The Wall Street Journal reports on a dimension of corporate welfare that helps explain the ever-growing price of public taxpayer handouts to land industry — site selecting consultants who are treated like royalty and sometimes grab a commission on the public welfare.
Arkansas, ever ready to pass out tax dollars to corporations, earns a spot in the first paragraph (and much more later):
Georgia rolls out a red carpet for them at the Masters Golf Tournament. Kentucky gets them tickets to the Kentucky Derby. Arkansas takes them on a private duck hunt with the governor. Utah recently arranged a private ski trip with an Olympic medalist.
Such is the life of site selectors — consultants who jet around the country helping corporations decide where to build new headquarters, factories or expansion projects, often pitting communities against each other in multistate bidding wars to maximize tax breaks, grants, land deals and other incentives.
This captured my attention:
In some ways, the site selectors act like lobbyists, interacting with government officials as they help their clients obtain favorable deals that sometimes require legislative and regulatory changes. Unlike lobbyists, site selection consultants often work on commission, which is frequently tied to the size of the incentive package they negotiate for their clients. That fee structure has drawn criticism from some of the very economic development officials who are competing against each other for the projects.
No Arkansas official is quoted as objecting to this shakedown. Indeed, the article explains how we were played for a recent Czech gun factory. (Local officials are accessories after to the fact. In Little Rock, we provided a whopping property tax break, cash to build a road and free land to get a CZ-USA factory at the Little Rock Port that won’t contribute any money to port revenue, won’t create new tax revenue for the city and may or may not employ anyone who lives in Little Rock. The state doled out a huge subsidy for the plant, too, and that’s where the site selectors came in.
Featured in the article is Mike Mullis of Memphis, a site selector who’s plowed the corporate welfare field in Arkansas for years. He was in on the deal that “landed” CZ-USA at the Little Rock Port. He’s famous, the article says, for hammering states for incentives.
Mr. Mullis was also an early member of an exclusive club of consultants known as the Site Selectors Guild. New guild members have to be approved by a committee, and every member is required to attend a conference where government officials and other attendees pay $2,000 a ticket for a chance to hobnob with them.
Guild members also get treated to extravagant parties and perks by local communities that host the events. Like the hunting trips and other events, they’re often public-private partnerships.
Get it? We pay and entertain these guys for the privilege of forking over still more tax sweat from working stiffs. Even the “Guild,” by the way, doesn’t claim incentives are the be-all. They just “make a good location better,” said a spokesman.
Still, when CZ-USA went looking for its first U.S. factory site, ait decided, what the heck?
Even if the subsidiary, called CZ-USA, received no incentives, it still would have proceeded with the project, said CZ-USA’s chairman, Bogdan Heczko.
Still, he decided it would make sense to “see how much we can get.”
Mullis worked Arkansas well, the article recounts. He scouted locations in a dozen states. Kansas and Missouri were leaders. Then Gov. Asa Hutchinson took Mullis and other site selectors on a retreat to a Northeast Arkansas hunting club. The governor asked Mullis how to close the deal. He confirms Mullis gave him some tips on how to “fine tune” the state’s pitch.
It was a sweet song. CZ-USA got $4 million from the governor’s slush fund known as the “quick action closing fund.” It got $20 million more in loans, grants, rebates and tax incentives. It has promised 565 jobs in return.
From Arkansas, the article moves to a whale of a corporate welfare boondoggle, the multi-billion Foxconn deal in Wisconsin.
Key point in the article: Most of the sites would have been chosen without the taxpayer handouts. Raw materials, workforce, location, utility rates and other factors are far more important. But will companies take proffered handouts? Of course they will. And the consultants get some of the gravy.