State starts chasing another factory megadeal

By TIM KALICH,

Mississippi reportedly is in the running for another automotive manufacturing plant.

Hold onto your wallets. There’s no telling what this one might cost the state to land.

In the past, the bidding war between states, mostly in the Southeast, to attract foreign automakers has been done largely behind the scenes. Economic developers in Mississippi have claimed the potential projects had to be kept hush-hush, or the manufacturer might go elsewhere.

Japanese automakers Toyota and Mazda, in a joint venture they are pursuing, are doing away with that pretense. They have made public their intentions to put a $1.6 billion plant somewhere in this country, probably in the union-unfriendly South, and they have essentially said, “Let the bidding begin.”

Based on the escalating size of incentive packages, whoever lands the project will probably be paying much more than it’s worth. Don’t expect, however, the winner to acknowledge it.

Whenever these megadeals are made, if the numbers are crunched, they are almost always crunched with rosy economic assumptions and without the full cost of tax breaks to make the return on investment for the public look more positive than it is.

Recently, in a successful campaign to defeat the unionization effort at the Nissan plant in Canton, the state and its partners in the academic and corporate worlds rolled out their public relations campaign to show what a boon the plant has been for Mississippi.

Typical was the so-called “data-driven analysis” released in June by the National Strategic Planning and Analysis Research Center at Mississippi State University.

Besides the questionable objectivity of the study (Nissan is listed as a “partner” of the Starkville think tank), it was noticeably lacking any mention of the hundreds of millions of dollars in incentives the company has received since striking its first deal with the state in 2000.

There’s a lot in the study about how good the 6,400-job plant has been for the growth of Madison County and adjacent Rankin County, how average incomes there are now above the national average, how Nissan has supposedly created another 19,000 indirect jobs around the state as well.

But there’s no analysis of the costs the state and private employers have accrued in creating those jobs at Nissan. Besides the obvious costs of the tax breaks, road building and other incentives, there’s also the costs to other employers, which have lost skilled workers to Nissan because they can’t keep up with its government-subsidized wages. And while Madison and Rankin counties have seen tremendous growth in their populations, most of the contiguous counties have seen theirs fall, suggesting that the state is not just choosing winners and losers among corporations but among counties, too.

 

This is not to single out Nissan. The deal it got — with honest estimates running about $175,000 per job over the course of the plant’s expected lifespan — is less outrageous than some that have been struck since. Continental Tire, now under construction in Hinds County, is going to wind up costing about $240,000 per job, an investment that will almost surely never pay for itself.

While the South’s politicians, desperate to claim credit for job creation, are the most prone to overbidding when chasing smokestacks, the malady is starting to show up outside the region as well.

Last week, a Wisconsin legislative agency released its analysis of the $3 billion-plus incentive package being proposed by that state’s governor, Scott Walker, to land Foxconn, a Tiawanese electronics giant. The study said the state won’t break even on the deal for at least 25 years and possibly longer.

Walker is a Republican, as are most of the elected officials in Mississippi now giving the store away to any big manufacturer who comes calling. The party of fiscal conservatism has become the party of corporate giveaways.

Those who work in economic development say that’s the nature of the game today. If a state wants to have a chance at landing a major manufacturer, it has to be willing to pony up.

Maybe so. But if the almost two-decade-old strategy of hugely bribing a few large companies to come to Mississippi were working as well as proponents claim, how come the state’s population has stopped growing? And why is Mississippi one of the last to come out of the Great Recession?

Gov. Phil Bryant and his recent predecessors claim to have created tens of thousands of jobs in the automotive sector. How many have been lost, though, as a result of the grossly preferential treatment these handful of companies have received?

The cost to produce a few pockets of prosperity and big headlines for the politicians does not appear to be doing a whole lot for everyone else.

Contact Tim Kalich at 581-7243 or tkalich@gwcommonwealth.com.

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