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This page contains a single entry from the blog posted on May 13, 2011 2:10 PM. The previous post in this blog was Japanese nuke cover-up -- literally. The next post in this blog is Maybe they should stop playing the 1812 Overture. Many more can be found on the main index page or by looking through the archives.

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Friday, May 13, 2011

Taxpayers will dig deep for "jobs"

Portland officials say they're bringing 500 "green" energy jobs to the city by putting a solar panel manufacturing plant out in North Portland somewhere. Exactly where, they're not saying yet, but what is already certain is that the deal comes at quite a cost to the taxpayers:

The approximately $57 million package includes nearly $18 million in tax abatements, $14 million in state tax credits, a $20 million state loan and $5 million in city loan guarantees, backed by Portland parking meter revenue.
That's $114,000 per job up front -- let's hope the company, something called SoloPower, actually makes it.

The City of Portland part of the deal is up for a rush-rush vote by the City Council on Wednesday.

This is the plant that was supposed to go into Wilsonville, through the wonders of "urban renewal." But as soon as there was talk of the public of that city actually getting to vote on the tax handouts, that was the end of that plan. So the next stop was Portland, where the people don't get to vote on anything meaningful, and when they do, they'll go for anything "green."

The jobs are good news, at least in the abstract. But do not overlook that they're being bought and paid for with taxes.

Comments (25)

Yea that had one in Massachusetts with all the handouts and after three years they moved it to China. We'll see how long this one last.

Jack,

You make it sound like they're spending your tax dollars and mine to bring this plant here, but that's just not the case. Tax abatements are not tax expenditures. They're a waiver of future tax obligations. And if this company didn't build the plant here, then we'd be in the same revenue position we're in with the abatement. Tax-wise, it's a zero-sum gain. However, the employees of the plant will pay taxes. And if the company survives/stays, then once it's past its incubation period, then there's more tax revenue to be made. I think you've got an overly stingy view of economic development assistance.

Jack,
Admittedly I don't know all the details of the deal, but I want to comment on your statement about our taxes paying for this.

$18 million in tax abatements - This is abatement of taxes that would otherwise be paid by the company once they are located and operating. If the land is left vacant, then these taxes would never be collected either, so I don't see this as a direct cost. It is rather reduced potential revenue.

$14 million in state tax credits - Again, this is credit against taxes to be collected once the company is operating, so again it is reduced potential revenue, not a direct cost. If the company does not expand their operation here, then those taxes are not collected either.

$20 million state loan - This is a direct cost from the state, and being a loan is expected to be paid back. If the company succeeds, and repays the loan, the state is no worse off. If the company fails to repay the loan, then we tax payers foot the bill for $20 million.

$5 million in city loan guarantees - This is the city taking on one quarter of the risk on the above mentioned $20 million loan. So, if the company succeeds, it costs the city nothing (ok, probably costs some administrative overhead to set it up). If the company fails, then the City is out $5 million and the State is out $15 million, again $20 million from the taxpayers in total.

End result - if the company succeeds, they provide over 400 living wage jobs in North Portland, and the tax payers are not out of pocket for anything, except a bit of administrative management. Fewer taxes are collected than would have been collected if the company located here and succeeded with no deal, but more taxes are collected than would have been collected if the company never located here. (Remember, of course, that all of those jobs are providing payroll tax revenues and income tax revenues, as well as the economic multiplier to other business in the area).

If the company fails, then Portland and Oregon taxpayers are on the hook for $20 million total. This is the amount of the gamble by providing the loans. I think the City actually made a pretty good deal here.

I can't say that I would vote "no" on this if given the choice, the job prospect is too great.

Although Portland will throw money at any green job sector possible, what they are doing is no different than any other city or state across the country. Corporate welfare is alive and well, especially these days. The recent shipment of Boeing manufacturing jobs from Washington to South Carolina is a great example.

Give me 60 million dollars and I'll create 500 jobs too.

According to the press, it's a $57 million package. Divided by "up to" 500 jobs, it's $114,000 per job.

Of course, if things go well, it will all be "paid back" to the public in the form of loan repayments or increased future tax receipts. The shareholders of SoloPower will also have made a lot of dough off the taxpayers' "investments." If the average worker out there is paid $50,000 (which seems high), the public paid their entire compensation for more than two years.

If things go poorly, the public will be out of pocket a lot of money -- at least $25 million -- and the SoloPower investors will have gotten away with not paying taxes that most other Portland businesses have to pay, even when they are losing money.

Oh, and who will build the plant? Wait -- don't tell me -- Hoffman Construction?

My question is, who will this company be employing? Local residents who are making this abated tax "loan", or skilled workers from out of state that move here to take the job?

If I understand the deal correctly, there is a cost to the tax abatements.

First, on the property tax side, proponents are assuming that no productive, property-tax paying facility would ever have been built where this company is locating. One would have to hope that assumption is wrong.

Second, on the state income tax credits, this deal means that this business, if successful, will be paying less in Oregon income taxes than the equally successful, already existing, business next door, which received no tax abatements or subsidized loans.

