orporations and governments alike are faced with transparency mandates that have brought renewed focus to tax liabilities, tax incentives and how to account for both.
In some states and cities, skepticism about the long-term value of incentives for projects is causing extra scrutiny at the very least. For example, in New York, former state attorney general and first-term Gov. Eliot Spitzer has ordered an audit of all deals involving the state’s Empire Zone program, which currently provides benefits to more than 9,800 businesses. Similar reviews are under way in other states and localities.
In the meantime, some other states are putting in place quick-action discretionary funds that governors can dip into to help make a deal happen. And some, such as Georgia, Michigan, Missouri and South Carolina, are making tax reform their mission.
Sometimes the value is not so much monetary as temporal. In a speech to Tennessee economic developers in September, Memphis-based international site selection consultant Mike Mullis said there are about 15 commissioner-level state economic development officials across the U.S. now with whom he can sit down and decide quickly whether a deal can be assisted enough or not, including Tennessee Commissioner of Economic and Community Development Matt Kisber.
“It’s important to understand about incentives that it’s not what we can take from you, it’s what you can help us do to reduce costs,” he told his audience, “to get net present analysis to a board of directors when you’re competing with [places such as] Malaysia.”
He offered a 1,200-job, $1-billion aerospace project he’s advising as living, breathing example.
“We’re spending a lot of time in Malaysia, India, Spain, Brazil and Singapore,” he said. “We’re just getting ready to finalize documents next week for another $400-million aerospace project in Malaysia. All product will come back to the U.S. There is a soft loan agreement of $100 million with the government of Malaysia, a $100-million grant for facilities and we’re going to spend four cents per square foot for the lease. That’s aggressive.”
For a sister company to that aerospace firm, concerns about highly engineered content and tech transfer in foreign lands brought a project back to the U.S. So there are opportunities, says Mullis, provided legislators can be properly educated on the truly global environment for business.
As for reining in the state-vs.-state incentives skirmish, Mullis asked, “Who wants to be the first to step up? How do we stop?” However, he noted, “There’s a difference between an incentives package and a give-away program.”
Bob Hess, consulting partner with Cushman & Wakefield’s Global Consulting Group and one of the lead advisors on ThyssenKrupp’s huge integrated steel mill project that landed in Alabama earlier this year, says teamwork needs to go beyond the local.
“We encouraged states to not go it alone,” he says of the ThyssenKrupp process. “They needed to talk to neighboring states and congressional districts. It’s not Alabama vs. Kentucky vs. Mississippi. Here’s a good example: A $500-million biologics facility was looking at Asia, North America and Europe, and Boston was one of the finalist locations. In their discussion with the lieutenant governor and Mass Biotech, state economic development leaders offered incentives related to sales and use tax. Then the company’s director of tax said, ‘That’s great, that will be helpful. But I’m more interested in federal taxes. We have some countries giving us tax holidays for 10 years, or an effective rate of 12 or 13 percent.’ And the room was silent. Then somebody said, ‘Nobody has asked us that before.’ “
In other words, it’s Massachusetts vs. Ireland vs. India.
In a statement reacting to disappointing jobs data released in September, NAM Senior Vice President for Policy Jay Timmons said the loss of manufacturing jobs is a direct result of Washington’s failure to address the external costs that
The editors also thank intern Celeste Dickson for her substantial research contribution.
make it unnecessarily expensive to create jobs.
“There is no great mystery to this,” Timmons said. “We have carefully documented that the external costs imposed on U.S. manufacturing for energy, excess litigation, regulation, taxes and health care add 31.7 percent to the cost of production in this country compared to our major trading partners. That is a severe disadvantage that has helped kill more than 3 million U.S. manufacturing jobs in this decade.
“We need a focused dialogue to make the U.S. more competitive, and take some of the burden off the states,” says Hess.
The major accomplishment of the Alabama Senate was a $400-million incentive package for the ThyssenKrupp steel mill megaproject that was passed in special session before the regular session in order to fit the corporation’s decision-making timeline. The package had to go before voters in a June referendum, when it passed handily. School construction projects will see support from an approved $1-billion bond sale. In June, Gov. Bob Riley signed into law a record $6.7-billion education budget for fiscal year 2008, including significant increases for the Alabama Math, Science and Technology Initiative (AMSTI), the Alabama Reading Initiative (ARI) and ACCESS distance learning program and a 7-percent pay raise for education employees. Alabama teacher salaries have increased almost 21 percent in the past three years.
Seeking to attract a $20-billion natural gas pipeline to the state to send North Slope gas to the lower 48, legislators passed the Alaska Pipeline Inducement Act, containing incentives and establishing a bidding process. A request for bids was issued in July. The state is willing to contribute up to $500 million in matching funds during the regulatory approval phase. Separately, a special session to reconsider the state’s Petroleum Profits Tax was due to take place beginning Oct. 18, after the program was reporting an $800-million shortfall for the current fiscal year.
Citing the repeated failure of the federal government to pass comprehensive immigration reform, Gov. Janet Napolitano signed into law Arizona’s own measure to penalize businesses that hire undocumented workers. Companies are now required to verify legal residency of employees via the Basic Pilot federal database. Under pressure from the EPA to reduce emissions and meet the new national ozone standard, state legislators passed a clean air initiative that expands the use of cleaner-burning, low-emissions fuels. In July, Gov. Napolitano signed into law House Bill 2515, ending the practice by cities of giving large tax breaks to businesses that choose to locate within their boundaries.
