A legislative proposal aims to streamline the incentive process to prevent boondoggles that in the past have left taxpayers holding the bag. Credit: Eric J. Shelton/Mississippi Today

Lawmakers are trying to revamp incentives to businesses that expand or relocate to Mississippi, to simplify the process, provide more transparency and prevent boondoggles that in the past have left taxpayers holding the bag.

“This will be performance-based, not promise-based,” said Senate Economic Development Chairman David Parker, R-Olive Branch, author of Senate Bill 2822, the Mississippi Flexible Tax Incentive Act, or “MFlex.”

To qualify for MFlex incentives, a business would have to make a minimum investment of $2.5 million and create a minimum of 10 new full-time jobs. The application would be only a few pages, compared to hundreds of pages of code companies have to sift through for many current state incentive programs. A company using the MFlex program would not be able to participate in other tax incentive programs.

Scratching for jobs and development for a poor state, lawmakers over many years have created dozens of tax breaks, credits and incentives for new or expanding businesses. Many sit in the books unused by or unknown to qualified businesses. Others, economic experts have said, provide little benefit to the state. Lack of oversight on the incentives has in the past resulted in businesses taking the incentives then defaulting on providing promised jobs and investments, leaving the state on the hook for millions with little way to recoup.

Around 2010, the state gave seven “green” energy companies more than $400 million in loans and incentives on the promise of them creating at least 5,000 jobs. Instead, many of the companies failed or floundered, creating a little over 600 jobs. KiOR, a company pledging to make cheap bio-crude, received about $75 million in loans and other state incentives, but went bankrupt leaving taxpayers a $69 million bill. Nearly two decades ago, the state saw the famous “beef plant scandal,” where a Yalobusha County beef processing plant heavily subsidized by the state cost taxpayers millions when it went belly-up after just three months. The list goes on.

In its recent annual report on economic development programs on tax incentives, the state Institutions of Higher Learning reported that of 20 state incentives it examined for 2020, only nine “generated a positive return on the state’s investment and two generated a negative return.” Others had not been used in recent years, and “five could not be analyzed because of insufficient information.” It noted that the Department of Revenue had no info available on how much tax breaks for the Tourism Tax Rebate Program had cost in forgone taxes, despite 11 projects, including the Biloxi baseball stadium, a children’s museum and the King Edward Hotel, receiving the rebates.

The move to overhaul incentives is being championed by Lt. Gov. Delbert Hosemann, who has in the past opined that Mississippi has lacked oversight and accountability in the tax breaks and other incentives it provides prospective businesses. Gov. Tate Reeves, who has also in the past called for more accountability on incentives, local economic development officials and the Mississippi Development Authority have all been involved in drafting the overhaul, Hosemann and Parker said.

Hosemann said the MFlex plan would help the state shift further from risky upfront incentives for businesses to rebates and credits. It would be attractive to businesses in its simplicity and ease of application, and would better protect taxpayers by providing more stringent annual accounting of jobs and investments created before companies would receive the incentives. Parker said it would also provide better “clawback” provisions for the Department of Revenue to use should a company be proved to have received more credits than it deserved.

MFlex would not create new incentives, Hosemann said, but would consolidate and simplify the process for applying for them, and require more accurate accounting of whether companies were producing the jobs and investments they promised in exchange. A “companion” bill would eliminate or change several of the dozens of incentives on the books that either are not often used or have shown not to provide a return-on-investment for taxpayers.

Both measures passed the full Senate Thursday without a dissenting vote.

David Rumbarger, president and CEO of the Community Development Foundation in Tupelo, is among several local economic developers who helped draft the MFlex measure. He said it would not only provide more accountability but more flexibility for new and existing companies. He said the state likely loses out on business or expansion when companies can’t figure out incentives or don’t realize they exist.

“It just streamlines the system,” Rumbarger said.

MFlex tax credit basic calculations would be based on:

  • 1.5% of the total purchase or value of all manufacturing or processing equipment for a new or expanding business
  • 7% of the total purchase or sales price or value of all non-manufacturing equipment
  • 2% of the total contract paid for construction or improvements

Plus, if applicable:

  • 15% of the of the total derived by multiplying the average wage by the number of full time jobs, if the average wage is equal or more than 75% of the average state or county wage
  • Increased incentives if the number of full time jobs is 50 or more, the average wage is 110% more than the state or county average, and all full-time employees are offered health insurance, then 30% of the total from multiplying the average wage by the number of full-time jobs
  • Increased incentives if a company creates 25 or more jobs and the average wage is more than 125% of the state or county average

Companies would have to provide a full accounting of their jobs, investment and tax liability to MDA each year before receiving the credits, instead of DOR or others having to dig for such information, Parker said.

Sen. Barbara Blackmon, D-Canton, was among several lawmakers who quizzed Parker on what the program would mean for economic development statewide, and what it would cost.

“This is not a new incentive, this just makes it easier and cleaner to apply,” Parker said. “The actual dollar amount going to companies might even be a little bit less overall, but the ease of application will far outweigh that … I think it will encourage economic development and new expansions in every area of this state.”

Sen. David Blount, D-Jackson, said he has in the past been frustrated by the inability to look at incentives and “see if they’re working, a net positive or net negative for taxpayers.”

“There’s no way to do that presently,” Blount said. But he said he is also concerned about language in the bill that would exempt much of the MFlex transactions from the state Public Records Act.

“It looks like MDA would get the info, the governor and lieutenant governor and speaker and IHL would get the info, but nobody else – no public access,” Blount said. “… That transparency is the heart of accountability. This is a step in the right direction, but any time you’re hiding information from the public, that gets my antenna up.”

Parker promised to work with Blount and others to amend such language in the bill if needed.

“I agree with you,” Parker said. “We are trying to balance our desire to get companies here, and there is certain info they would not want shown in the public air, but I think we are both trying to reach the same result. I will continue to work on that, and I’ll be glad to meet with you on figuring that out.”

Geoff Pender

Geoff Pender serves as senior political reporter, working closely with Mississippi Today leadership on editorial strategy and investigations. Pender brings 30 years of political and government reporting experience to Mississippi Today. He was political and investigative editor at the Clarion Ledger, where he also penned a popular political column. He previously served as an investigative reporter and political editor at the Sun Herald, where he was a member of the Pulitzer Prize-winning team for Hurricane Katrina coverage. Originally from Florence, Mississippi, Pender is a journalism graduate of the University of Southern Mississippi and has received numerous awards throughout his career for reporting, columns and freedom of information efforts.