A theoretical question

You know the old axiom about if a tree falls in the forest? I have a slightly different twist on it.

If your ‘incentive’ to attract a company is forgone taxes – taxes you would not have received anyway if you didn’t attract the firm – is it really cash out of pocket?

Alabama just beat out Lousiana for a german steel plant. The total incentive package was $811 million. A tidy sum to be sure – but on a $3.7 billion project. It still is far less than old McKenna used to give the call centres. Alabama ponies up about 22% of the value of the deal. 1990s call centres in New Brunswick would routinely get 25%-40% of the upfront costs. It’s just a ‘scale’ issue. $10 million for UPS on a capital/set up cost of $22 million compared to $881 million on a capital/set up cost of $3.7 billion.

The package for the steel giant includes $461 million in upfront incentives such as land acquisition, site preparation and work force training, and a total of $350 million over time in state and local tax breaks.

The tax breaks are money the state wouldn’t have recieved anyway.
There is another $55 million in road improvements that benefit more than just the company.
$45 million is for land acquisition – that may or may not be out of pocket (if the city owns the land).
$5 million to build a fire station for the whole community.
$20 million from the Port Authority – which will get easily paid back in contracts.

And in the end, voters will have to approve the $400 million via referendum.

So, is $811 million really $811 million?