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COLUMN: IBM deal includes protections for Columbia residents

Thursday, May 20, 2010 | 3:49 p.m. CDT

COLUMBIA — “Project Tiger” has a fine predatory ring to it. As everybody in Boone County surely knows by now, that’s the code name for the months of behind-the-scenes maneuvering that culminated Monday in the announcement that IBM is coming to town and bringing the promise of hundreds of good-paying jobs.

The announcement has led to communitywide celebration, and rightfully so. Still, there’s something we probably shouldn’t forget. In the world of flesh-and-blood tigers, as opposed to the football-playing variety, relationships generally come down to predators and prey. In the world of business, the current custom of providing lavish incentives to lure prospective employers can leave us ordinary citizens feeling less like hunters and more like a big cat’s midday meal.

That’s the worry that crossed my mind as I read in the Missourian about the invoice for $31 million promised by state and local recruiters. The worry intensified when I saw the warnings in Wednesday’s paper that, in the words of City Manager Bill Watkins, “IBM has the right to withdraw” if the City Council doesn’t move quickly to keep its promises.

So I called Bill and asked what guarantees we have from IBM in exchange for our cash and forgone tax revenue. I didn’t burden him with the tiger-prey metaphor, and his response to my question left me thinking that this might really be the win-win situation we all dream of but seldom see.

In the first place, he said, the state-level incentives are all based on IBM’s performance. “You don’t just say you’re creating 800 jobs and trigger the benefits,” he said. First the jobs, then the state payments. And much, if not all, of those benefits will actually be funded by the revenue from taxes paid by IBM and its new employees.

At the local level, the biggest chunk of Columbia’s cash commitment is the purchase of the old Tri-Con building on LeMone Industrial Boulevard, which will be leased for $1 a year to IBM. That’s really a good deal for us citizens, too, he assured me.

The building is conservatively appraised at the $3 million the city will pay for it. IBM will make, and will have to make, improvements worth upward of $10 million in order to use it. So when the lease period (10 years plus an option for another 5) expires, we’ll own a $13 million facility. That, Bill said, is “a good investment.”

Those Chapter 100 bonds, the same instrument used to encourage ABC Labs to expand, will mean that IBM will pay the same $25,000 a year in property taxes the building yields now and, in lieu of taxes, half the normal tax rate for new equipment for the first 10 years. In year 11, the full tax rate will apply.

Federal Reserve Board estimates, published Tuesday in the Columbia Daily Tribune, project about $12.3 million over 10 years in additional tax revenue for the city, county and schools if IBM does wind up employing the 800 new workers that are being speculated, though not actually guaranteed.

A bonus from the IBM deal, Bill added, is that it promises to jump-start a much-needed cooperative program of post-high school technical training. That could help with future business recruitment.

An essential piece of the incentive package was the controversial extension of Maguire Boulevard to connect the industrial park with Stadium Boulevard. “In a weird way,” Bill said, Jerry Wade’s tie-breaking City Council vote to proceed with that extension made the whole IBM success possible.

You’ll recall, of course, that Bob McDavid’s supporters beat Jerry up in the recent mayoral campaign for being “anti-business.” When I told Jerry of Bill’s comment, he laughed and reminded me that his environmentalist supporters hammered him almost as severely for that vote.

Those conversations left me thinking that politics is full of irony, and that sometimes a code name is just a code name.

George Kennedy is a former managing editor at the Missourian and professor emeritus at the Missouri School of Journalism.

 


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Comments

Tim Dance May 20, 2010 | 7:41 p.m.

Mr. Kennedy,

Did Watkins offer any minutes from any meeting that stated that the Lemone extension was a deal breaker? I think Bill is taking this opportunity to deflect attention from the fact that the extension is another city subsidy. Ask question please, don't be enamored.

(Report Comment)
John Schultz May 20, 2010 | 10:17 p.m.

Tim, my recollection is that the bridge will be repaid from a TDD that was formed by Bob Lemone (I think?) and another group of developers. I know Karl Skala always considered that public money, but I don't agree with his distinction, otherwise all the other TDDs in town must be considered city subsidies as well.

(Report Comment)
Mike Martin May 21, 2010 | 12:54 p.m.

Reducing taxes on ALL businesses would be a far better way to encourage economic growth in Columbia.

For instance, getting the Boone County assessor off the backs of high-paying manufacturing firms like Square D and 3M should have been something we did years ago.

http://archive.columbiatribune.com/2008/...

http://archive.columbiatribune.com/2001/...

http://archive.columbiatribune.com/2001/...

Instead, those beleaguered firms continue to downsize, and now we wonder why we have to give away the store to get other firms to replace them.

This story should be about IBM coming to Columbia for its highly educated workforce.

And its fine universities.

And its low-cost lifestyle.

And its parks, trails, and quality of life.

