Center for Local and State Solutions
Other Resources--Neal Peirce Column

Category: Article (Journal or Newspaper)
Jurisdiction: City/County Government, International
Management Issues: Catalytic Government, Community Based Strategies, Community/Economic Development
Policy Area: Cities/Counties

For Release Sunday, April 22, 2007


© 2007 Washington Post Writers Group

CORPORATE LOCATION SUBSIDIES:
DO THEY FEED SPRAWL TOO?

By Neal Peirce


Are government subsidies to job-promising corporations the waste of taxpayers’ money that critics have long claimed -- a zero-sum city-to-city and state-to-state shell game? 

Or are they worse? -- Do they foster sprawl, moving jobs out of cities, away from the workers in most need, and into low-stress, wealthier suburbs with little poverty, joblessness, or affordable housing?

That’s the charge the watchdog group Good Jobs First, based in Washington, D.C., is now making.  It has strong evidence, based on careful surveys rooted in government data, conducted in Minnesota, Illinois and Michigan.

Of 86 subsidized corporate relocations in Minnesota between 1999 and 2003, involving 8,200 jobs and more than $90 million in government payouts, four-fifths were outbound from the Minneapolis-St. Paul urban core.  People of color and transit-dependent workers lost out; more affluent, less racially diverse areas gained, registering increases in jovs that were five times that of the central cities.

The map of subsidized jop shifts in the Twin Cities area, says Greg LeRoy, Good Jobs First’s founder-leader, resembles an “evacuation plan.”

The findings add a new spin to the debates over suburban sprawl.  People usually cite such factors as crime and declining quality of urban schools.  Now it turns out that state governments, or localities acting with state permission, are actually shelling out taxpayers’ money to accelerate outward shift of jobs.

The proof is just coming to light with data that gets behind the wall of secretiveness thrown up by the economic development agencies that decide on and dispense the subsidies.  Good Jobs First has been encouraging allies in the states to press for full disclosure of all deals and their results.  The Minnesota findings wouldn’t be possible for example, without legislation that now requires, deal by deal, discloser of whether the subsidies involved a relocation, and if so, from where.

A new Illinois  law-- the 2003 Corporate Accountability in Tax Expenditures Act -- enabled a new Good Jobs First survey there, looking at $1.2 billion in Chicago area state subsidies between 1990 and 2004.  The study covered 782 subsidies in 10 programs, ranging from industrial revenue bonds to targeted road extensions.

The not surprising results: Chicago, with 38 percent of the region’s population, got only 15 percent of the subsidies.  The suburban “collar counties” all made out handsomely, up to six times as much per capita as Chicago.  Transit-accessible sites lost out; totally auto-dependent locations won.   A highly disproportionate share of the subsidies went to the area of “sizzling” economic growth around O’Hare Airport, already favored by heavy government infrastructure spending.  “Reverse Robin Hood,” said LeRoy of the subsidy pattern.

A parallel study in Michigan -- covering 4,000 economic development subsidies from 2001 through 2004 -- shows the same pattern of incentives shortchanging central cities and actively supporting development in newly developed or already prosperous areas.  Only 6 percent of the deals benefitted Detroit and other troubled cities, while 28 percent went to wealthier suburbs.

Governors across the country, notes LeRoy, have begun to talk “smart growth,” urging that land use policies undergird existing communities.  But their economic development programs keep promoting sprawl. “It’s nuts.  The two state policy silos need to be broken down and corrected.”

In the meantime, the taxpayer-hostile nature of the industrial subsidy game just keeps rolling on.

Example: Kentucky is getting ready to give Toyota $25 million to build production lines for a new SUV at its Georgetown, Ky., plant -- in return for zero new jobs.

In Minnesota, the Mall of America is asking for $234 million to subsidize a doubling of its already gargantuan size, including a skating rink, a water park, three hotels and a 6,000-seat performing arts center. And at what cost?  As State Rep. Ann Lenczewski told a reporter: “We’re supposed to be figuring out how to fund K-12 education, and how to get more people health care, not promoting a mall.”

In North Carolina, the state’s $240 million incentive payment to lure a Dell manufacturing facility is not looking so good after a study by the North Carolina Budget and Tax Center and Corporation for Enterprise Development predicted the net economic impact would likely be a negative $63 million to $72 million -- not the $707 million gain the deal’s promoters had claimed.

Just imagine if state governments would put these mega-sums into job training, critical 21st century technical skills to benefit workers, especially those in lagging population groups, in the communities where they live? 

As for the subsidy-garnering corporations, they seem to have been on socialism so long they think it’s capitalism.  The time for reform was never riper.

Comments may be addressed to npeirce@citistates.com