Term
| Local Economic Development Process (Stage 1) |
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Definition
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Term
| Local Economic Development Process (Stage 2) |
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Definition
Product
- Sites
- Buildings
- Parks |
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Term
| Local Economic Development Process (Stage 3) |
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Definition
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Term
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Definition
• South Carolina Department of Commerce
• County Developer and Staff
• County / Regional Allies
o Railroads
o Utilities
o Educational Institutions
• Universities, Community Colleges
• Very Important to Process
• County Council and Staff |
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Term
| Marketing Role in the Site Selection Process |
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Definition
• Business Recruitment / Marketing Efforts
• Initial contact with company
• Preliminary information and proposal sent out
• May Schedule a Visit
o To create interest to sell (create wealth)
o Professor’s Job (Marketing a 9 county region)
o Ex. How Whole Foods found old Kroger spot |
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Term
| Where Do Projects Originate? |
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Definition
- Site Consultants
- SCDOC (South Carolina Department of Commerce)
- New Companies
- Existing Industry (Continue to Re-Invest) (Work closely with these companies) |
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Term
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Definition
• Advertising
• Direct Mail
• Trade Shows
• Editorial Placement
• Website
• Video
• Collateral Materials
• Investment Missions
o Domestic/International |
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Term
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Definition
• Site Consultant Outbound Trips
• Site Consultant Inbound FAM Tours
• Outdoor Ads
• Airport Kiosks
• E-Newsletter
• E-Building Blasts
• Promotional Items
• Media Releases
• Special Events |
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Term
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Definition
• Who Participates?
• When to go?
• Where and Why?
o Board Members
o SCDOC
o Local Developers
o Elected Officials
o Investors
o Utilities
o Other Allies |
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Term
| Some New Marketing Initiatives |
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Definition
• E-Building Blasts
o One page HTML flyer sent to a targeted list of nearly 300 consultants and real estate executives
• FAM Tours
• Lead Generation
• Boeing Suppliers
o Same Goal: How to differentiate what we have to offer from other communities |
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Term
Role of Incentives in Site Selections
- Incentives are important if and when |
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Definition
i. They impact the prospect’s decision
ii. Differentiate one location from another
iii. Increase in importance as the decision process proceeds and the list of potential sites narrow |
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Term
| Role of Incentives in Site Selections |
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Definition
- Companies do not relocate or expand as a result of incentives
- Our incentives are generally performance-based and reward growth and profitability
- All deals are subject to the scrutiny of cost/ benefit analysis |
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Term
Role of Incentives in Site Selections
- Examples of Some Incentives Used |
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Definition
• *Corporate Welfare*
• FILOT (Fee In Lieu Of Tax)
• Property Taxes
• All depends on cost of operation
• Incentives in SC are performance based |
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Term
Tax Structure and Business Incentives
- Three Business Taxes |
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Definition
• Corporate Income Tax- State
• Sales and Use Tax- State/Local
o Local Option Sales Tax- concept is to reinvest in community to create more revenue in the future
• Property Tax- Local |
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Term
Tax Structure and Business Incentives
-Performance-Based Incentives |
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Definition
• Jobs and Capital Investment
• Economic Designation of Country
o Incentives will carry more value in poorer communities than in wealthy communities |
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Term
Tax Structure and Business Incentives
- County |
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Definition
• 5-Year Abatement
• Fee-In-Lieu of Tax
• Special Source Revenue
• Credits/Bonds (SSRC)
• Multi-County Industrial Parks (MCIP)
o Two counties partner to create industrial park and concept is that they don’t have to pay anyone else like schools |
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Term
Tax Structure and Business Incentives
- State |
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Definition
• Sales Tax Exemptions
• Investment Tax Credit
• Job Tax Credits (JTC)
• Job Development Credits (JDC)
• ReadySC- state training program
• Grants |
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Term
Tax Structure and Business Incentives
- Others |
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Definition
• Franchise Fee Credits
• Grants |
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Term
Local Property Tax Incentives
- Companies can work to reduce local property tax liability in two ways: |
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Definition
1) 5-Year Property Tax Abatement
2) Fee-In-Lieu of Property Tax Agreement |
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Term
Local Property Tax Incentives
1) 5-Year Property Tax Abatement |
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Definition
• Applies to:
Manufacturers
R&D
Corporate HQs, Office Facilities, Distribution Facilities
• Low Investment Requirement
$50,000 Threshold
75 Employee Job Threshold on Office and Distribution Projects
• Creates Valuable Savings
Abates County’s Operating Millage for the first 5 of operations
Generally 20-25% Savings |
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Term
Local Property Tax Incentives
2) Fee-In-Lieu of Property Tax Agreement |
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Definition
• Offered at discretion of local governments
• Creates valuable savings for company
Property Tax reduction of up to 60%
Assessment Rate as low as 6%, even 4% with large projects
• Greater financial control
Can negotiate locked or 5-yr adjustable millage rates
20-30 year agreements |
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Term
Local Property Tax & Exemptions
- Property Tax Liability
-Tax Formula |
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Definition
- Property Tax Liability is a functions of value, depreciation, assessment and millage rate.
