When Subsidies to Lure Business Don't Pan Out

[RamboLiberal]

http://www.nytimes.com/2003/11/10/business/10STAT.html?hp

A huge, light-gray building, trimmed jauntily in blue, rises from the rolling, grassy fields on the far side of the runways at Indianapolis International Airport. From the approach road, the building seems active. But the parking lots are empty and, inside, the 12 elaborately equipped hangar bays are silent and dark. It is as if the owner of a lavishly furnished mansion had suddenly walked away, leaving everything in place.

That is what happened. United Airlines got $320 million in taxpayer money to build what is by all accounts the most technologically advanced aircraft maintenance center in America. But six months ago, the company walked away, leaving the city and state governments out all that money, and no new tenant in sight.

The shuttered maintenance center is a stark, and unusually vivid, reminder of the risk inherent in gambling public money on corporate ventures. Yet the city and state are stepping up subsidies to other companies that offer, as United once did, to bring high-paying jobs and sophisticated operations to Indiana. Many municipal and state governments are doing the same, escalating a bidding war for a shrunken pool of jobs in America despite the worst squeeze in years on their budgets.

<snip>

So the city and state gambled, and the gamble eventually went sour. Caught up in conflicts with the unionized mechanics and pushed into bankruptcy by the abrupt cutback in airline travel after Sept. 11, United turned to cost cutting to survive. Heavy maintenance was a victim. It went increasingly to private contractors in the South, who took longer to get the airliners back into service. But the cost of using them was low enough to offset the loss in passenger revenue, airline officials said.

Mechanics in the South earning a third of the wages and benefits paid to their counterparts in Indianapolis helped to make this possible — and last April, United closed the Indianapolis center, laying off the last few hundred mechanics still there. Penalty payments built into the subsidy agreement failed to deter the airline's executives.

[lcordero]

1. Subsidizing big business is a bad idea

Putting focus on small to medium sized businesses is more prudent because they are more apt to stay on US soil.

[Wapsie B]

2. The thing is,

we've got this happening across the country. Chambers of Commerce and countless economic development commissions far and wide spend their days chasing after smokestacks. They do this rather than foster innovation and growth from within, meaning helping some local guy/gal get their idea off the ground.

Question-Has anyone anywhere had a local EDC come forward and open their books to the public? I haven't seen one, even though they're spending taxpayer $$.

[Old and In the Way]

3. This is where the federal government should step in and

make these "deals" illegal. I know Maine cities (and the State) are going broke giving up tax revenue to entice businesses. The "winner" usually ends up getting screwed with no guarantees of future employment.

Let businesses make investment decisions without factoring in the desperation of vying communities to ruin our taxbase.