Let's play a little game of Put Yourself in Someone Else's Shoes, shall we? Humble reader, your chosen career is now that of politician. You've kissed enough babies to become a high-ranking official on the council for the city of Metropolis. Well done! There's just one problem: over the past few years, Metropolis' economy has gone down the tubes. It's not your fault this has happened, but your constituents expect you to do something about it. What do you do to keep yourself from being voted out? (THINK FAST!)
One popular solution is to offer economic subsidy packages to major corporations interested in basing themselves in your region. Such development would pump lifeblood into the local economy, not only by creating jobs directly, but also through a corresponding ripple effect of the service economy.
In 2001, Boeing announced its plan to move its corporate headquarters out of Seattle to one of three potential sites-- one in Dallas, one in Denver, and one in Chicago. Dallas offered Boeing $14 million. Denver offered Boeing $18 million.
Chicago offered Boeing $56 million.
Guess which site Boeing chose?
The emotionally connotative term "clawback" is frequently used by those who move in economic development circles to refer to a certain type of provision one finds from time to time in packages like the one that was offered to Boeing. This provision is best understood as a community's chance for a refund. For example, if analysts have reported that the company that wishes to relocate to Metropolis is going to create 800 permanent new jobs by doing so, as a city official, you would be extremely interested in subsidizing Company X. But if you're smart, the deal you offer will contain a caveat, stating that if the move ends up creating fewer than 500 full-time jobs, at least some of the subsidy will need to be repaid. (This sort of forethought is especially necessary if the paychecks of the analysts in question were signed by Company X.)
When it came to Boeing's relocation from Seattle, the Illinois legislature was willing to offer them the following goodies:
Chicago mayor Richard M. Daley
and his subordinates cooked up an additional set of subsidies that brought the total of the package deal up to $56 million. However, on September 12, 2001
, "city deputy planning commissioner Robert Kunze
told Cook County Board
's finance committee
that if Boeing's headquarter jobs fall below 500 the city will cut the amount it reimburses for property taxes. If the number falls below 400 for 10 years, the company will have to pay back all the reimbursements."
Needless to say, given the events of the day before, Boeing was not happy to hear about the existence of this clawback.
SOURCE: Henderson, Harold. "Give Us a Break!", Chicago Reader Volume 32, Issue 28, 11 April 2003: 20.