Part of a record $200 million in tax cuts was a reduction in the tax paid by manufacturers on natural gas and electricity from 6 percent to 4.5 percent. Lawmakers also approved a $50-million Quick Close Action Fund to help secure new industry locations and expanded its Career Pathways training program. The state is investing a record $456 million in school construction and rebuilding, and $36 million in a cancer research center at the University of Arkansas.
Gov. Arnold Schwarzenegger has pledged to sign a greenhouse gas reduction measure that requires manufacturers, utilities and refineries to cut global-warming emissions by 25 percent through 2020, via a cap-and-trade system. The same measure that raised the state’s minimum wage to $7.50 an hour on Jan. 1, 2007, will raise it to $8 an hour on Jan. 1, 2008. In vetoing a bill seeking to establish an international trade office in Armenia, Schwarzenegger called attention to last year’s passage of a measure requiring the state to establish a new international trade strategy, after the state closed all international trade offices in the past few years. The Business, Transportation, and Housing Agency is required to complete an International Trade and Investment strategy to recommend priorities for state activities by February 1, 2008.
Gov. Bill Ritter vetoed a measure that would have made it easier to form all-union shops. He also signed into law an environment bill that increases the state’s renewable energy portfolio goal to 20 percent by 2020, along with establishing incentives. “HB 1281 will help stimulate the rural areas at the heart of the New Energy Economy – regions like the Eastern Plains and San Luis Valley where wind, sun and agriculture are abundant,” Ritter said in March. “The bill will help us attract manufacturers of wind turbines and solar products. It also will stimulate research and development of emerging energy technologies.” Signed into law in May, HB 1277 expands the sales- and use-tax exemption for high-tech companies that build clean rooms to manufacture computer chips and other highly sensitive components.
The Film Infrastructure Investment Tax Credit establishes a credit against corporation and insurance premium taxes for investments in capital projects that provide basic buildings, facilities, or infrastructure that the film and digital media industry need to function in Connecticut. Credits can equal 10, 15 or 20 percent of the investment, depending on the project’s total cost. Beginning in FY 09-11, the Historic Preservation Tax Credits for Mixed Use StructuresAact authorizes up to $50 million per three-year cycle in business tax credits for rehabilitating historic property used for residential and commercial purposes. For commercial or industrial purposes, the credit equals 25 percent of the total three-year credit allocation. A new eminent domain act prohibits municipalities from taking property by eminent domain for the primary purpose of increasing local tax revenues, among other restrictions.
Signifying economic development progress were budgetary measures putting $12 million into the Strategic Fund; $5 million into the fourth year of the New Economy Initiative; and $1 million into the Fraunhofer Center for Molecular Biotechnology for vaccine development. In addition, Senate Bill 1 reforms the state’s workers’ comp system.
The Innovation Incentive Program was expanded to $250 million, in an effort to attract “cutting-edge, world-class research centers and high-impact business projects to Florida.” Another measure sets aside $35 million in seed and investment capital for new, high-tech businesses, and establishes the Institute for the Commercialization of Public Research, designed to further ideas coming out of Florida’s 11 public universities The Don Davis Entertainment Industry Economic Development Act, signed into law in May, increases incentives to the film and entertainment industry by providing a cash refund for qualified expenditures in the state during production. The legislature also approved a $45-million Quick Action Closing Fund. In February, a new 15-sq.-mile Florida Enterprise Zone was established in Levy County, bringing the total 56 zones located across the state. Since 2001, nearly 36,000 new jobs have been facilitated as a result of the Program. The state has provided $56.8 million worth of tax incentives to businesses within the past five years.
Gov. Sonny Perdue signed into law a biofuel tax credit program giving a five-year sales and use tax exemption for materials and equipment used in the construction of biofuel facilities in Georgia. The Georgia Chamber proudly noted that no measure it opposed passed in the 2007 session, including a minimum wage increase. However, a measure it supported that called for sales tax reimbursements for tourism development projects and larger incentives for film and television projects was vetoed by Gov. Sonny Perdue. A bill allowing schools and school systems to establish charter schools was signed into law. Perdue signed into law a biofuel tax credit program giving a five-year sales and use tax exemption for materials and equipment used in the construction of biofuel facilities in Georgia. In a related matter, a measure seeking a sales tax exemption on energy used in manufacturing passed both chambers of the legislature on the last day of the session, and will be available for action during the 2008 session.
The newly renamed Office of Aerospace Development within the DBEDT will identify and promote aerospace-related industries in Hawaii. A new law lowers the taxable wage base for unemployment insurance payments, increases benefits, and “saves Hawaii business a net $151 million between 2008 and 2010 while preserving the state’s unemployment trust fund.” The ethanol production facility income tax credit was extended from January 1, 2012, to January 1, 2017. Lawmakers authorized $10 million in special purpose revenue bonds to assist Sopogy, Inc. with planning, designing, constructing, equipping, and operating a solar farm power plant at the Natural Energy Laboratory of Hawai’i Authority or another suitable site in Hawai’i. The legislature approved $400,000 in general funds for the next two years for the High Tech Development Corporation to lease laboratory and office space in Kaka’ako to operate a high technology incubator and innovation center. And another new law requires the department of business, economic development and tourism to collect, analyze, and publish data on efforts to innovate and diversify Hawaii’s economy. Act 111 establishes career and technical programs in a variety of fields, including engineering, computing, robotics and Project EAST (Environmental and Spatial Technology). It also includes the establishment of STEM academies on Kaua’i, through a HiEST (Hawai’i Excellence through Science and Technology) Academy pilot program that will be administered by Kaua’i Community College at two public schools. In addition, Act 111 creates the FIRST (Fostering Inspiration and Relevance through Science and Technology) program within the UH College of Engineering to focus on setting up project-based learning programs for students in grades 4 through 8.
