Saturday, May 18, 2019

The Guild Giveth, the Guild Taketh

The old adage that one shouldn't see how sausage and bills are made applies to economic development as well.  The Wall Street Journal provided a window in how states are at the mercy of a "Guild" of economic development consultants in a story published today:

Governors often find themselves at the Guild's mercy.  Credit: Critical Mass Blog.

Georgia rolls out a red carpet for them at the Masters Golf Tournament. Kentucky gets them tickets to the Kentucky Derby. Arkansas takes them on a private duck hunt with the governor. Utah recently arranged a private ski trip with an Olympic medalist.

Such is the life of site selectors—consultants who jet around the country helping corporations decide where to build new headquarters, factories or expansion projects, often pitting communities against each other in multistate bidding wars to maximize tax breaks, grants, land deals and other incentives.

As communities across America race to win such marquee projects, these middlemen have quietly become some of the most powerful consultants in corporate America.

There are about 500 site selectors active in the U.S. and a 2017 survey found that 54% of companies plan to outsource part of their next corporate location search, according to consulting firm Development Counsellors International....

In some ways, the site selectors act like lobbyists, interacting with government officials as they help their clients obtain favorable deals that sometimes require legislative and regulatory changes. Unlike lobbyists, site selection consultants often work on commission, which is frequently tied to the size of the incentive package they negotiate for their clients. That fee structure has drawn criticism from some of the very economic development officials who are competing against each other for the projects...

 Despite that, Upjohn research shows that the state and local costs of incentives have at least tripled since 1990, reaching $45 billion annually as of 2015. Average incentive awards have also tripled in size as a percentage of business taxes owed by the companies receiving the perks.

What the incentives can alter, in some cases, is the location of the project. That’s fueling competition that has helped turn site selection into a booming cottage industry.

“Kentucky Derby. Mississippi governor’s quail hunt. Georgia quail hunt…I’ve been to all of them,” said Mike Mullis, a Tennessee-based site selector. He works alongside his fiancée, Denise Mott, at a site selection firm he founded in the 1970s, J.M. Mullis Inc. The firm completes an average of about 50 projects a year, according to its website.

Mr. Mullis has developed a reputation for being a tough negotiator on incentives. When he represented Jeff Bezos’s rocket company, Blue Origin, on a site-selection search in 2016, a Washington state official told the Puget Sound Business Journal that Mr. Mullis “constantly hammered” the state to see what incentives they could offer. Mr. Mullis told the paper that the characterization was “pretty consistent with how we operated.”
The consultants formed a Guild that is almost as exclusive as the River Boat Pilots Club:

Mr. Mullis was also an early member of an exclusive club of consultants known as the Site Selectors Guild. New guild members have to be approved by a committee, and every member is required to attend a conference where government officials and other attendees pay $2,000 a ticket for a chance to hobnob with them....

 Since its founding in 2010, the Guild has grown to include 50 consultants and now attracts 355 paid attendees at the marquee event, which usually sells out within an hour, according to the guild’s executive director, Rick Weddle. Mr. Weddle says the industry’s mantra is that “incentives can never make a bad location good. They can make a good location better.” He said site selectors help companies weigh a variety of factors, such as the availability of qualified workers, access to infrastructure, proximity to customers and suppliers, the cost of utilities and other production inputs.....

Unfortunately, Mississippi has found itself at the Guild's mercy.  The Journal continues:

When the U.S. arm of Czech firearm maker Česká Zbrojovka began looking for its first U.S. factory site last year, the company had already committed to the expansion. Even if the subsidiary, called CZ-USA, received no incentives, it still would have proceeded with the project, said CZ-USA’s chairman, Bogdan Heczko.

Still, he decided it would make sense to “see how much we can get.”

Mr. Heczko’s company was originally deciding between two states—Kansas and Missouri—which have a long history of competing on incentives. Then CZ-USA hired Mr. Mullis to help with the search. Mr. Mullis advised CZ-USA to broaden the search to more states, according to Mr. Heczko. Mr. Mullis said he helped the firm scout locations in a dozen states, including Arkansas.

In early December, Mr. Mullis and a handful of other site selectors spent the day hunting at a private retreat with Arkansas Gov. Asa Hutchinson. Mr. Mullis said events like these are good “relationship-building” opportunities.

At the end of the day, as Mr. Mullis relaxed on a couch in a spacious hunting lodge in Northeast Arkansas, Mr. Hutchinson approached him to ask for his advice on how to attract the gun manufacturer to his state.

“What do we need to do to close this deal? We want this project,” Mr. Hutchinson said, according to Mr. Mullis.

Mr. Hutchinson confirmed in an interview that Mr. Mullis gave him advice on how to “fine-tune” Arkansas’ pitch to his client. He also said Mr. Mullis “is a very good shot.”

