There have been several unusual stories in the world of economic development incentives recently:

Tax incentives to enable lower bids for federal contract

California has agreed to offer tax breaks to Northrop Grumman and Lockheed Martin, two firms already operating in the state that are competing for a Department of Defense contract to build next generation stealth bombers. The tax break was first designed for Lockheed to make its team’s “bid more attractive to the Pentagon” and make California more attractive as a production site. However, its main competitor is Northrop, which had previously said it would locate production in California. The credit was extended to Northrop after it complained that the tax credit would give the competing Lockheed team an unfair advantage. (via Reuters and LA Times)

Incentives for no jobs, no investment – just “certainty”

Local Oregon officials approved a $2 billion, 30-year incentive deal that provides Intel property tax breaks on up to $100 billion in local investment. Intel did not promise to make additional investments or add jobs. The package uses the state’s Strategic Investment Program, which allows companies to pay a fee and partial taxes instead of the full property tax on equipment. Still, local officials “described the pact as providing certainty for the region.” (via Oregonian)

Incentives for job cuts

The Wisconsin Economic Development Corporation approved $6 million in tax credits to Ashley Furniture, with the condition that the company be allowed to retain only half of its workforce in the state – which means the company could receive incentives for cutting 1,900 jobs. The company has since stated that it does not plan to cut jobs, but the figure “sets the base line of risk Ashley was willing to accept as a good Samaritan to the City of Arcadia.” Deepening the controversial move, the company had noted it could downsize or close the facility completely prior to the approval and then donated $20,000 to the Governor’s re-election campaign soon after the approval. (via Minneapolis StarTribune and Wisconsin State Journal)

Lawsuit for enticing a company into taking incentives

In Florida, a film production company is suing Sarasota County claiming that the economic development office enticed the company into taking incentive funds and then proceeded to undermine its operation when it did not meet job and spending expectations. (via Herald-Tribune)

 

I’m not sure there is any broader lesson here, except that as incentives use continues to expand, we are likely to see more controversial projects and more instances in which tax breaks are used for all sorts of projects beyond those that were probably the original intent of the program.

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