Another Company Heads South
Sigh...
Gardner Denver Inc. said Monday that it would close its Thomas Products factory in Sheboygan, which employs 366 people, and move the operations to Monroe, La.
The company, based in Denver, said the move is part of its consolidation of its North American manufacturing operations of compressor and vacuum pumps. It is expected to be completed by March 31, 2010.
“Reaching a decision to close the Sheboygan operation was difficult and we deeply regret the impact that this closure will have on our Sheboygan employees and the local community,” Barry Pennypacker, president and chief executive of Gardner Denver, said in a news release.
“In the long-term, we believe this consolidation positions us with the best business solution and is in the best interests of Gardner Denver and its shareholders.”
The company employs about 76 people in Monroe.
Gardner Denver said the state of Louisiana will reimburse the company for most of the cost of moving equipment and staff to Louisiana, will provide annual payroll and sales tax rebates and will help the company with recruiting and training. The city of Monroe also will help with the construction of a 124,000-square-foot factory adjoining the company’s existing plant.
No word from the Governor. Of course.
Posted by Steve on April 13, 2009 at 1849 hrs
In other words, the state government of Louisiana is providing them with an enormous taxpayer subsidy to expand an existing venue. The company is also moving jobs to a city where the per-capita income is 30% lower than in Sheboygan, which means they can lower their labor costs as well.
In regard to the former, I’m not sure anyone wins in a headlong race to the bottom in terms of living standards. The former is also a dubious practice, one in which state governments effectively cannibalize each other by offering sizable amounts of taxpayer dollars as a bribe for relocation.
Wisconsin’s constitution and state law greatly restrict the ability of government to provide any targeted incentives to businesses in terms of property and sales taxes. Owen has written in support of the uniformity clause a number of times on this blog, even though the uniformity clause prevents Wisconsin from providing the kind of breaks that other states (Illinois in particular) have routinely used to poach jobs from Wisconsin.
I don’t know all the particulars of this business so there may well have been other reasons in play as well. But given the type of work involved, I’m not sure there’s any difference between moving to Louisiana and moving to China, at least in principle. The company gets a huge subsidy and in all likelihood gets to dramatically reduce its labor costs going forward.
Given that we have virtually no way to provide the kind of high-impact, targeted incentives Louisiana employed, how does Wisconsin compete for unskilled or blue collar jobs?
Posted by Recess Supervisor on April 13, 2009 at 1852 hrs
What was not in this story was the impact of the union. The management had asked for concessions for the use of temporary part-time workers to cover peaks in demand. The union refused and the management of the plant was not able to convince upper management to save the plant.
As for attracting business, if Wisconsin didn’t already have a high tax burden and cost of living (as compared to a state like Louisiana), they wouldn’t need tax breaks like this. Wisconsin could have used a TIF district for the plant expansion and other incentives.
But in truth, RS is right. Think of the fact that this company is going to build a massive new facility in LA to accommodate the expanded workforce. The Sheboygan facility is already large and would not have required as much work or money to expand it. Despite these expenses, it is STILL more attractive for them to move to LA.
We can sit around and complain about the fact that other states have a lower cost of living and lower labor costs, but that is precisely why they are attracting businesses while Wisconsin is losing them. Until we are willing to address these things instead making excuses, Wisconsin will continue to lose jobs to other states and countries.
Posted by Owen on April 13, 2009 at 1908 hrs
In reality, the few cost-of-living calculators I found online showed a negligible difference between Sheboygan and Monroe - it was three or four percent, as I recall. The people of Monroe simply have a lower standard of living. There’s a big difference between the two.
By your logic, it would seem that everyone in Wisconsin should just agree to a 30% pay cut. I bet that would draw businesses. But at what cost?
TIF is an option, but hardly perfect. And I’ll be the first to admit that I don’t know offhand what kind of wiggle room Sheboygan has to employ that incentive anyway. Digging for their TIF numbers of the DOR website is not something I’m quite up for. But yes, it may have been an option.
And again, I think the bigger question (one I’d be curious to know your thoughts on) is to what extent is the public subsidy of private businesses a legitimate function of government. It’s one thing, of course, to lower tax rates. That’s fine and well. But what Louisiana (and other states) routinely offer are a narrowly-targeted, taxpayer-financed bribes, ones in which the benefit falls disproportionately to the company. The people who live in the area benefit, but to a lesser extent. And certainly, those who do not live in/around Monroe but who are providing the bulk of the funding benefit little, if at all.
Posted by Recess Supervisor on April 13, 2009 at 1941 hrs
It’s less a question of luring business here as it is keeping business here. I don’t see the governor (or anyone else) lifting a finger to keep anyone here. And it’s been this way since I was a kid. What gives?
Posted by Steve on April 13, 2009 at 2000 hrs
TIF is an option, but hardly perfect
As I understand the use of TIF districts in Wisconsin, it is mainly used as a tool to make public improvements (streets, lighting, sewer, site clearance, highway interchanges, etc) to induce development in a particular area. In theory, the increased property tax revenue attributed to the new development is then used to pay off the debt that the municipality issued to “front” those development costs.