Mr. Hutchinson—who has okayed 435 incentive deals since becoming governor in 2015—ultimately allocated $4 million from a fund he controls, the “Quick Action Closing Fund,” to pay for improvements at the site in Little Rock selected by CZ-USA. That was in addition to more than $20 million of loans, rebates, tax breaks and other incentives Mr. Mullis helped negotiate. The company pledged to invest $90 million and create 565 jobs, according to a press release.

What the article did not report is that Mississippi was one of the states competing for the CZ plant. Mississippi offered a Rankin County site for the plant. Such a site would have access to good schools and the Jackson International Airport. The "broker" strung Mississippi along, using it to leverage a better deal out of Arkansas. Governor Bryant even flew to Las Vegas in January to close the deal - only to find a suddenly-crawfishing consultant in Sin City.  The sudden decision to back out of the deal and jump over to Arkansas was only sudden to Mississippi as it discovered it was played all along by the founding member of The Guild.  

Unfortunately, the crawfisher was instrumental in bringing Continental Tire to Mississippi so the state has little choice but to play his game by his rules if it wants a crack at future projects. 

 Economic development negotiations are usually protected from public records laws and the consultants are paid by the client.  Thus The Guild operates in a corporate swamp where rules are few as they play states against each other.  Woe to the Governor who has to explain to his voters why he didn't try to bring jobs to his state. 


Anonymous said...

What was the total amount of incentives given to Continental Tire to come to Mississippi?

Anonymous said...

The "guild" sounds like a cartel to me. Rather than buyers negotiating with sellers in a competitive market, it's all in the hands of a few "brokers." This is the kind of thing that Jim Hood's office has done well at investigating and prosecuting in the past. Election or no election, that's my $0.02.

Kingfish said...

Ever heard of the term "blackball"? Not to mention while you take that route, you will undoubtedly be backstabbed by other states who will take advantage of the ill will between the litigious states and the corporations.

Anonymous said...

If a "government" (city, state, federal) were aware of these machinations, they should do away with them altogether. We agree Kingfish. A great awakening must happen first, and the leaders willing to take those arrows in the back to speak these truths to the masses.....unless Google, Facebook, YouTube, etc. silence the truth behind all the corruption.

Anonymous said...

You can say what you want about site selectors but the truth is Mississippi is only really attractive for foreign companies. Not a lot of US companies want to deal with the flag issue, the gay law issue, and don’t forget the states shrinking population.

Anonymous said...

Someone should do a very large study of these deals. Include many deals in many states over several years. I think they would find the following: A very few cases that work out very well. The company prospers and expands many times over many years. A 'good chunk' of deal that are near break even for the taxpayers. 'Good chunk' being 20-50%. (This is a huge range. I have no idea what the actual number is. Hence the need for a study). Two other large samples (maybe 15-30% each) that include 'strong failures' and 'total failures'. My guess is that if all of this was added up the taxpayers would do much better to spend those millions on lottery tickets. Or better yet, not spend at all. Perhaps if a respected expert did a full study, the public would realize that these incentives should be done away with for the most part. (I say for the most part because I really don't mind that say Nisson gets two interstate interchanges added at their new plant site. But keep it small). Maybe studies about this already exist? I'm not interested in 'studies' funded by the folks who make a living doing this. Real studies by independent people and published for the general public to a national audience. Suppose all of the states came together and gave say 1% of what they are spending to attract industries to fund three different, independent studies, that we could all read and compare. Something like that might show that millions or billions of tax dollars are being wasted and lead to the end of this.

Anonymous said...

@11:31 It used to be that if there were even a PERCEPTION of conflict of interest, it would not be allowed. Studies are not needed. Once upon a time, if there was even the POSSIBILITY of graft or corruption, then the money would not be encumbered toward the initiative. Where are the grownups anymore?

Anonymous said...

As a professional economic developer for 20+ years, labor is typically the number one site selection criteria. Incentives are usually the icing after most of the cake has been baked. So if MS ever wants to be competitive across the state versus just a few communities, improving education is Job #1.

Anonymous said...

8:21. Education in this country ass state will never, EVER improve as long as you have kids that don't want to learn, parent(s) that don't care and no home training (or daddies) teaching life to offspring.

Anonymous said...

Improving education is the LAST thing the Mississippi gentry wants. They need them to justify their campaigns of "Saving the Children" or "It's for Students" etc. etc. etc. and to most of all keep the federal dollars rolling in for which there's no accountability and the connected know how to sweep into their pockets.

Anonymous said...

This all sounds bad but it's another attempt to distract.
There's a much more pressing need to pass some more bathroom laws! Otherwise the gays and transgenders

Suscribe to latest on JJ.

Recent Comments

Search Jackson Jambalaya

Subscribe to JJ's Youtube channel


Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).

Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.

In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS.

Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS