Someone asked me to comment on the VW/Tennessee auto deal:
Tennessee, for instance, has just disclosed that it agreed to give German carmaker Volkswagen $577m in incentives for its $1bn plant in Chattanooga. A senior executive at Fiat, the Italian industrial conglomerate, said: “With the amount of money US states are willing to throw at you, you would be stupid to turn them down at the moment. It is one of the low-cost locations to be in at the moment.”
First of all, the bidding for auto plants is getting crazy. However, the cash out of pocket to attract VW was actually limited. The subsidy to Volkswagen included free land worth $81-million, plus cheap electricity rates. In addition, there were a pile of tax incentives worth 10s of millions if not several hundred million or 20 or 25 years. Remember, all of that doesn’t cost the taxpayers a dime. However, I still think these are crazy sized deals.
The real point I want to keep making, however; is the use of these large projects as economic anchors in the community. According to this article:
Nearly 15 years after opening a $500 million BMW assembly plant with nearly 2,000 employees in Spartanburg County, the German automaker has more than doubled its staff and boosted its plant investment nearly tenfold. A new study estimates BMW now generates 23,050 direct and indirect jobs for the Greenville-Spartanburg area.
Now, ask yourselves on simple question. That $200 million that the Transportation Minister just announced to expand a highway around the Acadian Peninsula (for ‘economic development’ benefits we were told), would it be better served trying to attract a BMW plant or putting down asphalt?
Before you answer, let me give you a couple more numbers.
$2 billion. That is roughly the amount of EI paid out in the Peninsula in the last 15 years. $200 million for an auto plant doesn’t seem as much in that context.
10,000. That is roughly the amount of population lost in the Acadian Peninsula in the last 15 years. If 5,000 of those were working and producing an average amount of tax revenue in New Brunswick – it would add over $80 million per year in tax revenue to the provincial coffers.