o Tax= (FMV- Depreciation) * AR * MR
• Manufacturing- 10.5%
• Commercial- 6%
• Residential- 4%
• Personal Property- 10.5% |
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Term
Local Property Tax & Exemptions
-Exemptions |
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Definition
Exemptions Include:
- Inventories
- Intangibles (stocks, dividends, etc)
- Pollution Control Equipment
- Property within a MCIP and or FILOT |
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Term
| FILOT Investment Thresholds |
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Definition
- Generally, a company must invest at least $2.5 Million in a new real & personal property to qualify for FILOT treatment - Investments in excess of $45 Million may allow for equalized payment option
- Generally, any property that was previously on the tax rolls is not eligible for FILOT treatment |
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Term
| Special Source Revenue Credits/Bonds |
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Definition
- Use of credits is certainly more prevalent than bonds
- Can be used only in conjunction with a FILOT or MCIP
- Allow the county to finance “infrastructure” which includes improved and unimproved real property
- Payable solely from the proceeds of the Fee
- SC Code 4-29-68 |
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Term
| Multi-County Industrial Parks |
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Definition
- SC Code 4-1-170
- Can be established between two or more counties pursuant to an ordinance
- The park area is exempt from ad valorem property tax and, instead, becomes fee income
- The fee is equal to what property tax would have been
- Revenue Split
- Additional $1,000 Job Tax Credit |
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Term
State and Local Sales Tax
- In addition to maintaining a low sales tax rate, South Carolina offers a number of sales tax exemptions for manufacturing including: |
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Definition
- Manufacturing production machinery and applicable repair parts
- Manufacturing materials that become an integral part of the finished product
- Industrial electricity and other fuels used in manufacturing tangible personal property
- Research and developmental equipment
- Manufacturers air, water and noise pollution control equipment
- Material handling equipment for manufacturing projects investing $35 million or more
- Packaging Materials
- Long distance telecommunication services, including 800 services |
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Term
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Definition
- Taxed only on income derived from business done in state
- Rate is 5% |
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Term
| Job Tax Credits (against corporate income tax) |
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Definition
- Dollar for dollar credit against state corporate income tax liability
- 10 new full-time jobs
- $1,500 to $8,000 credit per job per year
- Higher job creation thresholds for service and tourism jobs
- 5 year credit
- Limited to 50% of liability
- 15 year carry forward
- Multi-County Park designation = $1,000 more |
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Term
| Economic Impact Zone Investment Tax Credit |
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Definition
• For Investment in NEW Production Machinery Only
• 1% to 5% Credit against Corporate Income Tax (One Time Credit)
• Based on Useful Life of Equipment
• 10- year carry forward
• Not limited to 50% liability
• Credit Limited to $5 Million |
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Term
| Other State Income Tax Credits |
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Definition
• Corporate Headquarters Credit
• Infrastructure Construction Credit
• R and D Credit
• Port Volume Increase Credit
• Credit for Childcare programs
• Minority Business Credit
• Quality Improvement Program Credits |
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Term
| The Enterprise Program Job Development Credit-Actually, two incentives- both quarterly refunds of state payroll tax withholdings. What are they? |
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Definition
| - Retraining Credit - Job Development Credit o Companies can receive both incentives, but not on the same employees |
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Term
The Enterprise Program Job Development Program
- Retraining Credit |
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Definition
• No “project” or job creation requirement
• Requires approval of local Tech college and Coordinating Council
• Benefit begins immediately and lasts 5 years
• Partially reimburses training costs for existing eligible employees
• Employer must match credit
• $500 annual coat exceeding $? over 4 years |
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Term
