Articles
9 February 2012

On the Fast Track

Incentive Program Helps Rural Companies Thrive

by Tom Haraldsen

09 February 2012—

The Industrial Assistance Fund (IAF) is one of Utah’s most successful business incentive programs. Originally created in 1994 to help McDonnell Douglas’ expansion in the state, the IAF is a post-performance grant program used to develop high-paying jobs in the Beehive State.

But that success has come only to large companies in the state’s metroplexes. For small businesses in the rural parts of the state, there was no similar assistance available until 2007.

That was the year the Utah Legislature mandated that 20 percent of the IAF be used for the Rural Fast Track Program (RFTP), a post-performance grant that’s available to small companies in rural Utah as an incentive for expanding and increasing their workforces.

“There was a need in the rural communities for some assistance for expansion,” says Derek Miller, managing director of business incentives and growth for the Governor’s Office of Economic Development (GOED). “The IAF worked on a much larger scale, and companies that applied for grants were subject to months of negotiations, developing financial statements, etc. As the title denotes, the Fast Track program expedites the process for smaller businesses.”

Miller says his office applies the same due diligence to the smaller rural companies applying for grants as it does with the larger companies when they apply for grants. The GOED board reviews all applications and looks at proposals as they receive them—at least quarterly. But the need for creating a more streamlined program for rural companies existed; thus, the RFTP was developed. “As they say, necessity is the mother of invention,” Miller says.

 

The Ground Rules

To qualify, businesses have to be in a county with a population of less than 30,000 and an average household income under $60,000 a year. Businesses must be at least two years old, have a minimum of two full-time employees and enter into an incentive agreement with GOED specifying performance milestones. 

Miller says applicants must obtain a letter of support from their local economic development leader that confirms the project’s plans are supported by the local city or county officials and that it meets the area’s development criteria. The letter must also explain how the project will promote business and development of the local economy. The maximum grant available for any one business is $50,000, with bonus markers in place based on the number of full-time jobs created.

“It’s great for rural Utah,” says Lester Prall, director of the Utah Department of Community and Economic Development at GOED. Prall often visits smaller businesses in the state. “We work with companies that are looking at expanding and help them with their capital expenditures,” Prall says. 

According to Prall, the RFTP will fund up to 50 percent of a project (to the maximum $50,000). Because these grants are post-performance, they serve as reimbursements to companies once they’ve completed their project expansions. They are not loans.

Prall says the costs of many projects will exceed $100,000, so each business is responsible to make up the difference, which they willingly do. “The last report I saw says we had about $1.7 million in state money coupled with more than $10 million in private money invested in projects,” Prall says, adding that “the RFTP has never come close to using all of the 20 percent” of IAF money it has been allocated.

 

Success Rolls In

GOED’s 2009 annual report stated that the RFTP had funded 39 projects so far. Carbon and Emery counties each had 10 businesses with grants, while there were five in Sanpete County. Other grants were awarded to firms in Beaver, Juab, Millard, Wayne, Grand, San Juan, Duchesne and Uintah counties. A total of 32 companies received grants, and close to 60 new jobs were added as a result.

“It’s really helping these rural communities, given the economy and the current climate,” Miller says. “Companies in rural Utah are continuing to grow and expand, and all the credit goes to them for putting it on the line and making their businesses work. We’re happy just to be the administrators [of the grants].”

Recipients are happy, too.

Michael Miller is the co-owner of Moab Brewery, which up until last year operated mainly as a brew pub. Miller and his partner were considering creating a full-strength beer with a brewing partner in Montana. But changes in Utah’s liquor laws opened the door for the brewery to manufacture, bottle and sell on premises the new product, called Desert Select Ale.

“We needed to add two fermentors to our operations,” Michael Miller says. “Desert Select Ale is a handcrafted product that we brew in relatively small batches—about 800 bottles three times a year. It’s a higher-end beer, and it requires a disciplined fermenting process. The grants allowed us to buy those fermentors.”

Sold in one-liter bottles and wrapped in parchment paper, much like a bottle of wine, it allowed Moab Brewery to create a signature ale that has already received great reviews. 

“Financially, the grant allowed us to hit the ground running,” Michael Miller says. His company added one full-time employee to help with the production of both Desert Select and the brewery’s other products. Most importantly, the manufacturing was kept within the state.

For Applied Composite Technologies of Gunnison, three of its four companies applied for and received RFTP grants—pending completion of their projects. Andy Hill, general manager of ACT Aerospace, says the grants “allow us to do things that otherwise we wouldn’t have done. We took some projects from our future growth plans and said, ‘We can go ahead with these now.’ It’s helped us to increase our capabilities in-house.”

Hill’s company produces airplane wings with light composite materials and is one of the largest employers in Sanpete County. With RFTP funding, ACT purchased equipment to allow manufacturing of parts in a central location, “functioning the way we should be functioning,” he says. “Down the road, we will probably be able to continue adding more employees as our orders increase.” Hill says ACT’s goal “is to support our war fighter effort. The military is our customer.” 

In Blanding, an RFTP grant assisted MG Manufacturing in two ways. First, the company updated its power supply for its shop, allowing it to continue making parts for a Kansas-based medical equipment company. Then the news got better—the company moved its assembly operation to Blanding as well.

“It’s allowed us to bring more jobs here, which is a pretty exciting thing for this community,” says owner Ralph Redd. Redd is currently awaiting final approval from the FDA for a new product, a transport hyperbaric ventilator. It is used for victims of carbon monoxide poisoning or decompression sickness.

“Once we gain approval, we’ll be making these for Providence Global Medical, who will be selling them,” he says. “We’ll be providing some of the components as well as assembling and testing them right here in Blanding.”

For MG, the rural grant has allowed it to add two full-time employees and set the stage for future growth as the ventilator project comes to fruition. 

“I think the Fast Track program is a good use of taxpayer money,” Redd says. “It increases the tax base for our communities, and gives a small business a shot in the arm to keep it going.”

Another example is Red Cliff Mining in Emery, a company that mines raw materials for different food supplements. Prall calls its expansion “value-added manufacturing,” since Red Cliff also turns the raw materials into power form for resale as well.

And as Prall says, there’s an upside to the Rural Fast Track Program for other businesses in Utah as well. 

“The companies receiving these grants need to purchase new equipment and products, not try to refurbish worn out equipment,” he says. “We want to see an expansion, new activity, an increase in a company’s capacity. Much of that grant money is spent with other businesses in Utah, and then also goes back to the state as well as part of the personal property tax on that new equipment.”

“Every project that we help complete with these grants is a success story,” GOED’s Derek Miller says. “It helps the communities where these companies are located with employment, increased wages and broadened tax bases. And that’s what economic development is truly about.”  


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