What might sustainable, local firms do with $49 mil?
In my vision of sustainable communities, I picture a thriving economy built around locally owned, independent businesses that embrace the triple bottom line: people, planet and profits. So it is that I have little patience for economic development practices prevalent in Oregon and around the country that emphasize national business recruitment over local business development.
I believe we should be doing much more to take care of the businesses that are already here putting down roots, hiring local residents, keeping their profits local and multiplying as they circulate in the local economy and being run by owners who are active in their communities — because they live here, too.
Editors at The Oregonian lost an opportunity to underscore that point in an editorial on Saturday about last week’s announcement of the Hynix semiconductor plant closure in Eugene. The decision puts 1,100 people out of work, many of them paid well above the average Eugene wage. Hynix, like any number of tech companies wooed by Oregon officials in the past several decades, was given large state and local tax credit incentives to locate in Eugene some 13 years ago.
Although the Hynix plant closure is an opportunity to question the wisdom of showering national or international businesses with tax breaks to locate in Oregon, The Oregonian editors say forget about it:
It’s not productive to second-guess the state’s wooing of Hynix and its use of tax incentives, as some in the Legislature have begun to do. A 2003 study by University of Oregon economics students Melinda Rowan and Jennifer Witt found that the $49 million in tax breaks and road enhancements used to lure Hynix resulted in a positive impact in taxes, wages and system development charges of more than $275 million over the first five years of its operation. Had the state not offered its incentives, Hynix wouldn’t have built its plant, employed 1,100 people and paid taxes.
Their argument against re-examining the Hynix recruitment strategy is hardly convincing. The editors conclude Hynix would not have come here without the $49 million incentive package, so the positive impact in taxes, wages and whatever system development charges would not have been realized. But that’s assuming the $49 million in incentives were not spent at all.
What might have happened had the state and city pledged that same $49 million in 1995 for support of locally owned, independent businesses? Hynix received the equivalent of $44,500 for each of its current 1,100 employees from state and local government. What might 1,100 locally owned, independent businesses in the Eugene area been able to do with $44,500 each? Or what might 110 of the best locally owned, independent businesses in Eugene been able to do with $445,000 each?
We’ll never know the answer, but I’m not aware of any state or local economic development group even asking those questions. Businesses based and owned in Oregon are getting the short end of the economic development stick. They can only dream of government officials coming to them and saying, “We believe in you and want you to thrive in Oregon. Here’s a half-million dollar package to help you grow your business.”
Can you imagine what a select group of Oregon’s most innovative, most environmentally and socially committed business owners and their employees could and would do to reward the citizens of this state for making a meaningful public investment in their businesses? Not all of them would succeed, of course, but I’m certain enough would to add at least the equivalent of 1,100 quality jobs.
And most important of all, those successful locally owned, independent and sustainable businesses would keep repaying Oregon’s investment long after the 13-year life span of Hynix in Eugene.