Entitlement Mentality?
We have an interesting example of the phenomenom of what I call a Corporate Entitlement Mentality.I touched on this in a discussion elsewhere in this blog. I will simply quote what I said before:
"Since you have me going on the so-called entitlement mentality, I can say that the biggest entitlement mentality comes from corporate America. Consider a factory location decision. Nine out of ten times, before a company makes its need for a new plant known, the decision has already been set. The typical strategy then is to announce 3 to 5 potential locations, even some across national borders. This sets up a bidding war between the announced competing sites. The shakedown process starts. Who will offer the best tax abatements? Who will offer the cheapest infrastructure improvement costs? Who will offer the best training subsidies? In most cases, the decision has already been made regarding the locational decision, which is made on the basis of labor availability and cost, location of raw material suppliers, location of the market, and so on.
The kind of consessions sought in the bidding war are usually far down the list of items that factor into the decisions. Then after the city has been shaken down, the company uses assets provided by the local, state and federal governments. Fire and police protection. Highways. Airports. When the company chooses to entertain clients, say at the Superbowl, the stadium where the game is played is paid for by taxpayer money. The transportation assets used to get there are paid for with taxpayer money, and so on. By transportation assets, the public streets and highways, the Airports are Federally owned or federal/state/city owned assets (billions of dollars), the Baggage Screeners are tax-paid employees, the Air Traffic Controllers and so on.
I cannot get a tax break if I threaten my city that I will move my residence to another city, and the receiving city will not offer me tax relief for me to make the move."
posted by Ohiodem1 at
5/17/2006 07:52:00 AM
25 Comments:
Quick comment (yes, I'm at work, but on a conference call and I don't need to talk).
You're not going to like this, but I agree with the SCOTUS decision. The use of tax incentives by state and local governments are political issues, not legal ones (I have no case law to reference, just my opinion). These are matters that need to be addressed at the ballot box, not the courts.
The one aspect of the third article is disturbing, but there really isn't much information to know if that's really the case:
"Herman Blankenship, whose Toledo auto shop was torn down to make way for the Jeep plant, said he hoped the challenge made people more aware of how much money government gives away to business."
Now, if Blankenship lost his auto shop due to eminent domain, this would be troubling as the SCOTUS is reaffirming the ridiculous and unconstitutional Kelo v. New London decision last year, made before Roberts and Alito were put on the court. But, if he sold it for a fair amount, then he has no business complaining. Unfortunately, the article doesn't say either way, just that his shop was torn down.
Just my opinion.
By
Steve, at 11:19 AM, May 17, 2006
I did a fairly detailed response, but it went into the ether when I hit the preview button.
No problem with SCOTUS ruling denying standing.
I recognize the need for economic development. I have graduate level training in urban planning, economic development, spatial economics, site selection, transportation economics and the like.
My point is that companies game the system to the degree that no individual can, and that they get a lot more money off the table than a complete economic analysis would say is necessary.
$285 M to a single site impacts negatively on school districts, (believe me, they are all strapped in Ohio), the city, county, and even the state. That $285 M must come from somewhere if the same level of government services is to be delivered by the government entities who are losing tax revenue and creating service demands as a result of the plant location decision.
It may take 30 years to recoup that tax money from income taxes and multiplier effects. Obviously, the communities involved need to make informed decisions, and this is the rub. Informed decisions by the voters is never offered.
Finally, a justice once said, the constitution is what the justices say it is. They said this element of eminent domain is constitutional, then by that logic it is. Ohio and many other states are amending their own constitutions or legislating against abusive eminent domain proceedings, particularly that that only stands to gain a private enterprise and a local tax base at the expense of a landowner. This is as it should be.
The ruling, as I recall, was 5-4 with no clear right/left voting lines. The dissent left many future litigation opportunities open. Unfortunately, the Justices said that the constitution permits this. I guess it does.
By
Ohiodem1, at 1:26 PM, May 17, 2006
If availablity of a willing workforce was the only criteria, the obvious choice of location would be either Michigan or Ohio. Michigan has tens of thousands of unemployed or underemployed auto workers, as does Ohio.
