PENDER: Incentives are way of the world

State and local government incentives for big businesses are dumb as a sack of hammers.

And they all said, amen.

But unfortunately, incentives are the game afoot, the realpolitik and the way of the world for most states including Mississippi if they want to land big businesses and create large numbers of jobs.

Gov. Phil Bryant has described Mississippi as a “hunter state.” It’s out hunting for businesses. CEOs aren’t lining up to move operations to the Magnolia State.

Incentives can work out well for taxpayers and the state economy, evidenced by the Nissan plant, a game changer for the state. The Toyota and Yokohama plants have the same potential.

Or, they can flop, and cost taxpayers, see also: Twin Creeks Solar, KiOR biofuels, $28 million and $79 million down the drain, respectively.

Some incentives programs are so asinine as to defy any logic. This includes the scheme devised a few years ago to provide taxpayer lucre for a few developers building shopping centers as long as they have a giant ball of twine or some other “cultural attraction.” Another is our motion picture incentives program: Film something here, then as you’re packing up to leave without having created a single permanent job or shared any of the millions the film might make, we’ll cut you a check.

Mississippi lawmakers on Thursday approved a massive incentives package for two projects, a Continental Tire plant for Hinds County and a shipyard in Gulfport. The state will borrow $275 million for the projects — $263 million for the tire plant. State and local leaders also approved long-term tax breaks that, although they couldn’t or wouldn’t tally up, could easily make the total incentives worth close to $1 billion over 30 years or so counting the tax breaks.

Continental is investing $1.45 billion into its plant; Edison Chouest $68 million into its shipyard. The tire plant will eventually employ 2,500; the shipyard, 1,000.

Bryant and state economic development officials have assured lawmakers and the commonweal this is a good, safe deal that was thoroughly vetted — over two years for the tire plant. Bryant said he’s avoiding mistakes made by his predecessors, such as on Twin Creeks and KiOR.

In the case of the tire plant, that would appear to be the case.

First, major incentives should be reserved for something big — a game changer — something that promises to create economic synergy that helps smaller existing businesses and creates others. The Continental plant appears to have that potential, to lift all ships so to speak.

Next, incentives should be only for projects existing state and local businesses can’t do. There doesn’t appear to be any Mississippi operation that would sink $1.45 billion into a plant in Hinds County. (Note: Numerous cities and counties in Mississippi have subsidized Wal-Mart stores. Wrap your head around that.)

Also, incentives should be for relatively safe bets, not used as venture capital for risky proposals (again, see: Twin Creeks, KiOR). Continental Tire has been in business for 145 years and had $42.5 billion in sales. If it goes belly-up overnight, the Zombie Apocalypse is probably nigh at hand.

Incentives should be part of an ironclad deal with protection for taxpayers. Bryant and other leaders say this is the case with Continental: If things go south, Mississippi can “clawback” all the way to its parent company in Germany for refunds. One lawmaker called the deal “the strongest clawbacks I’ve ever seen.”

Tax breaks as incentives should at least meet the Jethro Bodine Cipherin’ test: naught from naught equals naught. In lieu of this deal, would state and local governments see any money from the land, structures, etc.? In this case, no, other than deer hunters have been leasing some of the vacant land. A piece of something is better than a piece of nothing for local tax coffers.

Lastly, the Continental plant will help an economically depressed area: western Hinds County and Jackson. As Bryant put it: “Hinds County needs this plant.”

Now, the State Port of Gulfport project is a fish of a different color. Its state investment — borrowing $11 million plus tax breaks — is more of a pragmatic deal. A post-Katrina, federally funded $570 million pipe dream of “The Port of the Future” hasn’t panned out and created the jobs the state promised HUD it would.

Now, the feds are breathing down the state’s neck and have threatened to make the state repay hundreds of millions of dollars. State officials have been trying to count anyone who walks by the port and has a job as being a maritime employee. The 1,000 jobs from the planned Topship yard, on nearby inland port property, would appear to come close to satisfying HUD’s jobs requirements.

In a perfect world, states should stop doling out all these incentives. But could Mississippi afford to go first? Bryant says, no.

“I’ve often told people that if everybody else quit doing it, we would quit,” Bryant said. “But if they’re not going to put their swords down, I’m not going to.”

Contact  Geoff Pender at (601) 961-7266 or gpender@jackson.gannett.com. Follow @GeoffPender on Twitter.