Mall of America seeks massive new subsidies
 
The Mall of America is asking the Minnesota state legislature for $181 million in subsidies and another $53 million from the City of Bloomington (home to the mall) to assist in a $1.9 billion expansion that would double its size. Once the largest, the Mall of America is currently the third largest mall in the United States.
 
Redevelopment plans call for an NHL-size ice rink, a museum, a water park, a Bass Pro sporting goods store, three hotels and a 6,000-seat performing arts center. Mall executives are trying to entice the World Figure Skating Museum to relocate from Colorado Springs as part of the new redevelopment. Although the museum attracts only 14,000 visitors per year in its current location, its inclusion in the Mall's expansion plan will help executives argue that the expansion serves a public benefit. The idea contradicts current trends in mall redevelopment since public spaces lower profit margins.
 
Annual traffic at the Mall is projected to grow from 40 million to 60 million with the expansion, representatives say. Although just over 6 percent of the Mall's visitors come from overseas, Mall officials made the claim to the Minneapolis Star Tribune (March 22, 2007) that they must expand in order to retain these valued customers and remain competitive with larger malls being built in China and India.
 
Opponents of the assistance point out that unlike a sports team or corporation that can credibly threaten to leave for another location, the mall is "stuck" in the Twin Cities. Since its opening in 1991, the City of Bloomington has awarded the mall $108 million in tax increment financing (TIF) subsidies. One local official from Bloomington is fed up with the giveaways. Representative Ann Lenczewski (D - Bloomington) told the Minneapolis Star Tribune (February 28, 2007) "We're supposed to be figuring out how to fund K-12 education, and how to get more people health care, not promoting a mall."
 
 
Court: New York State must disclose company-specific Empire Zone data
 
Thanks to a court victory by the Post-Standard of Syracuse, the New York State Department of Economic Development has recently released company-specific information on Empire Zone deals for 2003-2005. A State Supreme Court judge ruled in favor of the newspaper in early February, finding that it was entitled to have its request for the data met under New York's Freedom of Information Law.
 
The Post-Standard has already highlighted some of the most egregious deals. For example, NRG Energy received very lucrative tax breaks in 2003 while adding only one-half of one employee, and the company again topped the list with $21 million in tax breaks in 2005 despite being among the state's worst polluters. The Rochester Democrat and Chronicle has also begun to examine subsidies in Rochester and Monroe County, finding that in 2005 almost one-third of suburban Monroe County businesses that received Empire Zone incentives got more in state tax credits than they paid in total wages.
 
Empire Zones were initially created to spur job creation and capital investment in impoverished areas, but critics argue that this mission has been lost. (Good Jobs First found New York's version of enterprise zones to be perhaps the most completely perverted of any state in our 2003 study Straying from Good Intentions.) Assemblyman Joseph Morelle, D-Irondequoi, told the Democrat and Chronicle, "The program has gotten, pardon the expression, bastardized, and every area claims to be distressed in one way or another...It is not strategic." Recent legislation has authorized designation of an Empire Zone in every county; by the end of 2007 there will be 85 zones statewide. The cost of the program has ballooned in recent years - from $30 million in 2000 to a projected $558 million for 2007.

The state launched its own review of the Empire Zone program after one of its new economic development commissioners asserted that around 30 percent of subsidized companies fail to meet job creation and retention targets. No changes have yet been proposed.


New Orleans: Big, Easy Giveaways
 
New Orleans' non-governmental Bureau of Governmental Research (BGR) released a new study in March, Protecting New Orleans' Tax Base: Which PILOTs Should Fly? critiquing the city's use of payments in lieu of taxes (PILOTs) to stimulate economic development. BGR argues that the city's excessive use of this subsidy has diminished the local tax base and imperiled rebuilding efforts after Hurricane Katrina.
 
The New Orleans Industrial Development Board uses PILOTs to facilitate the issuance of tax-free, low-interest revenue bonds for private development projects. To qualify for a bond, a public entity must take title to the financed property, which takes the properties off the tax rolls. PILOTs are negotiated to offset the loss of revenue to local governments. However, PILOTs are increasingly set at an amount much lower than what the business would have paid in taxes - essentially granting firms a large tax break on top of low-interest financing.
 
