Keaton PetersAlabama wants to boost economic development programs without raising tax rates or cutting existing services. The Alabama Growth Alliance, a public-private partnership of 15 state leaders formed by Gov. Kay Ivey last August, has endorsed the creation of the Alabama Development Fund, which would generate sustainable funding by retaining a portion of abated taxes from future economic development projects
The initiative, announced by Commerce Secretary Ellen McNair, would modify existing tax abatement laws to allow the state to capture a small percentage of sales and property tax revenues that would otherwise be fully abated in qualified economic development projects. The specific portion of abated taxes to be retained would need to be determined by the Alabama Legislature. These funds would then be directed toward rural development, international business offices, global marketing and infrastructure improvements.
The timing of the fund’s creation aligns with increasing competition for major economic development projects across the Southeast. The Growth Alliance, which was established in August 2024 as part of Governor Ivey’s “Working for Alabama” package of economic growth policies, recognized this competitive pressure in endorsing the fund’s creation. Other states have recently enhanced their economic development incentives and marketing efforts, putting pressure on Alabama to maintain its competitive position in business recruitment.
The funding mechanism provides a novel approach to economic development financing at a time when states across the country are seeking ways to remain competitive without straining existing budgets or raising taxes. The model would effectively create a self-sustaining funding stream by redirecting a portion of future tax benefits rather than drawing from current revenue sources.
One of the largest projects to be supported would be expanding Alabama’s international business development offices, which play a crucial role in attracting foreign direct investment. The fund would also support quality-of-place initiatives aimed at making Alabama communities more attractive to businesses and workers.
State Representative Andy Whitt, a sponsor of the legislation, emphasized the importance of maintaining Alabama’s economic strength in the region. “It’s essential that we remain competitive in this realm and take the next step to outperform our Southeastern neighbors,” Whitt said.
The fund would provide dedicated resources for marketing campaigns and infrastructure improvements that could help the state compete more effectively with neighboring states for major economic development projects.
The initiative builds on Alabama’s existing economic development framework, including the recently adopted Catalyst strategic plan. The Department of Revenue would manage the collection and distribution of funds, with proceeds going directly into the dedicated Alabama Development Fund.
The proposal now moves to the Alabama Legislature, which began its 2025 session this week. Lawmakers will need to modify existing abatement laws to enable the tax collection mechanism. The changes would only affect new projects receiving tax abatements going forward, with no impact on existing agreements or current tax revenues. If established, the fund could begin collecting revenues as soon as new qualified projects are approved under the modified abatement structure.
Photo courtesy Jim Bowen from Fort Worth, US, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons
