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Proposal revamps business incentives

Proposal revamps business incentives

September 19th, 2011 by DAVID A. LIEB, Associated Press in News

Easier money. More of it. And without the wait.

A proposed overhaul of Missouri's job-creation incentives could make it easier for many businesses to qualify for state incentives. Some also could receive more aid than under Missouri's existing programs. And for a lucky few, the new program could be like winning the lottery - they could choose to take the cash up front, instead of getting incremental payments over the coming years.

The proposal is called Compete Missouri. It's backed by Democratic Gov. Jay Nixon and passed the Missouri Senate last week on a bipartisan vote.

But it faces an uncertain future in the Missouri House as a special legislative session continues this week. Republican House leaders are skeptical about scrapping Missouri's current way of doing things and giving Nixon's administration greater flexibility over the state's business enticements.

The Compete Missouri proposal may comprise the most substantive change in the 174-page bill passed by the Senate, but it has largely been overshadowed by a debate over proposed tax incentives intended to transform Lambert-St. Louis International Airport into an international cargo hub.

Senators stripped from the bill $300 million of the original $360 million of tax credits earmarked for the so-called Aerotropolis. But an analysis by the Department of Economic Development shows that the same warehouses and manufacturing facilities targeted by the stricken Aerotropolis tax break may be able to receive just as much money - and perhaps even more - under the Compete Missouri proposal that remains in the legislation.

Officially, state economic development director David Kerr supports all parts of the legislative package equally. Besides Compete Missouri and the air export tax credits, Kerr says Missouri stands to benefit in the long run from proposed incentives for computer data centers and science and technology companies.

"I believe Compete Missouri is the one part of this package that gives us the tools that will help us create and grow jobs immediately," Kerr said.

House leaders seem inclined to delete Compete Missouri.

The legislation "is basically getting rid of all the programs that have been set up over the last couple decades in the state, rolling them all into one giant package, and handing that package to the governor in the form of Compete Missouri and giving him a blank checkbook to do whatever he wants for economic development in this state," said House Majority Leader Tim Jones, R-Eureka..

"I think that's the largest piece of central planning and expansion of government that I have ever seen, and I'm a little shocked that some of the folks who were filibustering earlier in the week in the Senate simply sat down and let that bill go through," Jones added.

The Compete Missouri proposal would end six existing business development incentives and three job-training programs and replace them with a single program using a standard set of definitions to offer a variety of incentives.

Compete Missouri is largely modeled on the existing Quality Jobs program, which was created six years ago. Its incentives would be based on the number of jobs a business adds or retains. Like under Quality Jobs, a business would have to cover at least half the premium of its employees' health insurance policies and pay them a decent wage.

But that's where the details begin to diverge.

Under Quality Jobs, businesses must pay their employees a wage at least equal to the average in that county or the state, whichever is less. To qualify for the maximum amount of state incentives under Quality Jobs, businesses might have to pay wages equal to 140 percent of the average salary.

Under Compete Missouri, the required wage to qualify would be lowered to 90 percent of the county or state average. Kerr said that change was proposed because Missouri is missing out on too many companies, particularly outside the metropolitan areas, whose wages are just a tad below average.

Compete Missouri also would be more readily available to smaller businesses. To qualify, most businesses would have to create at least 20 new jobs while those in "targeted industries" would need to add just 10 jobs. The department's targeted industries list is fairly broad, covering "advanced manufacturing," "energy solutions," "biosciences," "health sciences and services," "information technology," "financial and professional services" and "transportation and logistics."

Quality Jobs sets an eligibility threshold of 10 jobs only for "technology" businesses, 20 jobs for other businesses in rural areas and 40 jobs elsewhere.

The maximum incentives available to businesses also would be higher under Compete Missouri than Quality Jobs, though Kerr notes many businesses currently receive a bundle of tax breaks from the state's various programs that could be comparable in total value to Compete Missouri.

The difficulty, he said, is that some of Missouri's current programs are so complicated and outdated that they have lower participation rates.

Compete Missouri also would give the department a new alternative to provide upfront cash to businesses, instead of the normal five-year stream of incentives that starts flowing only after they have hired employees. That option would be contingent upon legislators placing money in the annual budget for that purpose.

The total amount of money available for Compete Missouri tax credits would gradually rise from $111 million this year to $141 million in the 2014 fiscal year and thereafter. That's roughly equal to the $143 million annual cap from five of the existing programs targeted for elimination.

Whereas Missouri has not come close to reaching its current tax credit caps, economic development officials believe the revamped program will prove more popular.

Compete Missouri also contains a new requirement that was essential to its passage in the Senate. It prohibits any incentives if their cost to the state is projected to exceed the net tax revenues the state would receive over 10 years as a result of the business project.

Because of those taxpayer protections, state Sen. Jason Crowell, R-Cape Girardeau, dismisses the concerns of House leaders about granting too much discretion to the governor's economic development officials.

After the bill was revamped in the Senate, Crowell changed from critic to supporter. As the bill now stands, "I think we're in a position to where this is a net positive to the taxpayers," he said.

David A. Lieb has covered government and politics for The Associated Press since 1995.