The Terrible Ten Corporate candy store deals of 1998.

• Author: LEROY, GREG
• Position: State and local corporate subsidies

Every year, cities and states around the country hand out government subsidies to corporations with few strings attached. It's the candy store school of economic development. Public outcry about the giveaways has prompted some change for the better in recent years. More states and cities are starting to attach conditions when they offer big companies tax incentives. Some are asking for guaranteed wages, money-back guarantees, and disclosure and monitoring safeguards.

But corporations are still getting a lot of sweet deals in American towns and cities. Consider my terrible ten deals for 1998. I found one city that admits it pays for jobs in other states. In five instances, taxpayers subsidize companies to the tune of more than $100,000 per job--and one at more than $1 million a job. Two states admit they let corporations avoid corporate income taxes altogether for fifteen to twenty years. Three deals involve companies in the midst of major labor disputes. And then there's a little-known but nefarious giveaway, tax-increment financing: A form of property tax diversion originally intended to help revitalize blighted urban areas, it now goes to pay for new corporate developments and suburban sprawl.

No. 1

Economic Development's Black Hole

In a deal with paper giant Willamette Industries for the expansion of a paper and pulp mill in Hawesville, state officials in Kentucky give Willamette tax credits worth $132.3 million. Jobs the company must create in return? Fifteen. In other words, a tax credit entitlement of up to $8.8 million per job!

Willamette spokeswoman Catherine Dunn declined to verify my tax credit computations. But the Kentucky Cabinet for Economic Development, a state agency, did confirm them. Cabinet spokeswoman Pamela Trautner hastened to add that it's unlikely the project will generate enough profits to qualify for all the credits Kentucky is offering. In other words, it's unlikely Willamette Industries will pay any income tax to Kentucky on the Hawesville project for fifteen years. No one knows how much of the $132.3 million Willamette will actually claim because corporate income tax returns are not public.

Although the financing agreement requires the company to create only fifteen new jobs, Trautner said Willamette's application refers to eighty-two new jobs. But she declined to give me a copy, saying that the document is confidential. Willamette Resident Manager Mike Maloney in Hawesville says the company has actually hired 105 new full-time employees, with hourly workers averaging $17.50 an hour plus lots of weekend premiums.

We'll take his word for it. At 105 jobs, the tax credit entitlement clocks in at $1.26 million per job.

"When these corporations don't pay their fair share, the taxpayers pick it up in all sorts of subtle little ways," says Doug Doerrfield, a member of Kentuckians for the Commonwealth. Doerrfield's sewer and water rates, in Rowan County, just went up 37 percent because, his group says, a nearby (subsidized) auto parts plant has exhausted the systems' capacity.

No. 2

The Big Apple's Biggest Bite

No place in the United States has paid out more to companies that threaten to leave town than New York City. It's hard to assemble a comprehensive list, but some of the companies that have threatened to leave if they don't get a tax break are: the New York Mercantile Exchange; Travelers, Inc./Smith Barney; Capital Cities/ABC; Republic National Bank; Morgan Stanley; Prudential Securities; Credit Suisse First Boston; Coffee, Sugar, and Cocoa Exchange; the New York Cotton Exchange; Nasdaq/American Stock Exchange; McGraw-Hill; The New York Times (printing facility); the New York Post (printing facility); Viacom; Reuters; Conde Nast; CBS-TV; ING Barings; and PaineWebber.

Now comes the mother of all retention deals in U.S. history: a package worth at least $600 million (some say $900 million) for the New York Stock Exchange.

The Stock Exchange reports it has 1,482 direct employees. Its press release on the deal refers to "more than 3,000" other workers it helps sustain indirectly--traders, brokers, and specialists on the floor. Spokesman Rich Adamonis now claims 4,000. That means the stock exchange got between $109,449 and $133,869 per job--for retention, that is--no new economic activity, just maintaining the status quo.

"All of the city's spending for development goes to Wall Street, high tech, media, and retail--either very high-income or very low-wage jobs," says Brad Lander of the Ad Hoc Coalition for Real Jobs. "Basic family-wage industries like printing, publishing, baking, garment, and fashion are being neglected."

No. 3

`No Justice! No Bonds!'

That was the cry as the Campaign for Justice at Audubon Hospital picketed in Louisville, Kentucky, last year. Campaign members were protesting taxpayer-financed bonds that would save Norton Healthcare at least $2 million a year, perhaps twice that much, for buying out three hospitals owned by Columbia/HCA.

Why the protest? Nurses at Audubon had been trying to organize a union for more than five years. A judge from the National Labor Relations Board ruled in 1997 that Columbia/HCA had committed such "serious and substantial" violations of workers' rights that chances for "a fair election are, in my opinion, nonexistent." In a strong...