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Sunday, July 20, 2003

Cities face hard work trying to keep firms



Fort Wayne, Ind.

In 1982, Fort Wayne lost its bid to keep a International Harvester plant from closing, despite its $30 million "financial assistance package." Two years later, GM offered to move into the site, asking for (and getting) $71 million in tax breaks. The deal did help the city's economy, but it then got more aggressive: It gave a computer firm $1.1 million to move in, but the firm went bankrupt; it gave Burlington Air Express a $15 million package to build a hub in 1985, but it moved to Toledo four years later for $50 million in incentives.

Toledo, Ohio

In 1978, Toledo gave Owens-Illinois $24 million in incentives to stay and retain jobs; it was sold a few years later to a firm that cut several hundred jobs. The city then gave Owens Corning a similar package in 1994 to keep it. In 1986, Chrysler announced it would close a Jeep plant in either Toledo or Kenosha, Wis. Toledo won, but in the mid-1990s had to craft a $262 million package to keep Jeep in Toledo at a new location - a plant that cut jobs from 5,600 to 4,900.

Rio Rancho, N.M.

The city has attracted large employers since the mid-1980s with generous tax abatements. The Intel Corp., for example, has paid no property taxes on its $2 billion chip-making plant. But in 1994, when the city's school system needed to construct five new public schools to keep pace with rapid enrollment growth, it didn't have a big enough property tax base left to pay for them. Rio Rancho then became a national symbol of poor long-term planning.

New York City

In the late 1970s, New York began offering incentives to hundreds of firms to stay - J.C. Penney, Mobil, Citicorp, NBC, CBS and ABC. Chase Manhattan got a record $235 million, then cut 4,000 jobs. By one estimate, it gave out $2 billion over 10 years. As Donald Trump put it: "If you offer major tax incentives for a company to stay at the best address in the world, why shouldn't everybody get them?"

Source: Corporation for Enterprise Development




SPECIAL REPORT: THE CONVERGYS DEAL
Are cities at a disadvantage?
Cities face hard work trying to keep firms
Expert: Reform incentive policies
How city can cope
Convergys I: Make the deal
Convergys II: Incentives
Greg Harris: Regionalism must be our new focus
James Orr: Convergys deal is a defining moment

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