Originally created 02/04/01

City calls for better incentives



After years of losing new industry to South Carolina, economic developers in Augusta are calling on lawmakers to strengthen the state's tax incentive program.

The Augusta Metro Chamber of Commerce intends to have legislators introduce its proposed "Rural Georgia Jobs Development Act," a plan that would allow new or expanding companies to recover up to 50 percent of their start-up costs through tax breaks.

Georgia cities, particularly those outside metro Atlanta, can no longer compete with South Carolina, Alabama and other states that have more attractive incentives packages, said Augusta Metro Chamber President Jim West.

"Atlanta has come to represent how things are going in Georgia," Mr. West said of the capital city's booming high-tech industry. "But things are not so good in the second-tier cities."

Augusta officials said the city has lost nearly $1 billion in new capital investment to other states during the past four years.

Recently, the city lost its bid for VF Corp.'s $25 million apparel distribution center to South Carolina's Edgefield County.

South Carolina, whose program of tax breaks is among the nation's most generous, beat Georgia's incentives by more than $4 million.

"When you get down to the nitty-gritty, incentives are the deciding factor on many of these deals," said Kevin Shea, the chamber's senior vice president of economic development.

Chamber officials also acknowledged that weak incentives cost the city a $600 million optical fiber plant that would have created 800 jobs.

New York-based Corning Inc., the world's largest fiber optics manufacturer, was seriously considering locating its 200,000-square-foot plant in Augusta until state and local officials in Oklahoma City ponied up more than $100 million in incentives over 10 years.

"I don't know the exact Georgia numbers, but it was much, much less," said Jim Lothian, a site selection consultant for Deloitte Touche Tohmatsu, Corning's adviser on the project.

The chamber's proposal would create the first major change to Georgia's economic development program since the 1994 adoption of the state Business Expansion and Support Act, which allowed companies to deduct a certain per-worker amount ($2,500 in Richmond County) from taxable corporate earnings.

But Mr. West's proposal calls for the creation of a "cash-back" incentive program, a form of tax break pioneered in Kentucky (where Mr. West worked in economic development for more than a decade) and adopted by several states, including South Carolina.

The cash-back program would allow new or expanding nonretail companies to recover up to 50 percent of start-up costs by deducting the amount from their state income and payroll tax bills during a 10-year period.

"This isn't a `cash on the table deal,"' said Mr. West, referring to more controversial incentives, such as the $40 million cash payment Alabama offered to Mercedes-Benz several years ago. "With this, companies have to make an investment before they get something in return."

Although Georgia's existing job tax credit has been adjusted several times during the past several years, many economic developers consider it to be ineffective.

That's because most new industry has little, if any, corporate income from which to deduct during the start-up years.

"If there is no income, there's no tax. So how do you get the credit?" Mr. Lothian asks.

Georgia's other economic development tools, such as QuickStart, which lets companies have free or reduced-cost worker training programs through state technical colleges, are now commonplace in other states.

Mr. West said he hopes to have members of the local delegation introduce the legislation this year, although he said the measure would probably not come up for a vote until the 2002 legislative session.

Approval of the plan hinges on its ability to pass constitutional muster. Georgia's economic development package has always been limited by constitutional provisions - many other states do not have such constitutional restrictions.

Also, Augusta and the other second-tier cities would have to convince the Atlanta power structure that the state should loosen taxation to attract new industry in outlying areas.

It could be a tough sell, local legislators say.

"Where does half of the population of Georgia live?" asked Sen. Don Cheeks, D-Augusta.

The Augusta chamber plans to meet this month with members of the Georgia Department of Industry, Trade and Tourism, the state's top economic development agency, in the hopes of bringing them on board.

Officials say such consensus building is necessary to sway Gov. Roy Barnes, who has been hesitant to boost the state's economic development incentives.

Industry, Trade and Tourism officials said they are interested in examining the chamber's plan.

"The bottom line is to talk about incentives in general," said Stan Holm, the department's executive director of programs. "If there's a lot of merit to the plan, we'll find out where we go from there."

Reach Damon Cline at (706) 823-3486 or bized@augustachronicle.com.



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