A top economic development official in Baldwin County says proposed legislation to modernize incentives designed to attract large-scale employers isn’t revolutionary but will make Alabama more competitive.
Over the last year-and-a-half, Lee Lawson, president and chief executive officer of the Baldwin County Economic Development Alliance, has tried to lure a manufacturer to the South Alabama Megasite, a 3,009-acre development-ready property in Bay Minette.
Alabama lost out because existing incentives aren’t usable or competitive, he said.
Provisions included in the Made in Alabama Accelerate Alabama Jobs Incentive Package, already working their way through the Alabama Legislature, could make Lawson’s work a bit easier.
Three bills – backed by Gov. Robert Bentley and the Republican Caucus – have passed in the House and are being discussed in the Senate. Two other bills focused on incentives have yet to be filed.
Alabama Department of Commerce Secretary Greg Canfield said the jobs package will help level the playing field for both job and income distressed counties.
These incentives are more sustainable because they are “pay-as-you-go” or performance-based, he said. Companies only receive these incentives a year after they have built their operation and hired their employees.
“As a poor state, we have to have a more sustainable approach,” Canfield said, admitting that some companies may not like the new method. The state can’t continue to provide incentives as it has in the past — by borrowing money, he said.
The new incentives don’t preclude incentives already allowed under state statute, including property, sales and use tax abatement.
Lawson said the Department of Commerce took feedback state officials received from companies and site consultants and used them to help draft the new incentives. The Economic Development Association of Alabama and the group Rural Development Committee also provided input.
“Economic development has become increasingly competitive over the last 30 years,” he said. “What we have to offer in Alabama which has become antiquated and even useless for a lot of companies.”
The first bill — the Alabama Jobs Act – allows eligible companies who will create at least 50 new jobs to receive a 3 percent jobs credit from the new employee wages after the first year, for a period up to 10 years. The credit is paid out of state funds from utility taxes. The legislation is sponsored by Rep. Alan Baker, R-Brewton.
Companies can receive a 1.5 percent investment credit to offset the cost of construction, equipment and development of projects. The credit would be paid through certain taxes for a period up to 10 years.
The state can take the incentives back if the companies don’t meet their agreed upon obligations.
The second bill – the Alabama Veterans and Rural Jobs Act – gives companies an extra job credit of 1 percent to locate in less-developed counties with populations less than 50,000. Minimum requirement for job creation is 25 instead of 50. The legislation sponsored by Rep. Elaine Beech, D-Chatom.
“In order for the rural areas to be competitive, the entire state has to be competitive,” David Hutchinson, the chairman of rural economic development for the Economic Development Association of Alabama, said, adding these bills will help do that. “If the state is more competitive, that, in turn, is going to give us more opportunities to compete at the rural level as well.”
Hutchinson, who is also director of the Butler County Commission for Economic Development, said the bill will help rural counties compete.
“We’re really happy about the Airbuses, the Remingtons, the Polarises and all of the big projects that come in and create hundreds of jobs and hundreds of millions of dollars in investments,” Hutchinson said. “At the rural level, a big project for us is a 50-to-100 job project.”
Butler County has a population 20,947. Its top industries are in automotive, wood products and metal machine products.
Sen. Arthur Orr, R-Decatur, has proposed changes to extend the added incentives for projects in rural areas to include low-income counties in more urban areas based on federal New Market Tax Credit Zones. Those zones are based on poverty rates and median-income. This area makes up more than half the state with the biggest exclusions being in the areas around Huntsville and Birmingham.
Projects slated for approximately 45 approved Advantage Sites would also receive additional incentives under Orr’s proposal.
Advantage Sites undergo a voluntary vetting process to show their site is readily available for a large industry. The South Alabama Megasite has that designation.
As the bill currently stands, Canfield said the Rural Jobs Act will also allow the state to increase a company’s investment credit from 10 to 15 years if a company is a supplier and supplying their customer within a 50-mile radius.
“This allows us to have our more economically challenged areas around the state a strategy to develop a supply chain in those areas,” he said.
Also, companies will be eligible to receive loans for site preparation and other development work for up to $2 million per project.
Austin Monk, director of the Washington County Economic Development Initiative, said the new incentives will present his rural county with more advantages.
“This particular package of bills … is going to give us more looks,” he said. “It is bad to lose a project, but it is even worse to not even be considered for a project. As of right now, we are in the scenario where in many cases we are not even considered.”
Washington County main employers are in chemical, electrical, education and government, but many times residents have to seek employment opportunities in Clarke and Mobile counties.
Jobs for veterans
Canfield said Alabama needs to do more to put veterans back to work. The legislation includes additional incentives for companies that hire a significant amount of veterans.
“Alabama has always sent more people into the military on a per capita basis than other states,” Canfield said, “but we haven’t always done a great job at providing employment opportunities.”
He said veterans currently make up 8 percent of Alabama’s workforce.
In the bill on the table, companies who make veterans 12 percent of their workforce will receive an additional 0.5 percent jobs credit.
Canfield admitted that it may not be easy for companies to hire that many veterans. “It is a stretch goal,” he said, adding that veterans are coming back to Alabama with great skills.
Canfield said the third job incentives bill – Alabama Reinvestment and Abatements Act — is about working with existing industry and encouraging them to reinvest in their Alabama facilities and modernize and upgrade so they become more productive and don’t close.
Provisions under the bill will provide companies that reinvest and spend $2 million or more will receive an abatement on taxes while they are upgrading.
March 21, 2015