Economic Development Incentive Legislation Proposal

EXECUTIVE SUMMARY

Background

Momentum Mississippi has adopted for implementation the recommendations from BluePrint Mississippi for the state’s economic growth and development

 BluePrint Mississippi utilized a comprehensive input process from business and community leaders throughout the state to develop its recommendations

 Momentum Mississippi is pursuing three specific recommendations ofBluePrint Mississippi to enhance economic development in our state:

• Pursue high value, high growth business opportunities by identifying targeted industries that include a mix of manufacturing and service industries and align incentives to attract targeted industries.
• Improve productivity and profitability of existing businesses
• Increase the development and deployment of new technologies inMississippi

 Momentum Mississippi is proposing certain changes to our economic development incentive legislation that will help accomplish these recommendations.

Intent

 This proposal is based upon four guiding principles

• Balance- achieve balance in pursuing manufacturing vs. high growth, high value business opportunities
  • Call centers, data processing operations, manufacturing distribution operations, corporate headquarters, research and development and high tech enterprises.
• Flexibility-provide flexibility to meet the needs of different targeted industries and every geographic region of the state.
• Growth-incent existing industry growth through investment in new technology and equipment to increase productivity.
• Value-incent industries to provide higher wages and greater levels of investment in Mississippi.

Proposed Amendments to Existing Programs

 Advantage Jobs Program (Cash rebate of employee income tax for new jobs)

• Provide for additional qualification criteria (Percentage of Wage Level, Job Numbers, Capital Investment) in an effort to attract targeted industries.
• Strengthen controls to insure company performance and positive cost/benefit to the state.

(1) Information/data processing operations only.

Current Law

 Jobs Tax Credit Program (Income tax credit for companies)

• Reward both employment numbers and higher payroll levels.
• Replace set dollar amount per new job with a percentage of payroll (taxable wages)
  Current Law Tier I-$500, Tier II-$1000, Tier III-$2000

Proposed Law Tier I-2.5%, Tier II-5.0%, Tier III-10.0%

 MBFC Revenue Bond Debt (RED) Tax Credit Program (Corporate Income Tax Credit)

• Re-authorize and extend repealer for one year.  
• Add Corporate Headquarters (National & Regional), Data / Information Processing, Research & Development Pilot Manufacturing, Research and Development / High Technology to the list of eligible businesses that may qualify 

 Sales/Use and Property Tax Exemption Incentive/Programs

• Modify existing code sections to provide a new category within the definition of manufacturing to include R&D Pilot Manufacturing facilities. 
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    • Sales/Use Tax Rate of 1.5% would apply 
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  • Provide for sales / use tax exemptions for R&D Pilot Manufacturing and Data/Information Processing facilities. (Similar to manufacturing or processing). 
  •  Provide authority for local government units to provide up to a 10-year local property tax exemptions (except school taxes) for R&D Pilot Manufacturing and Data/Information Processing facilities. 

 ACE, CAP, and DIP Bond Programs

• Request $10 Million for ACE Fund, $10 Million for CAP Loan, and $10 Million for DIP Program annually for three years.

 Research & Development / High Technology

• Fund the current program at $10 Million for R&D/High Technology loans at market based rates.

Proposed New Programs for Existing Industry

 Introduce and Establish a Manufacturing Investment Tax Credit Program (State Income Tax).

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    • Credit is 5% of the total new investment after meeting minimum requirements, subject to cap.

 Introduce and Establish an Existing Industry Productivity Loan Program

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    • Request $10 Million
    • Improve company’s productivity and competitiveness
    • Minimum of 1-1 Private/Public Match

Summary

• These changes will make Mississippi more competitive in the Southeast, the fastest growing region of the United States.
• These incentives will allow Mississippi to be more successful in our recruiting effort resulting in greater investment, more and higher paying jobs, enhancement of existing industry, and produce a positive financial benefit to the state’s economy.
• Budget impact will be $50 Million for 2006, $30 Million for 2007 and $30 Million for 2008.
• Adequate controls, oversight and accountability will exist to insure financial integrity.