Instead, it's about how community leaders worked behind the scenes to craft a costly deal with speculative, narrowly-targeted benefits.

It's about how once again, those poor volunteers we call Council Members are put in the unenviable position of being elected to question and investigate, then being told they need to go along quickly, under duress of IBM turning around and leaving town. (How'd you like to be the poor sap who gets blamed for IBM leaving town??)

If we're going to offer private, hush-hush, rush-rush incentives to lure businesses, the public should at least know from what palette we are drawing them in the beginning.

We should know that businesses will be offered TIFs or TDDs or whatever. We should know that if City Hall tells the rest of us, over and over and over again, that it's broke, Bill Watkins and company won't be okaying multi-million dollar spending deals with such limited, highly-specialized targets.

But with this deal, a perennially broke, tight-budgeted, can't-spend-money-on-anything-else City Hall has miraculously found $3 million in public tax money to buy a building from a prominent name -- Bob Lemone's estate and Lemone-Smith Development -- to hand over to IBM for essentially nothing.

Well -- with all the property tax breaks, at least the assessor can't bother them, at least for a few years.

(Report Comment)
George Kennedy May 21, 2010 | 1:09 p.m.

As to cost and who pays for the Maguire extension, I found a Missourian report from June 2008, when the council approved the project, that says the cost was expected to be $9 million. Of that, $5 was to come from the city and the rest from a TDD and a donation from the late Bob Lemone. Emory Sapp is doing the work, which Bill Watkins said is scheduled for completion by August. He offered no documentary evidence for his comment on the importance of the extension, but I was told the same thing by someone else who was involved in the IBM negotiations.

Thanks for reading.

(Report Comment)
Tim Dance May 21, 2010 | 6:40 p.m.

It seems like that's the line they are giving. Until I see it in writing, it's just an opinion. More like political cover for Watkins and his friends. So 5 million of taxpayer for bridge + 3 million dollar. wow what a subsidy, the tea party people and Libertarians should be protesting this hand out. Your silence is telling.

(Report Comment)
John Schultz May 21, 2010 | 9:03 p.m.

Uh Tim, some Libertarians aren't opposed to cities providing basic services, such as roads and police services to provide a couple examples. I worked on Lemone Industrial for several years and believe a second exit was needed quite some time ago. Don't forget that this bridge was approved well before Project Tiger was on the radar.

(Report Comment)
Tim Dance May 22, 2010 | 2:08 a.m.

I thought libertarians would be outraged about using taxpayers' money to subsidize IBM. I guess tea partyers and Libertarians are for the free market until they are not.

(Report Comment)
Ellis Smith May 22, 2010 | 5:45 a.m.

I am not a Libertarian but I know John and we share many of the same views. (My political affiliation and my religion are one and the same: I am a devout anarchist.)

Whether we like it or not, deals like this need to be done these days. Frankly, I would have preferred someone other than IBM, but my opinion isn't relevant. It is appropriate to question the specifics of such a deal, but to think that we (Columbia, Missouri) are so damned wonderful that all we need to do is sit back and wait for businesses to beg to come to our fair city is ridiculous. As that great economist, Madonna, has informed us in song, we are living in a material world...

Those who have spent their working lifetimes in the industrial world have a different take on these matters.

(Report Comment)
John Schultz May 22, 2010 | 2:20 p.m.

Tim, I'm not particularly enamoured of the city buying the building, nor the state providing the various tax breaks. I thought we were discussing the bridge to provide a second exit to Lemone Industrial, which I am fairly certain was voted well before IBM and Project Tiger was a thought (although I would be curious to see when the initial contact was made if anyone has that documentation).

(Report Comment)
Ellis Smith May 23, 2010 | 8:07 a.m.

Sometimes it's good to evaluate a situation by comparing it to possible alternatives. Suppose we were obtaining 600-800 jobs strictly through formation of small "start up" operations.

We have a good example of such an operation in Mo-Sci Corporation, Rolla, Missouri. Mo-Sci is a custom glass melting operation, its current product is glass microspheres, used for industrial and medical purposes. It will also soon produce glass nanospheres under a license agreement. This is an environmentally clean operation, and Mo-Sci ships product world-wide.

This firm pays its employees well and provides benefits, and it employs a mix of both university graduates and persons with no university education.

But there's a catch: Mo-Sci has less than four dozen employees. That's all the staff that is presently needed.

Suppose Mo-Sci has 50 employees. It would take 12 firms like Mo-Sci to employ 600 people and 16 such firms to employ 800. Forming 12-16 high tech start up firms is no easy feat! And if formed, all of them would almost certainly not make it to "maturity."

So, the IBM situation is better, right? NO. What would truly be "better" would be to have IBM plus several small high tech start up operations as well. Economic diversity is always a good thing. :)

(Report Comment)
a b May 29, 2010 | 11:20 a.m.
This comment has been removed.

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