State deficits shrink bribes to companies in jobs war

January 14, 2004|By JAY HANCOCK

THE ECONOMY is coughing, Maryland's budget deficit is $700 million and high school classes are being conducted in trailers, but at least we have this: The bribes we pay corporations to put jobs in our state are getting cheaper.

Home Depot plans to employ 230 people near Hagerstown to warehouse, sort and ship faucets, towel racks and other bathroom hardware to its stores.

Cost to Maryland taxpayers to induce Home Depot to choose Hagerstown: $405,000.

"That's cheap. That's undeniably cheap," says Greg Leroy, executive director of Good Jobs First, a Washington nonprofit group that promotes accountability and transparency for economic development incentives.

The Home Depot deal announced Monday works out to $1,761 per job. As corporate blandishments go, it's not a bad pact for taxpayers.

Look at history. Maryland furnished incentives worth $4.2 million to land a 700-job Staples Inc. distribution hub in 1996.

That's $6,000 a job.

And Rite Aid Corp.'s 850-job warehouse in Harford County cost $7.1 million in a deal struck in 1997.

That's $8,353 per job.

Granted, the Rite Aid and Staples deals brought millions of dollars in capital spending that created construction jobs and other spinoff benefits that could be said to justify their higher prices. Home Depot, by contrast, will occupy existing space.

Nevertheless, it appears that the endless Job War Between the States has lapsed into - no, not peace, not truce, not cease-fire - but something like a low-level border conflict with occasional atrocities.

"States are being somewhat more frugal" these days on economic development deals - with the exception of big factory and corporate headquarters projects, says Dennis Donovan, a top site-selection consultant based in Chicago.

(One atrocity: Florida and Palm Beach County offered California's Scripps Research Institute more than $900,000 per job to move east.)

It would be nice to attribute the low Home Depot price tag entirely to the canniness of the administration of Maryland Gov. Robert L. Ehrlich Jr. - although we should give some credit where it is due. It would be great if the new fiscal sanity were the product of enlightened governors across the country.

But you know better.

The main reason states are handing out less money to corporations these days is - they don't have any! Coast-to-coast deficits have dried the corporate welfare well even though capital projects are scarce and states badly need the few business expansions that break the horizon.

"When you do get a project you like to throw a decent amount of incentives at it to make sure you get it," Donovan says. "But on the other hand you're constrained by fiscal reality."

Now, $405,000 is not chopped rutabaga. It would pay eight Baltimore teachers for a year, and in a perfect world this kind of deal would be outlawed by Washington.

In a perfect world, states would not give away money to any business and would calibrate taxes to be fair and even for everybody. Corporations would relocate based on their needs and states' overall business climates - not on special deals that subsidize one company at the expense of another.

The world, however - have you noticed? - is not perfect. States are forced to play the giveaway game, participating in bake-offs conducted by people such as Donovan.

Apparently other states bid for the Home Depot project, although a company spokeswoman wouldn't tell me which ones. Probably Maryland's usual punching partners, Virginia and Pennsylvania.

So Maryland had to pony up - for some apparently decent jobs, too. The average pay for the Home Depot jobs is $11 an hour plus benefits, said Andrea Harrison, spokeswoman for the Department of Business and Economic Development.

Home Depot refused to strip executive salaries out of that calculation and tell me what the warehouse-floor jobs would pay, but even if a few bosses are making six figures, these still sound like good positions.

Not long ago Maryland was throwing money at jobs paying $8 an hour and less.

Nowadays, "I would suspect if it was $7 or $8 an hour there might not be any incentives," Donovan said.

That's progress. But it may last only as long as states' deficits do.

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