In an era of high unemployment, state and local governments are resorting to any available means to lure industry and promote business.
Many of these ideas are worthwhile. But the deal recently offered by Pennsylvania Gov. Tom Corbett for a proposed Shell petrochemical facility demonstrates just how far some officials are willing to bend over backward to attract jobs -- even if that means putting long-term fiscal solvency at risk.
After Shell expressed interest in purchasing a zinc smelting plant owned by Horsehead Corp. in the township of Potter, some 30 miles northwest of Pittsburgh, Corbett proposed a whopping $1.7 billion tax break to sweeten the deal.
Based on the taxes currently being paid by Horsehead, Potter would lose 7 percent of its annual budget and its school district would lose $275,000 because the plant would be exempt from property taxes for 15 years -- leaving "a full generation of Potter Township residents" paying property taxes before Shell ever has to, in the words of township Supervisor Rebecca Matsco.
Corbett has claimed the plant would create 25,000 jobs, but admits the vast majority of these would be temporary construction jobs, and only 400 employees would work at the plant.
Let's be clear: Governments have an important role to play in fostering commerce, and tax incentives are a useful way to close important deals. Take Sidney-based aerospace company Amphenol, for example. When severe weather from Tropical Storm Lee and Hurricane Irene last year wreaked a reported $20 million to $35 million worth of damage to Amphenol's facility, Gov. Andrew Cuomo agreed to a $20 million aid package that was likely the difference between Amphenol staying or leaving -- and taking their roughly 1,000 jobs and paychecks out of our local economy.
In the case of Amphenol, a significant regional employer faced a stark choice of leaving the area entirely or seeking public incentives that would make staying worthwhile.
But the site for Shell's proposed plant in Pennsylvania -- which would convert natural gas into other chemicals -- was already the company's first choice, being located in the heart of the Marcellus Shale. One can't help but wonder whether the deal is necessary, or merely payback to an industry that donated $1,277,550 to Corbett's campaign in 2010 according to followthemoney.com.
"You're already starting to see lots of businesses relocate around the Marcellus Shale," said Pittsburgh-based economic development consultant Steve McKnight. "This is a sector that's growing on its own by most accounts, so you definitely have to question the state putting forward something at that level."
Taxpayers shouldn't begrudge elected officials who offer modest, targeted tax credits that are in the best interest of the community. But it's important to ask whether they are truly needed -- or whether our leaders are simply telling us they are.
