A couple of years ago my bank ran a promotion where if you sign up as a new client, you receive a new iPad. I have had an account with this bank since I was a child, and have grown into a reliable client over the years. Like all my bank’s current clients, we don’t see incentives like this once we’re ‘under the roof.’
This thought was swirling in the back of my mind as I gave a presentation to the Energy Diversification Advisory Committee (EDAC) recently. In the presentation, we highlighted that in 2012, the Iowa state government gave $22 million tax credits to draw a $1.7 billion plant expansion for an existing company that also has operations in Alberta. That expansion came online in late 2016, creating 100 new, high quality jobs.
Iowa’s offer is essentially giving iPads to its best clients. The state knew that the company operated globally, and were likely looking at multiple possible expansion projects. To ensure that investment landed in their jurisdiction, they offered an existing business an incentive package that sweetened the pot and directly lead to nearly a 100:1 return on investment.
$22 million may seem like a lot, but in this case, it’s not cash changing hands. It’s a tax credit offering for a project that likely wouldn’t have landed in the jurisdiction otherwise. For a multi-billion-dollar project, it’s essentially the business development version of a free iPad.
Right now there are at least two companies looking at significant expansion plans in Medicine Hat. And like the Iowa example above, both companies are understandably looking for the best return and are working with governments in every jurisdiction in which they operate.
For companies that already spend hundreds of millions of dollars in the province and provide high-value jobs to the regions in which they operate, I believe that it is important that they feel valued. Approaches like Iowa’s are less expensive and time-intensive than attracting new businesses, and produce real returns. Or to put it another way, giving a free iPad to an existing client to convince them to borrow or invest more money with them.
The opportunity currently exists to grow our own high-quality jobs by reinvesting in existing industry. If we know there could be significant dollars of investment ready to go and all it would take is to sweeten the pot a little, it would be productive to have those conversations.
Although it might take a bit more than a free iPad.