Damn those welfare queens..

(noon. – promoted by ek hornbeck)

Cross posted at dkos

Am I talking about moms in mink coats driving Cadilacs and having babies for money?  Nope.  I’m talking about corporate welfare.  Here is a close up look at the handouts that have been going on in broad daylight; and most of the numbers are from the Clinton boom years, when there wasn’t even a pretense of an excuse.

Good Jobs First‘s list of these case studies include:


Biotechnology: This industry is regarded by many economic development officials as the key to local prosperity, and thus they are willing to shower subsidies on new projects.

Private prisons: Operators of for-profit correctional institutions not only receive lucrative operating contracts from government agencies, but they also get financial help to build new facilities.

(more)

Professional sports: Owners of professional sports franchises act as if they are entitled to huge amounts of taxpayer assistance when building new stadiums–and they get it. Follow me below the fold where we’ll first take a look at the cash given to transplants and then the biggest abusers in the system regardless of industry.

Automobile assembly plants: As the big Detroit automakers have contracted, foreign car companies have expanded their U.S. manufacturing operations. Local officials roll out the red carpet for these rare industrial investments–and eagerly hand over large subsidies.

They also have brief profiles of individual companies that have been involved in some of the most controversial subsidy deals or are simply frequent flyers recipients of public assistance.  

This essay  is going to present just some of their facts and figures on the automotive industry and the top ten most egregious abusers of the system.  

Automotive

As the U.S. automakers have downsized their domestic manufacturing operations over the past two decades, foreign car makers have been opening one U.S. assembly plant after another. And in nearly every case, the Asian and European companies have received financial assistance from state and local governments eager for industrial jobs.

By the 1990s the threat of protectionism had passed, yet foreign automakers continued to expand operations in the United States. The reason now was to bolster their ever-rising U.S. market share and to take advantage of what had become relatively inexpensive U.S. labor. The latter motivation prompted companies to shift their focus from the Midwest to “right to work” states in the South. Despite the fact that these companies would have come anyway, state and local governments continued to offer up lucrative subsidy packages.

Here are the deals that the state’s gave to corporate America:

South Carolina  

BMW: $230 million

Alabama

Mercedes-Benz:$258 million, 1993

Honda: $158 million, 1999

Honda: $90 million,  2002

Hyundai: $252 million, 2002  

Mississippi

Nissan: $685 million, 2000  

San Antonio, Texas

Toyota: $133 million, 2003.  Toyota said it selected San Antonio over higher offers so that they could gain access to the large Texas market for the pickup trucks.

By the late 1990s there were signs that the big giveaway to BMW by South Carolina was exacerbating a fiscal crisis in the state.  “The foreign companies that come in here don’t care that the schools are terrible,” one philanthropist told a reporter. “They just want the cheap labor. And the incentives are so extraordinary.”

So much for an educated workforce being plus.  The only plus that seems to matter is how cheap will they work?  

If that doesn’t frost your cake, here are brief profiles of individual companies that have been involved in some of the most controversial subsidy deals or are simply frequent flyers recipients of public assistance:

Egregious Abusers

Boeing Co.

Chicago and the State of Illinois:  $56 million  The amount is all the more amazing in light of the fact that Boeing’s new headquarters was expected to bring only about 500 jobs to the Windy City.  

Seattle and the State of Washington:  $3.2 billion subsidy package for Boeing and its suppliers that was meant to pre-empt the deals being offered by other jurisdictions. The strategy was successful, though there were lingering suspicions that Boeing never seriously considered leaving the Seattle area.

Cabela’s Inc.

Hamburg, PA:   $32 million, 2003

Richfield, WI: $5.25 million

Hoffman Estates, Illinois:  $18 million in direct subsidies for a new store, part of which will be designated a “museum,” allowing Cabela’s to save an additional $5.5 million in property taxes over 20 years.

Gonzles, LA: $50 million

Reno, Nevada:  $54 million

East Hartford, Connecticut: $21.9 million in state funding that became a matter of controversy in the state’s gubernatorial race.

Dell Inc.  

