Young Philly Politics - economic development en Pennsylvania Tax Giveaways and an Island in the Sun <p><strong>By Jamar Thrasher, <a href="">Third and State</a></strong></p> <p>A few weeks ago, the Pennsylvania General Assembly fast-tracked <a href="" target="_blank">a bill</a> in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes&nbsp;of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.</p> <p>Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN <a href="" target="_blank">reported</a> back in June.</p> <p>Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana'i, the sixth largest of the Hawaiian islands. Forbes <a href="" target="_blank">reported</a> that the deal was rumored to be worth $500 million.</p> <p>As CNN tells us:</p> <blockquote><p>The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.</p> </blockquote> <p>Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the&nbsp;new employees.&nbsp;</p> <p><a href="">read more</a></p> corporate welfare economic development Income Inequality Pennsylvania Pennsylvania Budget State Budgets Tax Giveaways Taxes Thu, 08 Nov 2012 16:02:31 +0000 8546 at A Rare Victory In The Endless Fight Against Corporate Welfare <p><strong>By Mark Price, <a href="">Third and State</a></strong></p> <p>In a rare victory against corporate welfare in Pennsylvania, Ahold USA has withdrawn its request for property tax breaks for a meat-packaging facility it is building in Lower Allen Township, Cumberland County.</p> <ul> <li>Jim Ryan, <em>Central Penn Business Journal</em> — <a href="" target="_blank">Ahold drops LERTA request for meat-packaging plant</a></li> <li>Monica Von Dobeneck, <em>The Patriot-News</em>&nbsp;—&nbsp;<a href="" target="_blank">Giant Foods owner withdraws request for tax break for its meat repackaging plant in Lower Allen Township</a></li> </ul> <p>As Michael Wood <a href="" target="_blank">explained</a> before the request was withdrawn:</p> <p><a href="">read more</a></p> corporate welfare economic development Pennsylvania Pennsylvania Budget Tax Giveaways Tax Incentives Taxes Thu, 18 Oct 2012 20:53:53 +0000 8540 at 'How 'bout No, You Crazy Dutch....' <p><strong>By Mark Price, <a href="">Third and State</a></strong></p> <p><img style="float: right; margin-left: 10px; margin-right: 10px;" src="" alt="The Only Proper Villian We Could Find From the Netherlands" width="224" height="225" />On Monday night, the Lower Allen Township commissioners in Cumberland County considered a proposal from&nbsp;<a href="" target="_blank">Ahold USA</a>, the corporate parent of <a href="!/Media/Giant-Carlisle.htm" target="_blank">Giant Food Stores</a>, for a $400,000 property tax abatement on a meat repackaging plant on which the company has already broken ground. (Ahold USA is itself the subsidiary of the Netherlands-based <a href="" target="_blank">Ahold</a>.)<br /><br /> The company has neglected a basic principle of the economic development game through which companies extract subsidies and tax breaks from states and localities where they were going to build anyway: until you have the subsidy in hand, don't give away that it will not impact your location decision. <br /><br />But since the company made this error, the title of this blog post, taken from the <a href="" target="_blank">Austin Powers</a> movie <em>Goldmember,</em> should suffice for the township's answer. (It is pure coincidence that Goldmember, a Dutchman pictured to the right, has a gold G on his velvet sweatsuit.)</p> <p>Here are two stories on this issue.</p> <ul> <li>Roger Quigley, <em>Patriot-News</em> — <a href="" target="_blank">Lower Allen Township commissioners delay decision on tax-relief request</a></li> </ul> <ul> <li>Jim T. Ryan, <em>Central Penn Business Journal</em>&nbsp;—&nbsp;<a href="" target="_blank">Lower Allen delays LERTA decision for Giant/Ahold facility</a></li> </ul> <p>The Lower Allen commissioners should continue to say no to Ahold's request because it is a simple giveaway that diverts needed tax revenue from the township. It would be that much costlier if the West Shore School District (which&nbsp;<a href="" target="_blank">has absorbed $2.2 million</a>&nbsp;in state budget cuts since 2010-11) and Cumberland County (where property taxes for most homeowners and businesses may rise by <a href="" target="_blank">22% next year</a>) follow suit.