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FEATURE

Utah's Tax Incentives Protect Public Monies While Keeping the State Competitive in Recruitment Efforts

Utah has distinguished itself as a state with a rich supply of natural economic incentives—a highly educated, skilled workforce, excellent quality of life, lower utility rates, access to transportation and convenient air travel connections—all of which make the state a great place to live and work. Utah has also distinguished itself with its structured business incentive program, which was designed to make the state more competitive in economic development recruitment efforts without jeopardizing public money.

Utah’s main sources of economic development tax incentives come from the Industrial Assistance Fund (IAF), a job-creation incentive, and the Economic Development Tax Increment Fund (EDTIF), a post-performance incremental tax rebate that returns a portion of state tax revenues back to the company when established benchmarks are achieved. EDTIF and IAF are both extremely powerful, useful tools that strengthen the state’s competitiveness and ability to grow the overall size and diversity of the economy.

The IAF and EDTIF incentive programs are administered by the Governor’s Office of Economic Development (GOED). EDCUtah assists companies in navigating the complex expansion and relocation process, including the incentive process. EDCUtah works closely with GOED staff to give advice and help the companies prepare the necessary application. A 15-member board, appointed by the governor, reviews applications and makes final incentive awards.

Executive Director of GOED, Jason Perry says the logic behind tax incentives is that the new economic activity created by the recruited business will be more than offset by the money paid out in tax incentives.

“The incentives are used by the companies as a stimulus. A limited amount of public dollars is expended, based on post performance,” says Perry. “Once the incentives are accepted, GOED continues its work with those companies through quarterly and annual reports, to maintain the integrity of the incentive offered, both for the taxpayer and company.”

“The state’s goal with incentives is to first, place Utah in a competitive and viable position with other states. Secondly, to offer a company or industry looking at Utah a formula based on an economic model that promotes healthy, sustainable relocation or expansion into Utah. This stimulates job growth and expansion of capital investment and purchases from Utah vendors in a community where it will have the most impact.”

“Business incentives have become an essential part of the process of recruiting companies,” says Jeff Edwards, President & CEO of EDCUTAH, which is responsible for the recruitment of businesses to the state. “Many states have sophisticated incentive programs that can offer significant benefits to companies. I am pleased to report that Utah’s new programs are very competitive on a national scale and have proven effective in helping to make business decisions in our favor.”

Jerry Oldroyd, attorney at Ballard Spahr and chair of GOED incentives committee, says Utah tax incentives are performance-based, which means a company must achieve agreed upon levels of performance before the incentives will be given. “Our incentive structure shifts the risk to the company and away from the state,” he says, “and by and large this has been very successful.” To receive the IAF incentive, a company must be in operation in Utah or have committed capital expenses to the state. If the company doesn’t perform to the agreed upon benchmarks, the incentive is never given.

Using the EDTIF incentive, if a qualifying company locates in Utah, it can receive a rebate for a portion of the state tax revenue that it would pay to the state. This could be a rebate on taxes paid for new wages, sales taxes, or corporate income taxes, which will be returned over a specified term as benchmarks are achieved. “This incentive makes a whole lot of sense because the company has to earn the rebate based upon performance,” Oldroyd says. What’s more, an EDTIF incentive requires a significant contribution from the local community as well. “We look at this as a partnership with the local entities, and put together incentive packages that make sense for the city, the state, and the business,” commented Oldroyd. The commitment from the community could take many forms. Many communities seek to donate land for the development, provide property tax abatement, or rebates on infrastructure costs.

One goal of the EDTIF incentive program is to make certain the state is not just incenting jobs, but high paying jobs. Along the Wasatch front, the jobs must pay at least 125 percent more than the county median wage. In rural areas, the wages paid must be at least 100 percent of the county median wage. However, averages are often much, much higher.

The GOED board makes all incentive decisions based upon established formulas, after complete financial and business analysis. Decision factors include location (rural or urban), impact on the community, wages paid, benefits paid, corporate taxes paid, number of jobs created, types of jobs created, and capital investment the company will make in the area. Such factors help the board determine the amount of and type of incentive offered. In some situations the incentive may be a blend of the IAF and EDTIF programs, but under no circumstances will more incentive be provided with a multiple source incentive than with a single source incentive.