Michigan does not appear to be under consideration, most likely beause the workforce is highly unionized and likely to remain that way, which rules it out for most foreign auto manufacturers, despite the availabliltiy of probably 20 qualified workers for each job.
Ohio used to be an auto parts powerhouse. At one time, Ohio was number two in parts production right behind Michigan, which naturally because of the auto industry was first. Ohio has lost about 200,000 manufacturing jobs, most of which will never come back. Again, workforce numbers are good, and Honda has a major footprint in Ohio. The two Honda auto assmembly plants in Ohio are not unionized, but labor costs are lower in Alabama and Mexico. Health care is not a cost item in Canada. I read a recent account that a major industrial facility decided to locate in Canada, despite the negatives of strong unions and other factors.
In that case, nationalized health care caused a locational decision that would not have been made otherwise. American auto makers are saying that about $1500 of each car goes to pay health costs. Maybe it is time to re-think how we do health care in America.
The current system, which most folks would charitably say it sucks, is what we got after the Hillary plan in 1993. The health care industry reacted with a totally crazy system that costs way too much money. If our health care system is causing America to lose thousands of jobs, maybe it it time to re-think.
By
Ohiodem1, at 4:50 PM, May 17, 2006
I heard an interesting discussion on the Ed Shultz show this afternoon. A small businessman (non-union residential construction contractor) called in to discuss the recent extension of the tax cuts for the rich.
He stated that he needs to set aside about 35% of his gross earnings for taxes and he is being hit by a 15% self-empoyment tax, even though he employees five workers. Of course he does not provide health care for his employees, because he can not afford it.
Ed Shultz proposed a novel idea: "What if the government would allow you to get a tax credit up to the 15% self-employment tax to help subsidize healthcare for your employees? After all, experienced workers are companies most valuable assets." Without hesitation, this small businessman said, "Yes. That is one of the best ideas to help out the small businessman I ever heard."
By
REB 84, at 10:36 PM, May 17, 2006
Quick comments.
Kelo decision breakdown: ruling for it were Kennedy (Reagan), Ginsburg (Clinton), Stevens (Ford), Breyer (Clinton), and Souter (Bush 41); dissenting were O'Connor (Reagan), Rehnquist (Nixon), Scalia (Reagan), and Thomas (Bush 41).
That Kelo decision wasn't just unconstitutional, it was a disaster. One of the key elements to the Constitution is that it is supposed to protect private property. Allowing any level of government to, in effect, steal the property of one private party and sell it (probably at below market value) is a sure sign of tyranny.
I hate corporate welfare. I find it pointless and stupid. One of the more amusing aspects of watching the EU Constitution get ripped apart was how Britain and France kept telling the other to stop subsidizing various industries, and both countries refusing to do so. Think about how ridiculous subsidies are: I'm a cigarette smoker. I pay taxes and some of that money goes to tobacco farmers to grow more tobacco to make cigarettes. Then I go and buy cigarettes and pay an extra sales tax to smoke them. I pay two taxes to smoke one cigarette. (Yeah, I should quit; maybe one day.)
I have less problem with tax incentives, provided they're done correctly. I do have to remember that we are talking about government here, so doing it correctly could be a stretch (mild attempt at humor).
The tax incentive for the guy Reb talks about sounds like a good idea.
By
Steve, at 12:04 AM, May 18, 2006
My local newspaper does not put its online edition up until about 8:30 AM, but there is a story on the front page that the choice is between Ohio and Indiana and Michigan received no consideration.
Honda has taked options on 4 pieces of property at two general locations in Indiana, and is playing off Ohio and Indiana for the best tax abatement package. Engine plant went to Canada.
I have never seen one of these events go this fast, which reinforces my contention that the decision has already been made, within certain paramenters. Honda has built a large network of suppliers, primarily in western Ohio, so from an industrial siting standpoint, there is little difference between locating in Indiana or Western Ohio, as most suppliers in their network will be equidistant to a any of the proposed sites in Indiana or likely sites in Ohio. Honda has announced that the plant will be located in the Midwest.
