State officials pushed back Friday against a critical study of the $1 billion-plus State Center project for midtown Baltimore, demanding that the Maryland Public Policy Institute "withdraw your recently issued report." Read the whole thing here.

One of their main arguments is that MPPI failed to add up the project's benefits in their study. This is a common response when somebody questions a public project. The development will generate $81 million in taxes, ground rents and parking fees! It'll be a "world class transit-oriented development." It'll create "thousands of jobs."

As if somehow that trumps all questions about the project's cost to taxpayers. The rents the state has agreed to pay seem substantially above the going rate. The developers want the city to approve an expensive tax-increment financing deal. The Department of Legislative Services, the General Assembly's nonpartisan research wing, found that the project "is not in the best interests of the state" and that the projected property-tax assessments appear "unrealistically high."

Perhaps the most troubling aspect is that the project did not result from a competitive bidding process. How does the state know it's the best deal when there was no request for bidding proposals? What matters isn't that the project has benefits. What matters is what taxpayers are paying for them.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (14)
Categories: Corporate welfare
        

There were already plenty of reasons to question the redevelopment of State Center as currently envisioned. The process of awarding the project was irregular. The composition of the development team changed afterward. The project could create an Baltimore office supply glut, suck tenants from downtown and add to a vacancy problem on the harborfront. And it's very expensive for taxpayers. How expensive?

The Maryland Public Policy Institute has published an excellent analysis by Jeff Hooke and Gabriel Michael. It's one of the best things they've put out, and anybody interested in the project should read the whole thing. It's less than five pages. Aside from the financial analysis the report is a good scorecard of players and events so far. The headline is that State Center as now structured would cost taxpayers $127 million when you count all the giveaways -- tax credits, free land, free parking garage, inflated rent etc.

Some other highlights:

To promote the first phase, the state has, among other items, (1) agreed to pay an above-market rental rate— about $10 per square foot extra—on its new office space, (2) construct a parking

Continue reading "127 million reasons to oppose State Center project" »

Posted by Jay Hancock at 8:03 AM | Permalink | Comments (9)
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Baltimore Development Corp. director Jay Brodie tells Julie Scharper that mayors-at-the-time Martin O'Malley and Sheila Dixon were aware of the deal with Sam Polakoff, which required the city to pay some of Polakoff's expenses even if he never bought the Gateway South property.

"We don't make any decisions without the mayor knowing about it," said Brodie, adding that the deal was brokered at the end of Martin O'Malley's term as mayor and the beginning of Sheila Dixon's tenure, and both were briefed on the deal.

City Solicitor George Nilson had said this week that the sportsplex deal was signed by a junior employee of the Baltimore Development Corp. and did not receive approval from the law department.

It's not the mayor's job to review legal contracts. It's the mayor's job to look at the big picture and let the many people who supposedly work for the taxpayers, including the Baltimore Development Corp., handle the details. Here is The Sun's editorial page:

The Board of Estimates is a unique Baltimore institution and a key safeguard to make sure city business is being handled properly. In general, contracts valued at above $5,000 are supposed to go before the board, but the BDC, a quasi-public agency, sometimes operates outside of that system — even in a case like this, when 11 acres of city-owned, waterfront property are at issue. That is a mistake, and this deal shows why.

I haven't seen on follow on this yet from The Baltimore Brew, which had a good story yesterday, in which Brodie declined to comment.

Posted by Jay Hancock at 8:56 AM | Permalink | Comments (0)
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I thought this Crain's headline was from the Onion:

Sears eyes moving HQ to Washington, D.C.: report

Whoever leaked the "news" about Sears's interest in the District is probably more interested in the publicity than in the highly remote possibility that Sears would actually move its HQ to DC. If it came from Chicago, then Sears is trying to whip up the auction fervor for tax breaks and other giveaways. If it came from economic development people in DC, they're trying to show that DC is a player and that they're doing their jobs, as if their jobs were to give away taxpayer money to the big retailer.

(I say "highly remote." I could see a Northrop Grumman situation in which Sears puts up a skeleton headquarters with a couple hundred people. But that's not a traditional corporate HQ.)

Posted by Jay Hancock at 10:58 AM | Permalink | Comments (1)
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Nice employment base you go there, Gov. Quinn. Shame if anything should happen to it. But we can protect you for a modest, multimillion-dollar consideration.

