http://online.wsj.com/article/SB10001424052748704081604576144312226133614.htmlStates to Business: Give Our Cash Back
By JENNIFER LEVITZ
To the list of those dinged by states' budgetary woes — from Illinois vendors to Wisconsin public employees — add YUSA Corp., an auto-parts supplier in the city of Washington Court House, Ohio. YUSA received a $35,000 development grant from the state of Ohio five years ago, pledging to expand a plant and employ 816 people. It's only at 445. Recently, Ohio sent the firm a bill, demanding $15,915 back...
The budget vise squeezing states and cities is changing the economic-development game. Governments are attaching more strings to their offers of tax breaks, cheap rents and bond deals designed to lure business, and are getting tougher on past recipients who didn't come through. Officials fret that taxpayers will look askance on any giveaways to business that don't yield a clear benefit, at a time when governments are paring services to save money. "We want to challenge this stuff before the public does. The political environment now is that you have to," says John Garcia, director of economic development in Albuquerque, N.M. His city, facing a potential budget gap of $35 million or more in the coming year, is taking steps to retrieve $492,399 in past property-tax abatements given to lure a call center, which closed in August and eliminated 670 jobs it had created...
State and local governments collectively give more than $70 billion a year of incentives to lure business and jobs, primarily through tax breaks, says Kenneth Thomas, an associate professor of political science at the University of Missouri-St. Louis.
Economists have long debated the wisdom of such incentives. Supporters say they help states build diverse local economies and boost employment, ultimately generating more tax revenue than they cost. Detractors say perks sometimes go to businesses that would have come anyway, and in other cases just enable companies to play one region against another for a sweeter deal...