Economic development approach narrows if bill passes Legislature

Brice Wallace 

A bill hailed as a “narrowing” of the state economic development incentives program is winding its way through the legislative process.

HB35 recently was advanced from the House Economic Development and Workforce Services Committee by a 9-0 vote, then passed in the full House, 50-21. As of the middle of last week, it had been advanced to the full Senate by the Senate Economic Development and Workforce Services Committee with a 4-0 vote.

“This is a targeted, narrowed approach to economic development in the state of Utah that we all believe will have a major impact going forward,” the bill’s sponsor, Rep. Stephen Handy, R-Layton, told the Senate committee.

The bill contains modifications to the state’s main economic development incentive program, called economic development tax increment financing, or EDTIF, which started in the mid-2000s. The EDTIF program allows companies to get a tax credit after they meet certain capital investment or job-creation obligations spelled out in a contract with the state. The incentive is post-performance, meaning the companies must meet those obligations first to be eligible for the credit. Utah does not provide upfront cash incentives for corporate retention and recruitment, and the credit is a percentage of the taxes the company has paid to the state as a result of the project.

The reworking of the EDTIF program spelled out in HB35 is the result of “a massive undertaking” by an interim committee last year, Handy said, and it changes the program’s priorities.

“This has been a massive relook at this,” he said, noting that it has traditionally been used to entice outside companies to put operations in Utah. “The bill encompasses changes that reflect how our economy has evolved and is also focused on rural Utah and provides an opportunity for balanced growth but will also maintain the strongest economy in the country.”

Ben Hart, deputy director of the Governor’s Office of Economic Opportunity (Go Utah) said EDTIF would have a narrowed scope, looking exclusively at targeted industries — advanced manufacturing, life sciences, financial services, technology, and aerospace and defense — and enable the state “to be much more aggressive in helping our rural communities.”

The bill also would enhance the state’s collaboration with local communities on economic opportunities, he said.

“In my mind, this is the best economic development strategy in the country,” Hart told the Senate committee. “It’s how do we work with communities and all join hands and grow together in a coordinated way, instead of just trying to fit in everyone everywhere wherever we can.”

In earlier debate before the House vote, Handy said EDTIF’s focus has been job creation. But the state’s economy has changed, he said.

“These changes that are in the bill will help balance growth but also maintain the strongest economy in the country,” Handy said. “These changes represent a significant change from the existing statute, as it has been significantly more open-entry. These changes represent a significant narrowing and targeting of those who can participate in the EDTIF program along the Wasatch Front but it’s particularly directed to spur growth in our rural counties.”

Acknowledging that EDTIF has had “tremendous success” for Utah, Handy highlighted some of the criteria for the program going forward, including whether an incentivized company is part of an industry “critical to the state’s current and future economy,” is involved in supply chains, re-shores jobs or targets rural counties.

“It is more targeted, it is tighter, it is focused and really directed to this growth specifically in more sections of rural Utah,” he said. “The focus is not so much on attracting businesses to come from other states, but to take existing businesses and help grow them and assist them with what they’re accomplishing in our state of Utah.”

Rep. Keven Stratton, R-Salt Lake City, said he liked the bill’s emphasis on rural Utah, which he described as “one of our pillars” for economic goals. He added that he appreciated the notion of “economic gardening,” or helping existing industries and companies grow.

“I believe there has been a rigorous process to tighten up, to refocus, to reset the EDTIF program … and believe that this will continue to spur the right kind of economic growth in the state of Utah going forward,” Handy said.

The House vote of 50-21 demonstrates that the bill had not garnered consensus. Still, there was little debate. The only dissenter who spoke up was Rep. Kay Christopherson, R-Lehi. He said economic development incentives “maybe at one time they were good for Utah,” but he wondered: “Is this something we should do as a state, to put our finger on the scale for different businesses?”

“I just think it’s time that we look at this and say, ‘Maybe we can end the program.’ … I think it’s time to end it. … We’ve even heard from some of our businesses leaders that it’s time that this program went away,” he said.

Christofferson is sponsoring HB262, which would phase out economic development tax increment financing tax credits. As of the middle of last week, the bill had not yet been heard by a House committee.

The legislative general session ends March 4.