Give me a break. Six thousand Sears employees are going to move to North Carolina? Call their bluff, governor.

Hoffman Estates-based Sears reportedly has been in discussions with North Carolina, Texas, Tennessee and New Jersey to move there. The news was first reported in the Arlington Heights-based Daily Herald newspaper.

"We do owe it to our associates and shareholders to consider options and alternatives and intend to be very thoughtful and thorough in our deliberations," a Sears spokesman told the Daily Herald. "It is still very early in the process."

Sears has both state and local incentives set to expire in 2012, and the company has commissioned a study to measure the impact a move would have on the approximately 6,000 employees and 9,000 ancillary jobs throughout the suburbs, the Daily Herald says.

Posted by Jay Hancock at 2:01 PM | Permalink | Comments (3)
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Maryland fell again in Chief Executive magazine's annual ranking of "best states for business." The state ranked 37th -- pretty poorly. That looks like it's down from 34th last year, although the magazine's chart seems to have some typos.

But Maryland's rank wasn't as bad as those of Illinois, New York and California, which scored 48th, 49th and 50th. Illinois and Maryland are distinguished by their inclusion in the "5-Year Biggest Losers" category for states with falling rankings. Illinois plunged 40 places, from 8th to 48th over that period, while Maryland fell 16 spots, from 21st. Of course that period coincides with the departure of Gov. Robert L. Ehrlich Jr., Maryland's first Republican governor in decades, and the inauguration of Democratic Gov. Martin O'Malley, who substantially raised taxes.

California and Illinois probably got negative marks partly for the miserable state of their budgets, which has earned them tons of bad publicity. If O'Malley hadn't raised taxes, Maryland's budget situation might have been as bad as theirs. The "winners" on the list are the usual suspects: southern states with cheap labor and low taxes. Texas, North Carolina and Florida were 1 through 3.

If the business climate in Florida is so great, why is the unemployment rate 11 percent? (Maryland unemployment is 6.9 percent.)

Posted by Jay Hancock at 5:36 PM | Permalink | Comments (15)
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In this economy, with the incentives given to Stanley Black & Decker Executive Chairman Nolan Archibald to downsize his former company, I suppose the $1 million in taxpayer money being given to SBD is a good buy. On Tuesday I talked to Tim Doyle, program manager for financing at the Maryland Department of Business and Economic Development, about the deal.

The $1 million is described as a "conditional loan," but it's really a conditional grant. To keep the money SBD has to:
-- Spend $12 million on capital improvement on the former Black & Decker headquarters in Towson by 2016.
-- Employee 1,100 people at the facility and 200 people elsewhere in Maryland between now and 2016.
-- Keep its headquarters for construction and do-it-yourself in Towson for the five years.

As usual SBD seems to have threatened that to move the jobs elsewhere unless Maryland ponied up.

"This is seen by the state and by the department as a very good economic development project," Doyle said. "There was the potential for them to go somewhere else. There was the potential for all of it leaving or part of it leaving."

When Stanley announced that it was buying Black & Decker, I would not have predicted that Maryland would keep 1,300 jobs in the combined company.

Posted by Jay Hancock at 5:35 AM | Permalink | Comments (5)
Categories: Corporate welfare
        

I thought states had learned to attach clawback provisions to economic development incentives. If the corporate welfare doesn't create so many jobs for so many years, the company has to give back the money. Apparently Massachusetts failed to do this, giving Evergreen Solar millions to open an 800-worker solar plant only to see the place shut down and move the jobs to China.

From Good Jobs First:

Of the $58 million award, $13 million was provided through an infrastructure subsidy, $21 million in the form of direct grants, and the remainder was provided in tax credits. Massachusetts officials stated that the state stands to recoup only $3 million of its $21 million grant, even though Evergreen constructed its factory just two years ago.

In its rush to bag a green trophy business, Massachusetts neglected to attach job creation requirements to the majority of the subsidy. Only $20 million of the total award contractually required that jobs be created at all.

Since the factory was only two years old, all of the tax credits may not have been reaped. So perhaps the $58 million figure is high. But it's still an amazing waste of money by Massachusetts officials.

