MONTGOMERY, Alabama — Alabama must redesign the financial incentives that it offers to attract new industry so that it can be more competitive, Gov. Robert Bentley said Wednesday.
Bentley and his commerce secretary, Greg Canfield, said Alabama has relied too much in the past on borrowing through bond issues to provide financial incentives for companies to build plants in Alabama. They are developing a new plan that relies on tax breaks, including cuts in taxes that go toward public education.
They said the tax breaks would apply in the future to plants that have not yet been built, and it will not reduce any tax revenues that currently flow to public education.
"It is not going to do anything to hurt education," Bentley said while attending a convention of the Economic Development Association of Alabama in Montgomery.
The executive director of the state teachers' organization, Henry Mabry of the Alabama Education Association, said he wants to review the governor's bills before commenting.
Rick Davis, senior vice president for economic development at the Birmingham Business Alliance, said the governor is correct that the state's incentives need changing. "We are a state that has lost its competitive edge when it comes to incentives," he said.
He said the governor's focus on jobs rather than capital investment could help the Birmingham area lure high-paying research and development jobs.
Bentley's plan calls for phasing out Alabama's tax credits for money invested in a plant. Currently, companies can recapture the cost of a plant by taking 5 percent of it a year in tax credits for 20 years.
Canfield said feedback from projects that Alabama has lost indicates some consider Alabama's offer worthless and others say it doesn't work for research and development companies that pay big salaries but have little capital investment.
Bentley's administration is working on a six-bill package to present to the Legislature when it convenes March 3. It includes a job-creation tax credit of up to 3 percent of the previous year's wages for 10 years and an investment credit of up to 1.5 percent of the capital investment per year for 10 years. The investment credit would apply to a broader range of job-creation projects than the existing tax credits for capital investment.
The package includes additional tax credits for new industries that locate in rural counties with less than 20,000 people or those that have veterans making up at least 12 percent of their workforce.
Fairhope Mayor Tim Kant said the plan "is a very positive step," particularly in how it could help rural areas, but there aren't many details at this point.
House Speaker Mike Hubbard, R-Auburn, said he and Senate President Pro Tem Del Marsh, R-Anniston, have met with the governor and provided suggestions.
"I am quite certain that legislation to encourage job growth will be included in our legislative agenda when it is announced," Hubbard said.
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