I am not aware (if someone knows different, please clarify) that TIF proceeds can actually be used as direct incentives to businesses (i.e., pay for construction of a new building). I’m not up on the impact on other taxing bodies (like the school districts), but I think that until the TIF bonds are paid off, the other taxing bodies do not share in that increased revenue.
Posted by .(JavaScript must be enabled to view this email address) on April 13, 2009 at 2024 hrs
I disagree. We could have made the same offer as LA did. We just didn’t want to. The business said that they wanted to consolidate and expand. Wisconsin made no effort to keep them here or help them.
Yes the union had an issue in this as well - but the union can be in LA or WI that doesn’t matter.
Posted by .(JavaScript must be enabled to view this email address) on April 13, 2009 at 2229 hrs
No one seems to want to address the end-game here, which is everyone in China and India manufacturing all our stuff, while the remaining people in the US sort of live off whatever wealth is left here and redistributed under Obama.
First the Midwestern States like Wisconsin and Michigan die and simply become tourist states like Montana (except with inner city ghettos and immigrant welfare populations that the federal government will service—as they are already with the stimulus giveaways)
But later it catches up with Lousiana and Texas as in no way can they compete with China and India either. Especially after “cap and trade” go through.
What is the solution here?
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 0013 hrs
So Bill, you think that anytime another state dangles millions in taxpayer money in front of a Wisconsin business, we should respond in kind? Isn’t it kind of irresponsible to use taxpayer money to essentially give in to extortion efforts by private employers? Is that really a good reputation to have? “Hey, let’s threaten to leave so Wisconsin will give us some taxpayer money to stay?”
Should government really be in the business of effectively using taxpayer money to buy jobs from other states? I would argue no, but I recognize that unless everyone stops, someone’s always going to be screwing someone else over.
Again, let’s establish that I’m not talking about lower tax rates in this case. I’m talking about targeted incentives that primarily serve to benefit the owners of a specific company.
I mentioned it earlier, and Steve definitely hit the nail on the head. The problem here is the race to the bottom and how we deal with it. Taxpayers providing sizable subsidies to private companies for what amounts almost entirely to private gain is never going to be a winning economic strategy. It’s a waste of money now, and it’s definitely a total waste of money in the long run.
Posted by Recess Supervisor on April 14, 2009 at 0300 hrs
Well RS, technically I’d say you are correct, but you can either keep you head held high while everyone else “races to the bottom” or you can try and save what business we have left.
Their strategy seems to be working for the states that are taking all the business from Wisconsin. You have to play the game or you can sit on the sidelines and watch as our tax base erodes even further. If you look a little to the east - you can see the future.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 0713 hrs
I don’t know why, but for some reason, on many levels, I can see this working against him (or anyone associated with him in upcoming elections):
http://www.sheboyganpress.com/article/20090413/SHE0101/90413160/1062/SHE01
Governor Jindal:
“Louisiana continues to outperform the national economy in large part because leading companies like Gardner Denver continue to announce expansions in our state. Today’s announcement follows a recent trend – since early 2008, leading companies have announced moves of their headquarters or other significant operations to Louisiana from states such as California, Georgia, Mississippi, Rhode Island, Virginia and now Wisconsin.
Leading up to previous elections, the issue was jobs going overseas. Here we have a “rising star” whose fortunes seem to be tied to poaching from within the country. Imagine the forfeiture of electoral votes from states like Wisconsin, Michigan, Pennsylvania, Ohio, Indiana, etc.
I think this will come back to bite him in the ass, politically.
Why hasn’t Doyle said anything so far? I think he is “keeping his powder dry” for future use.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 0746 hrs
Not to worry folks. Wisconsin may be losing manufacturing jobs by the 100’s, but we’ve got a growing film making industry that our Governor can’t wait to subsidize. Right now I don’t know if I should laugh or cry.
COME TO MADISON TOMORROW IF YOU CAN, OR FIND A PARTY IN YOUR TOWN AND GO.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 0751 hrs
This is a pretty debatable topic and it would really help if more facts had been mentioned in it. I tend to agree with RS in that LA is basically luring companies to come over there. Whether or not that is a dubious practice, I’m not sure. It’s similar to employment at will, where you could switch between employers if you want. Why shouldn’t an employer have the same freedom to switch between locations?
Posted by worcester movers on April 14, 2009 at 1150 hrs
Saw a great comment on another thread about this….
Seems Doyle was too busy travelling to Spain to look at trains and then he went to the Masters. Maybe Doyle could have used some of the $500MM he wants for the stupid train to the Dane County Airport to keep some of the jobs here instead?
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 1455 hrs
A profitable wealthy company wins. Taxpayers lose.
States battling it out with other states, only the companies receiving public money win. Everyone else loses.
