Archive for February, 2008

Another Olympic Game

February 29, 2008

The U.S. Olympic Committee (USOC) recently narrowed the field of cities competing for the new site of its 125-person headquarters to two, but final selection has been postponed at least until May. While USOC chief Peter Ueberroth refused to name the cities, the main contenders are reported to be Chicago and Colorado Springs, the latter being the current location for USOC headquarters. Ueberroth is demanding “bulletproof” proposals from the contending cities.

According to public documents released in response to a Colorado Springs Gazette lawsuit, the USOC’s main consideration is free (i.e., no leasing or acquisition costs) and bigger headquarters space. The present facility shares a cramped former Air Force base with USOC training facilities that will remain in Colorado Springs even if the headquarters moves.

Colorado Spring officials estimate USOC’s annual economic impact at $316 million. While it has not released all the details of the retention offer, fearing to be outbid by competing cities, the city has approved a special bond district that could provide a new USOC headquarters site $100 million in low interest bonds.

But state and local officials are also pushing back a little. Mayor Lionel Rivera responded to Ueberroth’s latest demand by saying “… our commitments are laid out and backed up and to use his term, ‘bullet-proof.’” Colorado’ U.S. Senators Ken Salazer and Wayne Allard have threatened to “examine” USOC’s federal charter if its headquarters leaves the state.

USOC may be using the three-city competition more to squeeze Colorado Springs than anything else, although Chicago’s superior air service and talent pool are reportedly attractive. According to news reports, Chicago has offered Navy Pier, a massive entertainment complex on Lake Michigan, as a potential headquarters site, but USOC is said to be more interested in the renowned but underutilized Sears Tower, which could be renamed if chosen.

While no other details of Chicago’s offer, including potential incentives, have been made public, officials think getting the USOC headquarters could bolster Chicago’s bid to host the 2016 Olympics. But having the headquarters will not help that bid much if the city does not make its aging and under-funded mass transit system more competitive with the efficient systems of competitors like Madrid.

Austin (TX) Voters to Decide Fate of City’s Retail Tax Breaks

February 27, 2008

Officials in Austin, Texas have announced that residents will vote in November on a proposed amendment to the city’s charter that would ban tax breaks to retailers. The announcement came after a group called Stop Domain Subsidies (SDS) succeeded in collecting enough petitions to put the measure on the ballot.

SDS, a group of about 450 locally-owned businesses, believes retail subsidies unfairly benefit large national chains. The group was formed in 2003 to oppose an estimated $16.5 million in property and sales tax rebate awarded to a luxury shopping center called The Domain.

Under pressure from SDS, the Austin City Council approved a resolution in December that sought to bar economic development subsidies for future retail projects. However, the resolution, which is not legally binding, does not go far enough for retail subsidy ban advocates. If approved, the amendment would not only ban city subsidies to new projects with retail components, but also stop the city from making payments to existing projects, like Domain.

The Domain is owned by Simon Property Group, the largest owner and operator of shopping centers in the United States and a frequent recipient of large subsidy deals. Good Jobs First knows of two retail projects for which Simon has received over $100 million per deal in taxpayer funding – the Mall of America in Bloomington, Minn. and Circle Centre mall in Indianapolis.

Austin would not be the first city with a ban on retail subsidies. Last summer, Arizona Gov. Janet Napolitano signed into law a ban on cities in the Phoenix area from providing retail subsidies. This law came after two metro area projects were awarded a whopping $340 million in sales tax rebates.

From Sprawl to “Social Disorder”: The Collapse of the Suburbs?

February 25, 2008

America’s sprawling suburbs are starting to show signs of “physical and social disorder” analogous to those that plagued many of the country’s large cities in the 1960s and 1970s, according to a provocative article in the March issue of The Atlantic by Christopher Leinberger.

The immediate cause, Leinberger notes, is the mortgage crisis and the ensuing wave of foreclosures. A growing number of homes in once tidy suburban communities have become blighted as angry residents trash houses they are being forced to leave, and vandals subsequently strip them of copper pipes and other salable materials. Leinberger cites reports of increased gang activity in the land of the cul de sac.

