With just days remaining in the 2025 legislative session, Alabama lawmakers delivered a landmark victory for economic development with the passage of the Alabama Development Fund—a first-of-its-kind initiative designed to create a long-term, sustainable funding stream for projects that bring high-quality jobs and capital investment to the state.
Gov. Kay Ivey signed the legislation into law earlier this week, calling the initiative “a game-changer for Alabama’s economic future” and praising its innovative structure, which provides consistent funding without raising taxes or cutting existing programs.
“This fund is about putting Alabama in control of its own economic destiny,” Ivey said. “We are giving ourselves the tools to compete—and win—for the projects that matter most.”
The Alabama Development Fund will capture a small portion of the state sales and property taxes that are typically abated when major companies locate or expand in the state. Specifically, the fund retains 0.75 percent from state sales tax abatements and one million from state property tax abatements. Based on historical data, the fund is expected to generate approximately $28.5 million annually, creating a reliable pool of money for future site development, infrastructure and workforce training.
The legislation passed with broad bipartisan support, and the Alabama Department of Commerce will oversee the fund’s administration to ensure alignment with the state’s broader economic goals, including rural revitalization.
“Too often, rural communities are left behind—not because they lack potential, but because they lack resources,” said Commerce Secretary Ellen McNair. “The Alabama Development Fund changes that equation by putting real dollars behind real opportunity.”
The fund directly supports the goals of the state’s Catalyst strategic plan, with targeted investments in site readiness, workforce development, international business recruitment, and quality-of-place initiatives that make Alabama more attractive for workers and industries alike.
Supporters say the fund is a major step toward closing the deal on more transformative projects—especially in rural areas—without having to rely on uncertain budget allocations or federal grants.
Economic development leaders have long argued that Alabama’s competitiveness has been hindered by the absence of a dependable funding mechanism. The new fund offers what officials describe as a “pay-for-performance” model, linking incentives to future tax revenue while ensuring a portion of that benefit is reinvested back into growth efforts.
“This is one of the most fiscally responsible and forward-thinking pieces of legislation we’ve seen in years,” said Rep. Danny Garrett, R-Trussville, a key sponsor of the measure. “It puts skin in the game and ensures we have the capital needed to meet tomorrow’s challenges head-on.”
The Alabama Development Fund is expected to begin generating revenue later this year, with the first round of investments anticipated in early 2026. The Commerce Department is currently finalizing guidelines for how the funds will be distributed, with a focus on transparency, accountability and measurable outcomes.
As Alabama competes with neighboring states for high-wage jobs and industrial expansion, the fund gives state leaders a tool they’ve never had before: a consistent, renewable stream of investment to shape the economic future on Alabama’s terms.
“We don’t just want to be in the game—we want to lead it,” Ivey said. “The Alabama Development Fund ensures we can do exactly that.”
