Kenneth Thomas | October 3, 2014 2:04 am
Via @BlogWood, I learned that Boeing is going to move 2000 skilled jobs away from Washington state, despite just receiving $8.7 billion (with a B) in subsidies for the years 2025-2040. Really, I’m speechless. “Chutzpah” is one of the more printable words I can think of to describe this.
You will recall that the state’s legislators were angry when their $2 billion (present value of $3.2 billion over 20 years) 2003 subsidy for the Dreamliner did not stop Boeing from putting a Dreamliner assembly line in South Carolina. So the 2013 subsidy was supposed to guarantee that Boeing couldn’t do this again.
Boeing’s response no doubt will be that these jobs are in the Defense division, not in civil aircraft. Thus they are not covered by either the 2003 or the 2013 subsidy. This has already been hinted at by a commenter on the Business Week article, wraiths13@yahoo.com. This is true, but cold comfort: It’s still a reduction of Boeing’s footprint in Washington.
Let’s take a similar example in North Carolina. In May 2010, American Express announced that it was building a $400 million, 50- to 150-job, data center in Greensboro, without incentives. Why would it not want incentives? Take a guess.
Here’s mine, which seems to be pretty widely shared: American Express already knew that it was going to close its call center in Greensboro, at the cost of 1900 jobs, which it announced in January 2011. Thus, it would have been subject to clawbacks of any incentives it received for the data center, so why bother negotiating for incentives it couldn’t keep?
What American Express knew it couldn’t do in North Carolina is exactly what Boeing is now doing in Washington. This suggests the Washington has weaker job creation requirements than North Carolina, which ties subsidies to the total number of jobs in the state, not just at one location. So Washington has combined the nation’s largest-ever subsidy with weak performance requirements. Meanwhile, Boeing has done nothing to earn the benefit of the doubt regarding its motives. This is just one more indication that the company will try to find a way to worm its way out of commitments directly covered by the incentive packages. When that happens, try not to act surprised.
Cross-posted from Middle Class Political Economist.
This is a pattern they established earlier with the tax payers of KS who gave Boeing millions in subsidies for the Wichita plant, then watched the jobs leave anyway. A real gut punch for the mostly GOP business friendly administration that got suckered. Hey at least its non partisan!
Brighton, Michigan just did an agreement with Eberspracher giving tax abatement, etc. to expand a facility and “potentially” add 500 jobs. I am sure there are no guarantees either of maintaining a presence or the jobs there.
“It is the recommendation of staff that the City Council considers a Resolution to approve the application for real property in the amount of $20,000,000 at a 50% tax rate for twelve (12) years and an application for personal property in the amount of $31,000,000 at a 50% tax rate for seven (7) years, based upon documentation from the applicant documenting that the weighted average of the useful life of all the personal property is no less than seven (7) years.” http://www.brightoncity.org/Business-Community/PDF/140306EberspaecherFinanceReport.aspx
The state did away with the personal property tax which will put a strain on cities, townships, and counties across the state. There is one giveaway that became meaningless.
Time will tell whether this is worth the money.
It’s not just Boeing. My adopted home of Austin TX learned about incentives the hard way when they gave a ton of them to poor beleaguered Intel Corp. in the late 90s to build a development site in the high rent downtown area. After constructing an ugly concrete skeleton (and clearing the checks of course) they abandoned the project citing “changing market conditions” and left town.
The clueless city administrators went back and read the agreement they signed and learned it didn’t provide for any clawbacks if Intel abandoned the project. The concrete and rebar structure remained as a middle finger to our downtown skyline for years before it was eventually leveled and revised into a beautiful new courthouse. Bastards. (yes I’m including the moronic “pro-growth” administrators who signed the deal with the other Bastards.)
90’s? How about Owens Corning building a bottle plant in Mansfield Ms in the late 70’s do to tax giveaways. My brother worked there. Paid well, but do to rotating shifts(every week you were on a new shift) had the worst alcohol problem around. He watched equipment come into the plant for 2 years and then sent to a new plant being built in the Carolina’s. This was during the last 2 years of the incentive contract. Once up, they were gone.
Just want to say that I love your posts on this issue, Ken. They’re terrific, on an issue that, best as I can tell, almost no one else is writing about.
Daniel, unfortunately there are many horror stories like that. Even more unfortunately, there still don’t seem to be enough to get movement toward a true solution, which would require federal action.
Beverly, thanks!
One day people will realize what the winner of this constant race to the bottom receives as the prize.
But not today.