Corporate Welfare in Goodyear; Suntek, Sub Zero, St. Gobain, SAS

If the following does not completely disgust you, it might just make you angry or even sick to your stomach when you read the following closer look at how GY makes decisions about spending your tax dollars.  Never in my wildest dreams did I think that it could be done in as amateur a fashion as this.

Goodyear thinks it is good policy to give incentives to just about any business who wants to move into an existing empty building in GY that they can purchase at fire sale prices, is close to some of their largest customers, and in one case is even already set up to do the kind of work that they already do.  Don’t believe me?  Just read Georgia’s latest taxpayer funded political advertisement, Goodyear’s October Infocus magazine for proof.

I showed in a previous post that St. Gobain is getting millions to come here, Suntek got hundreds of thousands and now SAS is in line at the public trough to get a few hundred thousand even though the existing building that they will occupy had the right kind of storage silos for their business and they went out and found the ones that Rubbermaid had previously scrapped and brought them back to the site.  A corporate site re-locator’s impossible dream come true.  So why does the city of Goodyear think it needs to deliver corporate welfare to billion dollar foreign companies when there are existing buildings that just happen to fit their exact needs, the buildings are cheap, and there are already huge state and federal incentives to put their factory in GY?

In this post, I look at Goodyear’s process for making these decisions about giving away your tax dollars to these companies.

First I asked GY for a copy of their “cost to benefit” analysis of the money that they gave to Suntek and Sub-Zero to locate here.  This is what they sent me. Brodbeck 9.2.11 Sub-Zero and Brodbeck 9.22.11 Suntech .

There are zero costs shown in what they sent me, only benefits.  There is nothing in these documents that consider the costs of additional police, fire, traffic, or road maintenance.  Even the tax breaks GY has given these corporations that should be shown against these proposed benefits are not in these analyses.  These documents are simply computer generated, blue sky dreams that a consulting company named ESI in Phoenix prepares based on a computer program that they have apparently purchased from a company in Minnesota called IMPLAN.  ESI inputs information that they are given by GY (notice that ESI disclaims any responsibility for the accuracy of, nor the output from any of that information) and then cranks out two estimates.  One estimate shows how much in future actual city revenues the company might bring if they locate in GY (Fiscal Analysis) and the second estimate is of additional economic benefits to the city (Economic Impact Analysis).

The consultant analysis is like playing a game of SIM CITY, the computer game where you have to keep all your city residents happy while growing the city.

So I wrote GY a second time and told them that they apparently forgot to send me the cost side of the equation.

Here is what they sent me in reply. Suntek and Sub Zero costs    These are links to the council meetings where the tax giveaways were approved by city council and a copy of each of the proposed giveaway agreements is appended.  I have to presume that no other cost analysis was done because I did ask them twice and this is all they sent me. Can you imagine that there is no RIGORUS, WELL DEFINED, METHODOLOGY in a $60 million per year organization for spending capital where ALL inputs, positive and negative, are REQUIRED to be clearly stated in a consistent format, on the same page, for evaluation by capital expenditure decision makers (in this case city council)?  How can an organization otherwise make good comparative decisions around how and where to best spend their available capital?  I can assure you that any private business of this size who did business without this kind of discipline is already out of business.  But private businesses are unable to just go out and raise taxes anytime they feel like it either.

It appears that the way GY evaluates giving away your money is after running a beefed up version of the computer game SIM CITY, GY compares how much in tax breaks GY wants to give away vs what the companies have promised to do to benefit GY in the future (and even those projected benefits are based upon the output of an outside consultant’s SIM CITY like computer program).

OK, if that’s all I have to work with and as absurd as that seems, I’ll give them the benefit of the doubt and take a closer look.

First the benefits.  I’ll just look at Sub Zero because Suntek is done exactly the same way and I presume all the others as well.

The ESI report shows that if Sub Zero does what they have promised to do over the next seven years, then they will generate about $950,000 in new city tax revenue (Fiscal Analysis).  The agreement that Goodyear gave Sub Zero gives away $760,000 of those potential taxes or about 80% of what Sub Zero would have otherwise paid in taxes according to the Fiscal Analysis.  Wouldn’t you like to have your taxes reduced by 80%?  There appear to be no other city costs considered and on top of that, it is an existing building that the city presumably already collects taxes on.

But how about the economic impacts that 100 new jobs will bring to the area? Hold on to your hat.

