Hot Money
Apparently our state government has been in another subsidy bidding war over a plant relocation, and fortunately it lost. Why the state government pulls together Defcon 5 activity levels to bring 80 jobs to a town of 4 million is just beyond me. But beyond my usual problems with subsidizing business relocation, which haven't changed from this post way back when I talked about relocation subsidies in the context of the prisoner's dilemma, I have three issues specific to our state's efforts to attract solar manufacturers:
- I am constantly amazed at the strategic planning that says Arizona residents should pay more taxes to promote a solar manufacturing industry because, uh, we have a lot of sun. That's roughly as logical as saying an FM radio maker should manufacture in NY City because they have a lot of radio stations. I suppose you could argue it would reduce shipping costs to solar using areas, but I can't believe that shipping costs dominate since most of the panels we buy in this country originated in Japan or Germany.
- Companies and industries that seek subsidies are like hot money in the investment world. Even if you attract it today, they will jump next week to another location that offers them more. We see it in this case, as AZ bought Kyocera's presence at one facility but can't afford the price to get them to build this new facility.
- The state's approach defies all business strategy, and is making a typical novice investment approach. Specifically, they are chasing the hot industry. Everyone is bidding for solar plants, so the price goes way up. This is why we have bubbles in housing and Internet, because people all pile into the same investment like lemmings. If I were to run a government business relocation strategy (which I most certainly would never do) I would be focusing on boring stuff no one subsidizes. We offered nearly 100% property tax abatement plus investment tax credits and can't get a solar plant. Instead we should be up in business hostile states like CA and NY getting rubber stamp makers and garage door manufacturers. Surely we could get 70 jobs a lot cheaper.
IgotBupkis:
> ...we should be up in business hostile states like CA and NY getting rubber stamp makers...(snip)... Surely we could get 70 jobs a lot cheaper.
We, but then, where would Pelosi get her needed votes for ObamaCare?
March 3, 2010, 10:57 pmanoNY:
"Defcon 5 activity levels"
Just a nitpick: I think you meant Defcon 1, which is the highest state of alert. It's backwards, which government tends to be sometimes....
Love the blog!
March 4, 2010, 5:26 ambipolarbaer:
Actually, you would have to to to Nogales Mexico if you want to steal the garage door business.
March 4, 2010, 1:24 pmADiff:
Bipolarbaer,
If you do a bit of searching I think you'll find there are numerous manufacturers of "garage doors" in California and at least a few in New York state.
Warren might be closer to the mark with that particular example than you imagine.
March 4, 2010, 5:20 pmCraig:
Here's a recent example. DC, VA, and MD are fighting to get the relocating HQ of Northrop Grumann. As the article shows, they stand to spend a lot, gain little, and the die is probably already cast.
March 4, 2010, 10:17 pmSam L.:
AnoNY; How about Top Ten lists: #10 is the least favored pick. As you said, Defcon 5 is the lowest, the normal state of readiness. Strategic Air Command was always in Defcon 4, except for highly infrequent incidents of higher Defcons.
March 5, 2010, 9:24 pmMesa Econoguy:
Wait, hold on.
1) Ryan Bozo is still employed?
2) First Solar (FSLR) actually employs people in Tempe?
Gosh, that’s odd, because I’ve driven past their brand-shiny-new HQ on the 202 both before and after “normal†business hours, and it’s still empty today, after being under construction for well over 3 years (and receiving mucho government subsidies).
Oddly, it’s much “brighter†at 5:45 am than 4 pm, yet equally empty.
Not that I would ever insinuate that First Solar is somehow “leeching†off the taxpayer, or otherwise abusing shareholder trust. Far be it from me to insinuate such things, or imply that such actions could be legally challenged.
March 6, 2010, 2:34 am