A new law authorized the Department of Agriculture to administer the Rural Economic Development and Freight Transportation Program. Another new law created the Idaho Rural Development Partnership to act as a clearinghouse for rural development resources and information, seek solutions to unnecessary impediments to rural development and establish strategies to improve the quality of life in rural Idaho. A new measure permits the financing of industrial, commercial and other projects to promote economic development throughout the state, in partnership with private financial institutions and state or local economic development entities, and allows the pooling of loans for such projects to save financing transaction costs.
Contrary to the Nov. 2007 print edition of Site Selection, a new “Tax Fairness Plan” proposed by Gov. Rod Blagojevich that included the implementation of a new gross receipts tax was defeated in May by a non-binding House resolution against it with a vote of 107-0. The state?s minimum wage increased to $7.50 an hour on July 1, 2007, and will see incremental increases each year up to $8.25 an hour in 2010. Senate Bill 1704 provides liability protection and establishes monitoring responsibility to help attract the $1.4-billion, FutureGen coal-to-energy facility that is considering two sites in the state in addition to sites in Texas. The measure comes on top of a package of support that includes a $17-million direct grant, local property tax abatements to site donations and/or land options for the facility, a sales tax exemption on building materials and selected equipment through local Enterprise Zones or the High Impact Business program and the issuance of $50 million of below-market-rate loans to the FutureGen Alliance. House Bill 3388, which would help Omaha-based Tenaska build the $1.4-billion clean-coal Taylorville Energy Center, was on hold in late summer. A complete wrap-up may be found in the Illinois General Assembly?s Legislative Research Unit?s Oct. 2007 issue of its newsletter, “First Reading.”
Gov. Mitch Daniels vetoed a measure to give tax incentives to the film industry, and signed into law review and recertification provisions for the state’s certified technology parks. HB 1722 limits cellulosic ethanol production tax credits to $20 million for producers of 20 million annual gallons or more, establishes that synthesis gas is eligible for a coal gasification technology investment tax credit, and creates a tax credit, beginning in taxable year 2009, for the purchase of Energy Star heating and cooling equipment manufactured in the United States. Another new law requires that the Indiana Economic Development Corporation (IEDC) report on certain tax credits, loans, and grants awarded or approved by the corporation, including the extent of compliance with representations that recipients made in the course of obtaining the benefits; enables clawbacks; and repeals separate requirements that IEDC make annual reports concerning the economic development for a growing economy (EDGE) tax credit program and the Hoosier business investment tax credit program. Separately, IEDC was empowered to offer a tax credit not to exceed 15 percent to manufacturers and assemblers of alternative fuel vehicles. HB 1774 authorized the establishment of not more than two regional development authorities in each economic growth region designated by the department of workforce development, and put into place various accountability and authorization provisions for such authorities.
Iowa’s minimum wage will increase to $7.25 an hour in January 2008, from $5.15 earlier in 2007. The Iowa Power Fund will invest $25 million annually in alternative energy research for the next four years. Business tax reform was put on the back burner. A nationally discussed measure that would have required non-union members to union dues died by the time the session was over. A new law appropriates $3 million a year from the Iowa Values Fund to the Department of Economic Development for targeted industries serviced in fiscal years 2008 through 2015. HF 890 provides $4 million to Iowa’s existing Targeted Small Business Program. Each qualified applicant will be able to receive grants, up to $50,000, for startup expenses. Another new law allows a city or county to designate an enterprise zone where a company has laid off 1,000 workers or at least 4 percent of a county’s work force.
Kansas legalized non-Indian casino gambling and slot machines, becoming the 12th state to allow commercial casinos (for more, see p. 938). Legislators voted to phase out the business franchise tax and reduce the unemployment insurance tax – the latter measure is projected to save businesses some $175.8 million. A new law created the Office of Rural Opportunity to help communities attract families and businesses. More than 64 percent of the state budget was devoted to education, according to Gov. Kathleen Sebelius. SB 33, introduced to assist authorities in Salina and Saline County, authorizes a city airport authority to increase its general obligation bond limit, issued by the authority, from the current 3 percent to 10 percent of the assessed valuation of all tangible property within the city limits for renovations, improvements, and development. A new law signed in April provides various tax credits and exemptions for energy investments, ranging from biofuel production, storage and blending equipment to electric cogeneration and waste heat utilization systems. The bill also provides a property tax exemption for new nuclear generation facilities within three miles of an existing nuclear facility, and exempts such facilities from various siting requirements.
Companies that lease manufacturing facilities may now qualify for some economic development grants. New TIF-enabling legislation creating different tiers of state and local support was signed into law by Gov. Ernie Fletcher (for more, see p. 902). Minimum wage will go up to $7.25 an hour by July 2009. Ford Motor Co. received a special offer of $200 million in tax breaks designed to induce the company to keep investing in and growing its Louisville operations, via the new Jobs Retention Act. Tax incentives for alternative-fuel and renewable-energy projects were passed in special session in August. HB 468, signed into law in March, creates an exception to the standard wage requirements for the Kentucky Jobs Development Act. The exception will apply to eligible businesses locating a project adjacent to one of five regional Kentucky Community and Technical College System postsecondary education centers if the projects are likely to provide employment opportunities for students and meaningful opportunity for technological and infrastructural enhancements. Projects qualifying for this exception will be required to pay an aggregate of wages and benefits equivalent to 200 percent of the federal minimum wage. Bluegrass State Skills Corp. job training funding has been significantly increased by $8 million, with over a third of it destined for northern Kentucky.