</p> <p>The repackaging plant will consolidate meat cutting operations for Ahold USA's stores in the mid-Atlantic region. Customers will no longer get their meat freshly cut in the store, instead, the meat cutting and packaging function is being moved to a central location with easy access to the interstate. Some meat cutters will lose their jobs in the process, while others might be offered jobs at the new facility, <strong>at a lower wage</strong>.</p> <p>For its $400,000, Lower Allen Township is being promised between 450 and 800 jobs; there is no word on how many jobs will be lost at Giant Food Stores in the region or at the company's&nbsp;<a href="!/Media/Giant-Landover.htm" target="_blank">Maryland division</a>. &nbsp;&nbsp;</p> <p>Normally, a corporate giant like Ahold will approach government officials to inform them they are on the short list for a new facility being planned. Just look at how the Shell Corporation enticed incentive offers from Ohio and West Virginia before securing the mother lode of all incentives from Pennsylvania&nbsp;(a $1.67 billion, 25-year tax break).</p> <p>Unfortunately for Ahold USA, the company has already broken ground on the meat repackaging plant. So the township commissioners made the right move by putting the request on hold. Why divert scarce tax dollars to a profitable corporation to do something they are already doing anyway?</p> <p>While they make <a href="" target="_blank">good beer</a> in the Netherlands, Ahold corporate honchos could learn a thing or two about economic development blackmail from Dick Yuengling Jr., the owner and president of D.G. Yuengling &amp; Son’s.</p> <p>Although the company recently expanded distribution in Ohio, making Western Pennsylvania an economically attractive location to expand production, the brewing scion doubts he would build a new brewery in Pennsylvania. Yuengling wasn't specific about what he means by business climate, but it is pretty clear from a <em>Patriot-News</em> interview that&nbsp;he doesn't think Pennsylvania as a rule offers enough taxpayer cash to corporations. (Although, Yuengling says&nbsp;his decision of where to build will not be based on the incentives offered.)</p> <ul> <li>John Luciew, <em>Patriot-News</em>&nbsp;—&nbsp;<a href="" target="_blank">Yuengling, now the largest American-owned brewer, says it likely won't build its next brewery in Pennsylvania for business reasons</a>:</li> </ul> <blockquote><p>The decision comes down to <strong>taxes, incentives</strong> and the state’s business climate, Yuengling said.&nbsp;<br /><br />In the interview, Yuengling hinted that there are far more business-friendly states. And while he didn’t directly criticize any Pennsylvania administration, past or present, he said he can never be certain which way the state is leaning in terms of its tax and business policies.&nbsp;<br /><br /><strong>By contrast, he said enticing incentives offered by other states might be too good to pass up</strong>. However, he declined to cite any states he might be considering for the brewery...&nbsp;<br /><br /><strong>“We don’t necessarily base business decisions on incentives like that. But if they are going to give them to somebody, we would stand there and take them.”&nbsp;</strong></p> </blockquote> Accountability Austin Powers economic development economy jobs Pennsylvania Tax Breaks Tax Credits Wed, 10 Oct 2012 20:32:37 +0000 8538 at Fact Checking the Corbett Jobs Record...and Some Unsolicited Advice <p><strong>By Stephen Herzenberg, <a href="">Third and State</a></strong></p> <p>The Corbett administration has a <a href="" target="_blank">new summary</a> of Pennsylvania's recent job performance. Today's news that Pennsylvania's unemployment rate is as high as the national unemployment rate underscores, however, that the state's recent jobs record is not&nbsp; good. Let’s take a closer look.</p> <p><strong>PA vs. U.S.:</strong> The Corbett jobs summary notes that Pennsylvania's unemployment rate is below the national rate — and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (<a href="" target="_blank">See Table A</a>.) But the gap between the two rates&nbsp;—&nbsp;the "Pennsylvania advantage"&nbsp;—&nbsp;has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.</p> <p><strong>Private-sector Job Growth:</strong> While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story.&nbsp;</p> <p><a title="Click to enlarge chart" href=""><img style="float: right;" src="" alt="" width="356" height="281" /></a>The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania's rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania's private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.</p> <p>These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy.