In the past year, the state of Mississippi has convinced an impressive array of green tech and other companies to open factories in its borders.

How exactly is it pulling this off, considering that the state doesn't even have a renewable portfolio standard?

The small state has put together a comprehensive package of incentives that could in some ways serve as an example for other states. It will even customize incentives. A $54 million loan and grant package awarded by the state to solar manufacturer Twin Creeks Technologies last year, for instance, was not part of the $145 million Mississippi Industry Incentive Finance Fund (IIFF) that issues loans to manufacturers. It was authorized in a separate piece of legislation.

Kathy Gelston, chief financial officer for the Mississippi Development Authority, walked us through some of the main components of the strategy:

--Low-cost loans. The state does not charge a premium on the money it doles out. Right now, the state can obtain loans for around 4 percent. Thus, manufacturers will pay about 4 percent interest on its loans back to Mississippi for establishing factories in the state.

"We're not losing money. The only cost to the state is getting the bonds issued," she said.

Four companies -- including energy efficient window maker Soladigm and biofuel vendor Kior -- obtained loans from the IIFF. Stion, which makes CIGS solar panels, announced a $75 million loan from the state. Those funds did not come from the original IIFF. The money had already run out. The legislature and the governor had to pass another bill to seal the Stion deal.

In all, that makes $275 million in loans. The total includes some grants, as well, but the vast bulk of the incentives come in the form of loans.

--Taxes are low to fictional. Incoming manufacturers qualify for income tax holidays, franchise tax exemptions, sales and use tax exemptions and payroll tax rebates.

"We can get you pretty close to tax free in Mississippi," he said. Even after tax holidays end, the burden remains light. The corporate tax rate maxes out at 5 percent and the sales and use tax tops out at 7 percent. 

--Personal service. "We never put together the same proposal twice," she said. If investors or executives want to speak to the head of the department of revenue or another agency, a meeting can easily be arranged. The state's population is only 2.5 million. (Look at the customized legislation for Stion and Twin Creeks.) The state, she added, also does extensive due diligence on potential partners.

Anecdotal evidence indicates that California really falls down on this score. Several CEOs have regaled us with horror stories about being snubbed by state bureaucrats or confusing incentive/loan programs. Arnold and State Treasurer Bill Lockyer managed to seal deals with some companies like Tesla Motors, but Arnold is now gone and the complaints roll on.

Stion, headquartered in San Jose, earlier planned to build its factory in California.

--Real estate. While Mississippi doesn't have lots of fallow factories like some states in the upper Midwest, it still has plenty of open farm land. "We can get a green field site at a reasonable cost," she noted, and often near freeways.

--Low cost of living. The average salary in the state is $33,000. Stion has committed to an average salary of $43,000, she said. The state's training program has also been adopted by other states, she added.

--A favorable political climate. You'd think a program like this could be a tough sell. Mississippi tends to be somewhat conservative and these programs essentially involve giving state money to private individuals. (And some of them are rich people living in California!) Sure, some grumbling is inevitable, but the low cost/high benefit nature of the program has broad appeal.

Stion and other manufacturers may currently be on tax holiday "but we wouldn't be getting anything from them anyway if they weren't coming here," Gelston said.

Considering the size of the state and some of the demographic issues, the Mississippi example may not be repeatable in some other regions. And it needs to be pointed out that none of the green companies the state has landed have yet proven themselves in the market. Twin Creeks and Stion have yet to face the buzzsaw that is First Solar and Suntech in solar, while Soladigm must contend with a dead construction market. Virginia and Scotland had once promised to rival Silicon Valley in semiconductors.

And don't forget that the programs ultimately benefit from the generosity of states like California, Colorado, Massachusetts and New Jersey that have put together renewable portfolio programs and passed carbon regulations. This is a far cry from pure free market capitalism.

But as a way to keep manufacturing on U.S. soil, the state provides an intriguing case study.

Tags: biofuels, incentives, kior, loans, manufacturing, mississippi, soladigm, solar, subsidies, taxes, twin creeks technologies