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The Beebe administration's triumphant landing of a windmill blade plant at the Little Rock Port called to mind former Gov. Jim Guy Tucker's triumphant announcement of a Southwest Airlines call center at the Little Rock Airport, long gone.
It reminds me again of the absence of sober and believable cost-benefit analyses when corporate welfare gets thrown around.
The Arkansas Democrat-Gazette has been doing some dogged reporting on the enticements to land the $150 million installation of LM Glasfiber, a Danish company. It could eventually employ 1,000 people.
What did it cost to create these jobs? A bunch.
• $6.9 million from the governor's “quick action closing fund.”
• Free land valued at $5.4 million from the city of Little Rock and the port.
• $8 million from the Economic Development Department.
• $3,500 per worker (as much as $3.5 million, in other words) for job training.
• $63,000 from the Highway and Transportation Department to improve freeway access.
• An untold amount from a 27-year state income tax exemption.
This is a significant sum for jobs that will mostly pay from $11.50 to $14.90 per hour and it includes no cost for the 27-year income tax exemption. (Of course, most big corporations have figured out accounting dodges around the corporate income tax.)
There are other not-so-evident contributions to the new company. Local taxpayers have paid millions to build the Little Rock Port and its railroad. U.S. taxpayers have paid hundreds of millions to build the Arkansas River navigation system that was critical to the plant. We don't know yet if the plant will seek low-cost Act 9 financing to build the plant itself, but this has been discussed. If it happens, the facility might or might not be made to make payments in lieu of property taxes on the tax-exempt structure. Based on the record so far, I wouldn't hold out much hope for contributions to the school property tax base.
At a minimum, taxpayers will plunk down nearly $24 million for a $30 million annual payroll, not counting substantial unknown costs. Is that a good deal?
Rollover effect of this plant will be slight. Products won't be sold here. Goods used in the manufacturing process won't be taxed. The corporation won't be taxed. No related industries are in the works. At this pay level, workers will pay modest income taxes, probably at a level that will take 20 years or more to recoup the direct government investment. Workers will buy groceries, clothes and other taxable goods. As for Little Rock's contribution, perhaps the workers will live in Little Rock. Perhaps they will commute from Cabot.
Developers are confident this is a winner any way you compute it. But I'd love to see a rigorous cost-benefit analysis for public inspection. I'd also like an analysis of whether Arkansas HAD to give up everything that was demanded. We had much to negotiate with.
Gov. Mike Beebe suggested that this plant was a strike back by the U.S. at the movement of manufacturing overseas. That's nonsense. This plant was built here for our low wages; our proximity to locations where the blades will be sold (Texas, for one), and for the important rail, river and highway (also taxpayer-subsidized) links to ship in raw material and ship out finished product. This plant was never going to be built in China.
The South hasn't quit fighting. No, but Robert E Lee did and he could have…