The computer maker has played hardball to get huge subsidy packages both for its corporate headquarters and for its assembly plants in several states, including a case in North Carolina where the subsidy package was larger than the cost of the facility.

Round Rock, Texas:  20 years of property tax abatements, $50 million in tax-exempt industrial revenue bond financing, and 40 percent of sales tax revenues collected by Round Rock on Dell’s sales.  1993

Nashville, TN:

*free land for the site worth $6.5 million;

*40 years of property tax abatements;

*$20 million in infrastructure improvements

*one-time credits of $2,000 per employee against state franchise and excise taxes

*Metro Nashville tax credits of $500 per employee for 40 years

*industrial machinery state tax credits

*$4,000 per employee to pay for job training costs (refundable after workers were hired).

Some observers estimated the cost of the incentives over the life of the Nashville agreement would be more than $200 million. However, in February 2002, Dell announced that it was eliminating all manufacturing operations at the Nashville facility.

Intel Corp.

The big chipmaker has used the lure of billion-dollar fabrication plants to win repeated subsidies–including massive industrial revenue bond deals–from several states.

New Mexico:

1980:   $30 million in industrial revenue bonds (IRBs).

Intel and New Mexico officials, however, have turned the bonds into an unusual way of allowing the company to avoid taxes. What happens is that the deed to the plant and its equipment is put in the hands of a public entity, which leases the facility to Intel. The entity issues the bonds–which are not exempt from federal taxes–and they are all immediately purchased by Intel. The proceeds from the bond issue pay for the construction of the plant, and Intel, not the state, is responsible for repaying the bonds (to itself). The arrangement is an elaborate ploy by which Intel lends itself money while avoiding taxes relating to the plant, which is considered to be publicly owned and thus exempt from property taxes as well as a 6 percent tax on the purchase of equipment for the plant.

1993:  Rio Rancho $2 billion in IRB deals.

1995: Rio Rancho $8 billion in new IRB deals.

2004:  Sandoval County $16 billion in IRB deals.

Arizona

1994:  Intel went with Chandler only after getting the state legislature to approve various tax exemptions and tax credits. The company also received foreign trade zone status from the U.S. Department of Commerce, which triggered additional tax breaks.

Oregon

1999:  $200 million in personal property (equipment) tax abatements.

2005:  $25 billion in new equipment tax abatements for an additional 15 years. The deal will save the company an estimated $579 million.

Intel has been sending a message to states around the country that if they want to be considered as a site for one of the company’s huge facilities, they have to change their tax code in the manner done by Arizona and Oregon. Intel is openly playing states against one another, thereby seeking to reduce its state tax burden to virtually nothing.

Nordstrom Inc.

1992 one developer told a reporter: “You pretty much have to guarantee that when they open their doors for businesses, they will not have any money invested in the deal.”

Norfolk, Virginia:   got the U.S. Department of Housing and Urban Development to offer $32.8 million in loans–secured by Community Development Block Grant funds–so that the city could pay for the construction of a store for Nordstrom. The retailer balked at a HUD requirement that 51 percent of the resulting jobs go to low-income residents, so the city turned to private banks for the funds. 1994

Seattle, Washington:$24.2 million, 1994

Spokane, Washington: $22.7 million, 1997  

Kansas City, Mo: $998 million

Rhode Island: $72 million, 1995

St. Louis, MO: $30 million

Ft. Worth, TX: $80 million

Richmond, Virginia: $25 million

Early 2000s, Nordstrom was in such demand that it could afford to turn down some lucrative proposals. The company decided not to proceed with the opening of a store in downtown Pittsburgh that was to be subsidized to the tune of $28 million. The retailer also snubbed Cincinnati, where officials had spent years putting together a subsidy package worth $48 million.

Sykes Enterprises Inc.  This operator of call centers has systematically extracted subsidies from numerous communities for facilities that are often later shut down as the company moves on to greener pastures, which are now usually overseas.

Greeley, Colorado: $915,000

Klamath Falls, Oregon:  $800,000 in cash, 52 acres of land, $250,000 of road construction, and a three-year property-tax exemption.

Bismarck, North Dakota:  

1995:  $2 million, 18 acres of city-owned property, utility breaks and other concessions, plus a five-year property tax exemption.

