Success Tactics for Economic Development

Transcription

1 Success Tactics for Economic Development William A. Holby Woodrow W. Vaughan III and Randal Morris Assistant Director for Economic Development Services, University of Georgia s Business Outreach Services/SBDC Network Tuesday, October 19, 2004, 12:30 1:30 p.m. EDT If you have not downloaded the program materials, please do so now at

2 To connect to the audio part of the program please call: A customer service representative will connect you to the seminar. For technical assistance at any time during the presentation, please call: Speaker Biographies Bill Holby is a partner with King & Spalding s Public Finance Practice Group, and has served as the Chair of that Practice Group since William A. Holby bholby@kslaw.com Mr. Holby regularly assists both for-profit and non-profit organizations with their taxexempt financing needs. He actively serves as Bond Counsel across the nation for corporate clients that utilize governmental bonds to finance exempt facilities such as docks and wharves, sewage and solid waste disposal facilities and affordable housing, as well as taxable and tax-exempt industrial development projects. In addition, Mr. Holby works with non-profit entities such as secondary schools, colleges and universities, as well as charitable service providers such as the YMCA, American Cancer Society, Sheltering Arms and others. A portion of his practice is focused on the representation of domestic and foreign financial institutions that provide credit and liquidity facilities that support municipal obligations. A frequent faculty member at seminars conducted by the National Association of Bond Lawyers, Mr. Holby regularly speaks on topics relating to exempt facilities financings, tax due diligence procedures, credit enhancement, structured finance transactions, and the bond rating process. He has served as a member of the Steering Committee for the Bond Attorneys Workshop conducted annually in Chicago, Illinois. Currently, Mr. Holby is serving a three-year term as a member of the Board of Directors of the National Association of Bond Lawyers. Mr. Holby was elected a member of the American College of Bond Counsel in A cum laude graduate of Vanderbilt University in 1976, Mr. Holby received his law degree from the Vanderbilt School of Law in 1979.

3 Woodrow W. Vaughan III Speaker Biographies Woody Vaughan is an associate in King & Spalding s Financial Transaction Practice Group, concentrating on public finance. Mr. Vaughan has been involved in numerous municipal finance transactions as bond counsel, underwriter's counsel, credit enhancer's counsel and borrower's counsel. Mr. Vaughan has extensive knowledge in tax-exempt finance for multifamily housing, education facilities, other non-profit entities, state and local governments and enterprise zones. Mr. Vaughan has served as bond counsel and represented credit enhancers and underwriters in tax-exempt multifamily housing transactions in Florida, Georgia, South Carolina, North Carolina, Virginia and Washington, D.C. Mr. Vaughan is a member of the National Association of Bond Lawyers and the Local Government Section of the State Bar of Georgia. Originally from Atlanta, Georgia, Mr. Vaughan graduated from the University of Virginia in 1990 and received his J.D., magna cum laude, from the University of Georgia in While in law school, Mr. Vaughan was a member of the Order of the Coif and served as a Notes Editor for the Georgia Law Review. Prior to law school, Mr. Vaughan worked in Washington, D.C. for U.S. Senator Wyche Fowler, Jr. and Congressman Sanford Bishop. Speaker Biographies Randal Morris is the Assistant Director for Economic Development Services with the University of Georgia s Business Outreach Services/Small Business Development Center Network, and has also served as the Network s Public Service Assistant since Randal Morris rmorris@sbdc.uga.edu Mr. Morris has a wide ranging background in the economic development field having worked in both the public and private sectors. His experience spans over 20 years and includes organization management, marketing, public relations, governmental affairs, coalition building and private consulting. As a senior or executive decision maker, he has held key economic development and chamber of commerce positions for three local jurisdictions in Georgia Savannah, Brunswick and Conyers. Additionally, Mr. Morris served as Deputy Commissioner of Marketing for Georgia s business recruiting agency, the Department of Industry, Trade and Tourism. Before joining the University s Economic Development Services group, he owned a successful boutique consulting company, REM Resources, LLC, which specialized in marketing program analyses, strategic planning, community/leadership development and business development services. Mr. Morris has an undergraduate degree from the University of Georgia and a Certificate in Port Planning and Management from the University of New Orleans.

