Site Location 101 Case Study

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Register to read the introduction… And the industry trend is that pay by commission is becoming increasingly common. So of course, the consultants are highly self-interested in maintaining the fiction that subsidies matter, so they can run up the subsidy tab and get bigger fees.16 Commissions also raise the issue of the consultants’ objectivity. As veteran site location consultant Bruce Maus puts it, “When the deal is incentive-driven, we lose our objectivity. I wish I had a nickel for every time a broker said she won’t show the client the property unless he agrees to the commission. That means the client doesn’t get to see all the options. The same is true with consultants paid by incentives. They only show the sites with high incentives. They lose the objectivity in the deal and may steer the client to the wrong place or not the best place.” 17 What does this all really mean for subsidies and jobs? Candid site location consultants will admit that the only time subsidies can actually tilt the scales is when a company has two equally compelling choices. But that rarely happens. So subsidies are a really crude tool that can only affect a really tiny percentage of deals. All the other times, the subsidies are just wasted windfalls, paying companies to do what they would have done anyway. That means less money for things that really do help create jobs, like skills and infrastructure. Long-term statistical studies of the relationship between taxes and growth confirm this. Large “metasurveys” have looked at dozens of such studies on what economists call “elasticity,” or how much …show more content…
It chose the Alamo City even though it had higher subsidy offers from Alabama, Arkansas, Mississippi, and Tennessee, one of which was reported to be $500 million—almost four times the amount of the Texas deal. Local reports at the time stressed business basics, such as the fact that Texas is the nation’s #1 market for trucks, and local officials agreed to install a second rail line (in other words, San Antonio offered proximity to markets and access to competitive shipping). The company even volunteered to pay $34 million in taxes to the school district and didn’t seek abatements from other taxing districts.25 In a refreshing moment of civic-minded candor, Toyota’s senior vice president in charge of site selection in North America said, “If you pull too many incentives out of the community in the beginning, you pay the price down the road. It’s a pennywise but dollar-foolish thing to do. We believe it is in our best business interest to be a good corporate citizen and contribute to the community right away.” 26 Even a company staying in Lower Manhattan after the attacks of September 11 admitted this. Upon receiving a $25 million grant for staying put, an American Express spokesman said: “Our decision to return downtown, which has been our home for more than 150 years, was not predicated on financial incentives.” But then he hastened to add backside coverage, as if to say: we’re no fools if people are going to throw money around. “Once those financial incentives became available, we chose to participate, as did other companies,” he said.27 In other cases, deals get explained and companies cite the business basics that drove their decision—without mentioning subsidies. In 2004, Citgo (which is 100 percent owned by the nation of Venezuela) got $35 million in subsidies to relocate 700 headquarters jobs from Tulsa to Houston. But the company readily

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