Parks and McCormick deals inspire musings about government help

The Outlook

July 07, 1996|By Sean Somerville

McCORMICK & Co. Inc. and Parks Sausage Co. recently celebrated developments that were made possible by government help.

McCormick marked the opening of a plant in Belcamp, Harford County, that was financed by a $20 million state incentives package to keep the company from moving jobs to Pennsylvania.

The deal to sell Parks Sausage Co. to Pittsburgh businessman Franco Harris includes about $2 million of debt forgiveness by Baltimore.

Legislation that took effect Monday calls on the governor to negotiate a pact with neighboring states to get rid of tax subsidies aimed at creating new jobs. Lawmakers say subsidies are hurting all the states and not boosting jobs.

What is the proper role for governments when it comes to attracting or keeping businesses? At what point has the state or local government gone too far? Should states sign "nonaggression" pacts with others to prevent expensive bidding wars? Should the federal government intervene?

William Schweke

Program director, Corporation for Enterprise Development

With incentives by states and localities, the problem comes down to whether action takes place in your neck of the woods or elsewhere. Typically, you know for sure you're one of two or three sites a company is considering, but not much else. Being in the dark encourages you to ante up more than you need to.

Also, governments are generally responding to what's going on. They need to be starting out with a goal. Some jobs may not be worth it. You're much more well-protected when you have a goal. You're also telling businesses whether they are in the box or not.

We also encourage performance agreements, which hold businesses accountable for the promises they make.

Compacts between states are a great idea in theory. But it's hard to keep them enforced. As soon as the right prospect comes in the door, one of the states says, "Hmmm, I'm going to go for it." A federal role would be difficult because of the climate against mandates.

Douglas P. Munro

Co-director and chief executive officer of the Calvert Institute for Policy Research

In the ideal situation, you would have all levels of government keeping out of this business of picking winners and losers.

When states or cities give a huge company incentives to come in, the existing company is operating at a double disadvantage. Not only have they got a new competitor, but the new competitor is not playing on a level playing field. The ideal thing would be to lower taxes uniformly for everyone.

Breaks for businesses are good things in the sense that they help produce a healthy economy. The problem is their uneven application.

There are various things that states can do without having to act in concert with our neighbors. The obvious thing is to make the state, all around, a lower tax state.

A federal role sounds appealing. But the federal government has a long record of botching problems.

Jeff Finkle

Executive director of National Council for Urban and Economic Development

I think government has already gone too far in many states. I think the proper role of government is to educate students, to police streets and provide other government services -- clean streets, pothole-free roads and neighborhoods free of crime.

The communities that do those things well should not have to have large amounts of incentives on the table.

The problem is many corporations have come to expect that they need to create an auction between communities. There are consultants who specialize in this. And there are some states that have given away the store.

What's the answer? Some method of stopping this game. Some people have suggested federal legislation. Some people have suggested cooperation between states. Some have suggested denying states that do this access to federal programs. I think anything that reduces this activity or makes companies or cities or states think twice would help.

Nicholas Pierpan

Executive program officer, Partners for Livable Communities

There is an economic war among the states right now -- 15,000 communities are vying for every 50 new factories. It's a waste because smaller and mid-size businesses can provide the same economic opportunities and they are poised for growth.

The major things they want are a greater work ethic, better work-force preparedness and a serious commitment to exporting.

If states and cities can work together to become cooperative in luring business, that's going to be a tremendous help.

For the federal government to ban this sort of incentive would help solve the problem to an extent. But then those states with the higher costs of production will lose businesses.

Pub Date: 7/07/96

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