Anyone who wants to look can search "Honda" at dispatch.com
As a side note, I have my own idea about how the tobacco thing ought to be worked out. Maybe I will post it here some day. Steve, I quit when I was 25, cold turkey, actually on a bet. I won the bet, but the other bettor never paid off. The key is that you want to quit for your own reason. External forces, guilt, whatever do not work. If you want to quit, decide that is what you want to do, and then do it. In 3 days, the physical craving stops, then any craving is just in your mind, which is a good one. You can do it if you try. Hope you do try.
OD1
By
Ohiodem1, at 7:57 AM, May 18, 2006
To your point on Honda having already made a decision before playing off one state and another, then going to Canada, a catalog company I used to work for did the same thing when it wanted to relocate from the city of Chicago to Columbus, Ohio (my job wasn't affected, I worked in a location in the Chicago suburbs that wasn't moving). This company did the same thing with a bunch of Chicago area communities, including the city, then moved out altogether.
My dad quit smoking cold turkey around 1979 and he still likes to tell me about it once in awhile. Others have given me great (and I mean, really funny) stories on how they quit.
By
Steve, at 10:28 AM, May 18, 2006
Steve - They gave the engine plant to Canada, not the assembly plant.
They are still playing off the two states against the other.
You have the last word in the last thread. No time to do legal research on one point you discussed (intelligence legal history, I think). Won't concede, but can't refute either due to time constraint.
Two more developement cases: UPS expands air hub in Louisville, gets $51 M tax reduction over 10 years, 5000 new jobs, plus large construction project. Increases UPS presence in Louisville from 18,000 to 23,000. The Louisville bargaining chip is that Louisville already had a huge investment in Louisville, and they had a very large existing hub facility. $51 M over 10 years is a perfectly good investment by Louisville to obtain $100 M annual payroll + large multiplier.
UPS expansion
A Nestle beverage plant which will create 250 jobs picked Anderson, Indiana over sites in Ohio. A Lima, Ohio site could not compete with Indiana incentives. The Indiana town once employed 27,000 GM employees, and is down to 700 Delphi employees, who may lose their jobs in restructuring.
The incentives were not discussed in the article.
Nestle
When you start looking, this stuff goes on all the time. How much is too much? Is it blackmail or good business? Is there a better system?
I think the catalog company you referred to is Spiegel/Eddie Bauer. They wound up buying a giant Sears distribution center, and are now in process to leave, Speigel already has.
By
Ohiodem1, at 12:11 PM, May 18, 2006
You guess Spiegel/Eddie Bauer? You guessed correctly (worked there for 15 years at the data center in the Chicago suburbs; left and found a new job in 1999). The reasons for removing to Columbus (around 1995, I believe) were two-fold.
One, the Spiegel warehouse complex in Chicago was old (nearly 100 years old) and they did need a new one. Spiegel had bought EB in 1986 and management wanted to merge warehouse operations. EB already had a warehouse in Columbus, plus (again, you are correct) Spiegel bought the massive Sears center. I still remember reports in the local news about how the city was working with Spiegel on getting them to stay, but the decision to move had already been made.
Second, the contract with the warehouse workers (Teamsters Union) in Chicago was to end in early 1995, and Spiegel didn't want to renegotiate.
Spiegel the corporate entity eventually became Eddie Bauer the corporate entity after Spiegel had massive financial problems before the economy tanked and 9/11 occurred (too long to go into here). Spiegel catalog was eventually sold to a holding company. I haven't followed what happened with EB since then (a bunch of my friends were laid off).
By
Steve, at 6:46 AM, May 19, 2006
I don't think we are fighting each other on this thread. Today's Honda story is that Ohio had its ducks in a row for years, due to history since 1979 of working with Honda. Indiana is doing its negotiating in the newspapers. Land deals not nailed down in Indiana, have been covered for months or years in Ohio.
Site selection will be announced in 2 months, which in my opinion, means that the locational decision has already been made, and concessions are being horse traded.
By
Ohiodem1, at 10:54 AM, May 19, 2006
You are correct, we are not fighting on this. I agree with what you say. I find it ridiculous that governments and businesses allow each other to waste the kind of time they do, and at taxpayer expense. Didn't mean to give you a different impression.
My whole working life has been in big corporations and it is amazing how idiotic, inefficient, and downright mean they can get. Unfortunately, I work with IBM mainframe computers and only big companies use them (and I do like what I do, even if I'm not always thrilled with the companies I've worked for).
