SEPTEMBER 15, 2010, 3:19 P.M. ET
Localities Ramp Up Incentives, Credits To Attract Jobs

By Darrell A. Hughes

Of DOW JONES NEWSWIRES


WASHINGTON (Dow Jones)--Facing high joblessness and lackluster economies, local governments are competing more aggressively with tax breaks and other incentives to lure companies to relocate to their regions.

Economic development incentives put forth by Oklahoma, for example, helped them to convince Boeing Co. (BA) to move an aerospace maintenance division to Oklahoma City from Long Beach, Calif.

Beginning next year, the aircraft manufacturing giant will begin shifting roughly 550 jobs to Oklahoma City. The relocation will begin in the spring of 2011 and is scheduled to conclude by the end of 2012.

"We hope a lot of companies take advantage of these incentive offers," Oklahoma City Mayor Mick Cornett said.

Oklahoma created an incentive package designed to attract what they call "21st century quality jobs." Under their plan, Boeing is eligible to receive cash back, up to 10% of its payroll, for up to 10 years. According to Oklahoma's Commerce Department, this incentive is a first; no other government across the U.S. is offering cash.

Additionally, Boeing would also be eligible to apply for a 10% tax credit, per employee, for hiring an in-state engineering graduate. Those hired from out of state would make the firm eligible for a 5% tax credit.

Aside from having attractive incentives for businesses, Oklahoma is slated to offer a $5,000 tax credit, for up to five years, to engineers hired into the aerospace industry.

Boeing spokesman Forrest Gossett declined to discuss the role incentives played in the company's decision to relocate. "I'm not in the position to determine whether [the incentives] were aggressive or not aggressive," he said.

U.S. Commerce Assistant Secretary for Economic Development John Fernandez said he understands why local governments are offering aggressive incentives in the current economic downturn.

However, he said, the competition isn't just among cities and states, "the competition is (among) regions all around the world."

Fernandez said state and local governments need to focus on creating globally competitive environments that build up the local workforce, improve the roads and other infrastructure and provide support for entrepreneurs.

"The goal isn't to land just one company; the goal is to create an ecosystem where many companies can be born and grow to create jobs," Fernandez said, adding that's a "harder sell sometimes."

Oklahoma City Mayor Cornett and the state's Commerce Secretary Natalie Shirley acknowledged the role of aggressive incentives, but said Oklahoma's incentives were crafted with specific goals in mind. In the past, Oklahoma hadn't provided inducements to attract targeted industries, such the engineering and information technology sectors.

"The incentive packages were developed at the same time as the engineering tax credit, and were very strategic in the sense of driving towards a particular type of job that we wanted to see in the state," Shirley said.

Cornett said that ultimately, companies assess the cost of doing business and whether there is an adequate workforce.

"Once people visit Oklahoma and see it, all questions are answered - but getting that first step in the door is a little bit tricky," Cornett said.

Even so, firms know there are limited projects, and many regions are searching for jobs, said Wayne Gregory, economic development director of Georgetown County in South Carolina.

"You've got to be aggressive with the incentives in order to compete in the marketplace," Gregory said, adding "you've got to pay to play."



-By Darrell A. Hughes, Dow Jones Newswires