BGR also found that there are few standards for evaluating funding requests, no guarantees that the firm would not have come to New Orleans without the subsidy, and little accountability for firms that do not reach their projected economic benefit goals. For example in 2006, the city awarded a 20-year PILOT worth almost $440,000 annually to a new Home Depot development, even though three existing metro-region Home Depot stores were expected to generate $100 million in sales each that same year - double the national average.


MSNBC episode prompts New Jersey reform debate
 
New York City's recent approval of $1.5 million in tax abatements for NBC cable subsidiary MSNBC to move jobs from Secaucus, NJ to Manhattan - and the ensuing uproar - are causing some New Jersey officials to call for clawbacks to recapture some portion of grants or tax breaks if a company reneges on a deal. State Senator Shirley Turner told the Associated Press, "If we keep giving without getting back, our investment strategy will become another bad joke about New Jersey."

Breaking a 1996 pledge to stay in New Jersey for 15 years after receiving $7.8 million in grants and about $8 million in sales taxes savings, MSNBC announced late last year plans to move 421 jobs from Secaucus to its Rockefeller Center headquarters. In December the New Jersey Economic Development Authority and MSNBC reached a settlement under which the state will reduce its future grants to a New Jersey based CNBC facility by $2.3 million. That means that although MSNBC only stayed in New Jersey for two-thirds of the time it had agreed, it benefited from much more than two-thirds of the subsidies it got. In response to this and the news of New York City's recent subsidy to the company, some New Jersey legislators are now considering adding "clawback" - money back guarantee - language to an economic development disclosure bill passed by the Senate last year and currently awaiting Assembly action.
 
 
Cabela's Deal in Idaho Sparks Ethics Debate
 
In March, Idaho Governor Butch Otter signed into law a bill that will reimburse Cabela's for a freeway interchange adjacent to a new store in Post Falls. House Bill 250 permits the State Tax Anticipation Revenue (STAR) program (which subsidizes new development projects using future sales tax refunds) to be used anywhere in the state.
 
Cabela's developer Foursquare Properties Inc. pushed unsuccessfully for the bill during the last legislative session without the support of House or Senate leadership. This year, it changed lobbyists, hiring former legislator Julie Ellsworth. Legislative leaders reversed their positions and the bill passed both houses with veto-proof majorities. House Speaker Denney later admitted to the Associated Press that he had recommended Ellsworth for the job.
 
Negative public reaction to these events let to the swift introduction of "revolving door" legislation that would prohibit lawmakers from lobbying for a year after they leave office. Ellsworth was hired by Foursquare three months after she lost a re-election bid by less than 700 votes. Speaker Denney says he supports the waiting period bill.
 

Study: North Carolina may lose on Dell deal

      
A recent study by the North Carolina Budget and Tax Center and the Corporation for Enterprise Development (CFED) finds that the economic impact model used by the North Carolina Department of Commerce has likely led to overbidding in a number of subsidy deals and a loss in state tax revenues. The report - "Getting our Money's Worth?" - focuses on the controversial 2004 Dell deal, in which the state provided the company $240 million in incentives.

The study found that when more plausible assumptions were substituted in the Department of Commerce model, the projected net change in state revenue from the project dropped from a positive $707 million to between negative $63 million and negative $72 million. A preliminary review of 31 other projects confirmed that problems with the state's cost-benefit projections may be widespread. One of the biggest weaknesses of the model, the study found, is that it relies heavily on sales estimates to determine a project's fiscal impacts. Sales estimates, it argues, "are too imprecise...and cannot be readily reviewed or verified, which leaves open the possibility of either the prospect or state policymaker using them to 'game' the negotiations and the public relations of the deal."
 
While not a condemnation of the North Carolina Department of Commerce, the study suggests adjusting the model and using more cautious assumptions. It also recommends more openness so that the methodology used to justify big subsidy deals is open to public scrutiny. 
 

