Survey prelims suggest lack of understanding about incentives

Preliminary results about state government incentive programs to recruit and retain economic development projects reveal opportunities to better inform people about them.

Final results of an unscientific survey undertaken by the Economic Development Corporation of Utah (EDCUtah) and the Salt Lake Chamber about Utah state incentives are pending, but some preliminary results showed a lack of familiarity about some of the incentive programs and a misunderstanding about how grant funds are derived.{mprestriction ids="1,3"}

Theresa Foxley, president and CEO of EDCUtah, said during a December briefing to the Governor’s Office of Economic Development (GOED) board that the preliminary results showed that only 54 percent of chamber member companies surveyed were familiar with Industrial Assistance Fund and Custom-Fit Training incentives, and only 39.6 percent were familiar with Economic Development Tax Incentive Financing, or EDTIF — easily the most-used recruitment/retention incentive that GOED offers.

EDTIF is a post-performance, refundable tax credit for up to 30 percent of new state revenues generated over the life of the project, which typically is 5-10 years.

“And this is concerning,” Foxley said of those results. “Half, essentially, of the Salt Lake Chamber’s members don’t feel like they have a lot of familiarity with our incentives toolbox.”

In a question about how Utah treats incentives, about 40 percent of respondents indicated that Utah provides post-performance tax rebates. However, 10.3 percent said Utah gives away land or property as an incentive, about 6 percent said Utah does not incentivize local companies, and 17.7 percent said Utah provides upfront money to companies considering moving operations into the state.

About two decades ago, Utah moved away from upfront incentives, preferring post-performance incentives instead. That means that companies earn refunds on a portion of the state taxes they paid but receive the refunds only after meeting its incentive obligations, which typically involve creating high-paying jobs.

“So, you see, we have a communications issue here with our key businesses that make up the chamber,” Foxley said of the 17.7 percent figure. And the fact that economic activity by incentivized companies funds the incentives “needs to be part of our messaging,” she said.

On a more-positive note, about 28 percent of respondents said Utah should offer more-competitive incentives, and about the same amount said current incentives should not change. Only 8 percent said Utah should offer no incentives.

Foxley said it was “a little bit surprising” that “more than a plurality say, ‘Keep doing what you’re doing or get even more competitive.’”

As for support for the types of incentives, 54 percent support post-performance tax credits, 59.6 support workforce training credits and 26.5 percent back infrastructure grants. Only 8.5 percent would support upfront cash incentives.

More than 90 percent of respondents support post-performance tax credits or support them in some cases. “So, that’s a pretty good validation for what we’re doing from a post-performance standpoint,” Foxley said.

The final results could help GOED and EDCUtah better understand where to tailor its messaging.

“There’s a lack of communication as to what we do, how it works and how it functions, and the role it plays,” Jerry Oldroyd, board chairman, said of the incentive programs. “We really do need to do a better job of communicating our successes and how it works, how the programs work. That alarms me that there’s that many people who don’t understand what the incentives are.”

Kori Ann Edwards, GOED’s managing director of operations, found it reassuring that while the results indicate that many people don’t understand the incentives programs, they nonetheless want to see them remain in place or even grow.

“So, that also shows me there’s a lot of trust: [an] ‘I may not understand it but it seems like it’s working, so keep it going’ kind of reflection,” she said. “So, I see trust in that. That’s my positive takeaway, I guess.”{/mprestriction}