The deterioration of the suburbs, Leinberger argues, goes deeper than the credit crunch. He says that large-lot, automobile-dependent developments on the fringes of metropolitan areas are falling out of favor in an era of high gasoline prices. Instead, more people are flocking to densely populated gentrified city centers in which they can walk or use public transit to get to shops, restaurants and workplaces.

That’s fine for affluent urban newcomers, but lower-income families displaced by condo development are fleeing to the declining suburbs, where, according to Leinberger, they will increasingly clash with the remaining homeowners desperately trying to preserve their version of the American Dream.

Leinberger’s article represents a caution for those smart-growth advocates who think that upscale central-city revitalization is by itself the answer to America’s problems. We also need to figure out a solution for those priced out of the expensive new urban paradises.

Clemens’ Misremembering Catching on in the Big Apple

February 21, 2008

At last week’s congressional hearing on Major League Baseball’s steroids scandal, Yankees pitcher Roger Clemens now infamously claimed a teammate “misremembers” their discussions about his possible steroid use. Funny, it seems Mayor Bloomberg too misremembers. In 2003 he claimed to have “essentially ended corporate welfare as we know it.” History proves otherwise.

Mega economic development projects throughout the city have been pushed forward with little input from community groups and left those advocating for accountable development scratching our heads. You only need to look to the Bronx to see the damage the subsidized new Yankee ballpark (now going up across the street from the current stadium) is doing to the city’s pocket book and to the South Bronx neighborhood whose parks were taken for it.

But the corporate baseball gravy train is on a roll. Next month the New York City Industrial Development Agency (the city’s subsidy granting arm) will hold a hearing on a proposal to subsidize TWO offices for the commissioner of Major League Baseball in Manhattan; one on Park Avenue in Midtown and one in the heart of Harlem. The city hasn’t released the value of the tax breaks but more information is expected next Friday.

I’m shocked by the Bloomberg Administration’s audacity in throwing more tax breaks at the lucrative baseball industry. As a fervent follower of the new Yankee stadium, Good Jobs New York has estimated the project will cost taxpayers over $800 million and the Mets joined in the fray with a $468 million subsidy for the new Citi Field.

To garner support from the city council the Yankees promised jobs for Bronx residents and mounds of cash to non-profit organizations. But public officials at all levels are asleep at the wheel; they haven’t verified the job figures claimed by the Yankees and the team has yet to allocate any of the resources it promised leaving some Bronx officials feeling betrayed, the Daily News reported.

Whatever the proposed subsidy figures for the MLB offices are, it will show Bloomberg is inching closer to a billion dollar taxpayer gift for baseball. Sure, the Mayor may have ended corporate welfare as we knew it but it looks to me as he’s just reinvented it.

Wisconsin Subsidizes Border Hopping, But Did It Need To?

February 20, 2008

Uline Shipping Supplies, a distributor of industrial packing materials, recently announced it will relocate its headquarters from Waukegan, Illinois to a new headquarters/distribution campus just 20 miles north in Wisconsin, for which it will receive up to $23 million in state and local business subsidies. The announcement has renewed debate in both states on the wisdom of providing such “incentives,” especially for companies taking a short step across state lines.

Uline will transfer 650 jobs based in Waukegan to Pleasant Prairie, Wisconsin, an affluent outlying suburb of both Chicago and Milwaukee. State and local officials have pledged $6 million in grants, credits and forgivable loans for the project, which is expected to create an additional 350 jobs in addition to the 650 transferred. Wisconsin has also designated the Uline campus an enterprise zone, providing up to $17 million in further tax breaks over 10 years.

The relocation is a blow to Waukegan, a small, economically depressed city in otherwise affluent Lake County. But, although Uline doubtless welcomes Wisconsin’s substantial public subsidies, it’s unlikely they are driving its relocation decision.

The key factor for Uline seems instead to have been finding a site big enough for both its headquarters and a new, much larger distribution center. Uline chief financial officer Frank Unick said the Pleasant Prairie site “gives us the opportunity to have significant space to accommodate future growth and to bring people together again who are currently located in a number of different Uline facilities.”