Lawmakers approved several major sales tax exemptions for industry including: $1.28 for new machinery at GM’s Shreveport plant; steel mill utilities; and Interstate trucks.
The legislature also approved $150 million for the Mega-project development fund, $12 million for a research park at Louisiana Tech University and $38 million for the Louisiana Cancer Research Consortium. The state approved $600 million for highway construction, $42 million for port construction and $200 million for coastal restoration and hurricane protection.
Maine reduced unemployment taxes for Maine businesses by a total of $68.7 million in 2008 and 2009.Businesses will see an average tax rate reduction per employee of $74-$77 each year respectively from what would have otherwise been collected. This is accomplished by reducing the benefit reserve cap of the Unemployment Insurance Trust Fund from 21 months to 18 months starting Jan. 1, 2008. Also approved was the Informed Growth Act Bill requiring developers building a retail development project larger than 75,000 sq. ft. to pay for an independent impact study.
The general assembly approved $400 million in school construction. It also restored the Office of Smart Growth to tackle overdevelopment and traffic issues and passed a Living Wage law requiring that full-time workers on state contracts be paid at least $17,000.
Lawmakers established the Base Realignment and Closure Sub-cabinet for the State of Maryland to work with local governments and military installations to coordinate planning for the base realignment. Maryland is one of a handful of states that will gain high-paying jobs and population from the Base Realignment and Closure (BRAC) recommendations. The BRAC process will result in significant growth at Aberdeen Proving Ground, Ft. George G. Meade, Andrews Air Force Base and the Bethesda Naval Hospital, over the next six years.
Gov. Deval Patrick created a Study Commission on Corporate taxation with the goal of developing a final report on long-term changes by Jan. 1, 2008. The commission is studying modernization and simplification of current business tax laws.
The state approved $76.2 million in grants to cities and towns to upgrade infrastructure and spur economic development. The grants, funded through the Massachusetts Opportunity Relocation and Expansion (MORE) Jobs Capital program, will help ensure that municipalities can pay for improvements such as water and sewer connections, roadway enhancements, and utility upgrades necessary to support business relocation and/or expansion leading to job growth.
Gov. Granholm and the legislature averted a government shutdown by a last-minute temporary budget fix on Oct. 1, including a tax increase aimed at reducing the state’s $1.7 billion budget deficit. Prior to that, the Michigan Business Tax was enacted, cutting taxes for more than seven out of 10 Michigan businesses, including both small businesses and Michigan’s major manufacturers. It is a simple tax that will provide the same amount of revenue as the Single Business Tax it replaces, while encouraging job creation. It will provide tax credits to companies that locate or create new jobs in Michigan and tax credits for entrepreneurial and R&D activities. In addition, a significant cut in the personal property tax will help the state’s largest employers and commercial businesses.
The state passed an aggressive renewable energy program that requires energy companies provide 25 percent of power from renewable sources by 2025. Xcel Energy, which supplies approximately half the electricity in the state, will be required to provide 30 percent from renewable sources by 2020.
Also approved was more than $35 million for energy projects and research, including 15 million for bioenergy, biomass electricity, biofuels, plug-in hybrid technologies, renewable hydrogen and solar technology projects and $17 million for energy research, including funding for the U of M Initiative for Renewable Energy and the Environment. The Minnesota Investment Fund will receive $5 million to help create new jobs and leverage private funding. Included is funding for the Thomson West expansion that will result in 2,000 new jobs and $100 million of new construction. Also approved was a $24.2 million tax cut, allowing deductions for higher education tuition and teacher expenses.
Lawmakers okayed a $300 million incentives package to bring Toyota to Northeast Mississippi where it will operate a manufacturing plant with 2,000-plus jobs. Education was given a lot of attention with community colleges getting a 20.5 percent boost in state funding and universities getting a 14.3 percent increase. A bill was passed that authorizes the construction of toll roads by state or private entities, but only in places where an alternate un-tolled route exists. Also, toll goes away with the road’s debt and the road can be used for emergencies with no toll to be charged. The Small Enterprise Development Finance Program was changed so more small-to-mid-sized businesses can qualify for low-interest loans of between $350,000 and $4 million to finance the construction and renovation of buildings or the purchase of new equipment.
Funding for the Quality Jobs act, an incentive program, was raised from $28 million to $40 million.
The state is also among those giving a lot of attention to alternative energy. Legislation sets targets for utilities to meet: a four percent renewable energy target by 2012, eight percent by 2015 and 11 percent by 2020. The legislation also requires the Office of Administration to ensure that at least 70 percent of the new vehicles purchased for the state fleet are flex fuel. Also, municipal landfills are now allowed to accept yard waste in order to create bio-reactors, which produce methane gas for use in energy production. A higher education reform package was passed that boosts scholarship funding from $27.5 million to $72.5 million.
Montana also had energy on mind with the passage of the “Clean and Green” energy bill that provides tax incentives for future development and transmission of clean and renewable energy. Incentives are designated for new, clean transmission lines, CO2 sequestration pipelines liquid fuel pipelines, power plants, coal to liquid plants, coal gasification plants, cellulosic ethanol and biodiesel plants, and geothermal, solar and wind projects. Lawmakers also approved a $400 property tax rebate for individuals.
A bill providing a new tool for cities and towns to use for economic development and redevelopment also was approved by the legislature. The bill allows a developer to enter into an agreement with a city to develop property within an enhanced employment area defined by the city. An occupation tax may be imposed only on those businesses within the enhanced employment area. Revenues generated by the occupation tax would be pledged to payments on revenue bonds issued by the city. The tax ends when the bonds are paid.
