Sowing the seeds: state incentives grow local companies.

• Author: Webb, Gaylen
• Position: Small Business - Utah Governor's Office of Economic Development

This is the place--to do business. At least that's the message that the Governor's Office of Economic Development (GOED) is trying to broadcast far and wide. GOED has an aggressive incentive program to help woo businesses to either locate or expand in the Beehive State. From fiscal year 2008 through fiscal year 2010, GOED offered $319 million in financial incentives to businesses.

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With such numbers, one might ask, is Utah spending millions to recruit out-of-state businesses, while neglecting homegrown companies? Not so, says GOED Executive Director Spencer Eccles. In 2009, more than 70 percent of those incentives were offered to Utah companies. In 2008, Utah companies received more than 60 percent of the incentives awarded.

Next question: Are such incentives corporate welfare? Spending $319 million to receive more than $1 billion in new state revenue certainly doesn't smell like corporate welfare. Rather, it smells like a rosy return on investment, especially when one factors in the $2.5 billion in capital investments the incentive awardees will make, and the new jobs they will create--generating state wages of more than $10.2 billion.

A Win-Win

The state's incentive program recently played a key role in keeping life sciences company Nelson Laboratories in the state--and helping it to grow and add jobs.

Jeffery R. Nelson, president and CEO of Nelson Laboratories, learned about the program by chance at a BIO International Convention. When foot traffic was slow at the convention, Nelson sat down to chat with Derek Miller, former deputy director of GOED, and Jeff Edwards, president and CEO of the Economic Development Corporation of Utah (EDCUtah).

At the time, Nelson was contemplating a major expansion of his company. He wasn't, however, looking for a financial incentive from the state. In fact, he didn't even know the state had an incentive program. Miller, who managed GOED's corporate recruitment and incentives program, took some time to explain how incentives can help homegrown businesses like Nelson Labs expand in the Beehive State.

Not long after their chat, the state of Missouri tendered an incentive offer for Nelson's company to expand there. Nonetheless, the initial conversation between Nelson and Miller eventually led to a post-performance tax incentive award from GOED totaling $1,996,000 for Nelson Labs, which currently employs 360 people, to expand in Utah.

"The incentive program feels more like a self-funding job creation and retention system," says Nelson. "On one side, we receive tax relief for creating jobs, and on the other side, the state receives new tax revenue. That looks like a win-win program to me. It's a smart way to grow businesses and actually add to the...