By Jonathan Walters

 
he crowing coming out of Alabama over the state’s recent scoring of a major Hyundai auto plant would be funny if it weren’t so sad. In beating out Kentucky for the plant, Alabama has accomplished little except to continue its decades-long history of capitulating to large business interests to the detriment of its own long-term health and well-being.

Alabama has always been a conflicted place. It has an enlightened elite who profess a desire to pull the state up and out of its sad and chronic below-45th status on a host of state rankings, from poverty levels to educational attainment. But the state’s warped tax structure — which socks it to the poor and protects business and agricultural interests — has always prevented the state from collecting the kind of money it needs to invest to move it out of its perennial cellar-dweller status in a host of socio-economic, health and education categories.

So it’s particularly amazing to read about the incentives and tax breaks handed to Hyundai as part of this deal. Here’s a state that is regularly ordered by the federal government to invest in basic services for its own citizens because state officials refuse to fund them, and the gang in Montgomery is giving away $120 million to lure a foreign multinational to its shores. Meanwhile, local governments — Montgomery and Montgomery County — are ponying up another $25 million.

But just to make sure the South Korean auto maker’s landing is really soft, the company won’t be paying any property taxes for 10 years, except for school tax allotments, a whopping sum that will no doubt catapult Montgomery schools into the ranks of the nation’s public school elites.

Oh, and don’t forget the jobs. The plant will create 2,000 of them, with all the attendant spin-off businesses, say plant supporters, who are hailing the arrival of Hyundai as the state’s economic salvation.

In conceding defeat, Kentucky Governor Paul Patton said that at the end of the day Hyundai asked for concessions to which the state simply couldn’t agree. Alabama Governor Don Siegelman is quoted as saying that company “never asked for anything that [Alabama] couldn’t give.”

It begs the question: In a state with a century-long record of capitulating to big business at every turn, is there anything that Alabama wouldn’t give?

Jonathan Walters is a staff correspondent for Governing.

Readers’ Responses:

COMPETE OR SUFFER

I was surprised to read so much negative in the article about Hyundai. Notwithstanding the incentives offered by the state, some additional information would be helpful so that a reader might make an informed decision of whether this was a good, bad or indifferent deal for the folks in the state.

For example, what will the average wage be for this company — above or below the existing wages paid in the state or that region? Let’s say the average wage is $20/hour — not unheard-of in the auto industry. BMW minimum wage in South Carolina is about this plus some healthy benefits: $20 X 2080 = $41,600 X 2,000 = $83,200,000 per year.

What is the investment in the plant and how much in school taxes will be paid? Let’s use $500,000,000 times a tax rate of $1.50/100 = $7,500,000 per year, or another way of looking at this is over 10 years the company will pay $75,000,000 in school taxes.

Now, let’s look at sales taxes paid by the workers who earn the $83,000,000-plus; the multiplier of say just 2 or 3; the construction jobs and payroll, and so on.

If you make an investment, how long do you expect it will take to get a payback: seven years, ten years? The state put up $120 million and the local community $25 million. At just $83 million per year (and that will grow in time and this does not include the 30% to 40% benefits paid) and the school taxes collected, what is the payback period — two years or three?

Last but not least, the community did not give up anything on the tax abatement. If the plant had gone elsewhere, they would not have gotten a dime.

Many articles are written about incentives to business, and more should be written. States and communities have to compete or suffer the alternative. Opposing views should be provided, but whatever is done, at least, as a minimum, put all the cards on the table so that we can see the entire picture or otherwise credibility is lost.

These are just the thoughts of someone who is working to create new jobs and opportunities for people who do not make $20/hour and have the benefits this company will pay, someone who is attracting companies to pay the taxes needed to provide governmental services and better education for all our citizens. Have I been wrong all these years?

John M. Stroud
Executive Director
Longview Economic Development Corporation
Longview, Texas

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