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Companies Take City, State Subsidies -- Then Wave Goodbye

Daily Policy Digest

State And Local Issues

Monday, August 13, 2001

Recent research shows that cities and states that offer subsidies and tax incentives to attract companies to locate in their jurisdictions often do a miserable job of safeguarding that taxpayer money. Companies can simply take the money and abandon grandiose development plans officials thought they were committed to.

  • The Center for an Urban Future says that since 1988 New York City and the state have authorized $2 billion in subsidies for 80 companies in exchange for promises of jobs in the city -- but 39 of the companies later eliminated jobs in New York or put themselves up for sale.
  • An analysis by the Institute on Tax and Economic Policy identified 15 states still giving money to companies that didn't follow through on their agreements -- such as training a certain number of workers.
  • Austin, Texas, was left with an uncompleted eyesore of an office building after it offered Intel $15.1 million in subsidies -- and paid out $450,000 of that -- before the company skipped town.
  • Less than two months after New York City announced a $3 million incentive package for USWeb to hire more workers, the company merged with a technology consulting firm and laid off 20 percent of its existing New York City work force.
Source: Elizabeth MacDonald, "Take the Money and Run," Forbes, August 20, 2001.

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