Jabil Circuit: Do state incentives work?
Do state incentives to attract and keep favored (meaning higher-wage) jobs do as much as we think? Florida depends heavily on incentive-laden packages of tax dollars to lure and keep businesses the Sunshine State thinks will elevate the state economy. Economic development officials say that without the incentives, other states will simply "buy" our industries out from under us. And businesses most in demand -- high tech, life science work that are high-wage, "21st century" jobs -- often get multiple state incentives waved in front of them at expansion or relocation time.
Perhaps the answer lies, as usual, somewhere in the middle. Incentives help but not as much as we assume. Consider the case of Michigan, a state with a terrible economy marked by higher-than-us unemployment and an auto industry on the brink of a massive downsizing.
The Detroit Free Press, in a story tellingly headlined Promises to create news jobs fall short, looked in depth at Michigan's incentive program from 1999 to 2005. The story notes, among many examples, of a package of Michigan incentives offered to St. Petersburg-based electronics manufacturer Jabil Circuit. If Jabil could create 451 jobs n Michigan, it would receive state tax credits. Similarly, Florida has committed a package worth millions to Jabil in St. Petersburg for its planned new headquarters (shown in rendering) -- if it can create more jobs. More on Florida in a moment.
In Michigan's case, the Detroit Free Press found that the state's major economic development tool has produced only about 24,000 new jobs over its 14-year life. State officials say the program -- tax incentives granted for jobs that are created or saved -- also has retained more than 43,000 positions. But the state has shed more than 700,000 jobs since the decade began. In March of this year alone, 25,000 people in Michigan joined the unemployment rolls.
In 1999, Jabil Circuit got a $14.5-million tax break from MIchigan for establishing a circuit board plant (shown in photo) in Auburn Hills. Today, according to the Free Press, the factory is still running, but the company never succeeded in its plans to create 451 jobs there. The tax credit has gone unclaimed.
Said Jabil spokeswoman Beth Walters: "Unfortunately, when the tech bubble burst in 2001 with the telecom bust, things changed abruptly."
So, too, has the recession slowed Jabil's new $54 million, worldwide headquarter plans in St. Petersburg. When first unveiled last September, the city of St. Petersburg called Jabil's plan "positive news" for the company's 1,838 local employees, and "great news" for the area as Jabil committed to create an additional 858 jobs in the coming years.
Florida supposedly was competing for Jabil's favor against other communities in California and -- guess where? -- Michigan. (Historical note: Jabil was founded in 1966 by William E. Morean(that's the father of the Bill Morean we know in the Tampa Bay area) and James Golden in Detroit. Hence the name, derived from founders James and Bill, of Jabil. So it's funny, in a way, since one of Tampa Bay's "own" businesses was lured long ago from Michigan to Florida.)
What's Jabil's HQ commitment worth to Florida? State and local incentives total about $34 million to the company, assuming these requirements pertaining to job creation are met:
* Retention of a current workforce of approximately 1,838 employees with an average wage of $89,983, and a local existing annual payroll of $171 million annually.
* Creation of 858 new jobs, projected to pay an average of $42,685, with a benefit package of $10,400 per employee, which would add an additional $36 million payroll annually.
* The construction value of $49 million in new facilities, including manufacturing facilities at the company's property at Gandy and I-275, and a new headquarters building at the company's property at Dr. Martin Luther King, Jr. Street, along with $5 million of new manufacturing and research and development equipment.
* The creation of a future Technology Development Zone, to be developed on property adjacent to the manufacturing site, to attract and retain additional technology companies with synergy to the company.
Since the original deal, Jabil's been forced by the tough economy to take layoffs and request delays in starting its new headquarters project. Will the Florida incentive package go unrewarded, as Michigan's offer to Jabil was never realized? Probably not, but the clear message is that not all incentive expansion packages unveiled with flair by state and local economic development officials pan out as planned.
As the Free Pressnotes in its story on overpromised state incentive package deals, here's a telling criticism from Michigan's Michael LaFaive, a director at the Mackinac Center for Public Policy: "This is a job announcement program, not a real jobs program."
-- Robert Trigaux, Times Business Columnist