Last week, the board of commissioners for the City of Tallahassee, FL, voted unanimously to pay Piper Aircraft $80 million to finance construction of the company’s new assembly plant. It’s part of an incentive package they hope will lure Piper to Tallahassee, instead of five other cities the company is considering for the facility. The stakes: 1,500 new, high-paying manufacturing jobs.
The facility would be located near the Tallassee Regional Airport. “It’s an area that is underdeveloped,” says Beth Kirkland, executive director of the Economic Development Council of Tallahassee. “It would add new development to the side of Tallahassee and job growth for the entire [three-county] region.”
Piper is supposed to choose the winning city in the next few months. The assembly plant could be up and running by 2010. (You can read more about that here.)
This scenario has become all too common lately. A major manufacturer announces its intention to build a new plant in the United States, and state and local governments then compete to see who can offer the company the most lavish package of financing, tax breaks and infrastructure improvements. In the past month, for example, both Paccar and Toyota announced that they would be locating new assembly plants in Mississippi thanks, in part, to financial incentives granted them by the state. Mississippi beat out Arkansas, Alabama and several other states for the facilities. (You can read more about that here.)
Corporations argue that such incentives are necessary to keep manufacturing jobs in the United States. But, not everyone believes such incentives are worthwhile. Taxpayers may object to such incentives as “corporate welfare.” Manufacturers who are already established in the state may resent breaks given to newcomers. In North Carolina, for example, some taxpayers and businesses sued the state government over the financial incentives it handed out to Dell Corp. to persuade the computer maker to locate its state-of-the-art assembly plant in Winston-Salem. (You can read more about that here.)
Certainly, a major assembly plant would be a boon to any local economy, but the game of one-upmanship can get expensive for taxpayers. Is the investment worthwhile? What do you think? Should state and local governments give manufacturers breaks to attract new assembly plants? Do manufacturers even need such incentives? After all, if manufacturers want or need to locate their plants in the United States, they have to build them somewhere. Are incentive packages wise investments or corporate welfare?