Friday, August 21, 2009

Site Selection Shenanigans

More business retention, economic development blackmail.

Typically, a business threatens to move its facilities unless a state or locality will provide a subsidy - a bribe. [Think Mercury Marine, which wants a 7-year pay freeze and a 30 percent pay reduction for new hires or says it will move to Oklahoma. This is more a threat to gain concessions from the union, but concessions nonetheless.] They don't do this because they seriously feel the cost of moving to another site is worth it or that another site is more optimal for their business. They demand a subsidy because they can. Threats of leaving caused politicians to provide subsidy packages to these blackmailing businesses. This is (supposedly) economic development.

140 new jobs, it claims, will be created. With a $3.25 million subsidy from the state and $3 million property tax credit from Menomenee Falls, that's roughly $45,000 per job created. This is actually not a bad number (compared to the hundreds of thousands some subsidies have cost per job). And, in the larger scheme of things, a $6.25 million subsidy is chump change. But just because this deal does not have the mind-boggling numbers of some others, that still does not make it right.

Why did normal business operations and expansions become partial monetary responsibilities for taxpayers? It's great that we have successful businesses that have grown over the years and are national leaders in their industries. But, if another site is more optimal, they should move, this would lead to more actual growth for the national economy. Why would we pay millions to retain a comparatively weaker facility? Eventually a competitor in a more optimal location will outperform and put the weaker company out of business. If a company feels they need to grow and increase production, it should not be the state's responsibility to fund this. One would think that this would be a sound management decision based on sound business principles.

Unless we're deciding on a quasi-industrial policy whereby taxpayers support local business retention and expansion. But if that's the case, there needs to be a public discussion between politicians, business leaders, and taxpayers. It has to be connected with comparative advantage, sectoral areas where we feel we can compete and grow, and within a comprehensive planning strategy for the state and the region.

These backroom deals, giving away millions to successful companies, need to be brought out into the light of day.

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