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.
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.
“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.”
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.”
“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.
“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.”
“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.”