While Wisconsin’s subsidies might not have been a big factor in luring Uline across the border, Illinois’ own subsidies –whether in the form of tax benefits like Single Sales Factor adopted to attract headquarters and manufacturing (see February 6 blog below), or of the EDGE corporate income tax credits Uline has been awarded in recent years —were also ineffective in keeping the company from moving.

Minnesota’s Rural JOBZ Program Falls Short

February 14, 2008

Minnesota Governor Tim Pawlenty’s signature rural economic development program is unaccountable and ineffective, says a new report by the state’s Legislative Auditor.

The Jobs Opportunity Building Zones (JOBZ) program has granted $46 million in tax breaks to 350 businesses since 2004. However, two-thirds of businesses admitted to the Auditor that they would have expanded to some extent without the subsidies – including 11 percent who admitted they would have made the same investment in the exact same location (a remarkable admission to a public agency; who knows how much higher the true figure is?)

The Auditor also found bloated job creation claims by the Department of Employment and Economic Development (DEED). Almost half of the subsidized businesses are obligated to hire a measly five or fewer new employees. And although DEED claims 5,500 new full-time JOBZ jobs, the Auditor concluded actual job creation is 20 to 30 percent lower.

Although Good Jobs First has found that Minnesota’s pioneering disclosure law (requiring subsidy deals to be posted online) has increased civic engagement and expectations on economic development spending, tax credits like JOBZ are not covered.

The JOBZ program subsidizes companies located outside of the Minneapolis-St. Paul metro area through the creation of tax-free zones. Although Gov. Pawlenty is lobbying to have the program extended past its 2015 sunset date, the legislature has shifted its attention to fixing the program’s massive flaws.

Oodles of Jobs, Gobs Less CO2

February 14, 2008

It’s time for America to use existing, garden-variety tax breaks to create oodles of jobs and eliminate gobs of greenhouse gasses. It’s time we attach Climate Quality Standards to economic development subsidies such as property tax abatements, Industrial Revenue Bonds, and investment tax credits.

Estimates vary, but buildings generate about a third of greenhouse gasses in the U.S. The U.S. Green Building Council, whose LEED standards are the most widely used system for improving buildings’ efficiency, has LEED-EB, its certification for Existing Buildings.

As the New York Times recently reported, commercial building owners can recoup the cost (via energy savings) of retrofitting to LEED-EB standards IN JUST 10 TO 30 MONTHS! Adobe recouped its costs in less than 10 months, the Times reports, and now gives tours. (A speaker at the recent New Partners for Smart Growth conference said Harvard claims a higher ROI on its physical-plant efficiency efforts than on its endowment!)

Given this reality, it’s time for a new leg on our Good Jobs First Subsidy Accountability “stool.” Every local and state legislator and executive ought to be applying Climate Quality Standards such as LEED-EB to any company that wants to keep common economic development subsidies. The same principle using LEED standards for new construction should apply to all future deals.

Oodles of jobs as owners of existing buildings scramble to comply and save their giveaways. Gobs less CO2 as America’s physical plant becomes more efficient.

Can you say “low-hanging policy fruit?”

Is Corporate Greenwashing Headed for a Fall?

February 12, 2008

Second perhaps only to the television ads being run by presidential candidates, the airwaves are filled with commercials from large companies touting the way they are taking steps to help the environment. One Chevrolet spot shows a man telling a group of children that a hulking SUV is a “vegetarian” because it can run on ethanol fuel. Toyota shows one of its vehicles being constructed as if it were a grass hut that then disintegrates back into nature without a trace. And, of course, General Electric continues to promote its “eco-imagination.”

This kind of greenwashing is the topic of the latest E-Letter published by Good Jobs First affiliate, the Corporate Research Project. The E-Letter focuses on signs that corporate greenwashing may be headed for a fall.

Articles questioning the validity of some green claims have appeared in the likes of the Wall Street Journal, Business Week and Advertising Age. A marketing firm called TerraChoice did an analysis of more than 1,000 products bearing environmental claims. After finding that all but one of those claims were false or misleading in some respect, TerraChoice issued a paper called The Six Sins of Greenwashing that analyzed the various forms of deception.

