Oklahoma Incentive Evaluation Commission Year 5 Incentive Evaluation

Oklahoma Incentive Evaluation Commission Year 5 Incentive Evaluation Update August 27, 2020 PFM Group Consulting LLC. © PFM 1735 Market St. 43 rd Floor Philadelphia, PA 19103 (267) 713 -0700 pfm. com 1

Today’s Agenda § Update on project activity to date. § Update on working drafts submitted to the Commission. § Discussion of key evaluation issues for selected 2020 incentives. § Update on data issues related to the Ad Valorem Tax Exemption program. § Next steps. © PFM 2

Project Activities to Date § Scheduled and held internal stakeholder meetings for each incentive. § With the assistance of the Oklahoma City, Tulsa and State Chambers of Commerce, conducted multiple external stakeholder video meetings. § Completed benchmarking activities for each incentive. § Conducting a recipient survey related to the Film Enhancement Rebate. § Working drafts were completed and sent to Commission members – 5 on August 21 st and 4 on August 25 th. § Participating in first in-person Commission meeting since January 2020. © PFM 3

Update on Working Drafts § Original target was mid-August, actual delivery about a week later. § As in prior years, these are about one-half of the final content. § They provide background (that is not likely to change appreciably) related to: - Incentive background and history, including 2016 evaluation; - Criteria for evaluation; - Incentive administration; - Benchmarking of similar programs (and program evaluations) in other states; § They do not include the economic impact analysis, or findings and recommendations. © PFM 4

Key Evaluation Issues for 2020 § Aerospace Employer and Employee Tax Credit - These had a strongly positive ROI in 2016; does consideration of layering change that? - Are both incentives (employer and employee) necessary to “address the critical shortage of engineering and technical talent facing the Oklahoma aerospace industry? ” § Tax Credit for Electricity Generated by Zero Emissions Facilities - How has eliminating the credit impacted on new construction of facilities (the ‘but for’ question)? - Has eliminating the credit impacted the projections for electricity generated by wind power? § Five-Year Ad Valorem Tax Exemption - Should the increase in use be cause for state financial concern? - Is there still a positive ROI with greater current use of the program? - Would changes to eligibility or the state-local partnership improve its functionality? § Film Enhancement Rebate - Has the increase in the rebate cap impacted on utilization? - Have changes in administrative practices increased the available program data and information? § Oklahoma Capital Investment Board - Do the results to date create a business case for additional program investments? © PFM 5

Update on Data Issues for the Five-Year Ad Valorem Tax Exemption § At the last meeting, data issues for this program were discussed. § OTC Commission Chairman Prater pledged to work to resolve those issues. § Chairman Prater arranged a helpful meeting between the project team and the key staff responsible for administering the program. § OTC staff has provided a great deal of time to assisting us with gathering data they believe is available to the project team – and we are grateful for that cooperation. § OTC operates within confidentiality requirements related to his Chapter in Oklahoma Statutes, and those differ from the requirements within the Incentive Evaluation Commission’s Chapter. § It is likely that one of three courses of action can be pursued by the IEC: 1. Accept the statutory tension and have the project team and OTC leadership continue to work to ‘figure it out’ on a case-by-case basis; 2. Seek an Attorney General’s opinion as to how to treat confidential OTC information in relationship to the IEC statutory requirement for agencies to provide information to the IEC; 3. Seek legislative clarification for how to treat otherwise confidential OTC information for the purposes of conducting IEC program evaluations. © PFM 6

Next Steps § The project team response to individual Commission member’s questions or comments related to the working drafts. § The project team is still targeting completed drafts submitted to the Commission on or before October 1. § Given the unusual circumstances related to this year, it is possible that a few drafts might spill over into the first week in October. - If that is the case, I will notify the Commission members of that fact in advance. - That notification will inform you of which evaluations may arrive after October 1 and the expected date of arrival. § As in past years, the project team will actively participate in the public hearings and the Commission’s deliberations to complete its report to the Governor and the Legislature by December 15, 2020. © PFM 7

Questions and Discussion © PFM 8