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (4)
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For decades cities have been billing taxpayers to build convention centers, finding that the space isn't fully utilized and then deciding that the solution is to expand the convention center. The rationale, of course, is that the city loses certain conventions by not having half a million square feet or whatever of exhibit space. This may be true. But when every city tries to be competitive for the megaconventions by building megaconvention centers, it creates a lot of wasted space.

Baltimore's existing convention center isn't that old. It opened in 1997. Now the Greater Baltimore Committee is talking about basically doubling the exhibit space as well as adding a too-large arena of 18,500 seats. And which major-league hockey team will be playing here to fill up all those chairs? The new convention center would have 600,000 square feet of exhibit space, Ed Gunts reports.

The Washington D.C. convention center has 700,000 square feet of exhibit space. In Seattle they're talking about doubling the convention exhibit space to 600,000 square feet. They're considering similar expansions in Indianapolis and Oklahoma City. And so forth. Like all these projects, the proposed Baltimore expansion would be paid for largely by taxpayers. Is that a good use of your money?

Posted by Jay Hancock at 9:15 AM | Permalink | Comments (6)
Categories: Corporate welfare
        

Good Jobs First, which has been tracking and inveighing against dumb corporate welfare since the 1990s, has a new report on how well states disclose the details of economic development subsidies. If states are going to create a double-standard taxation system -- one for the suckers who pay sticker price, another for the companies that can wheedle tax discounts and subsidies out of the pols -- the least states can do is disclose what they're doing. Most of them don't. At least not very well.

Maryland did poorly, getting a D+, but that's not unusual. (Good Jobs First graded on a kind of reverse curve, refusing to give credit for subpar performance.) For example, Maryland has no online portal to disclose recipients of Enterprise Zone tax credits, the report said. However, Maryland did disclose details of financing made through its Maryland Economic Development Assistance Authority Fund, the report said.

Maryland does a much poorer job disclosing details of economic development incentives than it did disclosing details of stimulus spending, said Greg LeRoy, executive director of Good Jobs First, a nonprofit based in Washington.

"Despite winning both of our recovery act competitions, reporting on federal money, Maryland is very much in the middle of the pack when it comes to reporting on its own money," LeRoy said.

Posted by Jay Hancock at 6:00 AM | Permalink | Comments (1)
Categories: Corporate welfare
        

From the testimony of Thomas Cafcas, Good Jobs First, before the Maryland Business Tax Reform Commission on Tuesday:

Statewide, the projected cost of the Enterprise Zone Property Tax Credit in 2009 was $1.79 per Maryland resident. This figure does not include the costs of local property tax abatement programs. A 2005 study found that Maryland has more property tax abatement programs than any other state in the country. With such high costs, are Marylanders getting bang for their buck in existing programs?

Taxpayers do not know. Maryland does not disclose recipients of Enterprise Zone Property Tax Credits, despite the cost of the program doubling between 2006 and 2010. Worse, this program contains no clawbacks to protect taxpayers if companies fail to meet benchmarks. But this disclosure problem doesn’t stop with the Enterprise Zone program. The state does not disclose how much companies were eligible to receive or actually received in Job Creation Tax Credits. The same is true of One Maryland Tax Credits which cost the state $8 million in 2008.

Maryland should take notice of other states. Many states, like Wisconsin and Illinois, have passed blanket laws that require consistent disclosure of tax credit recipients. The Illinois Corporate Transparency Accountability Portal allows taxpayers to search an online database by company or subsidy type. Any subsidy a company receives is posted in the database. Michigan maps the location of MEGA tax credit recipients and discloses all other subsidies made available to that company. StateStat already has this capacity.

Posted by Jay Hancock at 7:27 PM | Permalink | Comments (0)
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What Maryland Stadium Authority executive director Michael Frenz told reporters last night may be true: Cutting the state's take of Orioles' home-plate advertising in half might be the best deal the state could get. The lease says the state gets 25 percent of all ballpark ad revenue. The state, subject to approval by the Board of Public Works, says it'll settle for 12.5 percent from the home-plate ads.

The team argues, ridiculously, that the ads fastened to the wall behind home plate are really TV ads, not ballpark ads. Therefore the Orioles don't have to share (as much) revenue from those video billboards. But the state has its hands tied: Such disputes must be settled by arbitration, not lawsuits. So perhaps the settlement was inevitable. What's disappointing is that, as the Daily Record reports, "the settlement does not cover the potential for the team to replace the physical ads with virtual ones added to game broadcasts by computer, an option that could leave the authority without any ability to collect a share of the revenue and one the team has repeatedly referenced in the dispute."