Do-it-yourself greenwashing criticism is now possible through a website recently launched by EnviroMedia Social Marketing. Its Greenwashing Index site allows users to post ads—usually video footage taken from YouTube—and rate them on a scale of 1 (good ad) to 5 ( total greenwashing).

More troubling, from the corporate perspective, are signs that government regulators and industry-established watchdog groups are giving more scrutiny to green claims. Government regulators in Norway have banned automobile ads from stating that any cars are environmentally friendly, given their contribution to global warming. The U.S. Federal Trade Commission, which in 1992 issued national guidelines for environmental marketing claims but has done little on the subject since then, announced in November that it was beginning a review of its rules.

The E-Letter notes that some companies will not give up their environmental claims without a fight. Perhaps the hardest nut to crack will be Wal-Mart, whose CEO recently upped the ante by imagining a time when his customers arrive at the store in electric cars that could be recharged in the parking lot using power generated by wind turbines and solar panels.

If the world can achieve completely clean cars, it is likely we will also have found a way to meet our material needs without big-box stores full of goods made by sweatshop labor. But that, of course, is not part of the Wal-Mart vision.

Sonics flee Seattle, while DC residents get to work on new stadium

February 7, 2008

Professional sports stadiums are a bad public investment, according to a federal court brief filed by the Seattle SuperSonics. Trying to get out of its KeyArena lease in order to move to Oklahoma City, the Sonics management is recanting its previous claims that the team’s presence provides immeasurable public benefits. The brief states:

“The financial issue is simple, and the city’s analysts agree, there will be no net economic loss if the Sonics leave Seattle. Entertainment dollars not spent on the Sonics will be spent on Seattle’s many other sports and entertainment options. Seattleites will not reduce their entertainment budget simply because the Sonics leave.”

Jim Brunner, reporter for the Seattle Times, was the first to uncover this story.

Although the Sonics would like to simply pay off their 2010 lease and leave, Seattle is suing to require the team to play in the city for the remaining two years of the lease.

This battle hasn’t stopped the Sonics from asking Oklahoma City for massive subsidies. Voters there will decide in March whether to approve a $100 million tax package for stadium renovations. For more details on the Sonics departure, see Neil deMause’s blog, Field of Schemes.

In other stadium news…

Although Good Jobs First is critical of stadium giveaways, we recently spoke favorably at a press conference about the local-jobs outcomes of the project labor agreement (PLA) for the construction of the Nationals stadium in Washington, D.C. The PLA – formed by the city, contractors, unions and community groups – sets aggressive goals for hiring city residents in both apprentice and journey-level positions.

While at least one firm associated with the anti-union Associated Builders and Contractors (ABC) trade association has funded a group attacking the PLA, the project has been a great success in parts of DC that have struggled with high employment and too few economic opportunities. To date, 87 percent of all apprentices working on the project have been District residents, with wages ranging from $15 to $28 per hour.

Costly Business Tax Break Fails to Check Illinois Manufacturing Job Loss– Again

February 6, 2008

In a move reminiscent of Maytag’s 2002 decision to close its Galesburg, Illinois plant and transfer jobs to Mexico, Methode Electronics has announced it will close one of its three Illinois plants and eliminate a product line at another. A total of 700 jobs at the three plants will be cut, with some positions transferred to Mexico or China.

Methode, a multinational supplier of auto components like turn signals, cited fewer orders from the Big 3 automakers and pressure to cut prices.

Job cuts like these underscore the ineffectiveness of the Single Sales Factor method of determining the income tax liability of companies that–like Methode–operate in several U.S. states. Illinois adopted in 1998,

By excluding in-state property and payroll from the formula that determines income taxable, SSF provides a tax windfall to large companies like Methode with substantial in-state presence and substantial out-of-state sales. Proponents claimed an economic development bonanza would offset the revenue loss, as SSF’s tax advantages would attract new companies and investment and create 155,000 new jobs in the manufacturing sector alone.

However, after eight years and an estimated cost to the Illinois treasury of nearly $750 million, SSF has proven ineffective in stemming the loss of manufacturing jobs in Illinois. In fact, manufacturing employment has fallen by nearly 219,000 jobs since the beginning
of 1999.