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Posted April 9, 2001
Futility and the Vanishing JobBy Jonathan Walters
Given the choice between another building-cracking earthquake and Boeing’s recent announcement that the company is moving its headquarters out of town, most public officials in Seattle would probably take the earthquake.
Actually, it wasn’t Boeing’s announcement that it was leaving that seemed to nettle those officials as much as it was that Boeing never allowed the city or state to jump into the game to compete with Chicago, Dallas or Denver and entice the company to stay.
But if Seattle and Washington State officials need solace over that lack of opportunity, then they might consider the track record of a city famous for bribing businesses to stay put: New York City. State and local leaders in Washington might actually feel fortunate that they were never dealt into the game.
According to a report recently released by the Center for an Urban Future, a left-leaning New York City-based public policy think tank, the business retention sweepstakes — at least in the Big Apple — has proved to be about as surefire as Ed McMahon’s promises of the fabulous rewards associated with entering the Publisher’s Clearinghouse Sweepstakes.
Looking at almost 100 deals involving tax incentives in return for a promise of jobs that the city put together over the past decade, the center found that all too frequently the city — to put the thing as politely as possible — got what screws get when you turn them. High-profile firms from Merrill Lynch to ABC seem to have a penchant for taking the money and then conveniently forgetting the promise.
For example, in 1995 Donaldson Lufkin Jenrette was the beneficiary of a $30 million incentive package from the city for a promise to keep nearly 2,000 jobs in town while creating another 1,100 or so. That same year, CS First Boston scored $50.5 million for the promise of retaining 3,704 jobs and adding 5,500 new ones. The upshot of the two agreements: the loss of more than 1,000 people between the two companies in the six months after the deals were announced. With the merger of CS First Boston and DLJ last August, it looks like another 2,000 jobs will be disappearing, according to the Center’s report.
In fact, large financial institutions seem to have this down to a science. In June of 1997, Merrill Lynch won nearly $30 million of its own for a promise of 9,000 jobs, plus 2,000 new ones. Just a year later, the company announced plans to eliminate 3,400 jobs and move another 1,200 to New Jersey.
ABC, meanwhile scored $26 million in tax incentives in return for a commitment to retain 3,700 jobs and add another 185. A year and a half later, ABC was purchased by Disney. Since then, it’s been a steady diet of layoffs, including last year’s dismissal of 200 senior employees in the high-salary legal and business end of the company. Just last January, ABC canned 15 network news reporters.
The list goes on and on in that vein, with one big-name company after another stiffing the city on their promises to retain and create jobs in return for big-ticket tax breaks.
So those in the drizzly Pacific Northwest might actually count their blessings. Yes, they’re ultimately going to lose a lot of jobs, but at least they’re not paying Boeing millions of dollars for the privilege.
Jonathan Walters is a staff correspondent for Governing.
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