The Enterprise Program Job Development Program
- Job Development Credit |
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Definition
• Requires job creation and capital investment “project”
• Must qualify for the Jobs Tax Credit
• Discretionary
• And requires Coordinating Council approval
• Time delayed and performance based
• Reimburses certain project costs |
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Term
| Job Development Credit Value |
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Definition
• Maximum value ranges from 2% to 5% of payroll
• Actual (allowable) value based on county classification (ranges from 55% to 100%)
• Credit is not available for those employees making less than the County per capita average
• Total refunds capped at eligible expenditures
• Varies based on number of jobs maintained |
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Term
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Definition
• Real Estate (site/building acquisition and improvement)
• Build-to-suit leases on new construction
• Utility and transportation system upgrades
• Training costs (not covered by CATT)
• Manufacturing pollution control equipment |
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Term
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Definition
• May be the most significant incentive in our bag
• Provides recruitment, screening, testing, and training
• Provides for training materials, instructors, and training location
• Training is conducted to the standards and requirements of the company
• Followed up in most cases by OJT
• No cost
• When its time to expand, lets do it again |
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Term
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Definition
o Set-aside
o RIF Grants
o CDBG (Community Development Block Grant)
o Closing Fund |
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Term
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Definition
o Franchise Fee Credits
o Outright Grants |
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Term
| Use of Funds, Conditions, Etc. |
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Definition
• Roads, Water, Sewer, Site Prep
• Competitive Project
• Performance Agreements
• Generally administered through the County
• Budget Estimates, Application, Maps, Source and Use of Funds, Timeframe
• Closeout and auditing |
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Term
| Trends in Public Incentive Agreements |
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Definition
• Local governments must become smarter and more prudent when negotiating incentives
• Without an enforceable agreement, an incentive is nothing more that a gift and not part of a quid pro quo exchange |
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Term
Trends in Public Incentive Agreements
- A “good” agreement contains: |
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Definition
- Valuation of public cost and benefits
- Performance standards
- Disclosure and oversight
- Enforcement |
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Term
Trends in Public Incentive Agreements
- Companies must be willing to: |
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Definition
- Commit to jobs and investment
- Treat local government as any other contracting party
- Expect consequences for breaching agreement |
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Term
| Setting Performance Standards |
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Definition
- The public goals of the incentive must be explicitly stated in order to evaluate he extent to which the company in complying with the inducement terms
- Cannot be vague here. Absolutely necessary to have a written agreement representing the complete understanding between the parties |
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Term
Setting Performance Standards
- Performance standards typically make incentives conditional on: |
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Definition
- Number of jobs created
- Type of jobs created
- Quality of jobs created
- Job retention
- Capital investment threshold
- Stay-in-place provisions
- Defined investment period |
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Term
| Valuing Public Costs and Benefits |
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Definition
- Local governments must have a solid understanding of the value of expected public benefits and the real public costs associated with the deal
- Not interested in measuring indirect costs/benefits nor using multipliers. Model must be defensible |
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Term
Valuing Public Costs and Benefits
- Fiscal Impact Analysis measuring the present value of public costs and benefits of: |
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Definition
- Construction
- Operations
- Off-Site Employee Impacts
- Visitors |
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