Middle of Nowhere: Laying the Groundwork for Economic Growth in Rural Utah

There’s a 2,547-acre patch of dirt near Green River that’s begging for businesses to be built on it. The site is actually an industrial park, but you wouldn’t know it since it’s barren dirt with no roads, utilities or rail spurs leading into it—the essential amenities that make industrial parks shovel-ready attractions for expanding or relocating businesses.

A potential solar farm has been considered for a site nearby, but industrial and commercial development in the area is stymied by a lack of infrastructure that has put a chokehold on economic growth. Emery County economic development director Jordan Leonard says the lack of natural gas in the Green River area has inhibited economic development for years.

Economic Roadblocks

“We have a vast supply of natural resources in rural Utah—everything from energy and agriculture to mineral resources—and there are a variety of manufacturing clusters in rural areas,” says Linda Gillmor, associate managing director for urban and rural business services and director of the Office of Rural Development in the Governor’s Office of Economic Development. “But the high cost of infrastructure development is one of the biggest factors to inhibit growth and business recruitment in rural Utah.”

Occasionally, businesses are willing to pay for infrastructure development—but it’s a disincentive for businesses to have to spend their capital on infrastructure, especially when that same infrastructure is readily available in more urban areas.

Compounding the problem, many rural municipalities don’t have the tax bases or budgets to cover infrastructure costs for development, making it hard for them compete with more urban communities for business recruitment. In Green River, paying for the industrial park’s infrastructure would cost millions of dollars.

In Beaver County, businesses have easy access to the interstate freeway, rail service and utilities, but there are still roadblocks in the way for businesses looking to build in the area. Economic development director Scott Albrecht says, logistically, infrastructure constraints in the county largely have to do with the federal permitting process for the construction of internal roads.

“The mining industry is strong in Beaver County and some of the companies are willing to make the capital investment in infrastructure, but the permitting process is the constraint,” he explains.

Renewable energy, another big economic driver in Beaver County, is often stunted by lack of access to power transmission lines. Fortunately, Albrecht says, a 400-megawatt solar project that’s currently in development will tap into Rocky Mountain Power’s high-voltage Sigurd Red Butte transmission line, which runs through the county. If not for that, the solar project likely wouldn’t be viable.

Gillmor notes that a number of rural Utah counties in the central and southern parts of the state have real potential for renewable energy development, but, as in Beaver County, they require roads and transmission lines, often through federal lands. “The state’s natural resources, by their very nature, are often located away from the Wasatch Front, so rural Utah businesses have the potential of benefiting the entire state—if we can just develop the infrastructure to access those natural resources,” she says.

In Carbon County, the economy has been hit hard by the decline in coal mining, its supportive industries and the loss of the Carbon power plant. Difficult economic conditions are driving down the number of good jobs and also the population, as residents leave for better job opportunities. The declining workforce makes for less tax revenue to put toward infrastructure projects that might attract new industry to the area.

“It’s kind of a chicken and egg thing,” says Albrecht, speaking about similar issues in Beaver County. “Developers and businesses that come in want a good workforce that they can be confident in. But for the community, we can’t really have a good workforce without the jobs, at least for the higher or better paying jobs we are trying to recruit.”

Finding Solutions

Recognizing that infrastructure is a challenge for rural Utah, the state has taken two significant strides to help with rural economic development. One effort came to fruition last spring with the passage of Senate Bill 216, called the “Utah High Cost Infrastructure Development Tax Credit.”
SB 216 provides a post-production tax incentive to businesses for infrastructure costs when those businesses locate in rural areas of the state. The other stride taken involves the Rural Planning Group, which was established in 2013 within the Utah Department of Workforce Services to assists rural communities and counties with strategic planning and implementation.

The Infrastructure Tax Credit is a post-performance tax credit administered by the Utah Office of Energy Development and applies to state taxes generated by a new business or the expansion of an existing business in rural Utah. The program provides for a total tax incentive over a 20-year period of up to 50 percent of qualifying infrastructure costs incurred by the business. Qualifying infrastructure, as defined in SB 216, includes transmission lines, power substations, gas lines, rail facilities, road improvement projects, water self-supply projects and water removal system projects, among other things.

While other state incentives focus on job creation, the Infrastructure Tax Credit focus on capital investment. Government and industry leaders hope it will have a multiplier effect for rural Utah, meaning that once utility and other infrastructure is established in an area, more businesses will consider the area for location or expansion. Gillmor describes the tax incentive as an investment in rural economic development and a meaningful way to obtain private-sector help for the exact types of infrastructure that rural areas need. “We have to grow the infrastructure in order to have economic development success,” she adds.

The Infrastructure Tax Credit is already drawing interest. A specialty fertilizer company called EPM Mining Ventures, Inc. announced last summer that the bill could have a direct positive impact on the company’s ability to pursue its Sevier Playa Sulphate of Potash project in Millard County. There, the company controls mineral leases on more than 124,000 acres and is targeting the development and production of specialty fertilizers through the use of a cost-effective solar evaporation process. EPM says its fertilizers are used in the production of high value, chloride-sensitive crops such as fruits, vegetables and tree nuts.

“The Infrastructure Tax Credit was tailor-made for companies like ours, which are looking to develop Utah’s rich mineral resources and to expand Utah’s economic future,” says EPM CEO Lance D’Ambrosio. EPM’s qualifying utility infrastructure costs are projected to be as much as $150 million, so the incentive program has the potential to significantly reduce the company’s investment risk by reducing its net capital expenditure costs.

The Rural Planning Group can also play a huge role in rural economic development, according to Gillmor, by helping communities and counties determine what infrastructure they need and possible funding sources to help pay for it. What’s more, the group will help rural areas obtain community input regarding community and economic development strategies. “We encourage communities to do what we call community-driven economic development planning and also community planning,” she says. “I think the citizens of each community have to make planning decisions among themselves and the Rural Planning Group can help in that effort.”

At its best, the process involves input from the broader community along with elected officials, business leaders, chambers of commerce and other leaders to identify the condition of existing capital facilities along with present and future needs for additional capital projects.