Failure by the Nebraska Legislature to pass a bill creating a new business incentives program places the body in a bind next year.
The shortened 60-day session – in an election year, no less – means that senators will have to work quickly to address a variety of important topics, some of which will inevitably be left undone. But few have the immediacy of replacing the Nebraska Advantage Act, which sunsets at the end of 2020.
Nebraska needs these incentives to remain competitive in attracting new capital investment, employers and jobs, but they must be instituted in a way that doesn’t give away the farm.
In an ideal world, incentives packages of this nature shouldn’t exist. Every city, county and state should stand on its own natural merits and advantages when appealing to new development. But since our world is far from ideal in this arena, Nebraska must play ball in it – but do so in a responsible manner.
As plans for a mystery company’s data center near 56th Street and Interstate 80 materialize, the project is being hailed as "the kind of development that cities often dream of." Estimating at least $600 million in spending at the site and nearly 1,000 jobs when fully completed, it’s easy to see why.
The company’s application for state tax incentives indicates their merit for attracting new businesses. No doubt that decision will generate some criticism, but much of the opposition to incentives programs is based on a fundamental misunderstanding of how they work.
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One of the most common complaints involves the types of jobs being brought to the state falling short of expectations. The current law requires minimum salaries in many cases, and we don't want to incent low-paying jobs that don't offer benefits.
Another common grumble is that businesses will milk every penny they can get before bolting town for greener pastures. However, most incentive agreements include “clawbacks” that specify what money is returned if the operation moves or fails to meet agreed-upon goals. There’s no way to ensure a company will never leave, but smart clawbacks can minimize the community’s exposure to bad actors or a changing economy.
Lastly, a business takes a risk by making an investment in a new facility or hiring new employees. If the venture succeeds, it will benefit the state and municipality long term by increasing tax revenue and purchasing power. That little incentive can, therefore, propel a lasting ripple effect in the economy.
For this reason, a wisely crafted incentives package can make both dollars and sense for this state. In drafting and passing a replacement for the Nebraska Advantage Act, lawmakers have a chance – one they must seize – in 2020 to improve upon the shortcomings of the law’s predecessor.
If legislation were to fail again, the state would be unable to compete in drawing new business in the immediate future. Nebraska simply can’t be caught without such a program.