Dale Denwalt|Oklahoman
Electric vehicle manufacturer Canoo announced it would build a factory in Oklahoma, creatingmore than 2,000 jobs and relaunching auto manufacturing in the state. It was a big victory for the state, having beat out Texas and other states for the business.
But what will Canoo get in return?
Like most major corporate announcements about moving to a new state, the deal included promises by state and local officials to financially incentivize Canoo's decision. It's the carrot, or rather a basket of publicly-funded carrots, held dangling in front of their eyes.
We don't yet know the full extent of incentives offered to Canoo because it's simply too early for Oklahoma's open records laws to force their publication. Contracts involving the incentives haven't been signed. Taxpayer money hasn't changed hands, and likely won't for a while.
Related: After losing out on Tesla, Oklahoma Gov. Stitt helps land another auto manufacturer
"It actually may be years before some of the dollars change handsbecause they're going to go through a construction phase for a couple of years here," Oklahoma Commerce Department Executive Director Brent Kisling said.
Kisling expects contracts between the state and Canoo to be signed within a few months. At that point, details about the incentives will become publicly available.
"Our incentives in Oklahoma are all performance-based, which means the company has to have to do something in order to qualify for the money," Kisling said. "They don't get funding up front."
Without divulging specifics of the agreement, Canoo CEOTony Aquila recently told Reutershis company will receive $300 million worth oftax incentives from the state. That might also include local property and infrastructure incentives specific to the factory's site, MidAmerica Industrial Park in Pryor. The state has not confirmed the amount claimed by Aquila.
Oklahoma's pitch is considered a secret, at least for now, to protect confidentiality of negotiations and business decisions of the publicly traded company. Gov. Kevin Stitt said recently theincentives are typicalof a company making that kind of investment.
The state offers these sorts of incentives with the hope an investment will pay dividends for years to come. Even a lucrative incentive package worth millions of dollars can provide exponentially greater economic benefits to the state if that company provides jobs, generates increased economic activity, attracts complementary business, and so on.
Even cities jump in on incentives. Oklahoma City lured Costco in part because of a tax-based incentive package. And while those incentives were for opening the retail store,the company later brought a slew of corporate jobs to the metro.
The amount of money spent, and which companies are paid, is often debated. Oklahoma City recently incentivized Amazon for help with a distribution center. Some felt the money was wasted on a wealthy company that might have built in Oklahoma City with or without incentives.
In the case of Canoo, it's not the first time the state has sought to land an electric vehicle manufacturer. Tesla identified Tulsa as a finalist for a new facility last year, before ultimately choosing Austin, Texas. Its unclear just how close Oklahoma was as a runner-up, but it served as testament to the state's merits — and desire— to attract manufacturing jobs.
WhenOklahoma's Department of Commerce is finally able to release the finer details, the agreement will show the state offered several tax-based and cash incentives. Here are the ones most likely used:
Governor Kevin Stitt'sQuick Action Closing Fund
The Quick Action Closing Fund allows the governor to dole out cash after consulting with economic development professionals in his administration and legislative leaders.
A 2019 report of the fund's use showed the state gave $14 million to seven companies since 2011. During the coronavirus pandemic last year, Stitt authorized smaller awards to dozens of companies through the new Manufacturing Reboot Program.
In this year's budget, lawmakers set another $20 million aside for the Quick Action Closing Fund. Stitt said Canoo's award is considerably less thanthat number.
"For a 2,000-person company, the Department of Commerce goes through their numbers and makes sure it's a net positive to the state and then gives me a recommendation on what we can spend. I can assure you anybody that's going to bring 2,000 jobs is going to get the same type of incentives," Stitt told Capitol reporters this week.
Quality Jobs Program
The Quality Jobs Program is a “cash-back” job creation incentive that subsidizes up to 5% of new wages.For example, if a company's payroll costs increase by $100 million, they can get $5 million back from the state.
Participating companies receive cash payments for every quarter they reportfor up to 10 years.
The program is considered one of Oklahoma's oldest and most successful incentive programs, and has transferred hundreds of millions of dollars to participating companies since it was launched. A 2017 report from the Department of Commerce showed780 companies have enrolled since the program began, creating a payroll of over $22.3 billion.
Five-year Ad Valorem Exemption
Ad valorem taxes, also known as property taxes, can be waived upon completion of new or expanded facilities. The tax exemption isavailable for manufacturing, research and development, warehouse and distribution, and certain computer/data processing services, refineries or aircraft repair companies.
Investment/New Jobs Tax Credit
Oklahoma's Investment/New Jobs Tax Credit provides growing manufacturers a significant tax credit based on either an investment in depreciable property or on the addition of full-time-equivalent employees engaged in manufacturing, processing, or aircraft maintenance.
Automotive Engineer Workforce Tax Credits
Auto manufacturers who hire newly employed engineers can receive a corporate income tax credit of up to $12,500 per employee for five years.
The program gives an additional tax credit for tuition reimbursem*nt, and employees can get a $5,000 personal income tax credit for five years.
Staff writer DaleDenwaltcovers technology, aerospace and Oklahoma business news for The Oklahoman. Have a story idea for Dale? He can be reached at ddenwalt@oklahoman.com or on Twitter at @denwalt. Support Dale’s work and that of other Oklahoman journalists by purchasing a digital subscription today at subscribe.oklahoman.com.
