Driving south on I-65 from Nashville, Tenn., in a very rural farming area, you will encounter an unusually large flyover exit to “Saturn Parkway.” The five-mile-long parkway leads to a factory covering 2 square miles that General Motors constructed in 1990 to build Saturn cars.
Keep driving around the area, and you will see miles and miles of suburban housing developments, fast food restaurants and shopping malls. This is the result of a deal that then-Gov. Lamar Alexander made with GM to bring this large plant to the small town of Spring Hill.
But that’s not the whole story. It turns out that GM came to Tennessee because the state gave the company a package that included:
— $3 million in forgone taxes;
— $50 million for that exit off I-65, and the Parkway;
— $20 million in job training; and
— $135 million in other new interstate road construction.
In addition, the local county gave GM a 40-year deal where the company paid only $1 million a year, far below what they would have paid in property taxes.
Even though jobs were the reason for all of this largess, GM hired almost all of the several thousand workers for the factory from other GM plants, so few locals got the jobs. And, what was once a quiet farming community became part of suburban Nashville’s sprawl.
The worst came in 2009 when GM went bankrupt. Over 2,000 workers were laid off. Unemployment was as high as 17 percent. The real estate market in Spring Hill crashed and local businesses closed. In recent years, GM has brought some jobs back to this plant, but only because the United Auto Workers agreed to dramatically lower wages and accept less in benefits.
This is the type of economic development deal that Gov. Paul LePage is talking about when he suggests that giving tax breaks and lower wages to certain “Open for Business Zones” will bring large numbers of jobs to Maine.
Ten years ago, Winston-Salem, North Carolina, recruited Dell Computer to open an assembly plant there. The state of North Carolina and Winston-Salem gave Dell incentives worth $280 million dollars in return for around 1,000 jobs. That’s $280,000 per job. Problem was, the jobs were only going to pay around $28,000 a year. The rest of the money flowed to Dell. By the way, Dell closed that plant within five years. Now, that’s corporate welfare.
Dell got to keep the tax incentives.
In another part of North Carolina, there’s an example of a better way to grow jobs. The state has always invested heavily in its state university system, and NC State is no exception. The NC State Centennial Campus, for instance, is a large research park on the edge of Raleigh where companies come to work closely with NC State faculty, giving companies a competitive advantage in R&D unlike anywhere else in the U.S.
Here is just a sampling of the resources available to partners on Centennial:
— The fourth largest engineering undergraduate program in the U.S. (and the top provider of new graduate hires for Cisco, IBM, SAS, Duke Energy & Boeing).
— One of the top textile research centers in the country.
— One of the oldest computer science departments in the U.S. and fourth largest in graduate degrees awarded.
— The only National Science Foundation-funded smart grid research center in the U.S.
Only 25 years ago, this area was all tobacco farms, so this is not about what a rich state can do, but what a rural state that values education and research can do. The result: 65 companies and 11,000 employees. And not minimum wage jobs, either. And this area, and the surrounding Research Triangle region, fared extremely well during the recession.
This is the opposite of what LePage envisions. In fact, he’s actively trying to reduce funding for the University of Maine, holding back on bonds that have been approved by the voters, and vetoing others than would help us move toward an economy with the kind of jobs that don’t need concessions, and giveaways, and can’t be exported to Mexico.
Chasing smokestacks through the creation of “open for business” zones is an old and discredited economic development strategy. It’s a race to the bottom. Not only can’t we afford it, but it’s not what we want. It’s not the right choice for the future of Maine.
John Richardson is former commissioner of the Department of Economic and Community Development, a member of the Brunswick Town Council, and an attorney with Moncure & Barnicle in Topsham. Catherine Renault, former director of the Maine Office of Innovation, owns Innovation Policyworks LLC, an innovation policy and practice firm in Brunswick.