According to ESI’s Sim City computer program, these 100 new jobs will support or create (sound like Obama?) another 924 other jobs in the area.  And these jobs will have “induced” economic impact of about $1.7 BILLION.  Yeah, you didn’t read it wrong, $1.7 billion.  Go back and check the document I attached above if you don’t believe it.  I couldn’t believe it when I read it either that this kind of NONSENSE could be considered rational decision making.

This is so ridiculous that on Sept 27th I sent an email to GY city council asking them to please explain this to me because I certainly must have misunderstood something. (Here’s the email that I sent Sept 27 email Sub Zero Questions  ) and here is an excerpt from it;

Your economic impact study for Sub Zero by ESI Corp seems to imply that the addition of 100 new jobs at Sub Zero in GY over a 7 year period and total spending of $150 million at the same location over a seven year period will support or create county wide 940 jobs with a total increase in payroll of nearly $300 million and an increase in industrial output of $1.7 billion. $300 million is equivalent to one half of one percent of the total annual estimated payroll in all of Maricopa County. 100 new jobs in GY is going to generate that?  If that were true, then GY could solve all of Maricopa County’s current economic recession problems by finding 18 other manufacturers to add 100 jobs each in GY and the recession in Arizona would be over. (half of normal 2.5 % GDP growth = 1.25% X 7 (years) = 8.75%. / 0.5% = 17.5)

How can 100 new jobs in GY over a 7 year period possibly add 940 jobs worth $300 million in payroll to a county with only about 1.6 million total non-farm private jobs and a total annual county employment payroll of only $60 billion?

Hopefully, as a concerned GY citizen and taxpayer I am missing something major here and someone in GY who presented these figures to justify taxpayer paid for assistance to an out of state corporation can explain them better to me.

So far no answer to my inquiry.  But Georgia is not concerned.  She’s bragging about these giveaways in her most recent taxpayer financed political advertisement, GY’s October Infocus magazine.


4 Responses

  1. Not just the industrial, out of country business get the breaks… just about every big business gets a break, including sales tax rebated back to the business… Keep it up, you’re getting somewhere and I sure hope that more people start reading and commenting on your blog. Oh, and btw, they do the same thing on their capital projects, there is NO cost benefit analysis done on them.

  2. I am going to say it again and again, recall, recall, recall – The entire bunch, the first time it is called rookie error, repeats of the same, and it is called incompetence. People who are incompetent usually get fired.

    I brought up these issues 2 years ago and was quickly dismissed by CM, Finance and Osborne.

    I review budget funding requests everyday and we question everyone no matter how big or small. In the last 5 years I have reduced over $75 Million dollars through this rigorous process. It is not fun, I say NO a lot, but it is a requirement to ensure the limited resources we do have are not wasted.

    How about a retrospective review? Validate the assumptions made since this was the first time GY management entered into these types of transaction vs continuance of the same.

    Last time I check the City Organization Chart, council reported to the Citizens and City Manager reported to council. If council will not challenge City Management because they can’t or won’t then we have no check and balance. It is clear that Council does not want to report to the citizens or they would take action.

    Listen, the citizens are tired of the rhetoric, we are tired of the tax increases, and we are tired of your wasteful spending. We have tried for 3 years now to get you to listen. Why do you think we are still writing? Do you ever plan to listen?

    We are real world business people who do this every day, we have offered our services free of charge, yes that is right, no consulting fees, to assist you with restructuring your process and put rigor back in.

    The fact that you continue to berate us, and deny our voice, is mind boggling. See Sept 12th video of council response to a citizen’s comment.

    Stop already.

  3. This is happening all over. Sadly also on a national scale.
    Here you go, from a recent email from a friend.

    Subject: : More Solar Info

    The Solar thing just got a little more interesting…….REALLY!

    The Tonopah Solar company in Harry Reid’s Nevada is getting a $737 million loan from Obama’s DOE.

    The project will produce a 110 megawatt power system and employ 45 permanent workers.

    That’s costing us just $16 million per job.

    One of the investment partners in this endeavor is Pacific Corporate Group (PCG).

    The PCG executive director is Ron Pelosi who is the brother to Nancy’s husband.

    Just move along folks…..nuthin goin on here.

  4. […] they gave away millions of dollars of your tax money as corporate welfare to foreign companies like SAS, St. Gobain, and Suntek  including $3,000 per employee tax rebates… […]

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