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Lawmakers gear up to tackle economic incentive package

MONTGOMERY, Ala. – A sweeping economic incentive package revealed last week saw its first success today in a State Senate committee, with the package’s remaining bills set to be voted on in the coming days.

Dubbed “The Game Plan,” the four-bill package will extend and expand the Alabama Jobs Act and Growing Alabama program, create a new grant program to help fund local site development, carve out additional economic incentives for underserved areas and groups, as well as increase transparency by publicly posting economic incentive data online.

Two of those bills – the transparency and site development grant program bills – saw a favorable report today in the Senate Fiscal Responsibility and Economic Development Committee, with the remaining two bills scheduled for committees on Wednesday.

‘Let’s get out there and win the game’

Greg Canfield, Alabama’s secretary of commerce, told Alabama Daily News that the sweeping economic package was a continuation of the state’s existing economic incentive programs, which, according to the Department of Commerce, generated a record-breaking $10.1 billion in new capital investment in 2022.

The first bill in the package – the Enhancing Economic Progress Act – would renew the existing Alabama Jobs Act and Growing Alabama program through July 31, 2028, as well as expand the allowance cap for both programs.

First passed in 2015, the Alabama Jobs Act offers economic incentives to eligible industrial projects the state is recruiting and currently has an annual cap of $350 million; the Enhancing Economic Progress Act would expand that cap by $25 million annually, reaching $475 million in 2028.

“I think it’s fair to say, anyone on the Economic Development Board would prefer not to operate under a cap, but I think that that’s an unrealistic assumption in today’s world,” Canfield told Alabama Daily News.

“This is a very conservative approach to encumbering against the cap, and we feel it’s more responsible for us and easier for the legislative partners in the House and the Senate to look at this in a stepped manner, $25 million a year, each year for five years.”

The other half of the Enhancing Economic Progress Act is the expansion of Growing Alabama, a program that offers tax credits for improving sites to recruit potential projects that currently has an annual cap of $20 million. Under the bill, that cap would be expanded to $35 million upon becoming law.

“Increasing from $20 million to $35 million is needed because it will allow us to accelerate the amount of developable property that is what we call ‘speed-to-market ready,’ because we compete in the marketplace for projects to locate in our state,” Canfield said. 

“You used to hear it called ‘shovel ready,’ now it’s called speed-to-market ready because companies are more and more interested in getting into site, getting their plant built out, their equipment in and operating, hiring everyone that they need (and) going into operation as quickly as possible. And we want that too, because the quicker they go into operation, the quicker that they begin to generate new revenue flows into our state.”

The Enhancing Economic Progress Act is set to be voted on Wednesday in the House Ways and Means Education Committee, with Rep. Danny Garrett, R-Trussville, the committee chair, sponsoring the bill.

The second portion of the package, the Site Evaluation and Economic Development Strategy Act (SEEDS), would allow the State Industrial Development Authority to issue grants incentivizing and aiding local site development, which Canfield said would be instrumental in the creation of new sites for mid-to-large economic development projects.

“What the SEEDS Act does is it takes what Growing Alabama can’t do – the maintenance program – and is designed to be short term to intermediate term in its approach to being able to primarily add new land into the inventory of available sites,” Canfield said.

A grant matching program, SEEDS would primarily issue two types of grants; assessment grants and development grants. The former would offer funding matches on costs incurred from site assessments – things like engineering work, cost assessments and site planning – whereas the latter would offer grants for actual site development and construction.

The funding for the grant program, which Canfield said has yet to be secured, would be finite, as it’s specifically designed to jumpstart the development of mid-to-large sites on an intermediate basis.

“All of (Alabama’s) success means that we’re taking more properties out of being available because we’re putting projects on them,” Canfield said. 

“So as we continue to do that in an accelerated fashion, we just haven’t seen local economic development entities and partners being able to add property back into the inventory quickly enough, so the SEEDS Act is designed to give us a mechanism to do that through the State Industrial Development Authority.”