&nbsp;</p> <p><strong>Manufacturing Job Growth:</strong> Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania's manufacturing job growth since early 2010 is slightly below half the national increase. (See <a href="" target="_blank">The State of Working Pennsylvania 2012</a>.)&nbsp;</p> <p><strong>New Hires in Marcellus Shale:</strong> Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As <a href="" target="_blank">we've explained</a> repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is.&nbsp;</p> <p>The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.</p> <p><strong>Here's the unsolicited advice:</strong> Twenty months into Governor Corbett's first term, there is still time for the Governor to pursue policies that will improve Pennsylvania's job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor's own transportation commission.&nbsp;</p> <p>In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.</p> economic development economy jobs Manufacturing Marcellus Shale Pennsylvania Tom Corbett Unemployment Fri, 21 Sep 2012 21:00:34 +0000 8532 at Memo to Ripoffs, Swindlers, and Job Destroyers: Philly has a Tax Break for You!!! <p>Philadelphia now has a tax package in place that supposedly was a <a href="">major factor</a> in persuading Josh Kopelman to move his venture capital company, “First Round Capital” to Philly. It seems like FRC is a fine company. It funds brand new start-up businesses, and plans to provide incubator space for many of them in its new headquarters in University City. Patrick Kerkstra over at the Inky is <a href="">crowing over FRC’s move</a> and is all but saying “gotcha” to people like me who questioned the tax breaks that the City is giving them. </p> <p>Here’s the rub. Those same tax breaks are available to Bain Capital and Mitt Romney (if and when Mr. Empty Suit returns to full-time vulturing with the firm.) They’re also available to similar companies in the private equity industry, one which has over <a href="">$4 trillion of buying power</a> under its control without any tax help from us. So here’s the question: In order to get a First Round Capital, do we also need to exempt all these other private equity firms and their leaders from business taxes? Here’s the business model for many of them: buy up existing companies with money borrowed on their assets, pay huge management fees, sell off assets, dump workers. </p> <p><a href=" ">The New Yorker</a> gives an example of how this model played itself out in real life after Bain Capital acquired Armco Steel Company and reorganized it into “GS Industries”:<br /> <blockquote>[W]ithin two years of investing eight million dollars to create GS Industries and take a majority interest, Bain Capital had paid itself a special dividend of $36.1 million, financed by a big issue of debt. . . . G.S.I. subsequently struggled against domestic and foreign competitors. In 1999 it sought a federal loan guarantee, and in 2001 it entered bankruptcy protection. More than seven hundred workers lost their jobs, health insurance, and some of their retirement benefits. A federal agency had to put up $44 million to bail out the company’s pension plan. Even while G.S.I. was fighting for survival, Bain continued to extract management fees from it—about $900,000 a year, according to a recent Los Angeles Times story. “Bain partners think the profits they made are a sign of brilliance,” an official of the steel workers’ union who negotiated with G.S.I. told the paper. “It’s not brilliance. It’s lurking around the corner and mugging somebody.”</blockquote></p> <p>Sometimes jobs aren’t destroyed, they’re <a href="">just sent away</a>:<br /> <blockquote>The next step in many leveraged buyouts is outsourcing—closing plants and selling assets, using the returns to pay back the loans, and then contracting production out to low-wage factories in other countries, usually where repressive governments prevent workers from organizing their own unions. This is precisely what happened when Freescale Semiconductor was taken over in a 2006 leveraged buyout. In the first year after the buyout, Freescale was forced to pay $760 million in interest on the debt it assumed because of the LBO. In 2007, it laid off more than 2000 employees and outsourced a substantial amount of work, including 50 percent of its assembly, packaging, and testing. In the fall of 2007, Freescale announced plans to open a design center in China that would employ 100 engineers. </blockquote></p> <p>Most interesting about these stories is the point about that federal agency putting $44 million into GSI