COLUMN: After Mazda-Toyota, state looks to patch up incentives potholes

COLUMN: After Mazda-Toyota, state looks to patch up incentives potholes

By Todd Stacy, Alabama Daily News

In the wake of the massive 4,000-job Mazda-Toyota project announcement and with state unemployment at record lows, Alabama is experiencing historic economic momentum. Yet, looking ahead, state leaders are concerned that legal potholes could threaten Alabama’s ability to compete for the next big jobs opportunity down the road.

One pothole to fix: an interpretation of the state’s ethics code that might force project site selectors and local chamber of commerce officials to register as lobbyists before they can approach the state about a potential project. The 2010 overhaul of Alabama’s ethics code required for the first time those seeking to do business with the Executive Branch to register as lobbyists with the Ethics Commission. Before, those lobbying the governor or cabinet officials for prison, Medicaid, mental health, or other executive contracts were not required to register like those seeking to influence state lawmakers. It was a gaping loophole and lawmakers were right to close it. However, though it was never intended to be, that law is now being interpreted by some to apply to any project site selector or local chamber of commerce director who wants to approach the state about a potential economic development project.

Why is that a problem? Major economic development projects like Mazda-Toyota are highly secretive in their early stages. Site selection consultants might provide state and local officials an industry sector or potential number of jobs, but never reveal the name of the company. These are decisions that affect global stock markets, to say nothing of other people’s jobs, and word getting out prematurely is more than enough to spook away a project. 

So, imagine the site selector for Mazda-Toyota being told that, before having a conversation with the Department of Commerce about the project, they would first need to register as a lobbyist with the Ethics Commission and disclose their client or principal. 

Congratulations, North Carolina, and you’re welcome for the 4,000 jobs.

That unfortunate situation is one that state leaders are trying to avoid. The Alabama Ethics Commission recently voted to allow the legislature time to clarify the law rather than issue an advisory opinion with potentially damaging effects on job recruitment efforts.

HB-317, the Alabama Jobs Enhancement Act, sponsored by Rep. Ken Johnson (R-Moulton), is intended to clean up this and other problems in the state’s incentives and reporting statutes. The bill would clarify that legitimate economic development activity – defined as seeking legally-authorized incentives for a specific project – does not qualify as lobbying.

Secretary of Commerce Greg Canfield recently made his case for the bill in a letter to lawmakers saying lawyers in competitor states are starting to use the legal confusion against Alabama.

“Simply put, certain site consultants may choose to disqualify Alabama because of their concerns with the law. Additionally, inaction could subject your local economic developers and Chamber of Commerce employees to unnecessary legal liability in their efforts to bring jobs to your communities,” Canfield wrote.

Some have raised concerns that the bill would open the door to abuse from lobbyists or public officials themselves trying to skirt state ethics requirements using economic development as a cover. Alabama has earned a notorious reputation for high-profile public corruption cases over the last several years, and lawmakers are right to be concerned about anything that would exasperate those problems. 

That’s why the bill’s authors included a provision making the definition of bona fide economic development activity contingent on seeking specific state-authorized incentives for a specific project registered with the Department of Commerce. Also, the state’s existing prohibition against public officials lobbying or otherwise attempting to influence a government body on behalf of a paying client remains unchanged.

In other words, claiming the theoretical use of economic development as a get-out-of-jail-free card wouldn’t work for lobbyists or public officials.

While the ethics connection generates a lot of discussion, Johnson said his bill is mostly geared toward fixing the transparency requirements in the law.

Current Alabama law requires cities, counties or local development authorities to notify the Alabama Department of Commerce about the use of economic incentives – but only for incentives that no longer exist. HB-317 would update the law to require the same reporting for newer incentives authorized in the Alabama Jobs Act of 2015.

The bill also requires those seeking tax abatements to notify the Department of Commerce, something current law does not require. And, the Department itself would be required to publish economic incentive information two years after a project has announced, whereas it can now withhold that information as long as it wants.

“What good is a reporting requirement if it doesn’t apply to the incentives we are using?” Johnson asked rhetorically. “Why wouldn’t we require the same reporting requirements of tax abatements that we do of other incentives?” Good questions.

In today’s world, states and local governments needing to offer economic incentives to lure companies is an unfortunate fact of life. Though the state can’t do much about the competitive nature of project incentives, they can do more to make the process transparent and accountable. And the legislature can certainly make sure unintentional interpretations of Alabama law don’t put our state at an automatic disadvantage. 

Johnson’s bill has passed through committee and is expected to be considered by the House of Representatives as soon as this week. 

Todd Stacy is the publisher of the Alabama Daily News. His 15-year career in Alabama politics spanned from the State House in Montgomery to Capitol Hill in Washington, D.C. and now informs his political news analysis at www.ALDailyNews.com