4 Success Tactics for Economic Development William A. Holby Woodrow W. Vaughan III and Randal Morris Assistant Director for Economic Development Services, University of Georgia s Business Outreach Services/SBDC Network Tuesday, October 19, 2004, 12:30 1:30 p.m. EDT 1 The Shifting Culture of Economic Development: From Smokestack Chasing to Sophisticated Business Recruitment 2

5 The Smokestack Chasing Programs of Yesterday 60s Property tax incentives in common use by state and local government to attract industry 70s The development of the federal investment income tax credit and supply side economic theories result in an expanding group of tax incentives 80s The use of economic development incentives by every state and the publicity of large subsidies to automobile manufacturers make this the decade of industrial recruitment and the state incentive package 3 Common Characteristics of Economic Development 1960s 1980s Manufacturers seek government incentives to build industrial plants State and local governments seek manufacturing plants to increase tax base and employment; workers who are often low-wage, low-skill 4

6 Economic Development Today Expectations have been raised: Businesses are looking for more from governments Governments are looking for more from businesses 5 Governments Demanding More An estimated $50 billion a year was spent on economic development incentives in the 1990s. Governments are awarding incentives to higher paying, more specialized skill industries, including businesses in the hi-tech industry. Governments are expecting greater accountability from businesses. 6

7 Past Beneficiaries of Incentives Manufacturing Warehousing Distribution Today s Beneficiaries Biotech companies Research & development enterprises Internet providers Publishing houses Computer-chip plants Corporate executive offices 7 Job Trends Georgia Employment Sectors Manufacturing 20.3% 15.6% 11.8% Services 18.4% 25.3% 42.1% Government 17.2% 15.6% 5.7% Retail 18.3% 18.5% 16.6% Agriculture/Construction/Mining 6.5% 6.6% 6.4% Wholesale Other 7.6% 11.7% 6.6% 11.8% 5.6% 11.8% 8

8 Government Strategies to Attract Businesses from a Variety of Industries Developing the Jurisdiction s Products Develop the regional alliances Develop recruitment & retention strategy Develop the properties and infrastructure Develop the workforce 9 Strategies for Community Economic Development Established Firms Retain, expand Recruitment Attract new basic employers (Target Marketing) Enterprise Creation Support entrepreneurs & new business opportunities Financial & Human Capital Improve community s ability to capture and retain 10

9 Plug the Leaks More Strategies Retain/Expand Existing Business & Industry Recruit New Business & Industry Entrepreneurial Development Agribusiness & Natural Resources Retiree Attraction Tourism Corridor Development Cluster Development Workforce Development 11 Basic Strategy for Success The communities that prosper will be those that develop strategies to create resilient local economies that make the unique strengths of their people and their place a source of competitive advantage. - The President s Council on Sustainable Development 12

10 Attacks and Accountability Judicial Attacks Governmental Imposed Accountability 13 Court Challenges to Economic Development Historical Judicial Deference Eminent Domain Attacks Kelo v. City of New London, 843 A.2d 500 (2004), cert. granted, 73 U.S.L.W (U.S. Sept. 28, 2004) (No ). Commerce Clause Attacks Cuno v. DaimlerChrysler, 2004 FED App. 0293P (6 th Cir.) (2004). 14

11 Government Expectations Not only are governments awarding incentives to businesses in a greater variety of industries than in the past, but they are also expecting more accountability from them. 15 Incentive Recipients Fall Short of Expectations DaimlerChrysler Jeep Plant in Ohio Robots displaced 2,800 jobs General Motors Plant in Michigan Relocated after three years Mercedes Plant in Alabama Produced half the expected jobs 16

