Disappointing Letter Regarding Bombardier Deal

I came across two letters to the editor discussing the Bombardier tax credit plan in the Kansas City Star. I was first upset the writers do not know the impact the Bombardier tax credit deal would have on Missouri. Then I was a little more encouraged when I read one of the responses. Its good to know there are some Missourians who understand the reality behind this deal. It could be quite detrimental for the state. Of course, this is a Kansas City paper, so the support of this deal is a little expected.

Here is what the letter to the editor said:

The State of Missouri needs to send a strong message that it is “open for business” and pass the mega-project legislation needed to attract Bombardier Aerospace (4/22, Local, “House OKs bill for aircraft plant”). Not only is the legislation critical to attracting Bombardier, but it means Missouri can finally compete for other large manufacturing deals in the future.

JE Dunn has been involved in many projects across the country and has seen the impact on a city’s economy and its workforce. The opportunity presented by Bombardier alone means hundreds of construction jobs, not to mention the peripheral construction jobs required to create supplier facilities, new homes and support services for employees.

Passage of the “mega project” legislation will give Missouri a strong position to win Bombardier’s investment. Unlike economic development packages used by other states to lure such a mega project, the tax credits afforded this project get paid back by Bombardier.

This is a great opportunity to show that Missouri is “open for business.”

Terrence P. Dunn
President and CEO, JE Dunn Construction
Kansas City

US Bank finances major corporate projects all over the world, so I see the tremendous opportunity we have in front of us with Bombardier Aerospace. The residents and business community across the state of Missouri deserve the opportunity to compete for jobs and business with these large projects.

The legislation currently being debated in the Senate is a sound financial investment, offering a rare repayment on the tax credits the state would offer to Bombardier — with interest, to boot. Because of this, the state’s total fiscal benefit far exceeds the costs that will be incurred.

Mega deals that locate in other parts of the country are typically funded by grants for training, infrastructure and land in addition to tax breaks. The states don’t receive any of that money back, but fund the deals based strictly on the resulting economic impact. Missouri has the opportunity to not only recoup the tax credit investment but will benefit from a tremendous impact as well.

If the Missouri Senate approves the pending bill and we win this project, I believe we will look back on this moment in time as a watershed event for our region.

Mark R. Jorgenson
President and CEO, US Bank
Kansas City

I wonder...both letters are written by presidents and CEOs or large companies...does this make me feel like they are really looking out for the little guy? No, it does not. It seems to me they are only looking out for themselves. They offer no proof it will be a good deal for the rest of the state.

Shouldering the tax burden

The Windsor Star gives us a line of comparison on the Bombardier deal. The competing sites are Canadian, and as such would qualify for most of their incentives from the federal government. Bombardier would get exactly $0 in incentives from the U.S. government for relocating their new facility to Kansas City, so Missouri is now asking taxpayers to support a burden that should be shared and offset by federal funding.

Bombardier, which could be in line for federal funding totalling $350 million for the assembly of a fuel efficient airliner, received words of support Wednesday from federal Public Works Minister Michael Fortier. "I can't give details, but I wont that project to land in he said.

The money would come from the five year, $900-million Strategic Aerospace and Defense Initiative.

Maxing out the state credit with Bombardier

Tax credits are not always a bad thing...they can help people in need or help companies while creating jobs and growing our economy. However, the proposed plan for Bombardier would cost Missouri millions of dollars we do not have to spend. It would suck money away from other state funded services or increase our taxes.

Prime Buzz published an article...here is a snippet I found noteworthy.

But other senators said such spending was short-sighted because it would take away money needed now for major repairs on state buildings. By setting aside that money, the maintenance problems will grow worse and leaky roofs will begin to cause damage to the rest of the buildings.

Sen. Victor Callahan, an Independence Democrat, said the proposal was more corporate welfare at the expense of Missouri’s needs. He said the budget was out of control with the recent explosion of tax credits and other subsidies.

“All we’ve done in the last few years is shift entitlements away from health care for women and children and into guaranteed deals for corporations,” Callahan said.

Sen. Jeff Smith, a St. Louis Democrat, was angry about the proposal. He said Nodler had told him repeatedly that the state did not have enough money to expand early childhood education, in-home care for the elderly and other social programs. But the state could come up with $120 million for a foreign company.

This plan may create more jobs in Kansas City, but what about all of us who don't live there? We will still be paying for it in one way or another yet we will see no gains from it. I think it would be interesting to find out who is really behind this whole thing anyways. Does anyone know?

No Deal

Recently in the Prime Buzz, Kansas City Star:

House approves Bombardier legislation; bill will likely be preferred vehicle in Senate

The Missouri House gave final approval Monday to legislation enabling tax credits that could be used for the proposed Bombardier Aerospace aircraft assembly plant in Kansas City.