while its management was extracting $900,000 a year in fees. It’s interesting because it’s so typical. This industry thrives on government largesse. Indeed, the single largest source of capital to the leveraged buyout industry is government pension funds. Why is that? Well, apparently, it’s because governments are such good marks for the con-men that run the industry. By using a variety of <a href="">bogus methodologies</a> for calculating their returns, these companies feed the need of public pension managers to report strong growth in their funds. And as we’ve seen with governmental gullibility respecting <a href="">interest rate swaps</a>, City managers just can’t resist the pitches of anyone approaching them with a deal that seems too good to be true.</p> <p>So here’s what we have, for the most part, in this industry: ripoffs, swindlers, and job destroyers. (I’m trying to be nice here.)</p> <p>Now if these companies come to Philly, that doesn’t mean they would destroy Philadelphia jobs. Who knows, they might actually add some management type jobs. But isn’t extending tax breaks to such companies the reverse of socially responsible investing? Do we want to be known as the go-to City for socially irresponsible investing?</p> <p>Of course it’s easy for the press to make anyone who suggests that we stop subsidizing evil into looking like silly, naïve, navel-gazers. Kerkstra and I had a long chat about how we might survive as a civilization without getting in bed with corporate pillagers before he wrote his piece. But the only comment he published from me was the wistful one in which I suggested that we be leaders in just saying no. That comment was turned into lovely softball to be served up to the City’s Commerce Director, who replied: "We don't get that luxury. We have to be competitive, and this is a baseline requirement for being competitive." </p> <p>Well, that’s not all I said, Mr. Commerce Director. I noted that we have a Mayor who happens to be the head of the National Conference of Mayors. He’s also a leader in the region, and perhaps a rising star in the national Democratic Party. Couldn’t our Mayor take the lead in proposing that cities and counties stop throwing their money around by engaging in the zero-sum game of corporate bribing? Wouldn’t it be worthwhile to figure out how to use the money that would be saved by all of us just saying no for things that would improve the livability of our towns and cities? That would start a race to the top, instead of the bottom. It would be a race in which no one loses, instead of the one we’re in, in which everyone – except the .000001 % - loses.</p> <p>But no, the conventional wisdom is that cities are helpless, they must pay and then pay again for companies that rip off everyone, from workers, to cities, to school districts, to pension funds. It’s all pretty shameful, not to mention very, very unimaginative and downright stupid.</p> Corporate Tax Breaks economic development Tue, 28 Aug 2012 16:33:48 +0000 Stan Shapiro 8527 at Business Subsidies 101: Take The Money and Run <p><em>A blog post by Mark Price, originally published at <a href="">Third and State</a>.</em></p> <p>The <em>Allentown Morning Call</em> <a href=",0,986672.story" target="_blank">reports</a> that a plant operated by International Battery in the Lehigh Valley has closed its doors. The facility opened in 2008 with $4 million in incentives from the commonwealth:</p> <blockquote><p>International Battery, which opened an Upper Macungie plant in 2008 that was expected to create hundreds of jobs, has abruptly closed without explanation, workers said, surprising local officials who worked for years to attract the company to the Valley...<br /><br />Phone messages left with various company representatives were not immediately returned. A message left with Wexford Capital, a Greenwich, Conn., hedge fund that invested $35 million in International Battery in 2010, was not immediately returned. <br /><br />International Battery, which makes rechargeable lithium-ion cells and batteries for the military and industrial uses, was seen as a recruiting win in 2008 when it decided to invest millions of dollars in the Lehigh Valley and create manufacturing jobs.</p> </blockquote> <p>On that note, I will leave you with the Steve Miller Band.</p> <p><iframe src="" frameborder="0" height="315" width="420"></iframe></p> Business Subsidies economic development Lehigh Valley Pennsylvania Mon, 12 Mar 2012 14:23:00 +0000 8345 at PA Economic Development Programs Rank 40th on Job Creation, Job Quality Standards <p><em>A blog post originally published at <a href="" target="_blank">Third and State</a>.