Archive for August, 2014

Tesla Open Letter Electrifies Gigafactory Debate

August 29, 2014

Early this week Good Jobs First joined its voice with those of progressive organizations in Arizona, California, New Mexico, Nevada and Texas to express concerns about the pending subsidy bidding war over Tesla’s proposed Gigafactory.  In case you missed it, an open letter signed by Arizona PIRG, the California Budget Project, Progressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, Texans for Public Justice  and Good Jobs First regarding the multi-state competition has been generating growing media attention.  The letter calls for state leaders to seize the opportunity presented by Tesla’s subsidy demands, communicate with each other, and reject the harmful Race to the Bottom.

Much of our daily work at Good Jobs First consists of monitoring massive subsidy packages that often don’t receive much attention in the media.  But events like the Gigafactory bidding war provide an opportunity to break down these complicated issues into smaller pieces that allow a practical public dialogue about job creation, competition, and fairness.

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North Carolina Puts the Brakes on Subsidy Spending but Moves Ahead on Privatization

August 25, 2014

North Carolina State Capitol. Image by Abbylabar (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

North Carolina State Capitol. Image by Abbylabar (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

For the past decade, North Carolina has spent heavily on subsidies, abandoning its previous economic stinginess. In an encouraging new reversal, the Tar Heel State is returning to its old ways. In a just completed short session, the state legislature took two important steps to limit giveaways: it ended one of the country’s biggest film tax credit programs and it defeated a proposal by Gov. Pat McCrory and Secretary of Commerce Sharon Decker to create a deal-closing slush fund. The defeat of the fund also meant the rejection of an expansion of several existing subsidy programs and a special deal for a paper mill.

Not everything coming out of the session was positive. Lawmakers moved ahead with an ill-conceived plan to privatize job recruitment functions of the state’s Commerce Department. The plan was approved despite warnings of problems with similar quasi-public agencies across the country and despite revelations by the N.C. Policy Watch that the Partnership’s CEO lacks experience in economic development and led his company into bankruptcy.

It was the second attempt by the Governor and Commerce Secretary to pass this bill. During the previous legislative session, a similar proposal failed when an amendment that would lift the state moratorium on hydraulic fracturing was added to the bill (the North Carolina chapter in our Creating Scandals Instead of Jobs study has more details on that plan).

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An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

August 25, 2014

For Immediate Release August 25, 2014

Contact: Diane E. Brown (Arizona) dbrown@arizonapirg.org (602) 252-9227
Chris Hoene (California) choene@cbp.org (916) 444-0500
Bob Fulkerson (Nevada) bfulkerson@planevada.org 775-348-7557
Javier Benavidez (New Mexico) javier@swop.net 505-315-3596
Craig McDonald, (Texas) craig@tpj.org 512-472-9770
Greg LeRoy goodjobs@goodjobsfirst.org 202-232-1616 x 211

An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

There is no question that state officials should place a high priority on boosting employment and fostering economy opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” – undoubtedly a valuable source of economic growth for its eventual home state – has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla – or any other company – could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent – no law requires you to negotiate with Tesla or any company behind closed doors – and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry – with its far-flung supply chains and 50-state market – is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG

Chris Hoene, California Budget Project

Bob Fulkerson, Progressive Leadership Alliance of Nevada

Javier Benavidez, Southwest Organizing Project (New Mexico)

Craig McDonald, Texans for Public Justice

Greg LeRoy, Good Jobs First

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The Golden State Gives Out the Gold

August 21, 2014

California traditionally avoided the lavish subsidy packages that other states offer to large corporations to attract investment. In the Good Jobs First Megadeals report last year, there were only two California entries, and they both involved local rather than state money.

In a dramatic reversal, the Golden State is now giving out big pots of gold. The California legislature recently awarded cash-flow
special corporate tax breaks
worth more than $420 million each to two of the country’s largest military contractors.

The state also boosted the pot of money available for film tax credits from $100 million to $400 million. And it may put up a substantial amount to try to win the contest for the huge battery plant planned by Tesla.

The first of the defense megadeals went to Lockheed Martin in connection with its role as a major subcontractor for Boeing on a $55 billion contract the Air Force will award for next-generation stealth bombers.

When the legislature approved the subsidy deal in July, Northrop Grumman, the only known competitor for the bomber contract, cried foul play because the tax break gave Lockheed an unfair advantage.  To appease the company the legislature passed a similar subsidy bill for Northrop last week that was then signed by Gov. Jerry Brown.

Like other defense contractors, Lockheed and Northrop know that to attract political support for their projects, they need to spread their operations around. And in doing so, they manage to get state and local subsidies as well. The Good Jobs First Subsidy Tracker shows that Lockheed has received $134,349,564 in subsidies in 18 states.  Northrop Grumman has received $499,567,863 in subsidies in 9 different states.  Northrop’s most recent subsidy is a $471 million package from Florida. (This megadeal is included in the total and will be added to our database in a forthcoming update.)

Until now Lockheed and Northrop received only modest subsidies in California, mostly in the form of training assistance. California clearly wants to revive its shrinking aerospace industry, but it is unclear that the big giveaways are the way to go.

Defense contracting is a particularly risky bet these days.  With calls for cuts in the military budget coming from both the left and the right, the future of the new stealth bomber program is anything but certain.  If the program goes on the chopping block, California will have nothing to show for its new embrace of megadeals.