States pay companies big bucks to create jobs

The deal that paved the way for the Revel casino in Atlantic City was called especially troubling by the group.
The deal that paved the way for the Revel casino in Atlantic City was called especially troubling by the group. (SUZETTE PARMLEY / Staff)
Posted: June 21, 2013

What's the price tag for a job?

State and local governments spent an average of $456,000 per job, or $64 billion, to create and retain jobs and businesses in "megadeals" worth $75 million or more, a Washington-based advocacy group said Wednesday.

"That's a long payback period before the state would get that much revenue," said Good Jobs First president Greg LeRoy.

Pennsylvania and New Jersey rank high among states awarding "megadeals," according to the group, which has tracked 240 deals nationally since 1976.

"Deals that used to go for high-impact auto-assembly plants that created thousands of jobs are now going to very capital-intensive facilities," LeRoy said. "Therefore job creation benefits are smaller.

"It really begs the issue of whether taxpayers are breaking even on these deals," he said.

Good Jobs First, funded primarily by foundations, culls the information on the deals from media reports and government documents. The data do not include job creation or job retention figures with every deal, so the $456,000 per job might be skewed.

Pennsylvania ranks 11th nationally and New Jersey 18th, based on subsidies awarded or promised to businesses since 1976, the study said.

In that period, New Jersey has spent $1.36 billion on 10 megadeals.

"Especially troubling is the Revel deal," LeRoy said. According to the group, the Revel Entertainment Group, projecting it would employ 5,500, was granted $323 million in subsidies to smooth the way for its now bankrupt Atlantic City resort casino. It now employs about 3,200, after laying off about 80 employees in April.

The biggest chunk was a $261.4 million tax credit.

"All these projects need to meet certain milestones, and not one dime [of the tax credits] has gone out the door for Revel, given the situation," said Erin Gold, spokeswoman for New Jersey Economic Development Authority.

"States are competing aggressively to retain and attract companies and jobs, as well as private investment, and these programs were designed to do just that," she wrote in an e-mail.

Since 1976, Pennsylvania has set up three megadeals totaling $2.1 billion, the report said.

But the largest of those deals - valued by the group at an estimated $1.6 billion - is based on a project that may never come to fruition. It illustrates how difficult it is to precisely calculate the value and size of a subsidy.

Good Jobs First estimated that Pennsylvania would give Royal Dutch Shell a tax credit worth $1.6 billion over 25 years if it built the state's first ethylene production complex, also known as an ethane cracker.

But Shell has yet to decide whether to build on the site of a former zinc plant in Beaver County, near Pittsburgh.

Steven Kratz, a spokesman for the state's Department of Community and Economic Development, described the group's $1.6 billion estimate as "arbitrary based on a number of assumptions, which make [it] incorrect."

The subsidy would give the plant a tax credit of $2.10 per barrel of ethane produced, up to 20 percent of the company's total tax bill, Kratz said.

But the subsidies are tied to production and assume the plant will be operational by 2017, he said.

"We'd still get 80 percent, and 80 percent is better than zero," Kratz said.

Kratz provided estimates that the project would yield 10,000 construction jobs, 400 plant jobs, and 17,000 jobs in related businesses.

"Cynically," LeRoy said, "it might have been better to have it just across the border in Ohio, generating gobs of jobs" for Pennsylvania residents without Pennsylvanians having to shoulder the tax burden.


By the Numbers

Pennsylvania and New Jersey rank high among states offering "megadeals," subsidies of $75 million or more, to attract or retain businesses.

Pennsylvania New Jersey

$2.1B    Spent or promised to spend in "megadeals"       $1.36B

3                 Number of "megadeals" since 1976                   10

$1.6B              Largest "megadeal"           $323M

Royal Dutch Shell,                                        Revel Entertainment

Beaver County*                                        Group, Atlantic City*

*Both "megadeals" are tax credits, which have been promised, but not paid.

SOURCE: Good Jobs First, www.goodjobsfirst.org/subsidy-tracker


Contact Jane Von Bergen at jvonbergen@phillynews.com, @JaneVonBergen on Twitter, or at 215-854-2769. Read her workplace blog at www.philly.com/jobbing.

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