The proponents of higher corporate taxes will average the taxes paid by the two businesses, and conclude that Oregon's taxes aren't that bad, some future legislature will take the bait and jack up Oregon corporate tax rates even further (affecting the non-subsidized business, but not the subsidized one), and the non-subsidized business, who had to find their own capital to get started, will finally get smart and start thinking about where they can move to get one of these great subsidized deals.

Stated another way, it isn't fair to the businesses that are already here, whose owners shouldered all the risk without special tax deals and loans from the state.

To The Original Bob W,

Corporations for tax fairness?!? That's rich.

The sad reality is that states and localities are locked into a cycle of giveaways in order to secure jobs. There's a reason Texas has a much brighter jobs picture than we do -- they give away A LOT. And yet their budget is just as unbalanced as ours, in part because of the billions in tax breaks they give (http://www.chron.com/disp/story.mpl/metropolitan/7561247.html). So for Portland, this is a gamble, but probably one worth taking.

"Mark's" perspective:

IP Address: 159.121.4.169
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CIDR: 159.121.0.0/16
OriginAS:
NetName: OR-GOV
NetHandle: NET-159-121-0-0-1
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NetType: Direct Assignment
Comment: http://www.oregon.gov
RegDate: 1992-04-14
Updated: 2003-01-13
Ref: http://whois.arin.net/rest/net/NET-159-121-0-0-1

OrgName: State of Oregon
OrgId: OREGON
Address: 530 Airport Rd
City: Salem
StateProv: OR
PostalCode: 97301
Country: US
RegDate: 1995-08-14
Updated: 2010-04-28
Comment: http://www.oregon.gov
Ref: http://whois.arin.net/rest/org/OREGON

Nice use of my tax dollars Mark....

Good catch on the IP's jack, I thought those comments sounded slanted.

Divide by 150, not 500 jobs.

Yeah, private industry should pungle-up the cash! Yeah! Um....

About ten years ago PacificPower gave $1 million to some puffery-shovellers in New Jersey called BlackLightPower. Big splash in the Oregonian. Big story, on the front page of the biz section above the fold: The future of clean energy. Funny, nothing ever came back AND the Oregonian purged the piece from their archives. Funny that.

Lack of due diligence by political folks who can't explain a light bulb. Not so funny that.

What's the over/under that they go bankrupt before the ribbon cutting?

I'm only surprised the Scone or Streetcar Charlie haven't been "representing" the beggars.

Was this not mentioned in any of the stories?

The U.S. Department of Energy is giving SoloPower Inc. $197 million loan guarantee.

One thing that is not mentioned is the value of the land they will be building on. Since it is in an Enterprise Zone will the property be sold at a fair market value, or will taxpayers be subsidizing that also? That is generally how PDC operates, it gives land away, even sometimes down to a $1 for a parcel.

Come on media, do a little digging. I'm sure Sam will say "that will be determined later", then they'll think we will forget about it.

I'd love to see what guarantees SoloPower makes vs. all the guarantees our politicians make with our tax money. I mean these govt people have no clue on what makes a good business (like Intel/Nike) or a rip-off (like ReVolt Technologies.)

Instead of throwing a pot of money at every thing with a "green" or "clean" in their name, why not just make it easier and lower cost for all businesses?

Something like rolling back water rates or not raising BDS fees.

BTW - To Mark, if you think govt is the source of tax fairness I beg you to look at the IRS code and each year that goes by means that many more loopholes for some business that contributes to the right politician.

I think that 500 is the pie in the sky number. They're starting with 170 or so, then they'll "see what happens."

Meh. We need the jobs.

One thing overlooked by all the commenter’s here is the technology that Solopower developed. They manufacture their solar cells in a fashion that is more like offset printing rather than slicing silicon wafers. This technology should bring the cost of solar power down to ten cents a watt as apposed to the buck it costs now. Not only will the production process prove to be much cheaper but the cells are flexible which provides for many more ways to utilize solar power. Solopower could develop into a company the size of Intel.

Portland's formula for success:
1) drive away successful businesses like Columbia Sportswear and others that have left because of the obscenely high cost of doing business here.
2) use subsidies/giveaways/abatements to "lure" fly-by-night startups with no products, no sales, no profits to set up shop in Portland.
3) see what happens.

Oh, the stupidity of it all.

"I'd love to see what guarantees SoloPower makes vs. all the guarantees our politicians make with our tax money. I mean these govt people have no clue on what makes a good business (like Intel/Nike) or a rip-off (like ReVolt Technologies.)"

Well, Intel is in an Enterprise Zone too. Although, I'd rather throw money at proven industries like Intel.

Fast forward to 2015 when the City Council decides to double-down on this investment by replacing all the City's eco-roofs with thin film solar panels because "we can't afford not to" help out the struggling green technology sector.

This partnership has $7.50/gallon biodiesel written all over it.

Will the green-venture-carpetbaggers displace the condo-weasels and the light-rail-mafia for public subsidy dominance or will they join forces to milk us together?

Can't you picture the trains and streetcars picking up riders from the new TOD's where the trains, condo's and apartments are all topped with solar panels?

Fairy Tales, put me to bed.


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