Granite City, IL proposes $70-100 million TIF for US Steel and Sun Coke
 
US Steel and Sun Coke are asking Granite City, Illinois to approve a tax increment financing (TIF) district that would generate $70-100 million for the construction of a new coke battery - with just 70 new permanent jobs - at US Steel's Granite City location.
 
An existing coke facility on the site has had difficulty meeting federal air pollution standards. The projected new facility would use cleaner technology. 
 
The $340 million project will construct a large set of coke ovens; coke is an ingredient in making new steel. Sun Coke will operate the facility constructed on US Steel's land. With only 70 permanent jobs and $70 to $10 million in subsidies, the coke battery TIF will cost $1 million or more per job. Still, the project appears to have the support of Granite City Mayor Ed Hagnauer, who told the St. Louis Business Journal, "I want to make sure we've exhausted everything we can to make this development happen."

Mississippi provides $323.9 million in incentives for Toyota
 
In early March, Mississippi legislators finalized a $323.9 million incentive package for a $1.3 billion Toyota plant to be built near Tupelo. The state's bid for the project unofficially began in 2004, but newly elected Governor Haley Barbour's attempts to woo the company - which was also considering sites in Tennessee and Arkansas - were kept confidential at Toyota's request. Gov. Barbour told USA Today that he was grateful to get the plant for less than the $363 million the state used to lure a Nissan Motor truck plant in 2003.
 
The new Toyota plant will produce 150,000 Highlander crossover utility vehicles each year after its 2010 opening and is expected to employ 2,000 workers at an hourly wage much higher than Mississippi's average. However, last month the Detroit Free Press reported it had obtained a high-level Toyota document suggesting that the company hopes to slow the rise in its U.S. labor costs by 2011. The report, which the company has acknowledged as authentic but only speculative, says that Toyota's U.S. labor costs are expected to increase by $900 million by 2011 as its workforce expands, and that human resources officials are looking to cut that increase by one-third. One method the report suggested would be to more closely tie compensation to average manufacturing wages in each U.S. state. Meanwhile, Toyota reports record worldwide sales and profits, with net income for the fiscal year that ended March 31 rising to approximately $13 billion.

Leisure Subsidies: Arena, IMAX Theater and Amusement Park
 
DISTRICT OF COLUMBIA: Last week, the DC Council gave initial approval to the sale of $50 million in bonds to cover upgrades to the Verizon Center arena (a private facility owned by Abe Pollin, owner of the Washington Wizards and Capitals). The bond would be paid off by increased taxes on tickets and merchandise at the Arena. Supporters point to the huge subsidies given to the new DC Nationals baseball stadium and say Pollin should also be entitled to subsidies. Critics point out that the Center is already subsidized several ways, including a property tax exemption and a large land writedown. The bill is tentatively set for final passage at the District Council's next legislative meeting on April 17.
 
KANSAS: The city of Maize Kansas will award IMAX Corp and Dickinson Theaters an as yet undetermined amount for the construction of a new IMAX theater. Although Dickinson has already announced its location decision, the city is using funds to "guarantee" the development. At the request of the developer, Maize is evaluating a tax increment financing (TIF) plan.  Maize Mayor Clair Donnelly parroted the oft-stated "free lunch" theory of TIF, telling The Wichita Eagle, "I don't see this costing us anything...I'm not saying we'll get paid back quickly, but we will eventually."
 
NEW YORK: The Erie County Industrial Development Agency (ECIDA) in the Buffalo area of New York supplied a theme park with $29,000 in sales tax savings on the purchase and installation of a new "full tilt" ride. On the amusement park's website, the owner boasts that the installation of this ride "illustrates (the park's) long term commitment to Western New York." While some IDA directors felt that the park, Fantasy Island, should have paid sales taxes like any other business, others argued that it was worthy of incentives because it is a regional tourist attraction.
 
OKLAHOMA: The Oklahoma House of Representatives recently passed the Oklahoma Quality Events Incentive Act (House Bill 2071) intended to increase the number of conferences and events hosted by the state. It allows local governments to apply for a 50-percent state sales tax remittance if they have reason to believe they may lose an event to another state. Money collected from the sales tax is distributed back to pay for venue rentals, advertisements, event sponsorships or security measures. Critics of the bill call it a major hit to schools.