Over the years, Utah has become more creative in its use of incentives to attract businesses to the state, which has helped economic developers to be more aggressive in their recruitment efforts. “The overall integration of all of our economic development strategies is what makes Utah a strong, competitive player among states that may have more money or other individual advantages, but fail to integrate all of the tools necessary to attract companies,” says Edwards.

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Procter & Gamble (Project Goldrush) Incentive Approved

As reported in the Deseret Morning News, the Governor’s Office of Economic Development’s Board chose to offer a financial incentive to Procter & Gamble late Tuesday afternoon. The incentive was provided to assist the company in the potential construction of a manufacturing facility in Box Elder County for the company’s paper division.

The project, if realized, would bring a capital investment of more than $540 million and 900 new jobs to the state over the next 10 years. The company’s projected wages are greater than 200 percent of Box Elder County’s current median wage.

Goldrush-Related News Links

P&G Plant Utah Bound?
$85 Million Incentive is a Big Gamble
Facts and Figures
Utah Tries to Lure P&G Plant

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U.S. Foodservice, Inc. Plans
to Significantly Expand its

Ogden Operations

The new, approximately 265,000-square-foot facility will serve as one of U.S. Foodservice, Inc.’s 70 distribution and service points nationwide. The plant is expected to ultimately employ approximately 400 individuals. Construction on the facility is expected to begin immediately, with distribution expected to begin in late 2008.

“We are excited to continue U.S. Foodservice, Inc.’s growth in the intermountain west, “ said Alexander (“Sandy”) Raine, U.S. Foodservice Vice President – Corporate Real Estate. “The expansion of our Utah operations will increase our capacity significantly and give us a state-of-the-art, modern and efficient facility. We look forward to making this investment in the local economy and are pleased to continue our long relationship with Utah.”

This project was initiated in April 2005 with EDCUtah heavily involved in each phase of development. EDCUtah staff participated in the site selection process, served as a liaison with appropriate leadership in the public and private sectors and aided in the state incentive application process. EDCUtah partners Ogden City and NAI Utah played a critical role in the successful completion of this project. Competitors included Idaho and Nevada..

About the Company

U.S. Foodservice, Inc. is the second largest broadline food service distributor in the United States. It is a full-service distributor with more than 27,000 employees in 70 locations nationwide. The company distributes food and related products to 250,000 clients across the U.S., including restaurants, hospitals, hotels, schools, government and other establishments where food is prepared outside of the home.

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CALENDAR

Oct. 18:  PTAC Symposium (Sandy, South Towne Expo Center)
Cost: $50.00/person for the first person and $35.00/ additional registration from the same company. Fee includes a continental breakfast, lunch, and all the training sessions, exhibits and materials. Time: 7:45 a.m. to 4 p.m. Event Coordinator: Myrna Hill
Phone: 801-388-775. E-mail: ptac@utah.gov

Oct. 21:  Utah's Inventor Symposium; 9 a.m. - 5 p.m., Miller Business Resource Center, 9690 S. 300 W., Sandy. UtahInventor.org welcomes world-renowned inventors Stephen Jacobsen Ph.D. and Woody Norris. Presented by The Spirit of Renaissance® Foundation., the symposium will bring together inventors, entrepreneurs, and business people from all sectors of the community. To view the schedule and learn more about the Symposium, please visit www.UtahInventor.org. A $20 membership fee paid through the website covers the cost of attendance. Click here for symposium and registration information.

