Commerce chief wants to boost investment in Idaho

BOISE - Department of Commerce Director Jeff Sayer wants Idaho to step up its economic development game and approve a new incentive plan for businesses that make "material investments" in the state.

Sayer introduced legislation Friday that would give new or expanding businesses a partial refund on certain tax payments if they create at least 20 new jobs in rural areas or 50 new jobs in urban communities.

The jobs would all have to pay more than the average wage in the county where they're created.

The amount of the refund - called a "tax reimbursement incentive" - would be negotiated on a case-by-case basis, he said. Depending on the type of jobs and the economic effect of the project, the reimbursement could be worth as much as 30 percent of the company's combined sales tax and corporate income tax payments, as well as the personal income tax they withhold from employees' paychecks. The refunds could last for up to 15 years, so long as the company met specific performance targets.

"We feel like Idaho has an opportunity to step forward and be competitive, by putting an incentive package on the table that puts us in the game," Sayer said. "This allows us to attract the industries we want as part of our economy, that are going to pay higher wages and help us move to where the world is going."

In a presentation to the House Revenue and Taxation Committee, he said Idaho's current incentives work well in attracting infrastructure-dependent businesses, but aren't designed for high-tech or professional services firms.

"Our foundational philosophy has been that we won't give money to benefit a private individual or entity," he said. "Because of that, all our incentives are focused on (building public) infrastructure. But the technology, software and professional service firms that are part of the new economy don't need infrastructure. Our incentives right now can't touch those deals."

One of the key attributes of the reimbursement incentive, Sayer said, is that it's self-funding: Companies only receive the refund after they create the jobs and pay the taxes.

The incentive is also scalable, meaning the refund gets bigger if companies create more jobs than initially projected.

"Companies can determine their own destiny," Sayer said. "If they're more successful than anticipated, they get a bigger reward. The responsibility is squarely on their shoulders."

The reimbursement incentive is patterned after a similar plan in Utah, he said, which has helped attract thousands of new jobs over the past several years.

The refund bill includes oversight and reporting provisions as well. For example, the Department of Commerce would negotiate the initial proposal, including the job creation targets and size of the refund. But each deal is subject to approval by the seven-member Economic Advisory Council, which includes representatives from across the state.

Companies that receive the refund would also have to submit annual reports throughout the term of the agreement, as would the department.

"As we've looked at other states that use this tool, they've been very clear that it's been a significant catalyst in moving their economies forward," Sayer said. "This is our highest priority. It's a critical piece of legislation. We think it's a game-changer."

Rep. Lenore Barrett, R-Challis, said she liked the self-funding aspect of the incentive, but she's seen a number of incentive proposals during her 22 years in the Legislature and they haven't all worked as intended.

"What you're telling us sounds pretty good, but then we hear of New York dragging companies in by giving them free taxes for 10 years," she said. "You have states that are smart about this and states that are stupid. Hopefully you'll keep us on the smart side."

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Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.