As the Alabama Legislature enters its third week of the 2015 session, three of the five bills economic developers have dubbed the “Made in Alabama Incentives Package” have been introduced and passed by the House of Representatives.

Those bills are:

HB58 “Alabama Jobs Act”

Establishes a jobs credit (annual cash rebate up to 3 percent of the previous year’s gross payroll for 10 years for new businesses) and an investment credit (up to 1.5 percent of qualified capital investment expenses for 10 years, with potential to carry forward five years).

HB57 “Alabama Veterans and Rural Jobs Act”

Extends additional job and investment credit incentives to companies that create at least 25 jobs in rural counties and gives an additional job credit incentive to any company with at least 12 percent of its workforce made up of military veterans (for rural and non-rural counties).

HB59 “Alabama Reinvestment and Abatements Act”

Extends non-educational property tax abatements from 10 to 20 years on qualified projects and offers abatements and exemptions for projects that invest at least $2 million to renovate, upgrade or expand an existing facility.

Those bills were among the first introduced in the first week of this year’s session. They are scheduled to be considered by the Senate’s Fiscal Responsibility and Economic Development Committee on Wednesday, March 18.

Yet to be introduced are bills that would provide tax credits for investments in startup companies in the state (the Alabama Early Stage Investment Act sponsored by Rep. Ken Johnson) and tax credits for companies that conduct research and development in conjunction with certain research institutions already here (Alabama Innovation Act sponsored by Rep. Phil Williams).

Photo courtesy of www.madeinalabama.com.

Officials said all five bills are necessary to make Alabama competitive again, as other Southeastern states have modernized their incentives.

“Other states have become aggressive and have passed us on incentives design,” Alabama Commerce Secretary Greg Canfield told state economic developers when he unveiled the new incentives plan. “We’re not asking for more money, we’re asking for better incentives design.”

Moreover, the method of offering incentives would be better for the state, the architects of the new incentives said.

Bing Edwards, a partner with Balch & Bingham in Birmingham, said the capital credit that was once an attractive centerpiece of Alabama’s statutory incentives is now generally perceived as having little actual worth to a company. Edwards said the fact the state now has to borrow against other funding sources to offer cash for incentives beyond the statutory incentives is also a disadvantage for Alabama.

“We need a pay-as-you-go system that makes economic sense and can be deployed when we are in a competitive situation with other states,” Edwards said. “Our incentives are not rewarding jobs, and jobs are what we want.”

This HS Automotive Alabama Inc. groundbreaking happened in 2013. The Tier I company is an automotive supplier for Hyundai in Montgomery County. Photo courtesy of www.madeinalabama.com.

Rick Davis, lead economic developer with the Birmingham Business Alliance, was among the members of a BBA delegation that visited the Legislature last week to, among other things, get an update on the incentives legislation.

He said he has seen firsthand how the once-great capital tax credit the state offers has become inconsequential to companies Alabama is trying to recruit.

“I’ve watched site consultants take a red pen and mark through the capital credit when we present it as part of our incentives package,” Davis said. “They see it as a phantom incentive that will not have real value.”

Davis said he shares the hope of other economic developers in the state that Alabama will finally have incentives that companies will find valuable when it comes to recruiting and expanding industry.

“It’s going to give us tools we’ve never had before,” he said. “We think this can be a real game changer for the state.”