Carried by Sen. Arthur Orr, R-Decatur, the SEEDS Act passed Tuesday in the Senate Fiscal Responsibility and Economic Development Committee, though not before being amended.

One provision of the bill stipulates that a site must be “at least 200 contiguous acres” to be eligible under the program. Orr offered to committee members an amendment that reduced that minimum acreage to 75 acres.

“There are a lot of places in our state that may not have large, wide-open swaths of flat land that’s available, and it’s a little bit more hard to find 200 acres that are continuous, so this will help all geographical areas of the state by reducing that amount,” Orr said during the committee meeting.

The amendment, as did the bill itself, passed unanimously.

The third economic incentive bill in the package, referred to as the Innovation Act, will direct grants specifically toward underserved areas and underrepresented groups through the state’s public-private partnership Innovate Alabama.

“Innovate Alabama is going to use the incentive and funding mechanisms that are in the innovation bill to really focus on creating opportunities for early-stage tech companies, minority-owned companies, women-owned, veteran-owned, etc., to really have that early-stage seed capital that they need to begin to form and grow,” Canfield said.

The program will primarily target smaller economic development projects, with one eligibility criteria being that a company requesting funds have fewer than 15 employees and an average gross annual revenue of $1 million or less for the past three years. Eligible companies can be larger, however, depending on their composition, with companies owned and controlled by at least 51% of women or African Americans being eligible with up to 74 employees.

The Innovation Act will first be voted on and reviewed by the House Ways and Means Education Committee Wednesday, with Rep. Anthony Daniels, D-Huntsville, carrying the bill.

The final part of the package would see Alabama’s economic incentive data be shared more publicly, requiring the Commerce Department to publish data on everything from job numbers to average wages related to incentive projects.

“We recognize that we are in a world where there is a lot of opportunity for misjudging how incentives are working and whether or not they’re benefiting our economy,” Canfield said. 

“We’ve got data that certainly proves that these are pay-as-you-go incentives; companies have to make their investment, they have to hire their staff that create Alabama jobs, go into operation, and then they begin to create new revenue flows to the state and the local communities where they’re located.”

Published on the Commerce Department’s website, the data would include the names of all companies receiving state economic incentives, estimations on projects’ capital investment, job creation, average hourly wages, and the projected 10-year and 20-year return on investment, among other things.

“(Economic incentives are) all positive to our economy, and frankly, that’s why the Alabama economy has continued to fare so well during the pandemic and into this screwy economy that we have,” Canfield said. “So we want to continue to build on that, and to do that, the public’s got to trust our program. So we’ve come to the realization that in order to build public trust, we’ve got to share information.”

Sen. Garlan Gudger, R-Cullman, carried the bill Tuesday in the Senate Fiscal Responsibility and Economic Development Committee where it received a favorable report.

Before its passage, however, Gudger introduced what he called a “small” amendment to the bill that he said added additional means for lawmakers to collect economic incentive data. On the amendment’s passage, as well as the original bill, two members voted to abstain; Sens. Merika Coleman, D-Pleasant Grove, and Sam Givhan, R-Huntsville.

Givhan, a real estate attorney heavily involved in economic development projects, cited his job as the reason for his decision to abstain. Coleman later told Alabama Daily News that she voted to abstain as she did not receive adequate time to review the amendment.

All four bills are a priority for legislative leadership and are expected to move through the lawmaking process quickly.

“I think there will be (amendments to the economic incentive bills), but I think they’ll be positive,” Speaker of the House Nathaniel Ledbetter, R-Rainsville, said last week. “I think there’s a piece on tourism that I’m supporting that I think is a very positive part of it.

… I think (the incentive bills are) majorly important, I think it’s put us where we’re at today. We are producing more automobiles, building ships and airplanes, and probably the incentive package is the reason for that.”

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