Should Louisiana and Baton Rouge be doling out tax breaks, fancy office buildings and other public-dollar inducements to technology companies and anyone else doing business in the knowledge economy?
That, essentially, is the question a March 19 editorial by The Advocate set out to answer. Spoiler alert: The editorial board opts not to provide a definitive answer, stating that while the incentives given to IBM here, CGI in Lafayette and DXC in New Orleans are “probably” worth it, all should be on high alert that these companies could bolt at any time for some techier, more smart-people-filled pasture.
In other words: Be careful investing the taxpayers’ economic development dollars in companies where high-speed internet and the easy ability to find folks who can string together ones and zeros in rather innovative configurations is way more important than river-view office buildings and straight cash homey.
That might be true, but why reserve this concern exclusively for the tech sector?
I’m not sure anyone would consider Albemarle a new-economy company, but that didn’t prevent the chemical corporation—an outfit we bribed here from Virginia for some $4.2 million in 2008—from grabbing a fresh $6.3 million, all-in, to relocate its headquarters to North Carolina in 2015 and the carcass that remained here two years later.
To be clear, I’m not really a fan of corporate welfare, but here’s the reality: As long as one state dishes it out, every state will dish it out. Here, in Louisiana, we serve it up in supersized portions in an attempt to mask any number of critical shortcomings. For now, however, let’s set that debate aside.
If the measuring stick of palatable subsidies for place-based economic development is how long those companies and their direct and multiplier-effect jobs will stick around, then that pretty much limits us to the petrochemical, and oil and gas industries.
Yet, while it’s true ExxonMobil isn’t going anywhere anytime soon, the global giant does have the ability—when looking to expand or upgrade its operations—to invest its billions of dollars in scores of “not going anywhere” facilities in Texas and elsewhere around the globe.
In other words, when it comes to economic development, there are no guarantees.
But let’s get back to basic question of Louisiana and Baton Rouge using government cash as bait while fishing for technology and knowledge-based companies.
Indeed, the state did build IBM a spectacular downtown office building, but Big Blue doesn’t get to take it with them should they bolt Red Stick. Question the arrangement with Commercial Properties and the Baton Rouge Area Foundation if you want, but that property will be a benefit to our city for as long as it stands … and is maintained.
More important, a significant portion of the cash bounty thrown IBM’s way is actually a pledge to boost investment in LSU’s computer science department. Pretty much the same is true about the state’s deal with DXC in New Orleans, where state dollars will be divvied among several universities to better educate and prepare the potential tech workforce.
Worth noting, much has been made about what Stephen Moret and economic development officials in Virginia offered to land Amazon, but a key to the deal was the promise to pump nearly $1 billion in new higher education dollars toward university-based computer science programs and technology training facilities.
The Advocate’s editorial is correct in declaring the high-risk nature of chasing technology companies in the name of place-based development. Global marketplaces do change rapidly and most important to knowledge-based companies is a congregation of knowledge, not a pile of tax credits and cost-reducing taxpayer cash.
Which is exactly why Louisiana Economic Development, when Moret was here, made sure to include clawback provisions in its deals with companies like IBM, meaning the state’s up-front cash and credits must be repaid if the company fails to meet its promised obligations.
Heck, if we’re going to complain that spending state dollars on IBM is a problem because the company might not remain here, then we’d better rethink the entire TOPS program, where far too many of this state’s best and brightest flee for out-of-state cities like Houston, Dallas, Austin, Atlanta and Washington, D.C., after earning a taxpayer subsidized in-state degree.
Frankly, if the goal is to grow a knowledge-based economic sector in Baton Rouge, the wiser long-term investment is convincing the state to start pumping targeted cash back into higher education. This isn’t about increasing discretionary dollars for universities, but it is about investing state money in areas that create the workforce necessary for an Amazon or Google to locate something here other than a warehouse or call center.
Yet that spending only pays off if Baton Rouge is willing to invest in its quality of life offerings. Many in this town declare stuff like smart streets, bike lanes, walking trails, art museums and symphonies to be luxuries. The truth, like it or not, is these things are mandatory if the goal is attracting and retaining a young, educated workforce. Don’t believe me? Just ask Moret about the importance of quality of life offerings in Amazon’s decision.
When Albemarle fled Baton Rouge for good, the official spin from LED Secretary Don Pierson was Albemarle’s $5.7 billion acquisition in 2015 of Rockwood Holdings, a major lithium producer, greased the skids to North Carolina.
Far better is the story that Albemarle began taxiing the runway for its departure to Charlotte the day CEO Luke Kissam’s wife chose not to move her family to Baton Rouge, opting to remain in the Commonwealth known for its lovers.
I don’t know if that story is true or not, but it does help prove the greatest of all economic development truths: It’s all about people.
People who are skilled enough to work for the company—and people willing to live where the company is located. In the end, companies don’t follow the money … they follow the people.