There are better aids than tax abatements
Maybe 12 years ago, a manager called asking me to contact a state economic development agency with the purpose of giving back the building given to us as a part of a relocation deal. It seems that the building came with the caveat that we hire so many local employees within a stated time period. What the agency didn't tell us was that the high unemployment rate, which made the area attractive, included people receiving benefits from a NAFTA fund who were not likely to be attracted back to work, leaving only the undereducated in the pool. I'll never forget the response from the agency staffer: ``It took you long enough to figure it out.'' When learning of this situation, our CEO at the time, John Nichols, asked why we would ask for such benefits since, when incorporated into the unit's financials, they misrepresented the real long-term cost of operations.
Since then, when I am asked to become involved in a site selection search (unit managers have the authority to do so on their own), I inform the management that we will not ask for tax abatement, etc. but will accept offers of land within an industrial park (without caveats) and will always ask for hiring assistance and training funds. Some states and localities, however, insist you take every benefit on their menu.
I have concluded, however, that tax abatements and similar benefits are short-lived and shortsighted. Why take money that will be needed to educate our future workers or repair the infrastructure? Similarly, such ``deals'' provide new companies with cost advantages over long-term local companies. I have sat through many meetings with state legislators at conferences who decry these giveaways, especially when recipients face unsure business climates and are later required to downsize or close altogether, like the character in the Plastics News cartoon [``Don't promise more than you can deliver,'' May 15, Page 6]. Nonetheless, they appropriate these funds every year.
In 2004, the Manufacturers Alliance and the National Association of Manufacturers published a report citing nonproduction costs in the U.S. that place our manufacturers at a 22.3 percent disadvantage to our offshore competitors.
Instead of picking winners and losers, economic development staffs and all policy leaders should create more competitive environments by lowering our costs of doing business - not through subsidies for some, but by cutting costs for all. Vice President Gore himself identified and proposed the repeal of thousands of pages of EPA regulations cited by the agency, he said, as outdated, duplicative or overly burdensome. The repeal of these rules, he indicated, would not compromise our environment but make our business community more competitive, but to my knowledge, not a single rule was repealed by the Clinton or Bush administrations. The same could be said, I'm sure, for the millions of pages of regulations maintained by other agencies in Washington and around the country. Most businesses don't need command-and-control processes to operate safely. For the rest, there are already plenty of laws on the books.
The mantra of the plastics industry and all manufacturing should be: Lower our costs. Make us all more competitive.
Illinois Tool Works Inc.