Bringing new businesses to Augusta Economic Development Authority plays specific, key role in area’s job growth By Gary Kauffman If the Augusta Economic Development Authority was an animal, it would undoubtedly be a platypus. The platypus is an Australian animal that is mammal, but lays eggs like a reptile and has a beak like a bird. Likewise, the Economic Development Authority (EDA) has power granted by the state but is not a part of either state or county government; it is not a non-profit but operates some of its business that way; it doesn’t have money to lend but authorizes companies to borrow money; and it can own land without property tax, but does pay property tax on land it leases. But unlike the platypus, which lives in relative anonymity in Australia, the EDA plays a critical role in the long-term economic success of Augusta. The EDA’s efforts are to draw businesses to Augusta that will create jobs and revenue for Augusta-Richmond County. Walter Sprouse, executive director of the EDA, said it can be a daunting task, considering the competition for those companies. “Take 50 states, and take that by the number of counties in each state, and that’s how many competitors we have,” Sprouse said. The EDA has been in the news several
times in the past few weeks announcing the expansion of several companies into the Augusta area as a direct result of the new Cyber Command headquarters at Fort Gordon. “Our job is to identify what we (Augusta) do best,” Sprouse said. “Cyber Command will obviously bring in contractors working with the military. But we also do well in medical, manufacturing, nuclear, chemical, food processing and aviation.” The EDA does not, however, work with retail. It’s only contact with Whole Foods, for example, was to provide information about the area when asked, and writing a press release when the company announced its job fair. It did not have any involvement in the proposed fashion outlet mall. The EDA becomes the single point of contact for a business considering moving to the area, and the source for authorization to borrow funds. Helping companies find funding sources The state general assembly created the EDAs about 45 years ago when businesses began moving from the north to the south. Those businesses often had trouble with funding from northern banks because they were moving and difficulty in funding from southern banks because they weren’t established there. One of the EDA’s key functions is to autho-
rize Industrial Revenue Bonds for those companies. Sprouse stressed that the EDA does not give money or loan money to businesses – it only authorizes them to seek funding. For example, a company – we’ll call it Widget World – may need $10 million to build a new plant in Augusta. The EDA authorizes them to issue Industrial Revenue Bonds. Widget World may decide to issue those in $10,000 chunks on the open market. An investor, local or non-local, can purchase some or all of those bonds. The percentage of return and terms are determined by Widget World and the investors. The money comes from the investors directly to Widget World, and when Widget World pays back the bonds, it pays to the investors. “We’re the first cousin to a mortgage broker,” Sprouse said. “Our job is to make sure the company has the financial ability to pay it back.” Because of the way bonds are issued, Sprouse said it is not worthwhile to authorize bonds for less than $2 million. That is why, he said, it seldom makes sense for a retailer to seek their help. The bond process also funds the EDA. The EDA receives one-eighth of 1 percent, or .00125, of the balance remaining on the bond issue after the first year. That allows the EDA to remain an independent agency. The only funds the Augusta EDA receives from the county are $60,000, which are earmarked for specific expenses, like office rent and maintenance, office supplies
and utilities. Helping with tax incentives A key inducement for many companies in choosing a location is property taxes. Many states offer tax abatements where property tax rates are severely reduced or even eliminated (New York currently has a campaign offering no taxes for 10 years for businesses locating in certain areas of the state). In Georgia, however, it is illegal for a city or county to give tax abatements. That’s where the EDA comes in. The EDA can own property without paying property taxes. However, once it leases a property, it has to pay taxes on the lease, but at a graduated rate. The first year’s property tax, for example, will be only a small percentage of the total tax. This increases incrementally each year until it eventually reaches 100 percent of the amount due. The EDA is allowed to do what is called a lease-back to compete with tax incentives offered in other states. In our previous example, say Widget World raises its money and builds its $10 million plant in Augusta. It can then sell the property to the EDA, usually for a minimal amount, and then the EDA leases the property back to Widget World. It then pays the property tax through the lease. Since the EDA’s property tax on the lease is a fraction of the full amount early in the lease, Widget World in essence gets a See JOB GROWTH, page 24
Advance Services Pest Control hits $100K mark in donations to LLS Jeff Annis and his 40-member team at Advanced Services Pest Control are dedicated to the fight against cancer. For the past 10 years, they have been supporting The Leukemia & Lymphoma Society (LLS) by raising funds for cancer research and raising awareness for LLS in the greater Augusta community. It began in 2004 with LLS’s annual Light The Night Walk. Annis and his staff signed up to participate as a company and since then they have raised more than $100,000 to help cancer patients live better, longer lives. Over the years Annis has taken on many leadership roles for Light The Night
– Corporate Chairman and Honorary Chairman, his team has earned first-place fundraising team for the walk three times (2004, 2009 and 2012) and he has recruited other executives in his company to take on leadership roles with the walk. In 2012, LLS added a new event in Augusta – the Man and Woman of the Year campaign – and Annis and his team were first in line to help support this new fundraising endeavor. Annis served as Chairman of the inaugural event, as well as the 2013 and 2014 campaigns. Since its inception, the Man and Woman of the Year campaign in Augusta has raised nearly $600,000.
September 2014 Buzz on Biz
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