1996:   five-year exemption from state corporate income taxes.

1997:   $2 million

Milton-Freewater, Oregon:  $2.7 million, free land, utility services, and tax credits, plus $1 million in state funds for road improvements. Businesses just across the state line in Washington even chipped in $200,000 in private funds.

Manhattan, Kansas:   $2.6 million, free land, $500,000 for site improvements, and property tax reductions for five years, $550,000 from an Economic Opportunity fund, enterprise zone tax breaks worth nearly $1.8 million, and a project and training grant of $800,000.  In 2004, the remaining 256 workers lost their jobs when Sykes moved the work to Asia and Latin America. The Manhattan plant closed only six months after the enterprise zone tax breaks expired.

Hays, Kansas:  Business leaders contributed $1 million of their own money to land a Sykes call center, on top of $2.35 million and 20 acres of free land provided by state and local government.

Ada, Oklahoma:

1999:  $2.5 million in a cash grant plus land.

2004:   Sykes closed the Ada call center.  

Scottsbluff, Nebraska:    

1999:  $1 million from its federal Community Development Block Grant and $500,000 in local funds to subsidize construction and infrastructure. 2002:  The center closed.  

Hazard, Kentucky:

1999: $4 million, mostly state training money and another $6 million spent on the Coalfields Business Park, where Sykes located.

2003:  The center closed.

Pikeville, Kentucky:

1999:  $4 million from local funds, mostly for training, plus infrastructure and site preparation. The company also received a five-year property tax abatement.

2004:  The facility closed.

Eveleth, Minnesota:   $3 million cash grant, plus $1 million worth of site preparation improvements and 22 acres of free land.

Palatka and Putnam County Florida:

2000:  $3 million, a five-year property tax exemption, and 22 acres of free land.

2004:  The facility closed.  

Jackson and Marianna Florida: $2.1 million in subsidies, and the state another $2 million for land and infrastructure.

Many of the U.S. closures coincided with Sykes’ growth offshore. In late 2004, the company said it had 10,000 workstations in low-cost countries such as Costa Rica and the Philippines (up 82 percent over the previous year) and 2,700 workstations in the U.S. (down 45 percent) and only half the domestic stations were staffed. Ultimately, it appears, domestic subsidies were less appealing than cheap labor abroad.

12 comments

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    • dkmich on December 15, 2008 at 02:18
      Author
  1. … of when they started apportioning money for “homeland security” and ended up giving millions to some theme park in the northwest.

    Great essay, dkmich.

  2. Last night I heard that the son of a friend (engineer for a automotive supplier) was laid off last week.  My neighbor–had worked for Ford, was laid off a few weeks ago.  Another friend’s son’s, (an engineer working for another auto supplier) job is looking shaky.  Two of my family members are engineers for one of the big three & are worried about the next round of lay offs to come in January.  

    Oh, and I read in today’s paper that a small automotive parts supplier in our city, employing 80+ people is closing, after 35 years in business.

    I wonder how many of the increasing number of jobless Americans and their families will be shopping at those Cabelas & Nordstroms or buying those foreign cars any time in the foreseeable future?  

    • dkmich on December 15, 2008 at 22:00
      Author

    And I didn’t even have to pay you.  🙂

    • Temmoku on December 16, 2008 at 03:33

    that Cabela’s is like a museum with a bigger souvenir store and that Bass Pro shop has the same deal going for it so that the neighbor has at least one attraction which really nets it nothing for all its efforts. What an eye opener…I was so amazed to see that Cabela’s in Dallas and then the one in my area: Hoffman Estates and then the bass pro Shop/ imitation Cabela’s that is only a mile away!!! What a trick! It is amazing that these towns fall for this nonsense and Nordstrums too! WOW.

    • Diane G on December 16, 2008 at 14:41

    ::Applauds Wildly::

    THANK YOU!

    No one seems to notice this stuff.

    Well done, and enthusiastically recommended.

    Would you consider x-posting this to WWL?

    Its the Math I would be doing, if I could do the Math. Instead, I rant about general truths.

    But nothing is as clear as the cold hard figures.

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