Thursday, February 22, 2007

Smokestacks Caught

There was a time back in the '80s, as industry was folding up shop across this great land of ours, when the powers that be went to the heads of major manufacturing corporations (by then mostly Japanese) to plead on bended knee for some sort of branch plant to open up in their increasing destitute metropolises. They brought with them all manner of concessions, grants, loans, and other incentives in order to lure these branch plants in. The result was an unsustainable economic development practice commonly known as "Smokestack Chasing" and the moderately amusing Michael Keaton vehicle Gung Ho.

For those of you that think might have thought that Smokestack Chasing is dead:

Tempe, Ariz.-based US Airways (NYSE:LCC) said Pittsburgh won the bidding over Phoenix and Charlotte, N.C., for the operations center, a deal that brings with it 150 new jobs and keeps 450 in the region. Salaries at the center would average about $40,000 per year, US Airways said...

US Airways said the new operations center will be about 60,000 square feet, located on a 10-acre site. Groundbreaking for the project is slated for later this year. The first day of full operation is scheduled in early 2009.

Pittsburgh's offer for the operations center included $3 million in state and county grants, $12.5 million in loans and $750,000 in state tax credits tied to the number of jobs created by the project.

Phoenix's offer was about $36 million in grants and loans. Charlotte did not disclose its bid.
I've never been particularly comfortable with this type of economic development, partially because it an endless race to the bottom by metropolitan regions and partially because at the end of the day there's nothing inherent in the region (like talent or resources) that would compel an industry to remain after the initial bribe is spent.

Let us also set aside the fact that I've never been particularly thrilled about chasing after this particular smokestack.

This is an interesting situation, however, in that what is being reported is that Pittsburgh actually offered LESS than another region, and according to Mr. Briem's calculation and a conservative multiplier effect from construction, we, as a Region, would be making some money back, assuming the tax credit period wasn't too long.

So, is this a good investment by the powers that be? Depends, I suppose: how many of you are USAirways frequent fliers?


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