State News

Economic development deals hinge on timing and information, observers say

By T.A. DeFeo | The Center Square contributor

(The Center Square) — When it comes to keeping its cards close on incentives that attract new business, Georgia is not alone.

Many states, one observer says, keep secret what incentives they plan to give corporations. Taxpayers often learn how the government is spending Georgians’ money on economic development projects – such as tax credits or job training – months after a deal is done.

“These incentives can take many forms, including tax breaks, grants, and other financial incentives,” Lanesha Mohip, owner of Polished Business Solutions, a Chicago-based boutique accounting firm, told The Center Square.

Mohip said many states offer companies tax breaks, such as reduced corporate income taxes or sales tax exemptions.

“Critics tend to argue that these incentives often come at the expense of taxpayers and that they can also lead to a race to the bottom among states, as they compete to offer ever-more generous incentives to companies,” Mohip said. “However, supporters argue that these incentives are necessary to attract companies and create jobs in the state and that they ultimately benefit the state’s economy.”

When asked whether taxpayers deserve to learn incentive information in real time, the Georgia Department of Economic Development said timing makes a difference.

“While we try to align announcements with the signing of binding contractual agreements, it does not always work that way,” the agency said in a statement to The Center Square. “Factors such as real estate closings, company board approvals, SEC regulations, and other aspects impact when announcements occur and when contracts can be signed. However, we do our best to finalize the incentive agreements as expeditiously as possible to decrease time between the announcement of the project and the release of incentive information.

“It is also worth noting that the current open records law enacted by the Legislature exempts the disclosure of active economic development projects until such time that the projects sign a binding commitment with the State of Georgia,” the agency added. “The rationale behind this law is to prevent Georgia’s competitor states from being able to see Georgia’s incentive package, make a stronger offer, and entice the project elsewhere. Additionally, from a policy perspective, until the final binding agreements are executed, neither the State nor a company have finalized the binding terms to the deal, including requirements for job creation and investment levels for certain discretionary incentives to be received.

The Center for Economic Accountability awarded the state’s decision to give $1.5 billion in incentives for a Rivian Automotive electric vehicle assembly plant 2022’s “Worst Economic Development Deal of the Year.”

“The short answer is that these deals don’t exist to create jobs,” John Mozena, president of The Center for Economic Accountability, wrote in an email to The Center Square. “Rather, they exist to make voters believe that politicians are responsible for creating jobs. There’s no evidence that these deals are, on the whole, economically worthwhile, but there’s LOTS of evidence that they’re incredibly valuable to elected officials who crowd the stages at groundbreaking and ribbon-cutting ceremonies.

“There’s a reason that states where governors are running for reelection are twice as likely as those where they aren’t to see a sudden, large – 20%-plus – jump in subsidy deal spending, or why companies that make political donations are four times more likely to get subsidies than those that don’t,” Mozena added. “And for those politicians and bureaucrats who aren’t intentionally playing the game and do have the right intentions, there’s the inconvenient reality that a majority of voters – 57% in a national poll earlier this year – believe the advertising that these deals create jobs and get angry at their government if they’re NOT doing them – often prodded by the corporate, consultant or pro-subsidy political forces.”

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