Is there more to ED metrics than job creation?

Neal Young, Economic Analysis Director June 10, 2015

How did I get into this question

• • • • How to support business success, even if the company didn’t plan to increase jobs.

Most of our incentive programs required job creation, with clawbacks.

Wanted to find examples of programs that support increased productivity or competitiveness.

Resulted in a non-exhaustive review of ED programs that don’t use job creation as the primary success metric.

What method did I use?

• • • • You! I started with a message to C2ER state economic development contacts.

C2ER incentives database to find some examples.

Agency websites and program information Further follow-up with program contacts for clarification, if needed.

• • •

Kentucky Reinvestment Act

Program Description: Tax credits for companies investing in equipment and skills upgrade training. Alternative Performance Measurement: The company is allowed to establish an employment retention base 85 percent of existing employment.

More information:

www.thinkkentucky.com/kyedc/pdfs/krafactsh eet.pdf

Mississippi Existing Industry Productivity

• • •

Loan Program

Program Description: Loans for manufacturing businesses that have been operating in the state for at least two years. Funding from this program can be used to retain jobs in Mississippi and improve productivity. Alternative Performance Measurement: A business that accepts a loan under this program shall not reduce employment by more than 20 percent.

More information: https://www.mississippi.org/assets/incentives/eib loan.pdf

New York State Manufacturing Assistance Program

• • • Program Description: Loans for capital investment in machinery and equipment. The project may also include Industrial Effectiveness consulting and/or worker skills training. Alternative Performance Measurement: Projects must achieve substantial and measurable improvements to the output, productivity and competitiveness of the manufacturing facility, such as: increased production output, process efficiency, improvements in quality control, new product line, resource conservation, pollution prevention, or cost-reduction or revenue-enhancement measures. Intended outcomes must be quantified and verifiable. Must retain at least 85 percent of its workforce for five years.

More information: esd.ny.gov/BusinessPrograms/MAP.html

Virginia Investment Partnership

• • • • Program Description: Grants are available to manufacturers and R&D that supports manufacturing for capital investments, with no job loss. The amount of each grant is determined by the Virginia Economic Development Partnership on the basis of a project's return on investment to the Commonwealth. Alternative Performance Measurement: No net reduction in employment from the date of the completion of the capital investment until one year from the date of completion. Instead, the application asks whether the project will produce measurable increases in capacity or productivity, decreases in production of flawed product, or advances in knowledge, research or application of research findings for the creation of new or significantly improved products or processes in manufacturing. More information: www.virginiaallies.org/assets/files/incentives/VIPGuidelines.pdf

West Virginia Manufacturing Investment Tax Credit

• • • Program Description: This tax credit is for manufacturers making capital investments for industrial expansion or revitalization. Alternative Performance Measurement: No new job creation is required.

More Information: www.wvcommerce.org/business/businessassista nce/expandingorrelocating/businessassistance/d efault.aspx

Additional Programs That are Inactive

• Louisiana Modernization Tax Credit: Refundable state tax credit for manufacturers making capital investments to modernize or upgrade existing facilities in Louisiana. The company must show that 1) modernization helps improve the entire facility’s or the specific unit’s efficiency by greater than 10 percent or 2) the facility is in competition for capital expenditures within a company’s established, competitive capital budget plan. A third-party validation of the proposed modernization (i.e., engineering company, consultant) must be submitted with the application to show how the modernization will increase efficiency by greater than 10%. The third-party validation is not needed if plant officials can demonstrate that the plant is competing for capital expenditures within a corporate capital expenditure budget.

Additional Programs That are Inactive

• Michigan Economic Growth Authority (MEGA) Retention Tax Credit: offered tax credit for retaining 50 jobs and investing $50,000 per job.

Why is this question relevant today?

• • Job creation goals are difficult in two situations: – When there is little demand for labor (as in recessions) – When there is little supply of labor (workforce shortages) Want to help our businesses be competitive in order to retain existing jobs in the long term, even if they don’t create new jobs.

Thank you!

• Discussion: Do you know of other program examples?

• Feel free to contact me at [email protected]

or 651-259-7196.