12 The Government Strikes Back: Accountability Standards While a decade ago it was virtually unheard of to attach job quality standards to development subsidies, today it is becoming standard practice. - The Policy Shift to Good Jobs: Cities, States and Counties Attaching Job Quality Standards to Development Subsidies 17 Standards may require businesses to: Create a minimum number of jobs Pay a specified wage to employees Provide healthcare benefits to employees Offer permanent, full-time employment opportunities Provide worker training Remain located in the jurisdiction for a minimum number of years 18

13 Number of Jurisdictions with Standards # of states, cities, or counties with standards 19 Enforcement of Standards Penalties for Noncompliance Cancellation of future benefits Disqualification for any future government incentives Recalibration of existing benefits Prorated recapture of dollar amount falling short of promise Total recapture of incentives (sometimes plus interest) Fines Wage restitution 20

14 Monitoring Compliance In 1997: Nine out of 34 states responding to the National Governor s Association Survey reported having monitoring systems Today: 80% of jurisdictions using standards now have compliance monitoring mechanisms Only 20% rely on the honor system 21 Businesses Demanding More Expecting a greater variety of more sophisticated and more flexible incentives Seeking sites with infrastructure already in place, technological capabilities and a skilled workforce 22

15 Incentives Today Incentives are not going away, but they are getting more and more sophisticated and complex. - KPMG Peat Marwick, Area Development Magazine (January 1999) 23 Incentives of Yesterday Property tax breaks Infrastructure improvements Incentives of Today Income tax credits Sales tax exemptions Worker training grants Acceleration of depreciation deductions for in-state property Favorable tax formula changes Using taxes collected from increased property values in redeveloped areas to subsidize redevelopment Gift or sale of property seized by eminent domain 24

16 24 State Survey on Tax Credits Governmental Goals Georgia s List What Others Have Job Creation (16) Pollution/Recycle (6) Investment (9) Targeted Industry (1) R&D (10) Fuels/Raw Materials (1) Headquarters (6) Industrial Machinery (1) Training/Retraining (5) Material Handling (1) Day Care (8) Franchise Tax (3) Ports Activity (3) Employee Housing (1) Small Business Growth (1) Payroll Based (2) ( ) denotes number of states with programs from 24 surveyed State Survey Other Tax Exemptions and Abatements Georgia s List Sales & Use Tax (12) Freeport (6) Property tax (11) Sales Tax on Computers (2) Goods in Transit (1) Purchases of Resales (1) What Others Have Payroll Withholding (2) Electricity Charges (1) Goods in Transit (1) Pollution Equipment (1) Tax Equalization (1) ( ) denotes number of states with programs from 24 surveyed 26

17 What Drives Site Selection? It makes or saves money New Technology Additional Capacity New Labor Climate Customer Demand Access to Markets Cost Reduction New Products/Services 27 What Companies Look For Site Selection Factors Combined Ratings for 2003 Factors* Ranking Factor State and Local Incentives Labor Costs Availability of Skilled Labor Highway Accessibility Occupancy or Construction Costs Tax Exemptions Corporate Tax Rate Energy Availability and Costs Proximity to Major Markets Availability of Land 78.1 N/A * All figures are combined % s representing very important and important ratings in the Area Development Corporate Survey 28

18 What Companies Look For Quality of Life Combined Ratings for 2003 Factors* Ranking Factor Low Crime Rate Health Facilities Housing Availability Ratings of Public Schools Housing Costs Climate Colleges/Universities in the Area Recreational Opportunities Cultural Opportunities * All figures are combined % s representing very important and important ratings in the Area Development Corporate Survey 29 Conclusion: Higher Standards for Economic Development Governments Looking for More from Businesses Targeting industries: biotech, R&D, Internet providers, etc. Fine-tuning goals: Minimum number of jobs created Mandatory length of tenancy Higher wages for workers More permanent positions with greater opportunity Businesses Looking for More from Governments Sophisticated, flexible incentives Sites with infrastructure in place Population with skilled workforce Jurisdictions with technological capabilities 30