The potential for virtual home plate ads, of course, was the Orioles' primary leverage in achieving this concession. If the settlement indeed doesn't address this issue, it leaves the team free to apply that threat again, in the future.

Here is a September column on the dispute.

Posted by Jay Hancock at 10:42 AM | Permalink | Comments (3)
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Hancock blog, March 18, 2010:

So I asked Jay Brodie, chief executive of the Baltimore Development Corp., if the Remington Walmart and Lowe's or its developer may be getting tax abatement, payment "in lieu of" tax or other one-off breaks. Brodie's reply: The project "is in the Enterprise Zone and so is entitled to those credits. No other incentives have been asked for or offered."

Baltimore Sun, Sept. 14, 2010:

The developers of a Remington shopping center, which is slated to include a Walmart and Lowe's home improvement store, could be eligible for substantial tax breaks because of a resolution hastily approved by the Baltimore City Council last year.

The 25th Street Station project, planned for the site Anderson Automotive has occupied for half a century, is located in one of the city's two designated "focus areas," where businesses receive extensive property tax breaks and credits for hiring employees to stimulate growth in struggling communities...

The resolution, which was introduced at the request of the Baltimore Development Corp., the city's quasi-public economic development arm, also established four enterprise zones, where lesser tax breaks are intended to stimulate economic growth.

The "focus-area" tax breaks would appear to be over and above the Enterprise Zone tax breaks. Why can't Baltimore get even a discount retailer store without layering on the giveaways?

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (13)
Categories: Corporate welfare
        

Once state policymakers required only glamour, street-scenes and local employment from the film productions getting millions in taxpayer money. Now they want PR. Michigan has decided that having Michigan taxpayers pay for a cannibal movie might not be a great idea. From the NYT:

“This film is unlikely to promote tourism in Michigan or to present or reflect Michigan in a positive light,” wrote Janet Lockwood, Michigan’s film commissioner. Ms. Lockwood particularly objected to “this extreme horror film’s subject matter, namely realistic cannibalism; the gruesome and graphically violent depictions described in the screenplay; and the explicit nature of the script.”

These are the hazards of patronage for all artists and journalists. But in truth states shouldn't be using taxpayer money to pay anybody in Hollywood making anything. Maryland has sensibly rejected pleas to have the General Assembly pay welfare to film makers.

Posted by Jay Hancock at 10:25 AM | Permalink | Comments (2)
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Very nicely done and disturbing report from the Washington Post's Robert O'Harrow Jr. and Dan Keating on the power of members of Congress to directly affect their investments. Among the findings:

On the House Agriculture Committee, which holds sway over farm policies and subsidies, members had farming and agribusiness investments worth five times on average the amount held by other colleagues in the House. Many of the committee members' holdings were in family farms. Nothing prevents those members from also receiving farm subsidies, and in the past, some have.

Likewise, House Energy and Commerce Committee members, who routinely hold hearings about telecommunications and computer issues, had heavier than average investments in companies such as Oracle, Nokia, AT&T and Verizon.

House Homeland Security Committee members also had more communications and electronics holdings as a group than the House as a whole, and House Transportation and Infrastructure Committee members as a group owned almost six times more holdings in transportation firms.

In the Senate, the Banking, Housing and Urban Affairs Committee had on average almost twice the value of holdings in finance, insurance and real estate as that chamber as a whole. The Senate Environment and Public Works Committee members had almost three times the value of agribusiness holdings as their colleagues on other committees.

Posted by Jay Hancock at 10:24 AM | Permalink | Comments (3)
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Check out Ed Gunts' story on Morgan Stanley's move to Thames Street Wharf on the former Allied Signal property on the east side of Baltimore's inner harbor. It's a fairly improbable tale. Morgan Stanley chose Baltimore eight years ago for big brokerage back office, promising to bring hundreds of jobs. Unlike many companies making big pledges to get economic development incentives, Morgan Stanley came through with the jobs. Even more amazingly, they are still here despite the financial meltdown and Morgan Stanley's vicissitudes. The firm has had its problems but has come out of the crisis in much better shape than most of its peers.

