Cost of Business: Tens of millions of city taxpayer dollars goin - FOX10 News | WALA

Cost of Business: Tens of millions of city taxpayer dollars going to private corporations in Mobile

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Tax breaks, cities use them to lure businesses, but we're finding some companies in Mobile are getting more: cold hard cash.

In fact, a FOX10 News analysis of government records shows the city has offered more than twice as much in cash incentives to private companies than it has in tax breaks.

City documents show in the last four years, the city of Mobile has agreed to pay more than $27 million tax dollars in cash incentives for private corporations ($36 million including county and state contributions), and city taxpayers are also having to make up for more than $13 million dollars in tax breaks given to several other companies.

FOX10 News Investigates asked the city's communications director, George Talbot, why the city offers up millions of dollars to companies who are already so well off.

"It's been described as corporate welfare in some cases," he said, "but at the end of the day, this is the competitive world we are in."

There’s no doubt, the city has been able to secure a significant amount of progress through those deals.

Downtown development is on the rise, the aerospace industry is booming, the cruise ship is back, and shopping venues have gotten makeovers. All of that progress was made possible through tens of millions of dollars in cash incentives to the corporations involved in those industries.

This practice is nothing new, however, it has spanned multiple administrations.

Another justification behind shelling out all that money to big corporations that already have huge net worths?

They bring in jobs.

Critics of cash deals concerned about “quality” jobs created

“The problem is that often times, these jobs are what we call perma-temps. They hire them for a short time, a year or two years… they don't have any benefits… and we create a class of the working poor,” said State Senator Linda Coleman-Madison (D).

Coleman-Madison is an advocate for stricter regulations on cash incentive deals, so companies receiving tax dollars are forced to offer quality jobs. 

"We don't have the luxury to play Russian roulette with taxpayers' dollars,” she said.

The FOX10 News Investigative team contacted all 20 companies who have received incentives in Mobile in the last four years, to ask them how many people they employ, and what kind of jobs they have created.

Only six companies responded with an answer. Turns out, one company receiving more than $7 million in tax breaks only employs five people, Bayer CropScience in the Theodore Industrial Park.

Troy Wayman, Vice President of Economic Development at the Mobile Chamber of Commerce, helped secure that deal.

FOX10 News Investigates asked him it’s fair for this company to receive such a large tax abatement, when it only employs five people?

“Well, there are a lot of things to take into consideration with the Bayer CropScience project,” Wayman responded. “Number one, they co-located on site with Evonik, (which) meant an expansion at Evonik as well. Also, in the chemical sector, you're dealing with a significant capital investment, because of a number of things. They typically don't have as many jobs as other projects, but those jobs are higher paying, and therefore provide better jobs for people who are seeking jobs in the community."

Wayman said if it weren't for these incentive deals, Mobile would lose out in the long run.

"We have to remain competitive, if we don't remain competitive, we start losing projects. If we lose projects, then suddenly our community is not growing,” he said.

However, while many incentives are meant to bring new business in, the contracts show some of these cash incentives are going to companies that are already here, who have already created jobs.

VT Mobile Aerospace got $1.7 million of your tax dollars to do roof repairs on a hangar, and Austal received a check for $2 million to cover some construction costs.

Wayman defended those expenses.

"We want to keep those jobs here, we want to keep our company is growing here,” he said. “The more investment a company makes in your community, the less likely they are to go somewhere else."

Indeed, Austal employs some 4,000 people on the Gulf Coast.

However, if you take a close look at the fine print of the development agreement signed between the city and Austal, the company is given “sole discretion” as to whether or not it will hire Alabama-based vendors and workers.

“That would be a deal breaker when you start talking about discretion,” said Coleman-Madison.

How do other cities compare?

FOX10 News weighed Mobile's incentive agreements with those of comparable cities.

Our neighbor to the east, Pensacola, has only signed four incentive deals since 2014, in comparison to the 19 incentive deals Mobile has signed since 2014.

In Knoxville, which is about the same size as Mobile, the city does not give out any cold cash incentives to corporations, but instead focuses only on tax breaks for development of blighted areas.

FOX10 News asked for an interview with Mayor Sandy Stimpson multiple times about the incentive deals he signed, but he was unavailable to speak with us.

Instead, his Communications Director, George Talbot, sat down with FOX10 News.

We explained the figures in Pensacola and in Knoxville, and asked him what his response would be to critics who might say the city gives out too many public dollars.

“I think it's a sign that we are seeing a lot of business activity,” Talbot responded. “We continue to get calls every day from developers. We take it on a case-by-case basis, and every deal begins with a cost benefit analysis, and we always structure it in a way that we are certain is going to benefit the taxpayer of Mobile."

Talbot said mayor’s office is considering a shift away from writing checks with tax dollars to big industrial corporations, explaining there is a shift nationwide to focus on creating a more accessible city for your residents, and by doing so, the industries will come to you.

"We need to rethink how we approach this incentives game... we can do better,” said Talbot.

Talbot said all of the incentive contracts the city signs have what's called a claw-back clause, meaning if the companies don't live up to their expectations, the city has the right to get the money back.

He said with the contracts signed in recent years, a claw-back hasn't happened yet.

However, Talbot said with Gander Mountain on Schillinger Road closing this year, the Westwood Plaza developer will have to find a replacement soon, or else he could face having to pay back hundreds of thousands of dollars in cash incentives that they've received so far from the city.

To see a full breakdown of the cash incentives and tax breaks offered in the last four years, see below.

Cash Incentives offered since 2013 (includes city, state, and county contributions):

Carnival Cruise Line - $800,000

VT Mobile Aerospace Engineering Inc. - $1,700,000

Hutchinson Aerospace and Industry, Inc. - $85,050

RPI Bel Air Mall, LLC - $7,500,000

Leaf River Group, LLC (Meridian at the Port) - $4,500,000

IRC-MAB Mobile Midtown, LLC (Publix Grocery in Midtown) - $1,000,000

Wal-Mart Stores Inc. - $9,100,000

Austal USA, LLC. - $2,000,000

Rural Sourcing Inc. - $600,000

Westwood Plaza, LLC. - $9,250,000

Tax Abatements offered since 2013:

Alabama Steel Terminals - $2,516,400

Bayer CropScience LP - $7,180,423

iSAM North America - $51,570

APM Terminals - $2,277,789

Hutchinson Aerospace and Industry Inc. - $139,900

MAAS Aviation USA, Inc. - $812,988

Marine and Industrial Supply Company, Inc. - $100,146

Star Aviation, Inc. - $130,195

Prism Systems, Inc. - $22,498

Worthington Cryogenics, LLC - $271,902

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