Incentive fund seen as major recruiting tool

Have you ever been in a knife fight with a toothpick as your only weapon?

That's the analogy Muscle Shoals Mayor David Bradford uses when discussing what it's like trying to recruit industry to the Shoals.

He said Muscle Shoals, as well as most governments in Colbert and Lauderdale counties, are just about tapped out in terms of providing money as incentives in the area's industry recruiting efforts.

So, Bradford has no doubt the Shoals desperately needs a sustainable incentive fund to compete for new jobs. It's something he has felt strongly about and publicly advocated for nearly three years.

The issue was shoved to the front burner last week when economic development officials, at the urging of some area government leaders, asked commissioners in the two counties to raise sales taxes by ¼ to ½ percent.

The timing of the request is tied to a major industry that is looking at coming to the Barton Riverfront Industrial Park in Colbert County. The company would employ at least 1,500 workers and would provide an annual economic impact of $50 million or more, officials say.

To land the project and similar ones in the future, incentives will be critical, officials say. Shoals Economic Development Authority officials have been working with Gov. Bob Riley and state industrial recruiters for about eight months on the project and a decision is expected within a month.

Bradford wonders if the Shoals will be able to fulfill its financial commitment to the project without creating the incentive fund and provide a constant funding mechanism for it.

"I don't know where the money would come from (if the project decides to come to the Shoals)," Bradford said.

"Governments in this area have had to get into reserves, take money from the general fund budget and, in some cases, borrow money to get SCA Tissue, Walgreens Health Initiatives and North American Lighting here.

"We know we're in a very competitive situation with this new project and other sites are ready. This is a good project that would be good for our area. It would be tragic to lose it because our area can't make it happen."

Bradford is not alone in that thinking.

Florence Mayor Bobby Irons is blunt in his thoughts about the project, which he said would place the Shoals "in the major leagues for economic development" if it comes here.

"The establishment of an incentive program will place us in a strong position to be awarded this project," Irons said. "On the other hand, without the incentive, we have zero chance to bring this company here or other large prospects in the future."

Sheffield Mayor Billy Don Anderson said any major business that is worthwhile "is going to command an incentive.''

"(This project) could be the biggest thing since Reynolds or TVA came here, and I'd hate to see us lose out over not having (this tax) passed," Anderson added.

"There is a limit to what (local governments) can do, and we're at a point where we can only do small projects. The fact of the matter is, our coffers aren't big enough for larger projects.''

Some residents have voiced opposition to the proposal.

"We shouldn't have to buy a business to come here; it's prostitution," said Vernon James, a Lauderdale County resident. "It's just something else they want to use to get more out of us. I'm against it."

The Shoals Chamber of Commerce board of directors has adopted a resolution endorsing an incentive fund for economic development, but doesn't like the proposed funding mechanism.

"We feel it is not in the best interest of our chamber members to support a sales tax increase," chamber board chairman Jay Klos said in statement released Friday. He did not elaborate.

Commissioners in the two counties will ultimately decide what happens.

They are being asked to get local legislators to pass a local bill giving the commissions authority to raise the sales tax by up to ½ cent. If the bill passes, commissioners will decide how much to raise the tax to meet the area's obligation for the project, plus help develop other industrial sites and be a player in future projects.

The commissions could be asked to vote on the proposal at their next meetings later this month. If approved, a bill would be prepared and introduced in the legislative session which begins March 6.

A half-cent sales tax in the two counties would generate more than $6 million a year, local government officials estimate. It would be about $3 million if a quarter-cent tax is approved.

For customers, it means another nickel or quarter for every $100 purchase.

"When you raise sales taxes, it's usually felt on big-ticket items," said Ahmad Ijaz, an economic analyst for the Center for Business and Economic Research at the University of Alabama. "Most people don't feel it on every-day purchases.

"No one has seen a decline in sales when sales tax is increased a half-cent or cent. There is a threshold for that increase, of course. You certainly couldn't go up 15 cents without creating an impact."

Ijaz said he is unaware of any city in Alabama using a sales tax increase to fund an economic incentive program. He said having an incentive fund would not land a project by itself.

"Incentives help but they are not everything," he said. "Companies want to know about schools, transportation, highway access, railroad access and other infrastructure. They also want to know about work-force development. If you have all those things in place, then incentives will definitely help."

Several commissioners have stated they want to know more details about the proposal before deciding. Some, however, appear to be in support.

Colbert County Commissioner Troy Woodis said companies looking to relocate a plant or business consider more than location, work force, site and the community.

"They look at everything and the money," Woodis said. "That's just the name of the game. It's big money for every project and every state has different avenues of raising that money. The bottom line is, if we're going to compete, we've got to have an established fund. We'll never be able to compete without it."

Lauderdale County Commissioner D.C. Thornton said there needs to be some kind of accountability for the fund.

"It's necessary to create an economic development fund, but we need to know what it's going to be spent for and how much it will cost us,'' Thornton said.

"Someone has to let the people know (the fund) is not going to be just another hole that the money is going to be put into and never get anything out of it,'' Colbert County Commissioner Emmitt Jimmar said.

Irons said the area cannot achieve the success it wants in job recruitment without economic development incentives.

"State and local incentives are not something we agree with, but it is a way of life in industrial recruiting," Irons said. "Without incentive funding, we are going to continue business as usual and miss the major industrial opportunities that we so badly need."

SEDA officials and local leaders have discussed other options for the funding mechanism, including adding fees to all utility meters in the Shoals, charging a fee for car tags purchased in the two counties or putting on an occupational tax.

Woodis and others say the sales tax appears to be the best option. Bradford said it appears to be "the most inclusive, equitable and sustainable" option discussed.

"To honor our commitment on this project and to get done what we need to in order to plan for future growth, it will take significant money," said Macke Mauldin, chairman of SEDA's board of directors. "Anything we do will be painful, but if we are able to get this project and do the other things we've got to do, we will be able to realize the dream we all have of our children and their friends being able to attend college and then find quality work here at home."

Mauldin said if the area lands the project under consideration there will be an immediate need to create another industrial park large enough to handle another major project. He said sites of 1,500 acres or larger would be needed and the park will need to be prepared with roads, utilities and other infrastructure.

"If we get this fund and put in the accountability measures that we all want, we will actually see a vision that we've only dreamt for our community," Mauldin said.

SEDA Executive Director Forrest Wright said economic development officials in Montgomery have said that establishing an incentive fund would "make our area the most aggressive place in Alabama for economic development and this area is the first place they will send projects that demand aggressive thinking."

As Mauldin, Wright and others point out, there are many details to be hammered out about how money would be spent and what projects would be considered worthy to pursue.

Bradford is among those who insists that a checks-and-balance system is needed as well as guidelines for how money from the fund will be spent.

Irons said he favors a "special depository for the funds to be administered by an oversight committee that would approve all projects and expenditures."

Bradford said he's convinced the fund is doable. He also worries about what might happen -- beyond the current project -- if the area does not create an incentive program.

"If we don't, we'll probably be at a standstill for a long time," Bradford said.

"We can't just keep getting money from our general fund and reserves and still provide the other services we should be providing for our citizens. We won't have the money to develop parks like Shoals Research Airpark. We won't be able to compete nationally or globally.

"To do nothing at all, to me, is not the right thing to do."

Tom Smith can be reached at 740-5757 or tom.smith@timesdaily.com.