Morgan Stanley's presence in Baltimore and move to Thames Street Wharf is a testimony to an often-forgotten Baltimore strength: Its legacy, competence and influence in financial services. Despite the exit of Alex. Brown in the 1990s, Baltimore still punches above its weight in finance. It's a solid No. 3 on the East Coast, behind New York and Boston, with much lower costs. The cluster of talent and local quality of life mean that finance jobs tend to stay here even when the nameplates on the door change. Lots of Alex. Brown talent just moved to other shops. Morgan Stanley's 2009 purchase of Baltimore-based Legg Mason's former brokerage unit (via interim owner Citigroup) gives it even more of a Baltimore focus.

Morgan Stanley knew it could recruit the people it needed in Baltimore. Read the Baltimore Business Journal piece from 2002 to see how Maryland won Morgan Stanley. For those smarting from Maryland's recent failure to win Northrop Grumman's headquarters, it's a good antidote.

Posted by Jay Hancock at 8:33 AM | Permalink | Comments (2)
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I hate to belabor this, but I'm going to belabor it. Everybody is slobbering over Northrop Grumman CEO Wesley Bush to try to get him to move the company's headquarters to Maryland. He's supposed to be choosing between Maryland and Virginia.

Here is all you need to know about what will happen. Bush, who is succeeding Ron Sugar as Northrop's boss, will make about $20 million a year. (Sugar made $18 million last year and $20 million in 2008.) Let's assume for argument's sake that the $20 million is all ordinary income and that what gets reported in the proxy will be the same as what shows up on Bush's W2. (It won't be, but gross oversimplification here does not falsify the larger point.)

If he lives in Maryland he's going to pay at least $500,000 more a year in personal income tax, thanks mainly to local income taxes that Virginia doesn't have. And I'm not counting the Maryland's millionaire tax, which is supposed to disappear this year. Where would you put the headquarters?

Posted by Jay Hancock at 8:41 AM | Permalink | Comments (4)
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Today's column is about the tax increment financing deal that Harford County approved for developer Clark Turner last week. Turner will turn Beechtree golf course into a neighborhood of 768 houses, and the site's future property-tax revenue will be used to secure a $14 million bond issue to help pay for roads, sewers and so forth.

But only on and immediately outside the site. Proponents of the TIF kept talking about how it would upgrade county infrastructure at a time of scarce public funding -- as if the traffic nightmare on Fallston's Route 152 or some other systemic bottleneck would be addressed. The only road improvements that will come from the deal are four intersection upgrades right near Beechtree. These are the kind of projects developers routinely have to do with their own money.

Another point: Pro-TIFers keep trying to pretend that the Beechtree taxing district will somehow be separate from Harford County. "The bonds are not an obligation of the county," they say. True, Beechtree residents, and not the county as a whole, will have to service the bonds. But Beechtree residents will be county residents as much as anybody who lives in Harford now. If somehow the project got stalled and there wasn't enough tax revenue to pay bond interest and principal, the county would probably have to come up with a bailout. In any event the TIF will divert property tax revenue that ordinarily would have gone into Harford's general fund, and that's a material impact on all county taxpayers.

Posted by Jay Hancock at 7:55 AM | Permalink | Comments (2)
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Even if you're for the Walmart project in Baltimore's Remington section, like me, maybe you can agree that the one-off tax breaks associated with so many city developments should not apply here. Baltimore, slowly being taken over by tax-exempt nonprofit organizations, needs all the for-profit, tax-paying corporate citizens it can get. There's a dubious argument to be made in favor of giving tax breaks to a manufacturer or marquee hotel development. But there is no argument at all to be made in favor of one-company tax breaks for pure retail projects.

So I asked Jay Brodie, chief executive of the Baltimore Development Corp., if the Remington Walmart and Lowe's or its developer may be getting tax abatement, payment "in lieu of" tax or other one-off breaks. Brodie's reply: The project "is in the Enterprise Zone and so is entitled to those credits. No other incentives have been asked for or offered."

That's good. Remington is the kind of place enterprise-zone credits were designed for, and they go to any project locating within the zone. So they're not a special emolument just for Walmart and Lowe's. Under Maryland's law, the project will get an 80 percent property-tax credit on investment to renovate and rehab the site. The credit starts diminishing after five years and disappears after 10.

