State government incentives offered to lure technology company NCR to Georgia are worth at least $96 million, according to an Atlanta Journal-Constitution analysis. That is $36 million more than the state estimated when the deal was announced last week.
The $96 million tally does not include another part of the incentive package, a state grant. Officials confirmed late last week that Georgia has offered the grant but refused to say how much money is involved.
State and NCR officials confirmed the AJC's estimate. State officials said their initial estimate did not take into account every aspect of the deal.
Still, economic development experts say the package is well worth it for Georgians.
"It looks like a great deal," said Jeffrey M. Humphreys, director of the University of Georgia's Selig Center for Economic Growth. Humphreys analyzed the NCR deal at the request of the AJC.
The Fortune 500 technology company will get a break on corporate tax bills and enjoy about $15 million worth of free training and research assistance. But the big money in the incentive package will come to NCR when it deducts payroll taxes from its workers' paychecks — and then keeps the money instead of forwarding it to the state Department of Revenue.
That's the mega-benefit state law authorizes for giant economic development projects like the NCR deal.
Humphreys said the incentive package will eventually pay for itself through tax revenues that aren't exempted and by creating spin-off jobs that will also pump up tax receipts.
Georgia offered the incentives at a time when the state is desperately in need of cash as the recession depresses tax revenues. But economic development experts said it would have been virtually impossible to attract a major employer without a lucrative package of incentives.
"If you chose to take the high ground, you will not get these jobs and you will not get these companies," said Matthew Murray, a professor of economics at the University of Tennessee. "That is the ugly trade-off."
NCR announced last week it will move its corporate headquarters to Gwinnett County and bring 2,120 new jobs to Georgia: 1,250 at its Gwinnett headquarters and 870 at a new plant in Columbus that will manufacture ATMs.
Humphreys projected those 2,120 new jobs will spawn an additional 1,700 Georgia jobs — ranging from restaurant employees to attorneys who will take on work created by NCR's presence.
At the Duluth headquarters, the average annual salary for workers will be between $60,000 and $70,000. At the plant in Columbus, the average worker will make around $40,000, the company said.
State economic development officials said they expect tax revenues associated with the deal to recover the costs of the incentives in five years. Humphreys projected that once the tax credits are exhausted, the NCR jobs and the associated spin-off jobs together will produce about $25.5 million in state and local tax revenues annually.
In order to qualify for Georgia's most generous incentives, a company must bring 1,800 new full-time jobs to the state. The law requires the company to meet one of two additional benchmarks: an annual payroll of $150 million or an investment in property of at least $450 million.
Companies that qualify are eligible for an annual credit of $5,250 per new full-time job for five years. The company can use the credit to cover any corporate taxes it owes the state. Beyond that, the credit allows companies to keep payroll taxes that would normally be forwarded to the Department of Revenue.
Other states have offered this kind of incentive for years, say economic development experts.
Employees of companies involved in the incentive program see no change in their personal tax burden: Their W-2 statements will reflect state withholding payments even if the company holds onto the money.
The only other company to qualify for what the state calls its "Mega Job Tax Credit" is Kia Motors Corp. for its Troup County plant projected to employ 2,500. Georgia pledged an incentive package worth about $400 million to the Korean automaker in 2006, which included a range of benefits on top of tax-related credits.
The Kia incentive package is more generous on a per-job basis than the state's offer to NCR. But that's typical of auto manufacturing deals, which generally create five or six local supplier and spin-off jobs for every job inside the plant, said Murray, the Tennessee professor.
Humphreys projects that every job at the NCR headquarters will create one additional job, while every job at the Columbus plant will spin off half a job.
NCR is eligible to earn the credit on the 2,120 new jobs announced this week, as well as 916 new Georgia jobs announced last year but filled this year. If all those positions are filled, the company will keep $79.7 million that would otherwise have gone to the state.
In addition to the tax-related credits, the state will provide training and research assistance that has a market value of about $15 million. The state has also agreed to kick in $1.5 million for road and infrastructure improvements near the new Columbus plant.
"We made a very careful analysis," said Heidi Green, deputy commissioner for global commerce at the Georgia Department of Economic Development. "We are getting a solid return on our investment in a very short time frame."
In an 11th-hour attempt to keep NCR in Dayton, its location for 125 years, Ohio Gov. Ted Strickland offered an incentive package worth $31.1 million.
On top of the state's $96 million package, the city of Columbus pledged about $8 million to buy and retrofit the plant that NCR plans to lease to manufacture
ATMs. Columbus is seeking federal stimulus money to cover some of that investment.
Becca Hardin, executive vice president of economic development for the Columbus Chamber of Commerce, said the city did not hesitate to put incentives on the table.
"Everybody understands to play in this game today, it's internationally competitive," she said. "It's very rare that you get a high-quality Fortune 500 company on your line – you better learn to hook it and get it on the boat."
Gwinnett County already awarded NCR a property tax abatement — worth about $1.2 million over seven years. Gwinnett is offering to extend that abatement up to 20 years as a result of last week's announcement, according to Alfie Meek, Gwinnett's director of economic analysis.
Green, of the state department of economic development, said the state package includes a monetary grant, but declined to specify the amount.
The AJC requested a copy of a state document outlining all the incentives, but the Department of Economic Development did not release it last week.
The state law that allows the incentives was amended this year by the Georgia General Assembly. NCR wouldn't have qualified for the tax-related credits without those changes in the law.
The law allows Georgia to be competitive against Texas, Florida and North Carolina which previously held a significant advantage over Georgia, said Sam Williams, president of the Metro Atlanta Chamber.
"We're so glad we finally passed the bill and we're so glad it worked — and we hope it continues to work," Williams said.
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