The bill now moves on to the Senate, where it will likely become the vehicle carrying the Bombardier project through the legislature.

If approved, the bill would allow large-scale economic development projects to receive up to $40 million in tax credits a year for 22 years. In exchange, companies would have to provide $300 million in investment, create at least 1,000 jobs and agree to a repayment plan for the tax credits.

The House passed the bill 125-16 after less than an hour of debate. It won preliminary approval last week in about two and a half hours.

That contrasts sharply with nearly identical legislation in the Senate, which has weathered three days of debate and strong opposition from lawmakers.

Sen. Majority Leader Charlie Shields, a St. Joseph Republican, said he will likely put the Senate bill aside and focus on working the House bill through the Senate.

Having passed the House, the bill needs only to win one round of voting in the Senate. The Senate version still must pass two rounds of Senate votes and then win approval in the House.

The Senate will likely return to the legislation next week, Shields said.

Greg Steinoff, from the Department of Economic Development, was appointed by Governor Blunt, therefore not an elected official. He is a huge advocate of this bill, but I wonder why! He claims it will not cost the state anything, but we all know that is not possible! Tax credits of millions of dollars will be issued to Bombardier. Why is someone who is not an elected official acting like he knows better than those elected to represent Missourians?

Tax credits will reduce the revenue stream...which affects us all at some point or another. We may get higher taxes or we may see cuts in some other services. Is anyone willing to see either one of those happen for a foreign company, who may or may not bring us jobs in Kansas City? What about the rest of the people in Missouri...who will see the negative effects of this huge tax credit program, while only Kansas City folks will ever see the possible benefits.

This bill, if passed, would be devastating for Missouri. We simply cannot afford this.

Bullying for Bombardier--with our tax dollars

David Nicklaus, business columnist at the St. Louis Post-Dipatch, offers this look at Missouri’s ill-conceived Bombardier tax credit proposal:

In the economic war between the states, some people think it's time for Missouri to bring out the heavy artillery.

That's the impetus behind a "mega-project" tax-credit bill being considered by the Legislature. The bill's backers have watched other states lure thousands of jobs by offering truly staggering amounts of incentives, and they want Missouri to be able to do the same.

The immediate carrot is a 2,100-person airplane factory that Bombardier Aerospace may, or may not, build near Kansas City International Airport. The Montreal company needs a place to assemble its new C-series airliner, and it's long been expected to build a new plant in Canada. The weak U.S. dollar, though, made the Missouri site look attractive.

Some Canadian newspaper accounts say Bombardier still wants to build in Mirabel, Quebec. It may see the Missouri tax credits as little more than a bargaining chip that will help it extract more incentives from the Canadian government.

State governments must commit megabucks to even be considered for a mega-project like this one. Alabama put up a reported $158 million in 1999 to lure a Honda plant, and offered EADS and Northrop Grumman $125 million this year to win a controversial Air Force tanker plant. Texas handed Toyota $133 million in 2003.

"Missouri rarely makes the short list when such companies are site-shopping, and that bothers some economic-development officials. "We're very much in favor of Missouri getting into the set of states around the country that has a response to mega-projects that are national or international in scope," said C.K. "Chip" Casteel, senior vice president of public policy at the St. Louis Regional Chamber & Growth Association.

If the tax-credit bill passes — it easily won first-round approval last week in the House but appears to face more opposition in the Senate — Missouri's incentives would be available to any company willing to invest more than $300 million, hire at least 1,000 workers at above-average wages and offer health insurance.

Bombardier, which would spend $375 million to build the plant, would qualify for $40 million in tax credits annually for up to 22 years. Under certain circumstances, it would be required to repay some of the credits beginning in 2013.

Joseph Haslag, a professor of economics at the University of Missouri-Columbia, calculates that Bombardier would qualify for tax breaks with a present value of $377 million. That's a huge sum — it exceeds Bombardier's investment and amounts to $178,000 per worker.

Of course, an aircraft factory would buy goods and services from Missouri suppliers, and its workers would spend money at Missouri stores. The workers, the stores and the suppliers' workers all would pay Missouri taxes.

But Haslag says that, even if you use the state's estimate for spillover benefits, the present value of all taxes from the new economic activity would be just $355 million. That means the project fails a simple cost-benefit test, with Missouri taxpayers losing to the tune of $22 million.

What's more, Haslag thinks the state's estimate of spillover benefits is exaggerated. If one considers only the 2,100 Bombardier workers, the tax shortfall rises to $110 million.

Because of the slowing economy, Missouri lawmakers are likely to face tough budget decisions in the years ahead. Handing a large tax break to one company now may force them to raise taxes or cut services for other Missourians in the future.

By Haslag's math, at least, this mega-project is a prize best left for someone else to claim.

Video discredits Bombardier deal