Posted by Jay Hancock at 6:22 AM | Permalink | Comments (3)
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Not much time to get into details, but the proposed tax increment financing (TIF) in Harford County that Jonathan Pitts writes about in today's paper is the dumbest legislative proposal to come down the pike in -- well, at least a couple weeks. As of February there were 1,682 homes for sale in Harford County, according to my colleague Jamie Smith Hopkins.

That's a huge inventory -- much higher, as a multiple of local demand, than the national average. And developer Clark Turner and County Exectutive David Craig want county taxpayers to take out a special loan so Turner can build more houses? A mile from Aberdeen Proving Ground? In a county where base realignment will soon bring demand for houses and allow development to proceed naturally? No way.

TIFs are intended to bring development to challenged areas that might not otherwise get it. Harford, and Beechtree, will eventually be swamped with development without any special deals for Turner.

Posted by Jay Hancock at 11:14 AM | Permalink | Comments (3)
Categories: Corporate welfare
        

Excellent job by Michigan's libertarian Mackinac Center exposing hypocrisy by Michael Moore. Moore hates corporate welfare. He even hates it when taxpayers are forced to give money to Hollywood producers. The Mackinac Institute's Kathy Hoekstra has him on tape saying so.

But, in this well researched and produced piece, she reports that his producers are applying for taxpayer subsidies from Michigan's egregious film-welfare program for the portions of "Capitalism: A Love Story" that were filmed there.

Posted by Jay Hancock at 7:00 AM | Permalink | Comments (1)
Categories: Corporate welfare
        

Sun editorial writer Peter Jensen gives the top 10 reasons why NG should move its HQ to Maryland instead of Virginia. Among them:

1. Force Northrup executives to experience commuter rush hour in Virginia - say, 6 a.m. on Telegraph Road in Alexandria. I-95/Capital Beltway interchange in Springfield should also do nicely.

2. Express mail them a copy of Gov.-elect Robert F. McDonnell's college thesis and highlight his views on "cohabitators, homosexuals or fornicators." And you thought Virginia was for lovers.

7. Three words: No slot machines.

Posted by Jay Hancock at 11:32 AM | Permalink | Comments (3)
Categories: Corporate welfare
        

Today's column argues that Maryland will not win Northrop Grumman's headquarters and that it's not that big of a prize, anyway.

Wherever the 300-job head office lands, it won't add much economic oomph. Recruiting the defense company will waste public servants' time. It probably wants tax breaks no state can afford.

And the headquarters will end up in Northern Virginia anyway. Nothing the District of Columbia or Maryland can do will change that.

Read the whole thing here.

Posted by Jay Hancock at 8:02 AM | Permalink | Comments (0)
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Obama's statement, via Greg Mankiw:

"I applaud the Senate's passage today of the Farm Bill, which will provide America's hard-working farmers and ranchers with more support and more predictability."

"The bill places greater resources into renewable energy and conservation. And, during this time of rising food prices, the Farm Bill provides an additional $10 billion for critical nutrition programs. I am also pleased that the bill includes my proposal to help thousands of African-American farmers get their discrimination claims reviewed under the Pigford settlement."

"This bill is far from perfect. I believe in tighter payment limits and a ban on packer ownership of livestock. As president, I will continue to fight for the interests of America's family farmers and ranchers and ensure that assistance is geared towards those producers who truly need them, instead of large agribusinesses. But with so much at stake, we cannot make the perfect the enemy of the good."

"By opposing the bill, President Bush and John McCain are saying no to America's farmers and ranchers, no to energy independence, no to the environment, and no to millions of hungry people."

If the farm policy weren't driving food prices sky high, we wouldn't need "an additional $10 billion for critical nutrition programs." First American taxpayers funnel billions to agri-business so it can sell at anticompetitive prices; then taxpayers have to pay billions more so people can afford to eat.

Posted by Jay Hancock at 11:27 AM | Permalink | Comments (5)
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The most-read article from the Web site of Area Development magazine. Inside tips on how companies can play states off one another to cut their taxes and win taxpayer grants. It's a perennial outrage that violates promises of equal treatment under the law. Company A pays "X" taxes, but company B in the same industry negotiates a lower rate. And no, it's not "pro-business" to allow this. When one taxpayer pays less, its business competitors have to pay more and compete with it for workers to boot.

