• United Airlines gets subsidies for a short hop.
• Google search ends with Michigan tax break.
• Chinese auto transplant joins U.S. subsidy game.
• Chris-Craft gets the royal treatment in North Carolina.
• North Carolina wins vaccine plant despite being outbid by Georgia.
• Paying to keep Office Depot "within its clutches."
• Oil refiners enjoy local as well as federal largesse.
• AAA tows operations across state lines to win subsidies.
• Doh! Officials discover that subsidy recipients don't necessarily need them.

United Airlines gets subsidies for a short hop

United Airlines, which made noises a couple of months ago about moving its headquarters out of Illinois, has announced--to no one's surprise--that it will stay in the Chicago area. Despite warnings that it was considering Denver and San Francisco, the company traveled a short distance: from suburban Elk Grove Village to an office building in downtown Chicago. And, of course, United was rewarded with public funds for making this decision. It is receiving $5.25 million in tax increment financing from the city and $1.35 million from the state for infrastructure improvements and job training, even though most of the 350 jobs affected are managerial positions. In addition, state and city officials agreed to lobby for legislation that would cap jet fuel sales taxes for five years.

An unnamed "real estate observer" told the Chicago Tribune that United has engaged in a "classic leverage play" by indicating that it might relocate to another part of the country. The newspaper also quoted an economic development official in Denver as saying that the airline never even visited any sites in the city and an official in San Francisco as saying that the United visit "was a quick in and out...We thought it was a window-shopping-type trip."

Chicago officials, of course, painted the move in a much more positive light, noting that the move from the suburbs to downtown went against the usual pattern of sprawl.

Google search ends with Michigan tax breaks

Google Inc., the web search giant with a stock market capitalization of $115 billion, gave a boost to the struggling economy of Michigan, but it did so only after being offered a substantial tax break. The company announced that it had chosen Ann Arbor as headquarters of its new AdWords online advertising business, which is expected to generate 1,000 new jobs over the next five years.

The fact that Google co-founder Larry Page is a native of East Lansing who graduated from the University of Michigan was said to have played a role in the company's decision, but Wolverine ties were not enough. Google was apparently seeking substantial financial assistance, and it got it in the form of a $38 million High-Tech Single-Business-Tax Credit from the state. The company is also reported to be seeking property tax abatements from local officials.

The state announced the Google deal with much fanfare, including the $47,000 projected average salary, but Michigan is struggling as the state hardest hit by downsizing at General Motors, Ford Motor and Delphi.

Chinese auto transplant joins U.S. subsidy game

Announcements of new Japanese-owned auto plants in the U.S.--usually with a big subsidy package attached--have become commonplace. Yet the recent announcement by China's Nanjing Automobile Corp. that it intends to build an assembly operation in Oklahoma to revive the historic British MG brand stunned the automotive world. Nanjing, which acquired MG Rover Group Ltd last year, also intends to produce the cars in China and England.

Company executive Duke T. Hale told the Associated Press that Oklahoma's subsidy package was "pretty darn aggressive." The state is providing $15 million from its Economic Opportunity Fund (which was created only a few weeks ago) and will pay for job training costs. The project may also qualify for payments from the Oklahoma Quality Jobs Program. 

Nanjing Automobile's move came less than five months after General Motors closed its Oklahoma City assembly plant

North Carolina gives boatmaker the royal treatment

Executives at Chris-Craft Corp., which recently announced plans to construct a new manufacturing plant in North Carolina, are still marveling at the red-carpet treatment they received from officials in the Tar Heel State. Gov. Mike Easley made available his personal helicopter and a pilot to allow representatives of the boatmaker to view sites across the state. To get the competitive juices flowing, Chris-Craft also showed interest in South Carolina, whose Governor, Mark Sanford, told the company: "We will do anything to bring you here."

Chris-Craft went with a site near Charlotte that is projected to employ more than 640 workers with average annual pay of $32,000 within five years. A sister company, Indian Motorcycle, will open its own plant nearby, creating 167 jobs. State officials sweetened the combined deal with about $9 million in subsidies, including a Job Development Investment Grant of $5.2 million, $3.5 million in William S. Lee tax credits and $250,000 from the One North Carolina Fund. Cleveland County is kicking in another $971,000. 

The deal caused some hand-wringing in Florida, where Chris-Craft's production had been concentrated.  One trade association official told the Bradenton Herald that the company's move "needs to serve as a wake-up call for the state of Florida in encouraging manufacturers to grow here." Gov. Jeb Bush made a personal appeal to Chris-Craft, but the company was attracted to the cheaper land, electricity and housing in the Carolinas.  