Oct. 28-31:  CoreNet (Atlanta)

Nov. 7:  EDCUtah Quartely Update

Dec. 19:  EDCUtah Holiday Open House

Jan. 9:  "What's Up Down South?" Economic Summit at the Dixie Center in St. George. Contact Information:
Contact: Scott Hirschi, c/o Dixie College, 225 South 700 East
St. George, UT 84770  (435) 652-7750
www.whatsupdownsouth.com

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The EDCUTAH Economic Review is a weekly publication of the Economic Development Corporation of Utah. It is distributed to EDCUTAH partners and selected other government and civic organizations interested in Utah's economic development. If you prefer not to receive this newsletter, please use the link below. Subscribe or Unsubscribe Your comments and suggestions regarding this newsletter are always welcome. Click here: Comments

Utah Industrial Directory Reports Salt Lake City 15th in Nation for Manufacturing

Salt Lake City ranks among the top cities in the U.S. in terms of manufacturing employment and number of companies according to the 2008 Utah Manufacturers Directory, an industrial guide published annually by Manufacturers' News, Inc. (MNI) Evanston, IL.

MNI reports Salt Lake City ranks 15th in the nation for number of manufacturers, and 20th by manufacturing employment. What's more, Salt Lake City is home to more manufacturing companies and jobs than many historically strong industrial cities such as Detroit, which ranks 21st on MNI's list for number of manufacturing jobs and 47th for number of manufacturers.

"The state's natural resources and growing population have provided some immunity against the industrial job losses suffered by many other states," said Tom Dubin, President of the Illinois-based publishing company, which has been surveying US industry since 1912.

Manufacturers' News reports Salt Lake City is home to 1,303 manufacturers employing 53,583 workers, and accounts for 29.2 percent of Utah's manufacturers and 33 percent of its industrial jobs. MNI surveys both large and small manufacturers, including small companies with just a few employees.

Salt Lake City's printing and publishing industry is a major industrial employer, accounting for 6,752 jobs -- nearly half of Utah's 13,723 printing and publishing jobs. Salt Lake City's food sector accounts for 5,180 industrial jobs, or 27 percent of Utah's food-related industrial employment.

Major sub-sectors in Salt Lake City include manufacturers of communications equipment, employing 2,829 workers, business form printers, employing 2,531, and manufacturers of plastic products, employing 1,902.

The City of Ogden ranks second in the state with 269 manufacturers employing 15,469 workers. Logan accounts for 128 manufacturers employing 8,820 workers, while fourth-ranked Provo represents 127 companies employing 5,114. Fifth-ranked Clearfield is home to 54 manufacturers and 4,836 workers.

According to MNI there are 4,458 manufacturers employing 163,351 workers operating in the state of Utah. Northern Utah accounts for the majority of the state's manufacturing, home to 88 percent of Utah's manufacturers and 92 percent of the state's jobs, with nearly half of these jobs located in Salt Lake County. Southern Utah accounts for 313 companies employing 7,049 while Central Utah accounts for 5,975 jobs and 195 plants.

Top 15 U.S. Manufacturing Cities
 

Rank	City	Companies	Jobs
1	Houston	4,157	225,319
2	Chicago	3,203	135,320
3	New York	2,909	156,335
4	Phoenix	1,923	85,221
5	Cleveland	1,842	79,998
6	Dallas	1,813	94,231
7	Los Angeles	1,799	100,959
8	St. Louis	1,613	91,446
9	Denver	1,549	45,658
10	Miami	1,516	49,177
11	Cincinnati	1,485	97,790
12	Indianapolis	1,454	92,571
13	Minneapolis	1,414	69,296
14	Brooklyn	1,369	33,994
15	Salt Lake City	1,329	54,772

Source: Manufacturers' News, Inc.
 

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IN THE NEWS

Economic Development Headlines from the Past Week

22 Utah entities share $50K in match grants

- The Economic Development Corporation of Utah has awarded nearly $50,000 to 22 Utah communities and economic development groups through its match grant program. (Morning News)

Food distributor to build 265,000 sq. ft. facility in Ogden

- U.S. Foodservice, the nation's No. 2 food service distributor, has acquired land in Ogden where it plans to build a 265,000 square foot facility that should be operational by the third quarter of next year. (SL Enterprise)

Delaware home theater retailer opens first Utah franchise

- Theater Xtreme Entertainment Group Inc. has entered the Utah market with a new showroom and design center in Draper that offers home theater systems and full room build-outs at an affordable price. (SL Enterprise)

