Brice Wallace
For the second time in the past half-year, state officials are trying to counter misperceptions about Utah’s corporate recruitment incentives.
In November, the Governor’s Office of Economic Opportunity (Go Utah) changed its news releases in an attempt to ensure the public better understands its incentives, specifically tax credits through the Economic Development Tax Increment Financing (EDTIF) and Rural Economic Development Tax Increment Finance (REDTIF) programs. Those news releases now contain no mention of the maximum amount an incentivized company can receive.{mprestriction ids="1,3"}
Including information about the maximum awards had led people to mistakenly believe that those amounts were an upfront cash payment or that every business that receives an EDTIF award gets the maximum amount, Go Utah said at the time.
Now Go Utah is trying to set the record straight about how many companies receive incentives. At the July meeting of the Go Utah board, Go Utah officials discussed the EDTIF “sales funnel” that indicates that “very few” of the companies that make initial inquiries advance all the way through to board approval and a state contract.
“The two critical points I want to make is, one, EDTIF has been critical for building the Utah economy over the last 20 years,” Ben Hart, Go Utah’s deputy director, told the board. “This program has helped both rural and urban in terms of bringing in employers that have a significant multiplier effect. The second point that we really want to underscore with this presentation is that we do not give [incentives to] everybody who asks for a full incentive or any incentive. In fact, most of the time, there is no incentive that’s offered.”
Hart said Go Utah receives 10-15 requests per week for EDTIF information, but that number is whittled down during a process that involves vetting, application, an incentives committee, the Go Utah board, and contracting with the state.
“The number of companies that will sign a contract and the number of companies that will actually complete the tax credit goes to a very, very, very small percentage of the actual companies that ever approach the state,” Hart said.
Dan Hemmert, Go Utah’s executive director, pinned the source of the most recent misperceptions on members of the Go Utah board itself.
“When we hear comments, concerns, out of the board that we feel like can be addressed with more information, we’re trying to respond to it. The sales funnel was this comment,” Hemmert said. “We’d heard a couple of board members make comments about rubberstamping and whatnot, and we just wanted to let you know you’re not rubberstamping stuff. There’s a lot that goes into every incentive proposal that comes before you.”
In November, Go Utah said that its board had granted 237 EDTIF awards since the program was created in 2005, but only 126, or 53 percent, of the companies sought a tax credit by entering into a contract with the state. And of that 126, only 12 reached their maximum credit. On average, incentivized companies have received 34 percent of the maximum tax credit amount, it said.
Steve Neeleman, acting chair at the July meeting, noted that “In medicine, we always say sunlight is the best disinfectant, right?” He said anyone with questions about the state incentives can review the process.
“Just open it up and take a look,” he said. “And oftentimes when people really realize what’s going on, their concerns about secret dealings and all that stuff go away pretty quickly. So if you have questions, board members or anyone on the (meeting telephone) call, [it’s] just I think there’s nothing to hide. We’d be happy to talk about it.”
Neeleman added that Go Utah’s incentive responsibilities include raising the standard of living for Utahns by requiring incentivized companies to meet high-pay and other thresholds. “Maybe companies that aren’t committed to paying people better may have to kind of reshape or go away, go to a different state that’s more compatible,” he said.
During the most recent July-through-June fiscal year, Go Utah awarded incentives to economic development projects expected to generate or retain 20,478 jobs over the next few years. The previous high was 13,364 in fiscal 2020. Other related projections also were record-highs.
Hemmert said that success came during “a super-hot economy” during the past year, “and we should expect a cooling economy which should also weave into less-large expansions and capex (capital expendure) projects by companies.”
“It’s probably getting a little bit tougher, as we look at vetting,” Hart added. “We’re being a little bit more selective on projects. We’ll probably be more and more refined.”
Misperceptions about state incentives have been around for years. Members of the board and staff at Go Utah have said that many people, including state legislators, did not understand that the state incentives were post-performance and instead believed they consisted of upfront cash incentives. This happened when the agency was known as the Governor’s Office of Economic Development (GOED), and earlier when it was part of the Division of Business and Economic Development in the state Department of Community and Economic Development.
Before the EDTIF program was created, the state’s main incentive was the Industrial Assistance Fund (IAF). The IAF was a loan-based program, with loans forgiven if certain job-creation or other milestones were met.{/mprestriction}
