Article

Sowing the Seeds

Companies Flourish in the State’s Fertile Soil

Heather Stewart

March 1, 2011

When eBay had to decide whether to expand a facility outside of the U.S. or expand its presence in Utah, the decision came easily to the Web-auction company. With the financial backing of a post-performance incentive, eBay constructed a new data center in the Beehive State.

According to William Lasher, senior director of indirect and multi-state taxes for eBay, the post-performance tax incentives were key to the company’s decision to invest further in Utah. “A lot of factors go into site selection,” he says. “Tax costs are one of them. We do a comprehensive analysis of the tax situation for each site under consideration.”

But tax relief was not the only reason Utah became eBay’s top choice. “Utah has an educated and diverse workforce,” says Lasher. “The community is well suited for eBay, with great language, communication and technology skills.”

Lasher also credits the Governor’s Office of Economic Development (GOED) with helping smooth out the difficulties inherent in an expansion project of this size. “The officials at GOED helped us build relationships in the business community and with other government agencies,” he says. “They helped expedite decisions and cut through some red tape.” Along with eBay, Utah’s software and IT industry has been growing with leaps and bounds. A major new Adobe campus is currently under construction, Twitter, Microsoft and IM Flash Technologies have all joined the Utah business community or recently expanded.

 

An Incentive to Grow

Utah is well known for its diverse climate, ranging from the red sand dunes to the snowy mountain peaks. But the State has also been long recognized for its incredibly fertile business climate, which has enabled companies of every kind to thrive and grow.

The fact is that Utah has all the right factors to help companies succeed. The cost of doing business is low. The local workforce is young and educated, and a great quality of life attracts top talent from around the world. On top of that, the State’s vibrant community colleges and research universities turn out a fresh crop of graduates each year.

All of these factors contribute to the success of a wide range of companies, from financial powerhouses like Goldman Sachs to defense contractors such as ATK. Information technology companies like Adobe, Oracle and Overstock.com have also found a happy home in the Beehive State.

Utah’s great business climate is no accident—it’s nurtured and protected by GOED. “When Governor Gary Herbert took office, he wanted us to put a special emphasis on helping companies expand that already had Utah operations,” says Spencer Eccles, executive director of GOED. “We recognize that our best customer is our current customer, companies who currently have a presence in the State know and understand the competitive value of our highly productive workforce and our business friendly tax and regulatory environment.”

And the best catalyst for corporate growth is tax relief. GOED uses post-performance tax incentives—like the ones that eBay received—to help companies expand their operations in Utah.

These incentives only take effect when a company actually expands and adds workers to its payroll. If the company ends up paying increased corporate, wage withholding and sale taxes, it could receive a refundable credit for up to 30 percent of those increased taxes.

“We don’t incent ‘natural growth’ but we are aggressive in going after companies that can add new product lines or company divisions not currently in Utah,” says Eccles. “Everything is post-performance, there’s no up-front money.” Instead, companies enter into a contract with the State in which the company agrees to expand its operations in the State, hire new workers at wages that are at least 125 percent of the county average (in urban areas) and commit to remain in Utah.

These post-performance incentives could come into play in a variety of situations: when a company simply wants to expand with new offerings or products, when a company consolidates operations into Utah, or when a merger or acquisition results in a greater corporate presence in Utah.

The latter situation was the case for Merit Medical, a Utah-based company that was considering the addition of a major new product line in its Ireland facility.

“We engaged in meaningful conversations with the company leadership and helped them run the numbers,” Eccles says. “Eventually they agreed that Utah would be the best place for the new operation and invested over $11 million and hired 390 new employees. The company is now growing again and adding several hundred more employees in a newly constructed 240,000-square-foot facility.”

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