So Monroe, La gains 366 jobs, Sheboygan loses 366 Jobs. Net gain ZERO.
But Gardner Denver sure makes out like a bandit. Free building, moving costs paid for, tax incentives.
When people want to “hate the rich” and complain that “the rich get richer” they need look no further for one of the causes than their government.
Let Gardner Denver decide where to locate their plant based on their business model, not on taxpayer funded bribery.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 1458 hrs
Unless you pass a federal law to restrict states from offering money to companies to move there - I don’t see this environment changing.
You are either in the game or watching from the sidelines.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 1558 hrs
I think we’ve finally come up with a productive point in this thread. At what point do you prohibit States to offer direct economic incentives?
It is one thing to offer lower unemployment benefits, lower State taxes, better climate, etc. to lure business. But the South has been after this give-away strategy for twenty years now. For that matter, every city in the United States has been forced to compete based on how much public money they can give away. We’ve got the same problem with sports teams looking for publicly built new stadiums.
I’m not sure this is a productive use of resources. I think we could use a level playing field here. The lefty’s in this thread are winning me over.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 1756 hrs
Steve -
I’m not sure that you can. For a couple of reasons. First, I think its a State’s Rights issue.
Second, if the people of Louisiana, or Alabama, or North Carolina - wherever believe that using their tax dollars to incentivize businesses to move their to improve their job base and grow their villages/cities and local economies, I don’t think it is really up to anybody else to tell them they shouldn’t. If the people of Wisconsin elect leadership that is obsessed with trains, tribes, and trial lawyers and chooses not to do so. Well then…. sucks to be the people losing their jobs, But good for those that will get them.
Personally, I think it is extortion on certain level - especially the sports team crappola. Sports teams financial benefit to the cities is highly inflated other than local pride. At least for the people of Louisiana get something a bit more tangible from it. I don’t see this as any worse use of public funds than most anything else government spends money on.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 1916 hrs
Unless you pass a federal law to restrict states from offering money to companies to move there - I don’t see this environment changing.
I’m all for it.
Its about time the federal government protected taxpayer rights.
Posted by .(JavaScript must be enabled to view this email address) on April 14, 2009 at 2254 hrs
JJ, are the people of Louisiana really getting any more out of this than the people of (fill in the city) get when their assorted units of government pony up taxpayer-assisted financing for a sports stadium? That requires people to build the stadium and it requires people to work at the stadium. Those are jobs too. Presumably none of that would happen if the franchise left - or it would simply happen somewhere else (e.g. the Sonics moving to Oklahoma City).
To some degree we are discussing magnitude and efficiency of investment - certainly one could argue that there may be more effective ways to develop the economy than by building a stadium to retain a sports franchise. But then again, said franchise creates a heck of a lot more secondary economic activity (e.g. retail/restaurant/hotel/tourism dollars) than building an industrial production facility. And truthfully, either side can probably find numbers to make its case.
I certainly don’t have the numbers to argue that one is better than the other. But I can say that whether it’s an industrial facility in Monroe, LA, or Target Field in Minneapolis, the principle in play is the same. A taxpayer-financed subsidy is put in private hands, with some hope that a secondary public benefit will be created.
Posted by Recess Supervisor on April 14, 2009 at 2349 hrs
RS -
I pretty much agree with you - its extortion.
However, the people of Monroe, LA elected people to work for their interests. They believe that expanding the Gardner facility and bringing 300 jobs to their community is a valuable use of their tax dollars.
As stated before, I don’t believe this is any worse of a use of tax dollars than a boatload of other things that the state spends money on. I would think that Doyle could have used some to try to do the same to keep the jobs in Sheboygan as opposed to trains to the Dane County airport or 2800 DNR agents or more UW building-mahals or widening I-94 to 4 lanes between MKE and IL - you get the idea. Because Doyle didn’t feel the need to engage personally and make the offer, now add 300 more jobs in the WI “Lost” column.
Posted by .(JavaScript must be enabled to view this email address) on April 15, 2009 at 1013 hrs
Just curious, can anyone source what Doyle specifically did or did not do? I haven’t found anything, but some people here
seemed convinced he didn’t do anything. Don’t blame him for not commenting - why comment on a “losing” proposition?I know that locally, these types of things are handled by nonprofit Economic Development entities because when vetting these kinds of proposals, some of the information is proprietary and can not be revealed to competitors, which would happen if the negotiations were being done in the public sector.
Posted by .(JavaScript must be enabled to view this email address) on April 15, 2009 at 1349 hrs
Total Entries: 19997
Total Comments: 134021
Most Recent Entry: 05/24/2012 06:25 am
Most Recent Comment on: 05/24/2012 12:07 pm
Total Members: 9751
Total Logged in members: 0
Total guests: 112
Total anonymous users: 0
Most Recent Visitor on: 05/24/2012 12:24 pm
The most visitors ever was 538 on 12/01/2007 02:11 pm
Protected and licensed under a Creative Commons License (some rights reserved).