If you want to cut taxes, cut them for everybody or nobody.

HOW TO PLAY THE INCENTIVES GAME

Many state and local governments are eager to negotiate incentives with companies that might revitalize the area’s economy....

Negotiation is an art, and the negotiation of incentives should not be taken lightly. States can be quite competitive with each other in the race to recruit major employers, and the ability to negotiate effectively with the different players is essential.

In one recent case, five states were vying to land a major manufacturing facility. The initial incentive offers ranged from $7 million to about $30 million. By the time negotiations had concluded, the final package had climbed to approximately $80 million.

It’s important to know which resources the various contenders bring to the table. For example, some states can tap the 1998 multistate tobacco settlement as a source for discretionary incentives. While much of the nearly $250 billion that states will receive from tobacco companies over the first 25 years has been earmarked for public-health expenditures, a substantial amount remains available for other purposes — including economic development....

The competition among jurisdictions for corporate expansion and relocation is intense. Savvy companies that know how to play the incentives game can gain a valuable strategic advantage.

And it's all done beyond the knowledge of the taxpayers footing the bill:

Maintain confidentiality. To maintain negotiating leverage, companies should refrain from making any public announcement of plans for expansion or relocation until the incentives package has been finalized and comprehensive due diligence has been performed.

Posted by Jay Hancock at 1:54 PM | Permalink | Comments (0)
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Liberals know why corporate welfare is bad: It takes taxpayer money and gives it to fat cats. But there is a more effective conservative argument against economic development subsidies: They amount to government economic planning and, by taking resources from one company and giving them to another, they breach the Constitution's promise of equal protection under the law. Here is more of the conservative argument, as expressed by a professor at Jacksonville State in Florida and posted on the Web site of the Ludwig von Mises Institute.

Although we should always be wary whenever public officials ask for more of our money, increasing funding for state economic development programs increases the likelihood that states will waste resources competing with each other for the favor of firms...

When other states are competing for the same firms to operate in their states as well, wise firms will hold out for the best offer. This forces states to take into consideration economic development packages being made by their competitor states. An aggressive state can win the firm's favor, but the incentive package will cost much more. Is it still worth it?

Robert Lynch argues that it isn't. The Washington College economist has been studying state subsidy issues for 20 years and found that such packages rarely cause firms to expand in geographic areas that they would not have otherwise expanded to without state incentives. The implication is that many of the businesses choosing to locate in Alabama or any other state would have moved there anyway...

Indeed, these malinvestments are multiplied when carried out among a cartel of fifty states, each competing with the other for limited capital. When they do, each state development agency becomes a net negative to its state, at which time taxpayers would be better off if they all shut down. They should. As hard as it may be for the arrogant state development community to believe, the vast majority of economic growth that occurred in the United States was actually coordinated without any such such central planning boards.

Posted by Jay Hancock at 11:07 AM | Permalink | Comments (0)
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Good Jobs First of Washington does a good job of beating up governors and mayors for giving away taxpayer money to corporate fat cats for too little in return. They've also built an excellent database and reporting mechanism on deals. Here's the latest newsletter, with reports on sports outfitter Cabela's, a serial abuser of subsidies; ThyssenKrupp, whose Alabama steel mill I wrote about a few weeks ago; and Radio Shack, which is laying off hundreds in Fort Worth after getting big taxpayer subsidies for its headquarters building.

Cabela's recently announced that it will begin collecting sales tax on catalog and internet sales to residents of states where it also has retail stores. That's big news: Cabela's has been a holdout among national retailers with both "bricks and clicks," most of whom quit dodging such sales tax collections years ago. Normally, state "nexus" rules require companies with a substantial physical presence in the state to collect sales tax on all purchases that occur in the state - whether they occur in a store, via the internet or by catalog.

But as it morphed from mostly a catalog operation to also include a chain of (massively subsidized) mega-stores, Cabela's sought and won rulings from attorneys general in a reported 19 states that its catalog, internet, and retail divisions were essentially separate entities and therefore did not create overall nexus.

Posted by Jay Hancock at 2:24 PM | Permalink | Comments (0)
Categories: Corporate welfare