Development Corp. for Eastern Idaho; Bobbi-Jo Meuleman, director of the Idaho Department of Commerce; Celia Gould, director of the state’s Agriculture Department; and Marc Skinner, executive officer of the southeastern region for the University of Idaho.

photo of Jan Rogers
Jan Rogers

The trip, which is scheduled from April 13 through April 18, is in two parts, Rogers said. In the first part, just Rogers, Anthon, and Skinner will visit the Idaho Falls sister city of Tokai-Mura, where they’ll meet with leaders from agricultural companies and the university there. In the second part, from April 16 to 18,  Meuleman and Gould will join the other three and visit Sakae Casting in Tokyo and other companies. Travel, and the first portion of the trip, will be paid for by the participants’ respective organizations.

Sakae will host the delegation’s lodging and meals for the second portion of the trip. Sakae specializes in castings for inserting stainless steel pipes into an aluminum casting product necessary for optimal performance of semiconductors and supercomputers. It recently opened an office in Idaho Falls, a process that began when Sakae CEO Takashi Suzuki visited Idaho Falls in March 2016 on a sister city visit with other business executives. At Idaho’s suggestion, the company later attended the SelectUSA Investment Summit in Washington, D.C. in June 2016, where the state was exhibiting.

photo of connie stopher
Connie Stopher

Anthon, who speaks Japanese, played a pivotal role in forging the relationship with Sakae, even though the company wasn’t planning to visit the Magic Valley, said Connie Stopher, executive director of the Southern Idaho Economic Development Organization, or SIEDO. “He participates in a lot of our economic development activities, and he just happened to be going,” she said. “He didn’t go because they were making a connection; he was just ready on deck.”

photo of kelly anthon
Sen. Kelly Anthon

“I’d done business in Japan,” Anthon said. “Especially the small and midsize businesses, they don’t go out on their own and go overseas.” But the owner of Sakae Casting realized that when a business’ market is exhausted domestically, it’s important to look at foreign markets for expansion, he said.

Foreign direct investment, or FDI, is a relatively recent focus of the Idaho Department of Commerce. Most recently, the state sent 27 economic development professionals, including Lt. Gov. Brad Little and U.S. Sen. Jim Risch, to the SelectUSA Investment Summit in Washington, D.C., in June. Idaho, which was attending the event for the fourth time, was a second-year Diamond-level sponsor, the highest level.

The first such investment was Frulact, a Portuguese fruit processing company looking to site a new factory in Idaho. Frulact makes the fruit that goes in yogurt, and it was attracted by the Chobani plant in Twin Falls, Anthon said. The company, which first announced its intentions in 2013, has bought property but hasn’t yet built its factory, he said. However, though it has since built a facility in Canada, it still intends to build its first U.S. facility in Rupert, Rogers said.

“Everyone had the light bulb turn on,” Anthon said. “Idaho generally – this is not a criticism – didn’t realize the full potential of attracting foreign direct investment. The Frulact project really opened our eyes to that.”

In addition to Sakae and Frulact, other FDI projects in Idaho include Ohzen Precision Machining Cutting, a Japanese company setting up shop in Idaho Falls to make titanium after-market parts for Harley-Davidson motorcycles and a partner of Sakae; and McCain Foods, a Canadian food processing company with a facility in Burley.

This is all happening as FDI is actually dropping. A.T. Kearney, a global management consulting firm, said the U.S. was the top-ranked FDI destination in its 2017 A.T. Kearney Foreign Direct Investment Confidence Index report. But the United Nations Conference on Trade and Development Global Investment Trends Monitor earlier this year said that global FDI had dropped by 16 percent in 2017, which the organization attributed to elevated geopolitical risks and policy uncertainty, as well as U.S. tax reforms.

In November, the Idaho Department of Commerce awarded a nearly $238,000 Idaho Global Entrepreneurial Mission (IGEM) grant to the University of Idaho, Boise State University, and the Center for Advanced Energy Studies to partner with Sakae Casting on research and development on spent nuclear fuel storage and cooling capabilities, according to a blog post written by Lisa Buddecke, a marketing consultant for Regional Economic Development for Eastern Idaho.

Anthon speaks to federal audience

Kelly Anthon, Rupert city administrator and state senator, recently spoke at the FED Forum, presented by the International Economic Development Council, in Washington, D.C., about how Idaho had used SelectUSA programs for FDI.  “I talked about how rural communities can utilize all the resources, including from the federal government, to drive economic development success,” he said.

SelectUSA is a U.S. government program intended to promote and facilitate business investment in the U.S. It works with companies and U.S. economic development organizations to provide information, facilitate direct connections, and resolve questions regarding federal regulations. In addition, it provides a promotional platform for U.S. state and local governments.

“Kelly Anthon’s remarks on how rural America can successfully compete for Foriegn Direct Investment tapping federal agencies like SelectUSA really resonated with our attendees,” said Matt Mullin, senior director of public policy and strategic engagement with the International Economic Development Council in Washington DC.

McCain Foods gets maximum tax incentive for $200 million Burley expansion

McCain Foods USA will receive Idaho’s maximum state Tax Reimbursement Incentive for a proposed $200 million expansion of its frozen French fries production facility in Burley that will add about 180 new jobs. McCain is only the second company to receive the maximum amount from the TRI program.

The expansion was announced May 3 in a joint release from McCain Foods, the Idaho Department of Commerce and the city of Burley.

Commerce awarded McCain a 30 percent tax credit on the company’s income, payroll and sales taxes for 15 years. The incentive is estimated at $5.86 million in tax savings for McCain, for which the state anticipates $35.3 million in new total state revenue.

Both the percentage and length are the maximum amounts available from the TRI program. Albertsons is the only other company receiving the 30 percent/15 years among the 36 companies that have been awarded TRI since the program’s launch in July 2014, according to Commerce statistics.

McCain, a Canadian company with headquarters in Lisle, Ill., has about 750 employees in Burley, said Doug Manning, economic development director at the city of Burley.

The expansion will add a third production line, which had initially been planned in 2013 but was delayed, Manning said.

McCain will start construction in May with the expanded production expected to start in late summer 2018, according to the news release.