SEDC Economic Development Incentives Discussion State of Louisiana

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Cornelia Chase
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1 SEDC Economic Development Incentives Discussion State of Louisiana August 2013

2 Economic Development Incentives are defined as cash or near cash assistance provided on a discretionary basis to attract or retain business operations The following are common examples of development incentives: 1. Direct/subsidized loans or grants 2. Site advantage free land, buildings, exemptions from local and state authorities 3. Tax incentives government provided reduction in tax liability 4. Public utility rate break (water, electricity etc.) 5. Project/Infrastructure improvements site improvement by state and local governments 6. Industrial revenue bonds Loan issued for the construction of a facility, supplies, and equipment 1

Site advantage free land, buildings, exemptions from local and state authorities 3. Tax incentives government provided reduction in tax liability 4.

3 CREATIVE WAYS TO DEVELOP AND DEFEND INCENTIVES Some things to keep in mind: Together everyone achieves more (TEAM) Definition of insanity = Doing the same thing and expecting different results! Don t give up! 2

more (TEAM) Definition of insanity = Doing the same

4 3

5 STATE INCENTIVE PACKAGE PROPOSED TO BENTELER STEEL/TUBE State Incentive Package: Industrial Tax Exemption Program property (ad valorem) tax exemption 10 years = $108 MM Flexible Performance Based Grant, for infrastructure requirements (roads, rail spur, utilities, etc.) payable in year 1 = $40 MM Quality Jobs Program 5% or 6% payroll rebate for each qualifying new job; 10- year term; and either a 4% sales/use tax rebate on building materials, or income and franchise tax credits up to 1.5% of investment = $41.4 MM LED FastStart Program customized workforce recruitment, screening, training development, and training delivery during employment ramp-up period $4.4 MM Relocation expenses of key personnel $1 MM Package Total: $194.8 MM 4

) payable in year 1 = $40 MM Quality Jobs Program 5% or 6% payroll rebate for each qualifying new job; 10- year term; and either a 4% sales/use tax rebate on building materials, or

6 Response to the State s Offer

7 To make this work we will have to search everywhere!

8 GOVERNMENTAL PARTICIPANTS STATE OF LOUISIANALOUISIANA DEPARTMENT OF ECONOMIC DEVELOPMENT BOARD OF SUPERVISORS OF THE COMMUNITY AND TECHNICAL COLLEGE SYSTEM CITY OF BOSSIER CITY CADDO PARISH COMMISSION CITY OF SHREVEPORT CADDO-BOSSIER PARISHES PORT COMMISSION RED RIVER WATERWAY COMMISSION BOSSIER PARISH COMMUNITY COLLEGE 7

CITY OF BOSSIER CITY CADDO PARISH COMMISSION CITY OF SHREVEPORT CADDO-BOSSIER

9 CLOSING THE DEAL WITH INCENTIVES FIRST: LISTEN SECOND: GIVE THE CLIENT WHAT THEY REALLY WANT

10 You can t spin straw into gold. But you can spin a little gold into a lot of gold.

11 ADDITIONAL CONTRIBUTIONS FROM GOVERNMENTAL PARTICIPANTS OF MORE THAN $33 MM LOUISIANA ECONOMIC DEVELOPMENT $10 MM BOARD OF SUPERVISORS OF THE COMMUNITY AND TECHNICAL COLLEGE SYSTEM $2 MM CITY OF BOSSIER CITY $1 MM CADDO PARISH COMMISSION $2.6 MM CITY OF SHREVEPORT Non-cash services CADDO-BOSSIER PARISHES PORT COMMISSION $2 MM RED RIVER WATERWAY COMMISSION $6 MM BOSSIER PARISH COMMUNITY COLLEGE $ 10 MM TOTAL ADDITIONAL DOLLARS FOR THE DEAL: $ 33.6 MM 10

12 Opportunity + Preparation + Incentives = Success

13 NON-CASH INCENTIVES THAT CAN BE OFFERED BY LOCAL GOVERNING BODIES Discounted property Expedited permitting Local permit fee waivers Water and sewer improvements 12

14 Bond issues may represent a compelling platform, in some cases!

15 Consider Bond Financing (When appropriate) Direct clients to Bond Counsel for advice and discussion. Not free money but rather a form of finance for qualified projects. May create ownership scenarios which bring additional value to the client. Government may be the conduit for issuance.

Not free money but rather a form of finance for qualified projects.

16 What s new for 2013?

17 COMPETITIVE PROJECTS PROPERTY TAX EXEMPTION Overview: One of the new tools available to Louisiana Economic Development Organizations (EDO s) is the Competitive Projects Property Tax Exemption. For non-manufacturing projects. This program serves businesses that make capital expenditures of at least $25,000,000 and create and maintain at least 50 new direct jobs Eligibility: Parish has to opt in. A Parish is eligible to participate in the program upon approval by all of the following local governmental entities: 1. The parish governing authority; 2. All municipalities in the parish which levy an ad valorem tax; 3. All school boards in the parish which levy an ad valorem tax; 4. The parish law enforcement district; and 5. The parish assessor. 16

18 COMPETITIVE PROJECTS PROPERTY TAX EXEMPTION Key features are: Ad valorem taxes assessed valuation of the first ten million dollars or ten percent of fair market value, whichever is greater, and the balance of the property valuation will be exempt under this program. Eligible facilities include: Corporate headquarters; distribution facilities; data service centers; research and development operations; digital media and software development centers. Participating business must make capital expenditures of at least $25,000,000 for the facility and create and maintain at least 50 new direct jobs during the contract period. Program is not statutory but rather at the invitation of the LED Secretary or local governmental entities. 17

Eligible facilities include: Corporate headquarters; distribution facilities; data service centers; research and development operations; digital media and software development centers.

19 Defending Incentives

20 INCENTIVES ARE CONTROVERSIAL BUT NECESSARY The incentive controversy has been around since incentives were created. Sometimes called Corporate Welfare. Critical to defense: Return on Investment for the community. Based on industry type, number of jobs and wages. Often best when provided by a reliable and respected 3 rd party. Should be the but for inducement that allows a project win. Should not be used undermine existing business and industry. Should be performance based when possible and always secured. When approached thoughtfully the use of incentives can gain public trust and support. Establishing and honoring public trust should be the goal of every Economic Development Organization that seeks public dollars for project inducement 19

Should be the but for inducement that allows a project win. Should not be used undermine existing business and industry. Should be performance based when possible and always secured.

21 You can t spin straw into gold. But you can spin a little gold into a lot of gold. Don Pierson 20

22 CONTACT DON PIERSON Senior Director of Business Development Louisiana Economic Development

Economic Incentives. Local Incentives

Economic Incentives. Local Incentives Economic Incentives There are a range of economic incentives available to qualifying new, relocating or expanding companies in the Conroe area. GCEDC Staff will work with you to develop an incentive proposal