Ground broken for 10,000-home community in Hurricane

- Elim Valley in Hurricane is being developed by Idaho Falls-based McNeil Development, which will contain approximately 10,000 homes, two million square feet of commercial and retail space, a 40-acre equestrian center, 18-hole golf course, hospital, water park, hotel, family recreational area, community farming areas and a spa resort. (SL Enterprise)

Resort spells big bucks for Big Water

- That is when the first eight villas of Amangiri Resort Spa and Villas at Lake Powell go on sale. They will be built as they are sold. The operator will be hotel-management company Amanresorts. The only qualification is a fat wallet. The per-villa price: $6.5 million or more. (SL Tribune)

Office space boom

- The Salt Lake Valley is in the midst of an office space explosion fueled by near-historic commercial market growth rates. In order to keep up with current demand — based on current job growth and economic conditions — Salt Lake County needs to add one million new square feet of office space annually, according to a new quarterly update by real estate firm Commerce CRG. (Morning News)

Pay hikes higher in Utah

- Utah companies set aside 3.7 percent of their 2007 budgets for salary increases, compared to 3.65 nationally, according to a compensation survey released this week by Compdata. And the number was even higher — 3.75 percent — for northern Utah-based companies. (Morning News)

Ads show off Utah gems top to bottom

- The state's latest tourism advertising campaign has hit the marketplace, designed to convince out-of-staters that Utah is a winter wonderland they just have to visit. (SL Tribune)

Utah a hotbed for manufacturing: Capital ranks high on list

- Utah's manufacturing sector is booming and nowhere is that more evident than in Salt Lake City, which ranks 15th in the nation in the number of manufacturing concerns operating within its city limits and 20th in the number of manufacturing employees. (SL Tribune) (Morning News)
(Utah Business Magazine)

Convention & Visitors Bureau thinks big

- Even more than usual, the Salt Lake Convention & Visitors Bureau is thinking big this coming year. That is, big in terms of attracting future conventions large enough to fill multiple hotels throughout the downtown area - and even into the suburbs. (SL Tribune)

Utah economy is cooling

- With cooler weather has come a cooler economy in Utah, according to a business-conditions gauge produced by Creighton University in Nebraska. (Morning News)

County set to launch small business center

- Tooele County's Office of Economic Development is developing a small-business resource center to help start-up ventures and strengthen existing small businesses in the county. The center will be located in the old J.C. Penney building recently purchased by the county at 41 South Main Street in Tooele, according to Nicole Cline, Tooele County director of economic development.
(Tooele Transcript Bulletin)

Sugar House developers, city planners surprised when expected hostile hearing is amiable

- Sugar House residents, once full of vigor and vitriol over the redevelopment of the beloved Granite Block, may finally feel punch drunk. At least it appeared that way when they showed up en masse last week for a Planning Commission public hearing on the controversial plan. (SL Tribune) 

Territory Incorporated Announces New Upscale Retail Development in Park City

- Territory Incorporated CEO Terri Sturm announced the company is developing 150,000 square feet of upscale lifestyle retail space at Newpark, an 820,000 square-foot mixed-use development in exclusive Park City, Utah. (Utah Business Magazine)

Salt Lake Convention and Visitors Bureau Marketing Plan Unveiled

- On Thursday, September 27, 2007, the Salt Lake Convention & Visitor’s Bureau (SLCVB) hosted the Third Quarter Board of Trustees / Membership Meeting and President’s Forum, where “Return of the City-Wide” premiered from the main stage at The Depot. (Utah Business Magazine)

New SBA E-application Process Helps Small Businesses Gain Quick Access to Bonds

- Small construction, service and supply companies that need bonding can now apply for SBA surety bond guarantee assistance online on the SBA Web site 24 hours a day, seven days a week. (Utah Business Magazine) 

Utah Asian Group Courting China

- The Utah Asian Chamber of Commerce sponsored its second annual Access Asia networking event on the campus of Westminster College last Friday night. It brought together civic and political leaders along with members of the Asian and Utah business communities to discuss strategies for sharing information on tapping into the international marketplace — particularly Asia. (Morning News)

East Gate Project Gets Nod

- The East Gate economic development project here has received the unanimous approval of the RDA Taxing Entity Committee. (Standard Examiner)

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