Lawmakers also provided $425 million in tax relief, the largest such bill in state history. It reduces Nebraska’s income, sales and property taxes. The bill eliminated the marriage penalty on income tax. On the energy side, a tax credit was created for individuals investing in the development of a biodiesel production facility. Investments made in locally-owned facilities producing B100 biodiesel will be eligible for a tax credit of up to 30 percent.
Nearly $1 billion in critically needed transportation projects was approved by the legislature. Lawmakers also raised the homestead exemption for residential preoperty from $350,000 to $550,000. Also approved was a measure keeping the modified business tax at .63 percent. The tax had been due to increase to .65 percent without legislative action.
Gov. John Lynch signed a law creating the New Hampshire Rail Authority, which will oversee development and operation of commuter rail in New Hampshire. Last year, Gov. Lynch established a passenger rail working group to plan for the development of rail service in New Hampshire. Senate Bill 75 creates that authority and marks a significant step forward in the effort to bring commuter rail back to New Hampshire. Legislators also approved a bill creating a research and development tax credit, which will provide incentives for companies to expand and create jobs. The R&D tax credit, Senate Bill 134, will provide up to $1 million a year in tax credits to help companies to reinvest in their development and growth. A single company can earn up to $50,000 annually in credits.
Gov. Jon S. Corzine signed an executive order making the Office of Economic Growth (OEG) a permanent part of the executive branch and enhance its ability to coordinate the state’s economic development efforts across all sectors and departments. The OEG, which will continue to report directly to the Governor, oversees the implementation of the state’s Economic Growth Strategy and coordinates economic development efforts. Corzine signed landmark property tax legislation that will lower property taxes in the short-term while instituting long-term reforms to help break the decades-long cycle of steep annual property tax increases. The program will provide benefits to 1.9 million homeowners and to 800,000 tenants. The overall average benefit for all eligible homeowners will be nearly $1,100.
Lawmakers passed the Working Families Tax cut, a reduction of $52 million for lower and middle income families. The tax cut includes the following measures:
1) A new $29 million dollar tax credit for more than 200,000 working New Mexico families. These families will receive an average credit of $144.
2) The expansion of the $2500 per person exemption will benefit over 235,000 low- and middle-income families.
3) The elimination of state income tax for all active-duty military pay.
4) And a personal income tax credit of $1,000 per year for each “special needs child” a family has adopted.
New Mexico also passed the first tax credit in the nation to cover carbon capture technology and include specific capture goals at coal fired power plants. The amount of the advanced energy tax credit will be up to 6 percent of the plant’s expenditures for development and construction. The maximum credit claimed per generating facility will be limited to $60 million.
Governor Eliot Spitzer has proposed legislation that would restructure and improve the state’s brownfields program. If adopted by the State Legislature, it would redirect state tax dollars to provide incentives for cleanups of brownfields development sites in order to create “shovel ready” land across the state for development purposes. The proposal would:
• Change the existing brownfields tax credit structure to cover the full cost of brownfields remediation while providing additional incentives to encourage development of newly remediated sites. Current law provides tax credits for the construction of buildings on cleaned-up sites and other costs unrelated to clean up;
• Revise tax credits to encourage parties to undertake more rigorous clean-up efforts that adhere to higher standards;
• Require that participating parties responsible for contributing to pollution at a site pay a greater percentage of clean-up costs; and
• Expand reporting requirements by the recipients of the tax credits to provide the state with more accurate data on a more frequent basis.
Gov. Mike Easley signed into law in September a $60 million expanded incentives package that largely will benefit two existing tire manufacturers in the state, Goodyear and Bridgestone. The two will receive a total of $48 million over the next decade. The program will also allow three more companies to participate. To receive the incentives, companies have to have a minimum of 2,000 employees, invest $200 million over six years and maintain average wages 40 percent higher than the local average. North Carolina’s new budget provides $13.35 million for One North Carolina economic development grants; $4.8 million for One North Carolina small business grants; $5 million to establish the N.C. Biofuels Center; $3 million to the N.C. Biotechnology Center to create regional innovation centers; $600,000 to support the N.C. Motorsports Consortium and promote motorsports in the state; and $1 million for grants to small businesses to assist in conservation.
Gov. John Hoeven signed into law a $118.6 million tax relief package. The plan includes a 10 percent property tax credit against income taxes for homeowners, farmers, ranchers and commercial businesses. It also includes expanded Homestead Tax Credit relief for seniors and people with disabilities who own their homes or rent. And, it eliminated the marriage tax penalty for middle income couples.
Legislation was approved for another $20 million to fund the state’s Centers of Excellence program, which has been used to leverage additional funding for R&D in agriculture, renewable energy, advanced manufacturing, business technology and other areas.
The Dept. of Commerce’s budget includes a doubling of funds for the North Dakota Trade office to expand overseas trade.
Ohio Governor Ted Strickland signed his first budget into law on June 30th. The budget includes an expanded Homestead Tax Exemption, new investment in public schools and additional funding for public colleges and universities. A new Ohio Innovation Partnership will be created that includes two new programs: The Choose Ohio First Scholarship is a $100 million scholarship program, to be leveraged by at least $100 million in private dollars or other support, to encourage Ohio students to study science, technology, engineering or mathematics, or become teachers in those fields. The Ohio Research Scholars program is a $50 million effort to recruit world-class scholars tied to job creation in Ohio’s regional economies. The governor also signed the Bureau of Workers’ Compensation budget, House Bill 100, which includes new oversight and reform measures. The bill also includes the Ohio Industrial Commission’s budget for 2008 and 2009. In late August, the governor announced his “Energy, Jobs and Progress” plan that would ensure affordable and stable energy prices, attract energy jobs through an Ohio advanced energy portfolio standard, and modernize the state’s energy infrastructure. Also signed were an eminent domain bill with new definitions of blight and an economic development bill requiring the director of the Ohio Department of Development to adopt rules regarding the annual competitive process for the Job Ready Site Program.
