Wisconsin’s proposed incentive package to keep hundreds of Kimberly-Clark jobs may not be the most expensive in recent history, but it is one of the most generous for job retention when calculated on a jobs-per-dollar basis, a WisBusiness.com review finds.
An economic development official in Arkansas, which is trying to keep open its own Kimberly-Clark plant, called Wisconsin’s offer to the paper products manufacturer “unprecedented” after officials there received word their facility may shut down.
But a check of data compiled by a national organization that studies government subsidies found a 2012 package in New Jersey for Goya Foods that eclipsed what Wisconsin is proposing for the Fox Valley plant.
According to Gordon MacInnes, a New Jersey policy expert, the Goya deal was that big because there’s “really no cap” on the incentives the state’s agency for economic development can approve. He says the agency’s “hospitable” attitude toward these hefty deals means there’s usually “very little controversy” surrounding even the largest subsidies.
The incentive package proposed for Kimberly-Clark, which announced in January plans to shut down two Wisconsin plants, is currently hung up in the state Senate, where some have expressed concerns at both the price tag and the precedent such a package would set to companies considering layoffs. Others, however, are pushing the deal after Kimberly-Clark said it could pair the incentives with concessions from the United Steelworkers to keep open one of the plants.
Senate President Roger Roth, who co-authored the package for Kimberly-Clark, says he doesn’t focus so much on the cost per job retained. He points out the Fox Valley facility spends about $32 million per year with 197 Wisconsin companies in its supply chain. And he says the company is expected to have a $550 million impact on the state economy over the next 15 years.
“We’re making a decision based not just on what the numbers are today, but for the potential for what those things could be,” the Appleton Republican said. “We want to help out those anchor businesses within those anchor industries in the state.”
The state Assembly signed off on the Kimberly-Clark package in February, approving a boost in tax credits for job retention to 17 percent, up from the current 7 percent. Kimberly-Clark would also get refundable tax credits for 15 percent of capital expenditures, up from the typical 10 percent, over a five-year period. The company would also get a five-year sales tax exemption on those expenditures in a deal that some have described as Foxconn-like after the state gave similar incentives to the Taiwanese manufacturer to build a plant in southeastern Wisconsin.
Originally, the package was put together to keep open two plants in an effort to save 600 jobs. But the company is now only focused on whether to keep open the larger of the two, which is located in Neenah and employs about 450.
As efforts to keep open that plant have continued, Kimberly-Clark informed Arkansas officials that a facility there producing similar products could now close.
Arkansas Economic Development Commission Executive Director Mike Preston told WisPolitics.com earlier this month the state is aggressively trying to keep 350 existing jobs at the plant. But he added the incentives being considered by Wisconsin are “unprecedented” for already-existing jobs.
Still, according to a check of data assembled by Good Jobs First, a national policy center that tracks economic development subsidies, the most expensive incentive package to retain jobs in recent years was given by New Jersey to Goya Foods, the largest Hispanic-owned foods company in the country.
If approved, the Wisconsin incentive package for Kimberly-Clark would be less expensive per job retained than the Goya deal, but more expensive than any of the other retention deals identified by Good Jobs First.
Figures from the Wisconsin Economic Development Corp. show the incentive package for Kimberly-Clark being considered by the Wisconsin Legislature would provide about $80.3 million over 15 years to retain about 450 jobs, assuming average annual wages of $70,000. That equals about $178,500 per retained job.
New Jersey’s deal with Goya was linked to the company relocating its corporate headquarters and distribution center within the state, from Secaucus to Jersey City, rather than moving to New York.
In 2012, New Jersey agreed to provide $82 million in state tax credits over 10 years to Goya Foods. New Jersey’s Economic Development Authority had recommended the credits in October of that year, saying Goya was thinking of relocating to Long Island. A memo from the NJEDA shows that would have cost the state about 369 jobs.
Adjusted for inflation, New Jersey’s incentive package for Goya breaks down to about $247,066 per retained job.
Gordon MacInnes is the former executive director and current senior fellow at New Jersey Policy Perspective, a nonprofit group that performs research on state economic issues.
MacInnes, who served a combined six years in the New Jersey Legislature as a Dem, says the Goya deal is “not unusual” among projects approved by New Jersey’s Economic Development Authority — at least, not anymore.
“What I’ve been picking up over the past six years, we’re looking at deals that are even more flamboyant,” he said. “It’s just been getting worse in that sense.”
Critics of the Wisconsin proposal say it could set a precedent for other companies to squeeze extra dollars out of the state by threatening to leave for greener pastures. MacInnes says those concerns have merit.
He explains that the Goya deal was done under a program initially designed to encourage business activity in the hard-pressed urban areas of New Jersey. He says that law was expanded in 2013, just one year after the Goya deal, so “just about any place qualified.”
The Goya deal followed other high-profile retention deals in New Jersey — Prudential Insurance got a $250 million subsidy in 2011, and Panasonic got $102 million in the same year. Prudential’s deal equaled to about $143,040 per job, and Panasonic’s deal was about $137,309 per job.
They ranked third and fourth out of the most expensive deals, including Wisconsin’s proposed deal. The fifth was a 2011 deal between Sears and Illinois, for about $61,145 per job; the sixth was another 2011 deal, between American Greetings and Ohio, for about $60,808 per job. Those number are also adjusted for inflation.
When the New Jersey law was changed to encourage business activity more broadly across the state, MacInnes says it opened up the field even more, making it a lot easier to offer incentives to companies. Since then, the yearly dollar amount for subsidies been significantly higher, according to numbers from the NJEDA.
In 2007, $51 million was given out in subsidies both for job retention and attraction. By 2012, that had risen to $806 million. By 2013, it rose even further to $1 billion. That went up to $1.8 billion in 2014, and though it hasn’t been as high since, the yearly amount hasn’t fallen below $1.2 billion.
Jon Whiten, vice president for NJPP, wrote in a blog post earlier this year that more and more of these subsidies have been used to shift jobs around the state in cases where that’s preferable to the company leaving the state altogether. He says the subsidies have only been getting sweeter for companies, as they’re getting more credits with less required investment.
“New Jersey can’t afford to ink over $1 billion in subsidy deals every single year, or to continue approving 9-figure tax breaks to help profitable multinational corporations move their offices a few miles down the road,” Whiten said.
–By Alex Moe
WisBusiness.com
