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Firms eyeing Utah — but state has few incentives to offer

Industrial-aid fund is low and not legislative priority

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John Homer can't go to lunch without returning to his office to find a message from another out-of-state business eyeing Utah for expansion.

"I'm sweating. And I've been sweating for about 2 1/2 months because of the pace and the rate we are getting inquiries," said the director of incentive funds for the state Department of Community and Economic Development.

Homer has some $10 million worth of loan applications sitting on his desk from companies that could provide a combined 6,000 new jobs. But it's not the flurry of interest that has him perspiring. It's the fact that he has little more than $2 million in the state's dwindling industrial assistance fund to offer potential employers.

"It's a great problem to have, but without that money, we can't bring those jobs to Utah, " he said.

The Legislature set up the revolving fund in 1991 with a $9 million allocation to provide loans or grants for expanding or relocating companies. Companies' annual payments are forgiven as they meet specific employment goals and earn credits for buying Utah goods and services. The fund is capped at $10 million. Appropriations to the fund since that first year have been considerably less, and some years were zero.

State economic development officials, like administrators in every other government agency, are angling for a chunk of Utah's projected $118 million surplus. Homer figures the fund needs $9 million of that to keep up with the requests. Whether it gets that kind of cash, given lawmakers' conservative approach to incentives, remains to be seen.

"I don't have any idea yet," said Rep. Jeff Alexander, R-Orem, co-chairman of the Legislature's Executive Appropriations Committee, who has asked legislative fiscal analysts for an updated report on the revenue forecast. Alexander said that given education's continuing needs, legislators would have a tough time explaining additional funding for business development.

In a recent report to lawmakers, the Legislative Fiscal Analyst's Office suggests full funding for the incentive program next session might mitigate any economic downturn caused by the completion of I-15 and the financial impact of the 2002 Winter Games. It would also help Utah stay competitive with other states, the report said.

Still, state Sen. Parley Hellewell, R-Orem, chairman of the Senate Business, Labor and Economic Development Committee, also is noncommittal about funding.

"I'd probably have to look into it a little more to answer that," he said. "I guess it would depend on the companies that we have that are interested in coming."

Hellewell said retailers like the Nordstrom moving into the remodeled University Mall in Orem would come anyway. But he's not opposed to incentives for high-paying jobs in clean industries to come to Utah, especially if they chose to locate outside the Wasatch Front.

How or if the state ought to use financial stimulants is a subject of some debate among lawmakers. "That's a matter of opinion from one legislator to another," Alexander said.

The industrial assistance fund is one of seven economic enticements the state allows to lure businesses to Utah, ranking it 49th nationwide in terms of the number of different kinds of incentives it offers, according to a state Division of Business and Economic Development report. Neighboring Idaho ranks last. States adjoining Utah provide an average of nearly 10 incentives, while the national average is about 12.

Homer said that puts the state at a competitive disadvantage.

"Utah is not really dealing with a full deck of cards when it comes to playing the incentive game," Homer said. "It's kind of like an ante. I hate to use poker terms, but that's what it is. Utah has to do something to play in the game."

The Utah Taxpayers Association frequently criticizes the means the state used to woo large retailers, particularly tax increment financing. There is less resistance to incentives for high-tech or manufacturing firms, provided certain criteria are met.

"Utah is clearly not as aggressive as other states," said Greg Fredde, taxpayers association vice president. "Utah is by no means giving away the house."

Fredde said the state must be careful not to offer incentives to out-of-state business that could undermine existing companies. Utah also should go after wealth-creating jobs to obtain a return on its investment and derive a direct tax benefit, he said.

For every dollar invested through the industrial assistance fund, the state receives a $15 benefit, according to the Business and Economic Development division. The fund has fostered 6,647 new jobs and generated some $161 million in tax revenue over the past four years.

That's not bad, but Homer believes Utah could hit a grand slam if it had a heftier financial bat to swing. With $10 million in the fund, he estimates the state could create 20,000 new jobs and increase the work force nearly 2 percent.

"That," said Homer, "is huge."

E-mail: romboy@desnews.com