By
Steve, at 12:28 PM, May 19, 2006
You guys did a great job of staying on topic. And I can't recall any news outlets conducting this type of analysis into the games corporations play. It seems all we get from "news" coverage is parrotting the official stories of our Governors or Mayors. It amazes me how often we get sucked into these races to the bottom while we continue to see plants and jobs leave Michigan. Why aren't reporters asking the tough questions?
Of course another aspect to the corporate entitlement mentality is the massive uncollected taxes that are hidden away in "legal" offshore tax havens. This could make another interesting research topic.
Steve, I would like to continue on your Chicago corruption comments from the previous post. We have a long history of corrupt Democratic mayors in Detroit as well. We didn't have Al Capone back in the day, but we had the Purple Gang and plenty of bootlegging coming over the Detroit River from Canada.
Over the last few decades we had Coleman Young for most of my early life (another divider who blamed the "hostile suburbanites" for all the cities ills)and now we have Kwame Kilpatrick (our hip-hop mayor, who looks up to Coleman as his role model) and is never one to turn down a few favors or spend scarce city tax dollars to find jobs for his friends and family.
Yes, the entitlement mentality is alive and well amongst too many elected officials at all levels. This is why I continue to preach the need for greater oversight, enforcement, and protection of whistleblowers. See, Steve, I know that Dick Cheney is not the only politician with his head in the trough:)
By
REB 84, at 11:45 PM, May 19, 2006
Reb,
I'm still not a big fan of whistleblowers, but to continue off-topic on that subject, I have a juicy one for you.
Last year after Dick Durbin made his Gitmo is a gulag statement, I wrote to him to get him to resign and used a now three-year old story regarding torture at Cook County jail. I linked this story that came out a year later (originally in the Chicago Tribune but reproduced from the University of Chicago Law School website) about a Tribune reporter and two whistleblowing correctional officers who had reported the travesty at the jail.
The other night, Rep. Cynthia McKinney (not one of my favorite members of Congress, for a variety of reasons; I don't want to get into that here) was on the House floor during one of those late sessions where Reps. bring items to the floor after everybody pretty much goes home for the evening. She went up and, God bless her, brought up the torture story in a floor statement (link here, from her website). To date, not one of the Democratic politicians in Illinois has said a thing, but a fellow out-of-state Democrat sought to bring this horror story up.
The corruption with this incident is extremely deep:
"What has happened since these announcements? Nothing that anyone except a Cook County politician would call proactive. Lt. Byrne was not fired. Remus got mad and quit. The sheriff's [Michael Sheahan] blue-ribbon panel has not been heard from since the sheriff announced its formation. It did not hold public hearings, issue any public statement or deliver a public report.
The soldier who blew the whistle on misconduct in Iraq has been praised by his commanders, but that's not what happened in Cook County. The investigator who exposed the 1999 incident, Charles Holman [the Chicago Tribune reporter], has been transferred from his job of investigating misconduct at the jail. Correctional officers Roger Fairley and Richard Gackowski [the whistleblowers] have been forced to quit their jobs and have been unable to find new ones.
The second group of accountable officials is the Cook County Board of Commissioners. The board did not punish any of the medical personnel who the investigator had found to have falsified documents or then-Cook County Inspector General Timothy Flick, who had thumbed his nose at the jail investigation. (Flick left Cook County last year to join the Office of Homeland Security in Texas, but his name should ring a bell with the county commissioners. In January a federal jury in Chicago awarded one of Flick's employees $500,000 for the sexual harassment she had endured from Flick while he headed the inspector general's office; $100,000 of that award must be paid by Cook County.)"
Quite a tale.
And if I remember correctly, the Purple Gang and ol' Scarface did quite a bit of business together in getting some of that booze from Canada to Chicago.
By
Steve, at 9:14 AM, May 20, 2006
Honda update. Fayette County development officials are identifying a potential Honda site near the intersection of I-71 and US 35. Good transportation network, location vs suppliers, etc. No word from Indiana or Ohio development depts.
Torture should not be permitted anywere in America, or by its Armed Forces or national security intelligence operators.