<br /></em></p> <p>A new national study sizing up hundreds of state-level tax credit, cash grant and other economic development subsidies has some bad news for Pennsylvania.</p> <p>The commonwealth scored a D and ranked 40th place among the states in the Good Jobs First <a href="" target="_blank">report</a>, <em>Money for Something: J</em><em>ob Creation and Job Quality Standards in State Economic Development Subsidy Programs</em>. Some of the five Pennsylvania programs reviewed by researchers lack job creation requirements and wage standards for workers at subsidized companies. None of the programs required companies receiving state tax dollars to provide health benefits to workers in jobs or facilities funded by the subsidy.</p> <p>Researchers looked at Pennsylvania's Film Production Tax Credit, Job Creation Tax Credit, Keystone Opportunity Zone (KOZ) Program, Opportunity Grant Program, and Research and Development Tax Credit. Combined, these programs cost state taxpayers $181 million a year. </p> <p>Learn more about the <a href="" target="_blank">Pennsylvania findings here</a>.</p> <p>The Good Jobs First study confirms the Keystone Research Center’s 2010 <a href="" target="_blank">study</a> which found that nine major Pennsylvania business subsidy programs had low or no job quality standards.</p> <p><a href="">read more</a></p> Accountability economic development Good Jobs First Pennsylvania Thu, 15 Dec 2011 15:13:42 +0000 8267 at Could It Be the Weather? <p><em>A blog post from <a href="" target="_blank">Michael Wood</a>, originally published on <a href="" target="_blank">Third and State.</a></em></p> <p><em>The Delaware County Daily Times</em> <a href="" target="_blank">reprinted</a> a story from the PA Independent (the state news service started by the Commonwealth Foundation) which mistakenly blames unions for the out-migration of taxpayers in the state. </p> <p>Here is the claim:</p> <blockquote><p>The Tax Foundation, a Washington, D.C., tax policy nonprofit, tracks tax returns filed in every state to determine how shifts in population affect working by tracking the Social Security numbers of income tax returns filed with the IRS each year.</p> <p>Between 1999 and 2008, Pennsylvania saw an overall decline of 84,000 tax returns. The top three destinations for people leaving Pennsylvania during that time — Florida, Virginia and North Carolina — are all right to work states. The data is the most recent available.</p> </blockquote> <p>There are a couple of problems with this rationale.</p> <p>1. Not many people move between states as a share of the population. According to data on the IRS's website for the period 2004 to 2009, Pennsylvania lost a net 21,847 filers. This equates with less than 0.2% of our population. Most people who move do so to neighboring states. </p> <p>2. Included in these numbers are retirees. If you aren't in the workforce, I don't think workforce policies are high on your priority list.</p> <p><a href="">read more</a></p> economic development economy Pennsylvania Taxes Unions Wed, 24 Aug 2011 13:32:14 +0000 8152 at In Case You Missed It: Third and State Blog for Week of March 28 <p>Senator Jeff Piccola expanding school vouchers concept to include Pennsylvanians trapped in low-performing families? A state worker stunned to learn her mid-level administrative job is no pathways to riches? A Corbett speechwriter struck with a rare illness afflicting writers of overwrought clichés?</p> <p>Either Friday was a particularly zany news day — or it was the first of April!</p> <p>In Third and State's Friday Funny, we <a href="">passed on an April Fool's take</a> on the latest un-news coming out of Harrisburg. (Our thanks to a loyal blog reader for passing this one along.)</p> <p>In other news last week, we blogged about the taxes gas drillers do (or don't) pay, why the minimum wage matters, imaginative tax avoidance strategies, and much more! </p> <p><strong>IN CASE YOU MISSED IT:</strong></p> <p><a href="">read more</a></p> economic development Fiscal and Monetary Policy Jobs and Unemployment Marcellus Shale Pennsylvania State Budget wages Mon, 04 Apr 2011 14:52:22 +0000 7997 at Tax Reform can grow our economy according to Moody's Mark Zandi <p>Check out this great piece on the tax proposal by Maria and I. </p> <p><a href="" title=""></a></p> <p>Short version, do it now!</p> BPT economic development economy jobs Taxes Mon, 25 Oct 2010 02:07:24 +0000 BillGreen 7785 at