$64 Billion in State Incentives to Lure Business

By: - June 19, 2013 12:00 am

A supervisor observes work on the assembly line at a Chrysler plant in Detroit. In 2010 Michigan gave the company state tax credits valued at $1 billion, one of the state’s 29 “megadeals” in the past 35 years. (AP)

Michigan has given large tax breaks and subsidies toemployers more often than any other state, according to a new report that talliesup state and local “megadeals,” or incentive packages worth more than million.

Good Jobs First, which tracks subsidies thatstate and local governments give to companies, found that Michigan has given 29such deals to employers in the past 35 years. The state gave Chrysler andGeneral Motors separate deals worth $1 billion each in 2010 and 2009,respectively.

But while Michigan offered “megadeals” most frequently, NewYork ranked first in overall spending on such giant packages, with .4billion. New York also had the single most expensive deal: In 2007, the NewYork Power Authority gave aluminum producer Alcoa a 30-yeardiscounted-electricity package worth an estimated $5.6 billion. Washingtonstate had the second largest “megadeal,” a $3.2 billion package of tax breaksand other subsidies it gave to Boeing in 2003 (see sidebar).

Billion Dollar Deals

  • NY: Alcoa (.6 billion)
  • WA: Boeing (.2 billion)
  • OR: Nike (.02 billion)
  • NM: Intel ( billion)
  • LA: Cheniere Energy (.69 billion)
  • PA: Royal Dutch Shell (.65 billion)
  • MI: Chrysler (.3 billion)
  • MS: Nissan (.25 billion)
  • NY: GlobalFoundries (.2 billion)
  • AL: ThyssenKrupp (.07 billion)
  • MI: General Motors (.01 billion)
Source: Good Jobs First 6/19/2013.

Supporters say such incentives are an effective way toretain or attract employers. “The auto industry has rebounded andfactories and new shifts are being added all over Michigan.  Of course theincentives from all levels of government helped,” said former Michigan Gov.Jennifer Granholm, a Democrat who was governor between 2003 and 2011, when manyof the packages were negotiated.

But Good Jobs First argues that these incentives don’talways create the jobs promised. And while 45 states disclose somecompany-specific data from these deals, the information isn’t uniform acrossstate lines, making it difficult to evaluate the costs and benefits.

As Stateline’s recentLegislative Review reported,one of the biggest recent deals was Oregon’s decision to preserve Nike’spreferential sales tax treatment for the next 30 years. That agreement, aimedat keeping Nike in the state, is worth an estimated $2 billion to the company,the report said.

Following Michigan, New York had the second most “megadeals,”with 23; Ohio and Texas had a dozen each; Louisiana and Tennessee had 11 each;and Alabama, Kentucky and New Jersey all had 10 each, the report said.

Twenty-five of the packages involved relocations,14 of them from one state to another. Florida this year, for example, awarded Hertznearly $85 million in incentives to move from New Jersey to Estero, Fla. Theremaining 11 deals involved relocations within a single state. For example, in2011 Illinois gave Sears Roebuck $275 million to move its headquarters fromdowntown Chicago to a Chicago suburb instead of leaving the state.

Nationwide, since the late 1970s states and localities havespent more than $64 billion on large incentive packages designed to create orretain jobs, according to the report.

In total dollars spent on “megadeals,” Michigan rankedsecond to New York with a total of $7.1 billion. Five states were in the billion range: Oregon, New Mexico, Washington, Louisiana and Texas.

Twenty-nine companies have received two or more “megadeals.”General Motors has gotten the most, with 11, followed by Ford with nine, Intelwith six and four companies with four each: Boeing, Daimler (includingMercedes), Nissan and Toyota, the report said.

Absent from the report is Wal-Mart, the company thattops the Fortune 500 list.  The companyhas received more than $1.2 billion in taxpayer assistance, according to aseparate Good Jobs First account, but its individual deals were worth less than million each and thus didn’t qualify for this report.

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