The legislature passed several bills relating to business and economic development. SB 808 captures over $15 million in federal funds for the Oklahoma Employment Security Commission. The funds were made available by the federal Reed Act distribution and are slated to be expended no later than December 31, 2008. The Legislature enacted two pieces of legislation pertaining to storage tanks. SB 102 modifies the Storage Tank Advisory Council by altering the membership of the Council from nine to eleven members. The additional two members are specified to be one operator or agent for an agricultural cooperative and one county commissioner or petroleum storage tank operator. The Council serves to recommend ideas to the Oklahoma Corporation Commission relating to the Oklahoma Storage Tank Regulation Act. Fuel storage facilities and associated equipment used in wholesale activities that are supplied by a pipeline and from which fuel may be removed at a rack have been exempted from the Storage Tank Regulation Act with the passage of HB 1396. And SB 136 provides for a modest fee increase for the Commission on Marginally Producing Oil and Gas wells.
Governmental efficiency and accessibility to the public was a major goal of the legislature this session. SB 1 creates the Taxpayer Transparency Act by requiring the Office of State Finance to develop and operate a free searchable website containing information on state revenues, expenditures, incentive payments, and other state tax exclusions and credits. The website is envisioned as a “Google-like” system that will provide the interested public with access to a user-friendly vehicle to examine the manner in which state revenues are expended,
For the third consecutive year, the Legislature passed significant tax reductions. SB 861 accelerates the previous reductions in the top marginal individual income tax rate from 5.65 percent to 5.25 percent over a two-year period, provides an alternative child credit for taxpayers with children not choosing the child-care credit, provides an exemption for franchise tax filers with a tax liability of $250 or less, and provides for a sales tax holiday for back-to-school clothing and footwear.
Oregon’s 74th legislative assembly passed several measures, including spending increases for education. A record $6.245 billion for public schools in the next biennium represents an 18-percent increase over 2005-07 levels. And the 2007-2009 budget for Oregon’s higher education system received an $87 million increase over essential budget levels. Senate Bill 707 expands the type of containers that can be recycled under the Oregon Bottle Bill to include plastic water containers. Senate Bill 838, sets a goal of 25 percent renewable energy production by the year 2025 and will make Oregon a leader in working towards a cleaner environment and building a renewable energy industry. House Bill 2210 is a biofuels package that will develop new jobs in Oregon and will help curb dependence on foreign oil. House Bills 2707 and 2031 create the state’s first-ever comprehensive rainy day fund. House Bill 2278, legislation that builds on non-highway transportation efforts around the state to expand connections with rural and urban communities and combat transportation isolation in rural areas.
House Bill 1203 will better position Pennsylvania to attract new economic development projects in rapidly growing industries because of a stronger commitment to clean and renewable energy. Gov. Ed Rendell signed the bill at an Erie County middle school, adding a 30-kilowatt photovoltaic system as part of its renovation. The solar panels were funded with a $250,000 grant through the state’s Energy Harvest program.
“We passed the historic Alternative Energy Portfolio Standards Act in 2004 to put Pennsylvania on the path to the greater use of clean, renewable and alternative energy sources,” noted the governor. “Once we made that commitment, we saw growth in those industries– solar, wind, biomass and methane–totaling $1 billion in new private investment and the creation of approximately 2,500 jobs.” The law amends the commonwealth’s Alternative Energy Portfolio Standards (AEPS) Act to include the broader use of solar technology in retail electricity sales. It also is designed to encourage electricity suppliers to incorporate more clean energy solutions into the portfolio of resources used to provide service to its customers.
Much of Rhode Island’s legislative session was spent working on a state budget plan that Governor Donald Carcieri did not support. He proposed solving the budget gap by reducing state personnel costs, mainly through outsourcing. But despite the governor’s threats to veto the budget, the senate and house passed the budget in mid-June; his veto was overridden.
“Instead of agreeing to my plan to solve the budget problem by reducing personnel costs, the General Assembly has decided instead to balance the budget on the backs of Rhode Island families,” Carcieri said. “In particular, the General Assembly cut school aid, raised taxes and squandered one-time tobacco settlement funds. Cutting school aid hurts children, local communities and property tax payers,” he added. “Not only did the General Assembly do nothing to solve Rhode Island’s long-term fiscal problems, they actually included a provision in the budget designed to halt any potential progress in the future,” Carcieri said. “The anti-privatization measure – which was added to the budget at 11:30 on Friday night – is a clear giveaway to the state employee unions. Allowing private companies to provide some state services could save taxpayers tens of millions of dollars. But this budget would make that impossible.”
Workers’ comp reform, a top priority of Gov. Mark Sanford, was passed by the legislature and signed into law in June. The measure abolishes the Second Injury Fund, provides stronger language with respect to repetitive trauma claims, provides stricter requirements for medical expert testimony and makes changes to the 50-percent back rule, which before presumed total back loss with many injuries. That same month, the General Assembly passed a $220-million tax relief plan with respect to income and grocery taxes.
