Economic development is the practice of positioning an economy for long-term growth and sustainability that creates and retains quality jobs. Louisiana has struggled with economic development historically as a result of challenges related to corruption, infrastructure and education.
However, in recent years Louisiana has emerged as an economic development powerhouse after massive reforms to address those issues. At the state level, Louisiana Economic Development guides the agenda and delivers professional leadership, while organizations like Greater New Orleans Inc., the Baton Rouge Area Chamber and the Lafayette Economic Development Authority are the boots on the ground to manage projects and lead regional development.
The current alignment of economic development objectives at the state, regional and local levels is allowing the state to compete for high-impact corporate expansion projects that it would not have been considered for just a few short years ago. In addition to the inherent value proposition that Louisiana offers for select industries, the ability to lower costs associated with expansion through incentives is an important driver of economic development success.
Last week, the House Appropriations Committee amended House Bill 1 to eliminate $81.8 million in existing funding for Louisiana’s Mega-Project Development Fund. The decision to reduce the Mega-Project Fund comes at a time when Louisiana has built up its strongest ever pipeline of major corporate relocation and expansion projects.
The Mega-Project Fund was introduced in 2007 as a “closing fund” to provide financial incentives to companies that choose to relocate to Louisiana and to help existing companies in the state expand. This year, shrinking state budgets have threatened to reduce the Mega-Project Fund. Although Louisiana has an Economic Development Award Program in place, its annual budget of $5 million will struggle to make an impact alone.
According to Louisiana Economic Development Secretary Stephen Moret, in the next two to four months, 14 high-potential companies will consider relocating to Louisiana, creating up to 25,000 new jobs across the state. Reducing the Mega-Project Fund will severely hinder Louisiana’s ability to compete with other markets for these projects.
In these tough times, investment in economic development should be increased rather than cut. The creation of new jobs is the only thing that will help this economy bounce back faster and stronger than before.
Louisiana is not the only state with state-funded business incentive programs; these programs are a best practice in the industry and other states in the Southern region have developed similar funds. Since 2005, closing funds were used in Texas, Arkansas and Mississippi to secure 14 major development projects, collectively adding 12,000 new jobs and raising $1.5 billion in investments to the region. As competition between Southern states for new business investment and expansion increases, we must recognize the importance of the Mega-Project Fund to Louisiana’s future economic prospects.
So far, Louisiana’s Mega-Project Fund has proven its efficacy statewide by increasing business revenues and creating thousands of new jobs. In Orleans Parish, for example, $125 million in Mega-Fund dollars were granted to the Marine Force Reserves Headquarters to retain 1,663 jobs and add 300 more in 2009. The success stories of Louisiana’s Mega-Fund program present a clear trajectory: why should we stall our economic development now when there are great opportunities at stake?
Let’s not play politics with our economic future.Rodrick Miller is president and CEO of the New Orleans Business Alliance.