Secretariat

U.S. State programs for new investments:

Summary

In examining investment programs in the U.S., the report looks at the programs in place in ten key states: Alabama, South Carolina, Georgia, Mississippi, Tennessee, Kentucky, Ohio, Michigan, Indiana and North Carolina. Although their official investment programs focus on two key areas - taxes and employee training - the packages offered go far beyond these two key areas. Consequently, the report is divided into three sections. The first section examines the official published investment programs offered to companies in the ten states. The second section identifies recent automotive investments in the region and the actual investment packages the companies were granted. Finally, the third section examines in great detail and in-depth the investment programs, or economic and industrial development programs, offered in Georgia.

The first section provides an overview of the official published investment programs offered in the ten identified U.S. states. However, in many instances these official investment programs are only a starting point in preparing a package for a specific investment opportunity. The actual or offered programs and the sizes of these programs may differ somewhat from the published programs as a result of discussions/negotiations between governments and the investors.

While the official published programs vary from state to state, many of the programs have common characteristics. The tax programs tend to focus on job creation by offering direct tax breaks for each newly hired employee and by offering indirect tax breaks for increasing use of existing state services such as seaport or rail service. The goal is to increase employment directly through the investment or indirectly through increased demand for existing services, thereby creating new employment opportunities at these service providers. In terms of human resources programs, almost all states offer full and free services for employee selection, hiring, and training. The training programs tend to assist investors with training new employees as well as training existing employees for new responsibilities. The finance programs are structure to offer financing to both local governments and the investors. The state issues Industrial Development Revenue Bonds in order to provide local governments with funds for infrastructure investments (water, sewer, power, road, etc) required to attract investment projects. In addition, the state can also use the proceeds from these bonds to provide investors with low-interest financing for purchase and construction of real property, machinery, and equipment.

The second section is a list compiling major automotive industry investments in key U.S. states over the last 20 years. The list identifies the amounts and types of programs offered to companies by state and local governments.

The information collected for this compilation is not readily available or verifiable in some instances because governments and companies rarely publish official package breakdowns; hence, the majority of data was collected from the media. Since this list was composed from various secondary sources, the actual package amounts may vary.

It is interesting to note that in the 1980s the majority of packages were offered in traditional northern auto industry states. However, from the late 1980s and early 1990s through to the present, the majority of packages were offered in southern U.S. states. Further, the investment packages offered have been on a steady increase over the last twenty years, reaching levels as high as US$320 million and 48% of the total investment amount.

The third section examines programs of general application offered by local and state governments in the State of Georgia, which have the objective of attracting new investment. The programs are grouped under three headings, which are direct, indirect and tax based programs. This section also briefly addresses the recent Daimler Chrysler investment in Pooler, Georgia relaying information gathered from media accounts and official publications available to the public.

Programs for new investment in Georgia are structured on a four-tier system, tier one counties being at the lower end in terms of economic development. Delivery of these programs is assured in most part through local governments. Job creation for persons of low-and-moderate income and rural development are the primary focus of most of the financial programs at both state and local levels in Georgia. For example, one direct financing program chaired by the United States Department of Agriculture grants guaranteed loans reaching $25 million in an effort to improve the economies of rural regions mostly located in Ahave-not@ tiers. Investors are encouraged by generous investment programs to establish business ventures in Tier 1 and 2 counties. Perhaps not surprising is the fact that Tier 1 counties in Georgia, the Ahave-not@ tier, account for almost half of Georgia's territory.