Inspecting the H-P gift horse | Arkansas Blog

Friday, June 20, 2008

Inspecting the H-P gift horse

Posted By on Fri, Jun 20, 2008 at 6:49 AM

Big day for Conway. 1,200 $20/hour jobs.

What kind of jobs? Nobody said and who cares for the moment.

But I think it's worth compiling a handy quick checklist of what it took to land this company, in addition to Conway's agreeable demographic factors.

$10 million from the state

$5 million from the city of Conway

A property tax cut worth, I estimate, about $200,000 per year in tax bill reductions on the new building.

A free land lease on 12 acres. Essentially a gift of $1.2 million worth of land.

All this is a lot, but probably, as the business shill up at Walton University suggests, it's a necessity. It's become a given that companies must be rewarded with corporate welfare wherever they locate, without any return promises on staying long enough to repay the gifts, without any showing that new jobs one place haven't devastated some other city, without any report on potential environmental impact, etc. This shakedown is just a fact of life.

But .... that ain't all. Consider these other state promises, as detailed in the Democrat-Gazette:

* An unspecified state income tax credit. "Terms of the agreement are private."

* Sales tax and use tax refunds on equipment.

* A rebate equal to 5 percent of the payroll for 10 years ($2.4 million a year, or at least $24 million total, based on estimates of payroll yesterday) "if the company meets terms of a private agreement."

In all, I don't think a $50 to $60 million total benefit is an overly generous estimate. If you're counting, that's more than $40,000 per job. Is it for a truly transformative job center or for a glorified call center? That question will be answered in the months ahead.

Good deal? Maybe. But these private agreements are outrageous. Not the givebacks, necessarily, but the privacy.

If the public doesn't know the terms for the giveaway of ITS money and if the public isn't given ANY future accountability on the lavishing of that money, we'll never have a way to know if this was a wise investment for the state and whether it was made with sufficient protection should the inkjet printer market -- or whatever product this call center will provide assistance on -- turn south.

We must simply trust Gov. Mike Beebe. Do you think he's likely to tell us if his giveaway turns out to be a bad deal? Deal 'em, Mike, but first cut the cards.

I am not convinced of the theory that every aspect of these giveaway deals can be cloaked in secrecy. Perhaps there's an FOI lawsuit in the making here.

On the jump, a story from New Mexico with a key point on nearly a mirror image announcement there yesterday:

If Hewlett-Packard ultimately pulls out of New Mexico, it will be required to repay a certain portion of the incentives.

Question for Gov. Beebe's office: Does our agreement contain similar language?

UPDATE: No, the governor's office won't release the details of the secret agreements. But spokesman Matt DeCample emphasized that the state's $10 million doesn't go directly to H-P, but to the Conway Development Corp. to build the building that H-P will occupy rent-free lease. So, should H-P bail out, the building would remain as valuable infrastructure. But, though the specifics were not provided, DeCample also said there is a provision for the company to pay a portion of the $10 million should the company not meet performance targets.

The tax incentives, he said, are peformance-based. If specific criteria aren't met, they won't get the incentives, he said. The specific criteria? The amount of the incentives? The length of the terms? Only a few insiders are allowed to know, not the public who's making this beneficence possible. Don't worry your little head about it. If you can't trust Gov. Beebe, who can you trust?



Computer giant Hewlett-Packard plans to open a technical support center in Rio Rancho that eventually could employ 1,300 people.
    Several hundred employees would be hired when the center opens, and the work force would be rounded out by 2012.
    The center could be open by next summer and is expected to have a payroll between $50 million and $60 million.
    To draw Hewlett-Packard to New Mexico, the state offered incentives that could range from $28 million to $40 million.
    Gov. Bill Richardson made the announcement Thursday and trumpeted Hewlett-Packard's decision as evidence of New Mexico's economy faring better than others despite national economic downturns.
    "This is one of the most significant economic development agreements we've ever made," said Richardson, who returned Wednesday from a 10-day trip to Europe and the Middle East.
    An exact location for the center hasn't been decided, but Rio Rancho officials said they expect it to be within a 160-acre central business district along King Boulevard and Paseo del Volcan.
    The Santa Ana Star Center is also in the business district, and the University of New Mexico plans to build a campus on 200 adjacent acres.
    Jobs at Hewlett-Packard mostly would be in customer support and sales. They could help offset layoffs at Intel, which remains the state's largest private-sector employer despite cutting about 1,000 jobs during the last year.
    New Mexico's unemployment rate is 3.5 percent. The national rate is 5.5 percent.
    Hewlett-Packard executives declined to specify starting salaries at the Rio Rancho center, but they indicated they will rely heavily on the local work force to fill jobs.
    "We believe overwhelmingly that most of the employees hired will be from the local area," said Jon Flaxman, the firm's executive vice president. He joined Richardson and other state officials at the Capitol for the announcement.
    The largest portion of New Mexico's incentives— an estimated $20 million to $30 million— will come from the state's high-wage jobs tax credit program, which is available to employers for a four-year period.
    An additional $8 million to $10 million will come from job training initiatives, said Fred Mondragon, secretary of the state Economic Development Department.
    Richardson said he also will ask the Legislature to approve $12 million in capital outlay funding to help offset infrastructure costs.
    If Hewlett-Packard ultimately pulls out of New Mexico, it will be required to repay a certain portion of the incentives, Mondragon said.
    Hewlett-Packard, based in Palo Alto, Calif., has 172,000 employees worldlwide and was listed 14th in the 2008 Fortune 500.
    It plans to open a similar technical support center in Conway, Ark.

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