Corporation Courtship 

Utah's Office of Economic Development is in the business of luring big business to Utah

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From Utah's growing technology sector in Utah County to banking behemoths setting up shop on Main Street in Salt Lake City, Utah is luring big business to the state.

Government officials cite myriad reasons for the influx, like the state's rapidly growing population and workforce, its low unemployment rate, relaxed regulatory environment and stable corporate tax rate.

But one arm of state government can directly trace its influence in luring new businesses, and the jobs and taxes they bring, to Zion: the Governor's Office of Economic Development (GOED), which at its Sept. 11 meeting issued more than $1.5 million in corporate tax incentives to two corporations looking to set up shop in Utah.

In 2013, the GOED board, made up of lobbyists, attorneys and assorted titans of business, offered $171 million in corporate tax breaks to lure big businesses to Utah.

During the September meeting, the board offered a $1.4 million tax incentive to Viracon, a glass-window manufacturer, and $113,447 to Oemeta, a German chemical company.

Monte Mitchell, senior vice president of administration for Viracon, said his company had received incentive offers from Georgia and from Minnesota, where the company is headquartered. But Utah's offer was too good to pass up.

"It was the deciding factor," Mitchell says, noting that the company intends to reopen the St. George factory it shuttered during the recession instead of opening new plants in other states. "The incentive tipped the scale toward choosing Utah."

The type of incentives offered by GOED, says board member Jerry Oldroyd, are corporate tax rebates that a company receives only after it has paid its bushels of taxes to the state. GOED typically issues rebates that stretch for 10-year terms and account for around 20 percent of the estimated new tax revenue the state would receive if the company comes to Utah.

Sometimes, though, the incentives are for a higher percentage. In 2009, investment bank Goldman Sachs received a $47.3 million tax incentive, which represents an estimated 30 percent of the taxes it would pay to the state over 20 years.

In the case of Viracon, the company pledged to bring 300 new jobs to Washington County while paying just over $7 million in corporate income taxes over 10 years. As this revenue materializes and taxes begin flowing to the state, the company will be able to apply for rebates over the course of its deal with GOED that would give it back up to $1.4 million.

"The whole purpose of this was to stimulate the economy," Oldroyd says of GOED's mission. "It's critical that we continue to grow new state revenue, and that's measured by jobs. It's a revenue-generating incentive."

Because the incentives are tied to the jobs they create and tax revenues that might not otherwise flow to the state, Michael Sullivan, GOED's communication director, says the bait offered to companies shouldn't be considered "corporate welfare."

And Sullivan, an impassioned champion of GOED's process, says he's confident that tech companies like Adobe, which received $40.2 million in tax incentives, and BioFire would not be in Utah if it weren't for the corporate tax breaks they received.

"That building at the point of the mountain literally wouldn't be here if not for the people in this office," Sullivan says.

The $171 million in incentives given to businesses in 2013, according to GOED's figures, are a drop in the bucket compared to the overall economic impacts of having these companies put down roots in Utah. Sullivan says an estimated 9,289 jobs will be created by the businesses that received incentives in 2013, while $6.4 billion will be paid out in new wages and $830 million in new taxes will flow to the state.

The incentives are also given to Utah companies. Sullivan says 60 percent of the companies receiving tax incentives are existing businesses looking to grow their operations here.

One key factor that plays into whether GOED offers incentives to a company, though, is whether there is competition from other states. This competitive component can preclude smaller Utah businesses.

As the economy rebounded in recent years, the competitive dynamic of the incentives has grown.

Oldroyd says some states offer to build new buildings for the companies in addition to offering tax incentives.

Some states lure businesses through cash payments, or through means that could put taxpayers at risk. One recent example of this is a deal hammered out between automaker Tesla and the state of Nevada. In addition to more than $1 billion in tax incentives, Nevada will give the company discounted electricity, which will be subsidized by Nevada ratepayers.

"It's a very, very competitive process," Oldroyd says. "States all over the country are providing incentives to lure business. It's really unfortunate, but it's become a very competitive business."

Occasionally, though, GOED does offer some cash. In March, GOED gave Houweling Nurseries Oxnard Inc., which was looking to settle in Juab County, a $500,000 grant to offset water line and well infrastructure costs and another $300,000 for training its employees. This was in addition to a $4.6 million tax incentive.

Although many of the large incentives GOED offers impact companies looking to locate along the Wasatch Front, it has ventured into rural Utah, as well.

A recent example occurred in June 2013, when the GOED board voted unanimously to give $12.7 million in tax incentives to Emery Refining LLC, which hopes to open an oil refinery a few miles away from the Green River. The scale of the operation and its possible tax revenues, as estimated by GOED, are large. Over the course of 12 years, GOED says, the refinery, near the city of Green River, could create $63.6 million in new revenue to the state and provide 125 jobs.

Emery Refining, owned by a London financial firm and a Houston investment bank, has sought air-quality permits from the state. The GOED incentive for Emery, Sullivan explains, is predicated on the refinery receiving all of the required permits and commencing construction. He said the purpose of approving the incentive in 2013 was to endorse the company, with hopes that the federal government would see that Utah was in favor of the project.

Anne Mariah Tapp, staff attorney for the Grand Canyon Trust, says incentivizing this type of industry on the bank of the Green River, within shouting distance of the Colorado River and Arches and Canyonlands National Parks, could have impacts on southeastern Utah's booming tourism and recreational economies, which are not finite like the Uintah Basin tar sands that the refinery will process.

"My hope is that the state understands and prioritizes its environmental resources, which are also financial resources for the state, that could be permanent rather than looking to subsidize industries that threaten both the region's and the United States' treasures," she says.

Since its founding in 2006, GOED hasn't been looked over by state auditors. However, the state auditor is expected to release an audit on GOED in October. Neither Sullivan, nor a spokesman with the auditor, would comment on the audit.

"We're under injunction not to speak," Sullivan says. "We'd love to, but we can't."

Editor's Note: This story has been changed from the print version to reflect that 60 percent of businesses receiving corporate income tax breaks are already Utah companies.
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