Inhuman treatment should not be tolerated by Americans, nor our government. End of story as far as I am concerned.
By
Ohiodem1, at 1:14 PM, May 20, 2006
Steve,
Interesting that you bring up the Cook County Jail torture story. I just heard of this for the first time on NPR this past week.
The story was brought up because the UN Commission on Torture has sighted the Cook County case as a Human Rights Violation. According to the story, it looks like everyone may walk due to a "statute of limitations."
As I stated previously, Corruption is a bipartisan problem, closely linked to those in positions of power. Check out "Absolute Power Corrupts Absolutely" for a bit of historical perspective on this problem.
By
REB 84, at 8:33 PM, May 20, 2006
Nothing on the Honda front. An article yesterday showed 10 items that may be important to a factory locational decision, but I felt it made more of some fluff type issues, and failed to mention some other more important questions. Also spilt transportation into more than one category, which was used to fill the space. Not much useful there. It looks like the political horse trading is taking place out of the public eye. Look for more news to emerge in about 30 days.
By
Ohiodem1, at 1:47 PM, May 22, 2006
This morning, it was reported that Michigan belatedly came into the process. UAW strengh and distance from the Honda supplier network makes Michigan a dark horse.
It is not known if site work has been done by Michigan, but it seems that their development department would be on top of this quesion.
By
Ohiodem1, at 1:26 PM, May 23, 2006
OhioDem and Steve,
I found the following post about the Honda Plant at AutoBlog - Ohio and Indiana gunning for new Honda plant. These bloggers seem to think Ohio and Indiana have the inside track.
It includes an interesting analysis by Brian D. #7 "Honda traditionally hasn't sought out incentives for their factories in the U.S. What they are most interested in is having around 1,000 acres of land ready with a purchase option and Ohio seems to have an edge in that department. With the land locked up in a purchase option if Honda selects the site they can buy it immediately. Given statements by Hondo of being online in 2008 they are on a very tight timetable."
By
REB 84, at 9:37 PM, May 23, 2006
Have a good Memorial Day, all. I'm outta here for the weekend (my turn to take a trip, with the missus).
By
Steve, at 11:47 PM, May 24, 2006
Enjoy your vacation Steve. We look forward to continuing our debates in future posts.
By
REB 84, at 10:55 AM, May 25, 2006
Steve, Yes enjoy your time off with your family. My nest is now empty and we don't see family as much as we would like. We will be going to a graduation this Sunday. That will be a nice family gathering.
By
Ohiodem1, at 12:14 PM, May 25, 2006
Here is a little twist in the Honda story. The Ohio legislature put off a hearing about making English the Official language of Ohio for fear of causing discomfort to Honda executives who normally bring Japanese speaking management and engineering personnel to new plants. They indicated that they did not want to appear hostile to foreigners bearing money.
Honda plant location decision postpones language legislation
By
Ohiodem1, at 11:46 PM, May 27, 2006
Last week Michigan Governor Granholm provided some interesting evidence that health care costs are a major factor in selecting plant locations.
"Last year for the first time more cars were built in Ontario than in Michigan. For those obsessed with tax rates and regulations, that didn't happen for any of those reasons. It happened because you get assistance with health care in Canada. That's a huge lesson for us."
By
REB 84, at 8:53 AM, June 05, 2006
The word is out this morning (June 28, 2006) that the new Honda plant is going to Greenburg, Indiana. This city is Southeast of Indianapolis on I-74.
Speculation is that Honda did not want to bid up labor costs in Ohio, and in effect, compete against itself for workers.
The article I read also suggested that the Indiana selection would put another Congressional delegation in Honda's corner in Washington.
More details will come out regarding the nature of the concessions, tax breaks, training, infrastructure development and other items negotiated from the city and state, which sweetened the deal. Let's keep an eye on this. Note that at least for now, labor cost is reported as the prime issue, not concessions.
By
Ohiodem1, at 7:41 AM, June 28, 2006
It will be interesting to see what kind of health care and other benefits packages Honda will be offering the Illinois workers.
By
DTW 06, at 11:37 AM, June 28, 2006
Post a Comment
Links to this post:
Create a Link
<< Home