 Todd DormanTodd Dorman is a columnist for The Gazette. His blog has been bringing smiles to readers' faces since November 2007. |
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The Orascom Deal – Two Views from Illinois
A couple of Illinois newspapers are editorializing on the recent announcement that Orascom Construction Industries will build its $1.4 billion fertilizer plant in Iowa, and not in Illinois.
The Chicago Tribune says “Bye Bye Jobs:”
This is a terrible loss for Illinois. Once it’s built — the biggest capital investment ever in Iowa — this massive fertilizer plant can’t move. It is a long-term bet for Orascom, and a long-term source of jobs, related commerce and tax revenues for the Hawkeye State.
But (Orascom CEO Nassef) Sawiris is making a rational choice.
Illinois government leaders need to make rational choices, too, if this state’s business climate ever is to improve.
The dithering in Springfield over pension reform has got to end. Illinois’ unfunded pension liabilities — $83 billion if you’re optimistic — grow by more than $12 million every day. With the massive debts facing today’s taxpayers, and the fear that means big tax increases tomorrow, the Nassef Sawarises of the world will keep passing through en route to Iowa, Indiana or Wisconsin.
But the Peoria Journal Star is less glum:
Perhaps (central Illinoisans) shouldn’t feel too down, as the jury is still out on whether Iowa “won” or not. That’s because corralling the plant will cost governments in the Hawkeye State collectively more than $250 million – more than $1.5 million per job – in various tax incentives, which even in the 21st century is still a nice chunk of change. Wish our neighbors to the west well – even though their governor called us “the poster child of debt, unfunded liability and corruption,” which smarts, true though it may be – but time will tell whether it produces the expected return on investment.
Do the 165 full-time jobs really materialize and remain for any length of time? How long will it take those workers to earn $1.5 million each? What if the spin-off development state economic development officials are counting on does not occur? What if those supporting businesses want subsidies to open their doors, too? What protections are built in for taxpayers if the Egypt-based company, Orascom Construction Industries, doesn’t do well, or gets a better offer down the road and flies the coop?
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The Peoria newspaper is asking important questions — but is understating a real rate of return. The question is not how long it will take those workers to earn $1.5 million each — but how long it will take for the state and local governments to recoup that much revenue per worker.
Mike,
You’re right that the questions isn’t quite the right one, but I think the question about government revenue has an answer which is much too complex to really be answered. Not only do you have to include the revenue from those 165 full-time jobs, but you have to include the revenue from all of the temporary construction jobs needed to build the plant. Include into that the taxes paid for the fuel needed to carry a swarm of trucks to and from the plant, both during construction and after. Then there is the possibility of related industries popping up around the plant once it is built, industries tend to create new industries. One final point, the 165 jobs only are those created by the plant’s owner, it doesn’t include any sub-contractor jobs on the plant, or by the plant’s suppliers.
I know news stories like to simplify these down to X dollars, Y jobs, but nothing is ever that simple.
I agree that this is much more complex than just comparing X dollars and Y jobs and Z tax revenue from those jobs. However, it is still hard to believe that, when all things are considered, this is an smart investment.
Did anyone do a comprehensive analysis of the costs and benefits or was this decision based on a macho, competitive spirit? If a comprehensive analysis was done, can it be shared with the public?
So I am to understand that Illinois has increased their tax revenue by$250 million? Because they didn’t get the plant?
With regard to the Tribune editorial, it’s a conservative paper. It’s been a conservative paper ever since it aligned itself with the Know Nothing Party in 1855.
From a 2007 Statement of Principles:
“The Chicago Tribune believes in the traditional principles of limited government; maximum individual responsibility; minimum restriction of personal liberty, opportunity and enterprise. It believes in free markets, free will and freedom of expression”
In other words, its stated position on Orascom is in line with its stated editorial position (the Tribune hated FDR and it was the Tribune’s headline “Dewey Defeats Truman” that Truman held up the morning of his election in 1948) for the last 160 years.
The Tribune may be the last newspaper standing but its decades old efforts to turn Cook County Republican have been about as successful as the efforts of the Press Citizen and the Gazette to do the same in Johnson and Linn Counties. Good luck
That said, it looks like Branstad not only struck an under the table—crooked?–deal, but a stupid one as well