Grocery chain won’t sell off

BOISE – The announcement that the Albertson’s grocery chain won’t sell out and pull its headquarters from Boise brought sighs of relief from Idaho leaders on Friday, but the months of uncertainty about the company’s future highlighted the mixed results from a series of business tax incentives enacted by Idaho lawmakers last year.

The Legislature approved five direct business tax incentive bills, including one designed specifically with Albertson’s in mind – but four have yet to be used. The only new exemption businesses have taken advantage of so far is a sales tax break for research and development that’s largely benefited an existing employer, Micron Technology.

“You could say that our economic development policy isn’t being effective,” said economist Judith Brown, head of the Idaho Center on Budget and Tax Policy in Moscow. “We want to attract higher-paying jobs to the state, which is what these credits attempt to do. But we also want to prepare Idahoans to be able to fill those jobs, and that’s what an investment in education would do.”

Gov. Dirk Kempthorne, however, maintains that the credits can’t hurt – even if they don’t get used. “The hope was to attract new companies to Idaho, and to allow existing companies to thrive in Idaho and to expand their operations here,” said his press secretary, Mike Journee. “If someone takes advantage of it, great – that means we’re creating jobs. If no one does, then there’s no loss.”

Albertson’s announced in September that it was putting its company on the auction block. Months of uncertainty followed, with reports that several investor groups and others were bidding on all or part of the grocery and drug store chain. Then, on Thursday night, Albertson’s announced that it “has terminated all discussions regarding the potential sale of the entire company,” and would look only at selling underperforming assets.

CEO Larry Johnston told Boise’s Idaho Statesman newspaper, “We’re going to continue operating here in Boise.”

Nancy Vannorsdel, president and CEO of the Boise Metro Chamber of Commerce, said, “We’re greatly relieved.” The company, which has been headquartered in Boise for more than 60 years, is “a huge player” in Boise and in Idaho, she said, and has about 2,500 corporate employees. With 2,500 stores in 37 states, Albertson’s is one of the largest food and drug retailers in the world.

“The governor is very pleased to hear the news that Albertson’s will continue to be an Idaho company,” Journee said Friday.

Lawmakers nicknamed HB 306 the “Albertson’s bill,” and Kempthorne persuaded them to enact it by wide vote margins last year. It grants an array of large tax breaks, including income tax credits, sales tax rebates and state-paid property tax abatement, to companies bringing in at least 500 jobs averaging $50,000 a year or more and investing $50 million in new facilities in the state. The hope was that it would entice Albertson’s to consolidate its operations in Idaho, as well as attracting other companies’ corporate headquarters. No one’s applied to use it yet.

“Our elected officials are working hard to recruit and protect high-paying jobs in the state, and we strongly support their efforts,” Albertson’s spokeswoman Shannon Bennett said. “The significant economic development opportunities that come with a package such as this will benefit communities across Idaho for years to come.”

Bennett had no comment, however, on whether Albertson’s might use the incentive package in the future.

Legislators also demanded a companion bill, HB 323, granting scaled-down incentives to smaller employers who create as few as 10 new jobs paying at least $40,000 a year. Companies would get income and sales tax breaks, and county commissioners could opt to give them property tax abatements.

Some companies have expressed interest, and the state Commerce and Labor Department is aggressively marketing the new small-employer incentive act. But so far, no one’s applied for it.

“As of right now, we’ve not been contacted by anyone saying they were going to avail themselves,” said Dan John, tax policy manager for the Idaho State Tax Commission. John said he’s had half a dozen inquiries from companies about how the incentive package works.

Lawmakers also enacted two tax-break bills at the request of Micron Technology, the Boise-based computer chip manufacturer that’s the state’s largest private employer. One, HB 319, caps the company’s property taxes if its taxable value exceeds $800 million in a single county. Micron’s value has been as high as $1.5 billion in past years, according to the Ada County assessor’s office, but it’s closer to $600 million now, in part because of other exemptions granted by the Legislature in recent years.

Mike Reynoldson, Micron spokesman, said the company’s recently announced partnership with Intel will mean new equipment and personnel will be added in Boise in the next year that likely will push Micron above the cap, triggering the tax exemption. “I think there’s a definite possibility that it will,” he said.

The second Micron bill, HB 261, granted a sales tax exemption for the lease, rental, purchase, sale or storage of property used primarily in research and development, including anything used in high-tech “clean rooms.” That exemption is expected to cost the state about $7 million a year, with most of the benefit going to Micron.

“Even if we are manufacturing in other locations around the world, much of the research and development activity to develop our manufacturing process and products takes place in Boise,” Reynoldson said. “We have used that incentive. … It’s an excellent incentive for us to continue that kind of activity here in Idaho.”

John said there’s no way for the Tax Commission to say how many businesses are using the new exemption, but “I’m sure that the R and D exemption is being used – there’s not a doubt in my mind.” State officials are sticking by the $7 million estimate, he said.

That’s the only one of the five that businesses have actually used – and unlike the corporate headquarters incentive and the small-employer incentive, it doesn’t require that companies add jobs in Idaho to qualify.

The fifth business tax break that lawmakers endorsed was HB 110, a sales tax exemption for purchase of machinery or equipment used in alternative methods of generating electricity. State officials expected to grant a little over $2 million a year in sales tax refunds under the bill, but so far no one’s applied.

That bill was backed by an eastern Idaho firm that’s developing a wind energy plant.