Most employers in the South Dakota should see a small decrease in workers’ compensation rates effective July 1, 2007. This is because of the continuing pattern of less frequent on-the-job injuries while the costs of treating injuries continue to escalate. “I commend South Dakota employers for their commitment to improving workplace safety,” noted Gov Rounds. “Although medical costs are rising, their efforts to diminish the number of on-the-job injuries are making a positive impact.”
The overall increase for voluntary loss costs, the basis on which individual insurance companies calculate their rates for the large majority of employers, will go down 1 percent. Those employers who have not been able to find coverage in the open voluntary market and are in the assigned risk plan will have their rates increased by 4.9 percent this year.
The first three economic development investments, totaling $25 million, funded through an innovative federal program to benefit rural areas in North and South Dakota were announced in Aberdeen earlier this year. Dakotas America LLC, a collaboration between South Dakota Rural Enterprise and the North Dakota Rural Development Finance Corporation to support and enhance economic development in both states, received a $50 million New Markets Tax Credit (NMTC) allocation–a 39% federal tax credit designed to stimulate economic investment in low-income communities.
The three projects were a $10 million investment to the West Bowdle Grain Terminal of North Central Farmer’s Elevator; a $9.4 million investment in a wheat processing and grain shipping upgrade at the McLaughlin location of the South Dakota Wheat Growers cooperative, and a Qualified Equity Investment totaling $5.6 million to be used for large projects in highly distressed geographic areas.
Also, HB 1176 was passed, allowing for grants from the revolving economic development and initiative fund, to revise certain provisions concerning the making of grants and loans from the revolving economic development and initiative fund, and to repeal the capital investment entity program, the value-added tourism sub-fund and the entrepreneur support program.
The Tennessee General Assembly in May passed the Tennessee Regional Megasite Authority Act of 2007, which authorizes cities and counties to cooperate in developing regional industrial megasites designed to attract jobs and investment. The Act creates the same rights and requirements for regional megasite authorities as Tennessee law currently holds for industrial development boards, including the ability to issue bonds, enter into payment-in-lieu-of-tax agreements and receive grants or loans. It also specifies that the authorities are subject to the same open meetings and open records requirements as industrial development boards.
In September, manufacturers of biodiesel fuel began receiving a $.20-per-gallon incentive for every gallon produced and sold to Tennessee companies. The Department of Revenue estimates an additional 2 million gallons of biodiesel fuel will be available to Tennessee companies per year; 2.7 million gallons were produced and sold to Tennessee distributors in 2006.
House Bill 1 includes $75 million in new general revenue, which along with previous balances and interest results in an estimated $180 million being available for the 2008-09 biennium. Additionally, HB 1188 authorizes the governor to make awards in the form of loans and to charge and receive reasonable interest for the loans. It also provides authority to take an equity position in the form of stock or other security when making an award and to sell the security for the benefit of the fund. HB 1 provides $1.2 million for the biennium to administer the fund. HB 1 also appropriates an estimated $200 million, including unexpended balances and anticipated interest earnings. It also appropriates $51 million to the Skills Development Fund, an increase of $11 million to provide customized job training to an additional 8,000 workers.
In June, Gov. Rick Perry signed House Bill 1634, which provides $22 million to help Texas attract jobs in television and film production. The bill provides filmmakers with grants equal to 5 percent of what they spend in Texas. To qualify, they must spend at least $1 million in Texas, shoot at least 80 percent of the project within state borders, and hire at least 70 percent of actors, crew and extras in Texas.
The Business and Economic Development Board of the Governor’s Office of Economic Development (GOED) approved Economic Development Tax Increment Financing (EDTIF) and Industrial Assistance Fund (IAF) and Motion Picture incentives for a variety of projects throughout Utah. Recipients include Air Liquide Industrial U.S. LP, a leader in industrial and medical gases; Cedar City Corporation, for completion of a redundant broadband network; and film producer Game Plan Films, LLC. Senate Bill 10 modifies provisions of the Industrial Assistance Fund by creating a Rural Fast Track Program as a component of the fund to help provide an efficient way for small companies in rural Utah to receive incentives for creating high paying jobs in the rural areas of the state and to further promote business and economic development in rural Utah.
Vermont employers will join the state in an effort to more directly recruit young people who have left Vermont to return and join the state’s workforce. As part of the new outreach program–an effort to help address Vermont’s changing demographics–the Agency of Commerce and Community Development will be working closely with Vermont’s employers to host networking events around the region and launch an interactive Web portal that appeals to young workers. “We know that many workers want to return to Vermont to live, work and raise a family,” Governor Douglas said at the launch of the initiative in August. “By making it affordable for them to do so, leveraging our quality of life and letting them know about the good jobs being created here, we can dramatically increase the chances they will.” The web portal, which allows the effort to extend far beyond key urban markets like Boston and New York, will feature jobs, housing, recreational and social event notification to prospects. In addition, Secretary of Commerce and Community Development Kevin Dorn and his economic development team have been meeting with representatives of Vermont colleges and universities to enlist their aid in reaching out to alumni and creating internships for students with Vermont companies.
In June, Gov. Douglas announced a task force to implement an innovative public-private partnership that will invest $20 million in energy efficiency efforts over the next four years, without raising new taxes or bureaucracies. The program creates a pool of private capital to provide $20 million no-interest or low-interest loans allowing homeowners and small businesses to make their building more fuel efficient at no net cost, and save them more money over time. The governor vetoed an energy package June 6, and lawmakers fell short of the votes needed to override the governor’s rejection during a special July 11 veto session. The energy bill would have targeted global warming by offering incentives for alternative energy and would have essentially tripled the tax the Vermont Yankee nuclear plant pays. Douglas said he vetoed the measure because of that tax. In May, the governor signed into law a bill providing $12 million for a new scholarship program and other workforce development measures.
