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Idaho Sets Its Sights on Smaller Manufacturers

To reflect changes in the economy, Idaho has tweaked its 3 percent investment tax credit so that 3 percent of the capital investment in machinery can be written off on a company’s state income tax.

Business Xpansion Journal

“Due to the slowness of the economy, our high-tech companies that have made machinery investments are losing money,” says Jay Engstrom, administrator of the economic division, Idaho Department of Commerce. “If an electronics company buys expensive equipment and has a couple of years of losses, it can apply for a two-year property tax decrease that would equal the same amount as if they would have been able to earn the investment tax credit.”

In other economic development activity, Idaho has added a rural component to its workforce and development training fund program. “The training program pays up to $2,000 per employee for training, and the rural component provides up to $3,000 per employee, depending on training needs,” Engstrom says. Fifteen of Idaho’s 44 counties qualify as rural areas.

Targets

Idaho is well suited to support small- to medium-sized manufacturers that are currently located in areas with high operation costs.

“In eastern Idaho we target small manufacturing companies that employ 20 to 100 people,” says Chris Hertz, president and CEO, Eastern Idaho Economic Development Council. The council markets the cities of Pocatello, Rexburg, Idaho Falls and Blackfoot, among other cities and counties.

“We look for companies that are not dependent on their location, or a particular transportation system or a nearby supplier,” Hertz says.

“These manufacturers are high-tech companies, including computer, electronic equipment manufacturing and semiconductor manufacturing.”

Idaho is home to Hewlett-Packard’s laser printer division, and AMI Semiconductor recently opened a $4.5 million engineering and research center in Pocatello, which will house 180 employees, mostly engineers.

Idaho is also suited to support medical applications and biotech companies. “Idaho State University (ISU) in Pocatello is the state’s leading medical institution,” Engstrom says. The university is looking at building a new center in Boise.”

Additional support is found at the Idaho National Engineering and Environmental Laboratory (INEEL) in Idaho Falls. The INEEL was established by the U.S. Department of Energy to produce electrical power through nuclear reactors.

In the area of medical research, the INEEL has developed the Change Detection System, which helps doctors analyze X-rays to note changes in people’s bodies over time. “There are quite a few medical applications that come out of the INEEL,” Engstrom says.

The INEEL also lends itself to security and information systems companies. “A network formed between INEEL and ISU features leading research in security detection,” Engstrom says. “These systems are working at keeping data safe, detecting hacking, conducting encryption analysis, etc.”

Hertz says that his region targets special materials, which is supported by the presence of the INEEL. “Through the years people have learned a lot about the behaviors of special metals and steel, sensors and coatings,” he says. “We have quite a cluster of companies that have spun out of the INEEL that deal with metal powders and coatings.”

Hertz notes that the INEEL accepted contaminated waste from a plant in Colorado. “We have many environmental companies already here,” he says. “These companies deal with cleanup activities.”

Idaho has also seen an increase in technical support centers. TSYS, a developer of applications for credit card and financial institutions, recently located in Boise and will employ 83 workers.

Qwest has conducted a couple of expansions for inbound DSL technical support. Also, Dell Computer opened a technical support center in Twin Falls, which initially employed 243, with 800 workers planned by the end of the year.

“Dell Computer was an interesting project because we ended up being one of five sites meeting all of Dell’s criteria, except having an available facility,” says Jan Rogers, executive director, Southern Idaho Economic Development Organization. Her group markets the cities of Twin Falls, Jerome and Gooding, among others.

“As fate would have it, the day after the company visited, a 50,000-square-foot Albertson’s building became available,” Rogers says. “From there we worked on demonstrating we had the labor force to support the company, with assistance from the College of Southern Idaho, the U.S. Department of Labor and the state.”

Engstrom says that back office operations are able to take advantage of Idaho’s regulatory climate. “A past study ranked Idaho as one of the top states from which to run financial operations.”

Sports equipment manufacturing, especially jet boats, has seen industry growth. Engstrom notes that the value-added agricultural industry continues to grow as well, highlighted by last year’s announcement by Grupo Modelo (Corona beer) that it would build a $64 million barley-malting facility in Idaho Falls.

What’s more, “In southern Idaho, we rank number one or number two in 17 different ag categories in the state, which creates one of the most diverse ag bases in the country,” Rogers notes.

Workforce and Education

Technology transfer support is found at the TechConnect Offices located in Idaho Falls, Nampa and Post Falls. As part of the services to entrepreneurs, the INEEL staff can provide limited engineering support.

An affiliated program, Techelp, offers engineering staff services throughout the state to assist companies who are looking at lean manufacturing and quality assurance issues. There is also assistance available for human resources and R&D issues.

Techelp partners with the Idaho Business Network, which is a program that screens federal and large corporation bid availability for the nearly 1,000 Idaho companies that are part of the network.

Idaho’s Workforce Training Network, which consists of all the professional and technical schools in the state, leverages a particular school’s specialty to deliver the program to other parts of the state.

Rogers says one of southern Idaho’s strongest assets is the College of Southern Idaho. “It is progressive and gets involved immediately to set up training programs for businesses,” she says. “In fact, the curriculum it created for Dell is used by Dell to train workers in other areas.”

Idaho’s higher education system features 20 colleges, universities and training centers.

Business Climate

Rogers says that for a third time her region’s Business Plus 3 Committee raised more than $1.5 million for additional incentive funds for companies. She says Dell was able to use $500,000 to assist with infrastructure issues when it located in Twin Falls. “This fund speaks to the proactive business and economic development organizations we have in this area,” Rogers says.

Hertz says the Eastern Idaho Technology Corridor in eastern Idaho is important in marketing his organization. “For example, our recruiting efforts into southern California are being conducted by all of our communities, from Pocatello to Rexburg,” he says. “We share the leads we develop and have had four companies out of 20 we visited in California come to our region for a visit.”

The Southern Idaho Economic Development Association also shares leads within its region.

Regarding the low cost advantages for manufacturers that select Idaho, Engstrom says there are numerous areas for savings. Economy.com ranks Idaho in the top 10 in the country for overall low business costs and third lowest in the Western states. Workers’ compensation rates are reasonable as the rate per $100 of payroll in Idaho is $2.37 as compared to $5.23 in California, Hertz notes.

What’s more, wage rates are competitive, and energy costs are low. “Our low cost energy is produced by hydro dams,” Engstrom says. “We are roughly about a quarter less in cost, using the same sizing, of what you will find in California today.”

Among the state’s numerous incentives and tax credits are the 100 percent property tax exemption for business inventory and the 5 percent R&D tax credit for basic and qualified research performed in Idaho.

In terms of market access, Interstates 15 and 90 cross the state. Engstrom says the state is situated halfway between the Seattle and Salt Lake City markets. “We are within a few hours of a major portion of the Northwest, even down into San Francisco,” he says.

Rogers notes that Solo Cup sited its western plant in her region because of the transportation cost advantages. “The company was looking to site in one of the 11 Western states and from here it found it would save 45 percent on transportation costs,” she says.

Commercial air service can be found at the Idaho Falls Regional Airport and the Magic Valley Regional Airport in Twin Falls.

Idaho’s transportation system also features an inland port in Lewiston, which provides direct barge service to the Port of Portland.

For complete information about conducting business in Idaho visit http://www.idahoworks.org, http://www.southernidaho.org and http://www.eastidaho.org.

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