North Carolina also wins vaccine plant despite being outbid by Georgia

Novartis has also succumbed to the charms of North Carolina. The Swiss drug maker announced that it would build a vaccine plant in Wake County that is expected to cost $267 million and which will employ some 350 people within five years. The state lured the company with some $44 million in subsidies, but this was less than the $61 million package reportedly offered by Georgia. The company, which will also receive a $220 million grant from the federal government, insisted its main consideration was the availability of "a highly trained work force."

This point was taken to heart by the Atlanta Journal-Constitution, which editorialized that the decision by Novartis "should make it clear to proponents of costly state incentives that money isn't everything when it comes to economic development...North Carolina got serious about reforming its public education system--raising standards and instituting merit pay for teachers--more than a decade ago. (And still it had to offer incentives.) If Georgia is still going to have any chance at winning in this league, it, too, must improve public education."

Paying to keep Office Depot "within its clutches"

In the minds of some newspaper editors in Florida, money still is everything. Fort Lauderdale's Sun-Sentinel has run editorials urging Palm Beach County to "do anything it can do in order to keep the Fortune 500 giant Office Depot within its clutches." The company has outgrown its headquarters in Delray Beach and is considering a new location a bit to the south in Boca Raton. It apparently wants taxpayers to underwrite the move.

Palm Beach County is not resisting. Prodded by claims that other states have made lucrative offers, it has agreed in principle to provide some $6.5 million in tax abatements to the company. But it is still waiting for the conclusion of negotiations Office Depot is having with the state on another $10.2 million in subsidies. It's not clear what else the Sun-Sentinel expects county officials to do--march on Tallahassee?

Oil refiners enjoy local as well as federal largesse

Despite the oil industry's astronomical profits, public officials just can't stop throwing money at it. That's the conclusion one draws from a recent (July 18) article in the Wall Street Journal that pointed out that local governments around the country are putting together big tax breaks for oil refineries to help underwrite expansion costs.

These subsidies come on top of federal incentives awarded to the refiners last year by Congress. As an example, the Journal said that a $3.8 billion expansion in Port Arthur, Texas planned by Motiva Enterprises (a joint venture of Royal Dutch Shell and the Saudi Arabian Oil Co.) could enjoy more than $600 million in local abatements. Former Louisiana Senator J. Bennett Johnston, now a Washington lobbyist, was quoted by the Journal as justifying subsidies by suggesting that the oil giants might otherwise engage in a capital strike: "The fact that companies are making record profits does not mean they will make investments where the reward will not compensate for the risk."

AAA tows operations across state lines to win subsidies

Most people think of AAA as the "auto club," an organization that provides towing services and road maps. But a new report by New Jersey Policy Perspective shows that AAA Mid-Atlantic is acting more and more like many large companies: it is branching out into new lines of business, and it is moving around its facilities in a manner meant to extract tax breaks from state governments. AAA Mid-Atlantic is one of five clubs that were formerly known as the American Automobile Association.

The report, written by Sarah Stecker, shows how AAA Mid-Atlantic has played off four states--New Jersey, Pennsylvania, Delaware and Maryland--against one another.  By moving its headquarters from Pennsylvania to Delaware, shifting a technology office from Pennsylvania to New Jersey, and transferring a call center from Maryland to Delaware, the organization received a total of $8.1 million in state and local subsidies, without creating any new jobs.

Doh! Officials discover that subsidy recipients don't necessarily need them

Officials in Durham County, North Carolina have suspended plans to provide a $400,000 subsidy package to the American Institute of Certified Public Accountants, which recently agreed to move its headquarters to Durham. The decision came after a spokesperson for the trade association was quoted as saying that the incentives were "not a major factor" in the relocation, which involves 320 jobs. The AICPA is also set to receive state subsidies worth up to $7 million.

County Manager Mike Ruffin removed the subsidy plan from the agenda of the county board of commissioners, saying: "You shouldn't give people $400,000 if they're coming anyway." Once the controversy erupted, the AICPA changed its tune. An official of the organization wrote a letter to the editor of the Durham Herald-Sun insisting that "ultimately, we made the final decision to relocate to Durham  because the competitive incentives offered by the state and county made it economically feasible for us to do so." You'd think that an organization of bean-counters could get its story straight when it comes to money issues.