Unlike any other...Bombardier a Red Herring?

Missourinet has an interesting ex post facto plug for why we should all love Bombardier.

Creators of the tax credit program pronounce it unlike any other economic development tool in the nation or maybe in the world [was that a pun? the French language is hard for some people!]. It provides millions but it also says no tax credits will be given until people are on the job..and the company has to pay back all of that money over time, with a five percent interest.

Does it say if Kansas City or Bombardier is responsible for actually building the thing? Does it say what to do if, like their Canadian loans, they DON'T pay them all back?

Although legislators think Missouri's chances are 50-50 at worst...and maybe as good as 75-25 that Bombardier will build its factory here, they think the state will still win if the company decides to stay in Montreal. They say this kind of tax credit structure can be used for the next mega-industrial development project anywhere in Missouri and if local communities want to base their own business development tax-incentive packages on the state structure, they are welcome to.

So let me get this straight. Legislators DON'T want Bombardier to come here? But they put together a package under the guise of luring them here, all the while in "talks" with the company. Raise your hand if you feel played. Now, if what they wanted to do was make a sexy tax credit package, why didn't they just do that, and why aren't WE the ones taking the highest bidder?

Last concern: what happens if an excessive number of new Missouri businesses avail themselves of this tax credit? I don't see it as a likelihood, but if the cap on tax credits offered is only per business, then the real amount of tax credits could be anything. If I understand that correctly, we've just opened the doors to a flood of uncontrollable spending, with an uncontrollable affect on the budget, and turned the State into a corporate welfare office.

I guess we'll have to make new license plates for sure now.

Bombardier's Deal Stinks

Well, people are at it again with this whole Bombardier deal. I was hoping it would simply be destroyed in the Senate, but my hopes were destroyed instead.

Written by Jason Noble

Earlier versions of the bill had included stringent conflict-of-interest guidelines that would prevent current lawmakers, Department of Economic Development officials and their families from working not only for a company receiving the $240 million tax-credit package, but also any firms contracting with that company.

Among those affected were Amy Blunt, sister to Gov. Matt Blunt, and Sen. Jack Goodman, a Mt. Vernon Republican.

The version of the bill approved Thursday includes a conflict-of-interest clause, but limits it to elected officials and some Department of Economic Development officials going to work directly for Bombardier or one of its subsidiaries, meaning Lathrop & Gage is once again a safe haven for lawmakers and their kin.

This bill, which would allow millions of our dollars to be basically given to a Canadian company, is rotten as it is. Now, there seem to be breaks for 'special people'. Additionally, there has never been a lot of transparency with it either. Greg Steinoff recently told people he was sorry, but he could not release all the details. So, we don't know everything there is to know and the Governor's sister will not be affected...all on top of the millions we would lose. Can Missouri afford this...can you afford this?

All I can say about this is Stinky Stinky!

SLP-D: Don't pull the wool over our eyes!

From the St. Louis Post-Dispatch:


The Missouri Legislature seems poised to hand over $40 million a year in tax credits for eight years to Bombardier Inc., if the Montreal aircraft manufacturer agrees to build a new jetliner plant at Kansas City International Airport.

The best that can be said about this proposal is that it’s not as bad as it could have been. Bombardier originally wanted a 24-year tax credit package that could have cost the state $880 million. The second-best thing that can be said about the plan is that it probably will not be needed.

Bombardier still is negotiating with Canadian authorities to build the plant in Mirabel, Quebec, in the Montreal suburbs. Company officials say they’d prefer to build their new C-series jetliners in Canada, if only because they’d have to repay millions in subsidies if they pull out of Canada.

Bombardier says its $400 million plant might employ as many as 2,100 people at salaries averaging $63,000. If those numbers are even close to correct, it would be worth putting some taxpayer dollars on the line to secure the project.

But it’s not worth submitting to a fleecing. The Missouri House was rolled by Bombardier, agreeing to the 24-year, $880 million package.

Last week, the state Senate chopped the offer down to a more reasonable size; the Senate deal would allow Bombardier to use only $155 million in state credits at any one time. If Bombardier really does hire 2,100 people, that would amount to about $74,000 per job. That’s not an unheard-of investment to acquire the kind of good, blue-collar manufacturing jobs that once formed the backbone of the middle class.

The state would pay Bombardier through tax credits, which offset state income taxes. Every dollar in tax credits is a dollar that doesn’t go into the general revenue fund. That means less money for Missouri schools, police, health care and other state services.

World Trade Organization rules say such government help must be repaid, and the Senate is demanding 5 percent in annual interest. Bombardier would pay the state a commission on each plane it sells.

If the deal works as advertised, it would produce a net gain for the state in economic activity. But there’s a lot of “ifs” in this deal.

The state Department of Economic Development is being vague with details such as what sort of guarantees and timetables Bombardier would be required to meet. Also, Standard & Poors rates Bombardier’s debt a weak BB-plus, which is on the border of junk bond territory. The Fraser Institute, a Canadian think tank, says Bombardier has taken in $745 million (Canadian) in subsidies since 1982, and paid back only $188 million. Missouri might well kiss its money goodbye.

And then there’s the fact that the airline industry faces an era of uncertainty, with high fuel prices leading to bankruptcies and mergers. The C-series jetliners will be short-haul aircraft that compete with Boeing’s 737 and 717 jetliners. Should the state help a foreign firm undercut a U.S. firm that has a big presence across the state?

The government incentives game is like an arms race. Other states offer money to lure businesses, so Missouri and Illinois offer giveaways, too. No state is willing to disarm, for fear the competition would swipe the good jobs. Meanwhile, the incentives get bigger and bigger.

Critics say, correctly, that citizens would do better if no government offered incentives. Government then could cut taxes for all businesses, or it could spend the money providing the things all businesses need to succeed: a well-educated work force and good infrastructure. Citizens would benefit along with corporations.

Smart officials play the incentives game with restraint. Government giveaways rarely are the deciding factor in a corporate move. Every now and then, you should call a company’s bluff.

Tags: Boeing, Bombardier, C-series, Fraser Institute, Missouri legislature, tax credits

understanding investment grades

I didn't! So, I tried wikipedia, and found that it's really fairly straightforward: AAA, AA, A, BBB, BB, B, CCC, CC, C (D is for debt already in arrears), and, just like in school, you can have a plus or minus to indicate what "side" of the letter a company is leaning toward. The grade really indicates how likely an investor is to be at risk of a loss, almost exactly like a personal credit score, but less accurate. BBB- is the cut-off to be considered investment-grade (worth the risk to invest in). Below that grade is considered speculative grade, and bonds given out to companies below investment grade are often termed "junk bonds"

The S&P just recently bumped Bombardier Aerospace up to a BB+, still one increment below investment grade. So I'm more than a little concerned that Missouri still wants to give them a $230 million tax credit. That would include repayment with interest, making the structure suspiciously close to that of a bond...my favorite comment thus far has been Sen. Jeff Smith's (via the Arch City Chronicle) that he is a proxy investor for his constituents, and if he wouldn't invest his own money in Bombardier, he should be just as vigilant with the money of the folks he represents.

I've been wondering...

...if we pass this Bombardier deal, and they pass on it...and another company comes along and fits the parameters of the "tax credit", would the DED have the only and final say on giving out those tax credits to ANY company they saw fit? I feel like it's important for our ELECTED officials to be the ones deciding on where tax credits go.