Businesses of all sizes can benefit from incentives of the Gulf Opportunity Zone Act that was passed by the federal government to help Gulf Coast states recover from the devastating storms of 2005. The zone includes 49 counties in Mississippi.
Two of the most widely used benefits are the issuance of tax-exempt bonds and accelerated depreciation of equipment. Large developments have seemed to have the advantage in fully utilizing the package of benefits.
Economic developers and others working to help clients use the benefits would like to see more small and medium businesses utilize the legislation.
“There are some small businesses using it, but if they use the bonding, the investment must be $350,000,” said Larry Barnett, executive director of the Harrison County Development Commission. “Most small businesses won’t have that much investment. They can, however, use the first-year depreciation of equipment.”
He feels many business owners don’t explore the possibilities of the GO Zone package because they think it’s too difficult to navigate the red tape. “It’s not as complicated as people think it is,” he said, “There is some paperwork, but it’s not that difficult.”
There are professionals including attorneys, bankers and certified public accountants available to assist business owners with the ins and outs of the legislation.
John Harral of the Butler, Snow, O’Mara, Stevens & Cannada law firm’s Gulfport office says the primary incentive small businesses can utilize is the accelerated depreciation, but it’s hard to gauge the impact.
“There’s no way to know how many small businesses are using that because that’s between them and the IRS when they file their taxes and claim the depreciation in the first year in service,” he said. “We keep saying that no business should open or expand without considering the possibility they can benefit from the GO Zone legislation. There can be tremendous benefits for all businesses, large or small.”
Other economic developers in the area agree that it’s difficult to track which businesses are using the benefits.
“There’s no reporting coming into our office, but we have a lot of inquiries and talk to people about it,” said Charlotte Koestler, executive director of the Stone County Economic Development Partnership. “I think the disconnect is that local people who were already in business here thought it was a grant — money handed out. We try to make it known that it was designed to stimulate outside money coming in to build businesses in the area.”
Harral points out that new or expanding local businesses can also utilize the benefits. “We’re confident that a good many small businesses can benefit from the accelerated depreciation incentive,” he said.
Neco’s Family Market in rural Harrison County did utilize the GO Zone Act. Located on Cablebridge Road north of Pass Christian, the business is owned by Derek and Marsha Necaise and opened in June.
In the absence of the owners, general manager David Sellers said he could not discuss any benefits they received from the GO Zone Act, but could attest to the positive effects of the expanded business from a little corner store to a 35,000-square-foot full-service grocery store and convenience store with gasoline pumps. The expansion was on the drawing board before Hurricane Katrina walloped the area.
“There is a need here for this business. The area is more populated than people think,” he said. “We feel like there’s enough population up here to justify the business but big companies won’t look at a rural area like this. The nearest store is about 10 miles away and there is no grocery store in Pass Christian.”
The dual-purpose business has a supermarket with a bakery, deli, specialty food items, fresh fruits and vegetables and a full-service meat market where meat is cut daily. The store also offers a variety of general merchandise. The convenience store is under the same roof but completely separate.
“We employ 75 people and business is good,” Sellers said. “We draw customers from Harrison and Hancock counties.”
Buddy Mitchum of Government Consultants works with cities and the state on bond issuance and is working with businesses wanting to take advantage of the GO Zone benefits.
“There’s a lot of interest in it, both the tax exempt bonds and the accelerated depreciation of equipment,” he said. “A good many are in the process of issuing bonds and have until the end of 2010 to do so.”
Mitchum says he has recently worked with Siemen Composites in Gulfport, Morgan Building in McComb, Southern Specialty Foods in Jefferson Davis and Lawrence counties and Townsend Capital in Columbus.
Townsend Capital is a Baltimore-based real estate investment and development firm doing business all over the country. It came to Lowndes County two years ago and purchased a building in the county’s industrial park that had never been used.
Rick Cundiff is the company’s vice president and managing director of investment banking. “We put a substantial amount of money in the building and brought in a tenant that provides services to SeverCorr,” he said. “We partially financed the acquisition and rehabilitation of the building through the issuance of GO Zone bonds.”
Additionally, Cundiff said Townsend Capital plans to develop buildings for tenants who will be in the Mississippi Steel Technology Center.
“We are looking to finance improvements to the industrial park through the issuance of GO Zone bonds,” he said. “We will also take advantage of the accelerated depreciation benefit for one of our tenants.”
Townsend Capital recently opened an office in Jackson to look for more investment opportunities in Mississippi where GO Zone incentives can be utilized. Hopefully, that will include the Coast where company representatives have had meetings with the mayors of Biloxi and Gulfport.
“We like doing business here,” Cundiff said. “In our experience, the people are embracing, warm and wonderful.”
Congress extended the 50% bonus depreciation provision until December 31, 2010, for Hancock, Harrison, Jackson, Pearl River and Stone counties.
Contact MBJ contributing writer Lynn Lofton at firstname.lastname@example.org.
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