Governor Timothy Kaine worked with the General Assembly to authorize up to $600 million for transportation in locally imposed taxes and fees in Virginia’s two most congested areas – Northern Virginia and Hampton Roads – while dedicating equally significant funding to statewide projects. The bill also includes measures that build on the Governor’s reforms in transportation and land use planning, expanding the scope and application of transportation impact fees for by-right commercial and residential development in communities with growing populations.
The Governor also negotiated business tax reforms, preventing imposition of the business, professional, and occupational license (BPOL) tax on motor fuels tax payments and making taxation of machinery and tools used by manufacturers more consistent.
In March, Gov. Kaine amended House Bill 3068 / Senate Bill 1416, which change how Virginia’s electric utilities are regulated, to strengthen consumer protection and expand the opportunities for conservation and more environmentally friendly sources of electricity. He also proposed amendments to House Bill 2954 / Senate Bill 781 / Senate Bill 1296, which restate that property may only be condemned to promote public interests, and clearly define what constitutes a public interest. The bills are a reaction to the 2005 U.S. Supreme Court decision in Kelo v. New London, in which the court ruled that each state was responsible for setting its own rules for eminent domain. The Governor’s amendments improve local redevelopment authorities’ ability to act to rebuild and revitalize blighted areas.
Washington’s legislature passed measures in 2007 that will promote tourism, invest locally to bring new jobs to Washington, expand small business development centers, create an Innovation Partnership Zones program and provide microenterprise assistance, among other measures. Washington’s $33.4 billion budget includes more than $7.5 billion to be invested to improve roads, rails and bridges and $4.6 billion for investment in new construction projects across the state. With respect to economic development, the budget create jobs by investing in tourism, small business support, research, promotion of Washington products, infrastructure improvements and local and regional workforce training across the state.
In April, Governor Chris Gregoire signed into law a measure to modify the average unemployment insurance contribution rates. Her proposal would save small Washington businesses approximately $10 million annually and won support from both business and labor organizations.
“Washington has taken enormous strides toward reducing costs in the unemployment insurance system, and I requested this bill so that I can pass those savings on to Washington businesses,” said Governor Gregoire. House Bill 1278 passed the House with 96 votes and passed the Senate with 43 votes.
In March, Gov. Gregoire signed into law a measure to help Washington business compete with out-of-state sellers. The bill encourages out-of-state sellers to collect sales tax on items that they sell to Washington customers. The legislation allows Washington to join 21 other states in the Streamlined Sales and Use Tax Agreement, a multi-state compact that establishes common definitions and procedures to make it easier for each participating state to collect sales and use taxes from remote sellers in every other participating state. So far, more than 1,000 remote sellers have agreed to participate.
Economic development highlights of the 2007 legislature include passage of three Senate bills. SB 697 allows revenue-sharing agreements to be made between county economic opportunity development authorities and similar authorities outside the state. The agreements must be made with respect to tax revenues and other income generated by facilities that are owned by the county economic opportunity development authority. The bill allows the county authority to make rules for its organization, elect its own officers, enter into and amend contracts, apply for grants, buy or receive real property and raise funds. SB 738 requires the West Virginia Parkways, Economic Development and Tourism Authority to report any need for a new toll or the revision of an existing toll to the Joint Committee on Government and Finance, on the condition that any evidence to support their conclusion is included. If the committee confirms the need for a new or revised toll on any parkway project, an affirmative vote by the full Legislature is required before it can be implemented. And SB 748 creates the Electronic Telecommunication Open Infrastructure Act. This measure requires an inventory and mapping of the current availability of access to broadband communications in this state and seeks to develop the coordinated deployment and operation of technology infrastructure within this state.
In August, Governor Jim Doyle was working with officials in private industry around Wisconsin to urge the State Legislature to support the Wisconsin Development Fund (WDF), the state’s major job creation tool. He credits the fund with helping to create more than 3,200 jobs in Wisconsin over the last four years. The budget passed by the State Assembly cuts more than $35 million from the WDF, which the governor says significantly compromises Wisconsin’s economic outlook by limiting the state’s ability to attract and retain jobs in Wisconsin.
“For Wisconsin’s economy to thrive, we have to make key investments that support good, Wisconsin businesses, and it starts with supporting the Wisconsin Development Fund,” noted the governor in August. “The Wisconsin Development Fund is the primary tool we use to create and retain businesses and good-paying jobs in this state.” The WDF is the state’s largest economic development fund. Over the last four years, it has helped 40 businesses expand in Wisconsin. It is also a vital resource for training workers with the skills they need for the jobs of the future, and for uniting entrepreneurs with the capital they need to get their ideas off the ground.
Governor Doyle’s budget more than doubles funding for the WDF, providing more than $50 million to support business expansion, retention, and targeted business attraction. Under Governor Doyle’s budget, the WDF will also help Wisconsin manufactures adopt lean manufacturing techniques, launch the state’s first cellulosic ethanol plant, and support regional economic development organizations.
Wyoming’s 59th Legislature, which adjourned March 1st, passed three bills with respect to economic development. HB 124 clarifies several provisions concerning the state’s use of eminent domain; HB 127 creates a film industry incentives program; and HB 138 establishes a work force housing infrastructure program to provide loans for cities, towns, counties, special improvement districts and joint powers boards for workforce housing infrastructure and community land trusts.
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