Biotech, Beer, and the Public's Right to Know
Chuck Sheketoff
Oregon competes with many other states to roll out the best red carpet for desirable companies to locate or expand here. State officials and agencies tailor incentive packages, using our tax and lottery dollars. What does Oregon get from these companies in return?
In Oregon, it's hard to tell, and too often, the companies - not public officials - get to decide whether to share the details with the people - you and me - who are footing the bill. We have to wait until after the ink on the deal dries.
Take Genentech, for example. Considered by some to be the "founder of the biotechnology industry," Genentech has the largest proportion of FDA-approved manufacturing capacity for the production of biotech medicines in the world. This California company, with manufacturing facilities in Spain and California, wants to locate a new facility in Oregon.
Why? According to the company, Oregon's "advantageous business environment," high-quality available labor force, and development-ready land with supporting infrastructure were key factors. The company also likes the fact that its profits will hardly be taxed under Oregon's new corporate tax scheme.
In March, Governor Ted Kulongoski announced that Oregon "committed" $4.8 million in public funds to Genentech, including $2 million from the Governor's Strategic Reserve Fund, for training and infrastructure improvements.
What will Oregon get? "Potentially 300 new jobs" by 2015, according to the Governor.
The Oregon Center for Public Policy asked for the details regarding how Oregon was going to spend the $4.8 million and what we'd be getting for the money in terms of jobs, benefits, and clawback provisions that ensure that if Genentech doesn't deliver they'd pay Oregon back, and the like.
State officials denied our request under a law that allows Genentech to declare that the information is confidential until all negotiations with the state are completed. Because of this company-imposed blackout, we don't know how many of those possible jobs will come from Oregon's labor pool and how many will be Genentech transfers.
Even though the Governor made the public announcement, he couldn't and won't tell us exactly how he's going to spend our tax and lottery funds, or what Genentech is promising to provide in return. That makes it hard to applaud the deal.
Eventually, Oregon's Public Records Law will allow us to see whether Governor Kulongoski made a bargain that included an enforceable job commitment from Genentech. Even then, tracking it down will be no easy task. Interested Oregonians will also have to track down data each year to keep up with how Genentech is doing.
About the same time Genentech was nixing public inspection of their Oregon deal, Illinois Governor Rod Blagojevich was announcing that Illinois had lured Pabst Brewing Company's corporate headquarters to the Chicago metro area from Texas.
The Illinois Corporate Accountability for Tax Expenditures Act will allow anyone with access to a computer to view online Pabst's annual reports on their progress toward their employment commitments. Illinois thinks their taxpayers should be able to check online to see whether the subsidized companies are fulfilling their promises.
Oregon should follow Illinois and other forward-thinking states into the 21st Century. The public has a right to be able to check online to see whether the subsidized companies are fulfilling their promises and whether our tax and lottery dollars are well spent.
Who can argue against the need for an Oregon Corporate Accountability for Tax Expenditures Act? What would they be trying to hide?
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9:30 a.m.
Jul 21, '06
I'm having an odd sense of deja vu reading this post--Chuck identifies a similar problem he noticed about PurpleOregon. There's absolutely no reason Oregonians shouldn't demand corporate transparency. How many PGEs do we have to go through to learn this lesson?
(Note to fiscal conservatives: you should be leading this charge.)
9:50 a.m.
Jul 21, '06
The Oregon Economic Development Department hardly works in some underground bunker trying to bring new jobs to Oregon. The suggestion to emulate the Illinois law has merit. I hope it gets a serious look. The post carries all sorts of shades of implication and secrecy. When all is said and done, Governor Kulongoski, along with several private and public officials from several municipalities review carefully any agreements made with a company relocating to Oregon. Company relocations take incredible hard work, involving sometimes up to a 100 people before agreements are reached. Oregon competes with 49 other states for each business. Oregon worked itself out of a bad economic situation to become the 5th fastest growing economy under the present state administation.
Jul 21, '06
it's good to seek assurances, but a one-time investment of $16,000 per job by oregon might be a good deal for jobs that will likely pay well above $20,000 plus benefits yearly. these would be good jobs that would draw in/keep good people in oregon, too.
Jul 21, '06
Businesses would flock here, bringing high-paying jobs with them WITHOUT corporate welfare if they felt that they could operate without a significant regulatory burden. We've driven them out with some of the highest insurance costs (second only to NY and in some cases CA and MA), an aggressive regulatory bureaucracy, and constant uncertainty on education funding. Why do you think all of the headquarters operations have fled the state in the last ten years? (Save Nike, of course)
Let's have an ambassador program that recruits businesses without our checkbook. It's possible. Look at Charlotte, Austin, and Las Vegas. Their draw isn't millions in subsidies, but a positive govermental relationship with business, a relaxed regulatory structure, relatively low taxes (which we have, outside Portland), and a smart population that can do higher-paying work.
These corporate giveaways are abhorrent to me and in my view are nothing more than vote-buying in an election year. A republican would be doing the same thing, unfortunately. Jeff's right, fiscal conservatives should be howling about this sort of thing, but they get up and promise to "bring more jobs" through just this sort of giveaway.
It's like sports teams asking for new publicly financed stadiums. If you don't build it, we'll move. Fine. Move.
That $4.8MM could have gone to the university system to educate more students (or cut them a break on their tuition), making Oregon that much more attractive to all employers. Argh.
Jul 21, '06
From what I have read, calling these "biotech jobs" is a little like calling hamburger work at McD's "manufacturing". Newspaper accounts said these are packaging jobs. No Research, Development, or Production. Just packaging. The kinds of jobs that eventually get sent overseas - like call centers. The biotech hype is marketing. If we got a plant where the workers jobs were to pour Tylenol into plastic bottles, would those be "biotech"? No. Neither are these.
I could at least comprehend the logic of the tax break if Genentech were making an Intel style investment of brainpower, production, etc. This doesn't appear to be the case. These are jobs that will eventually move overseas or at least out of state, and in no way serves as the anchor of some sort of biotech hub.
Jul 21, '06
Great point, Bob. Great point. Now, who's going to tell the Guv not to spend this money? I nominate Chuck.
1:56 p.m.
Jul 21, '06
Jami -- Given that Oregon's income tax is 9%, you don't break even on a $16,000 investment until that job pays out a total of $177,777 in salary over time.
And: That doesn't count tax breaks that might cause a real tax rate of less than 9%. It also doesn't count the opportunity cost of what we might have done with that money - either in good spending, or as an investment that earns a return.
OTOH: You do also get some property tax benefit when that employed person owns property, plus they spend their income on things that create more taxable income for others, yadda yadda.
In any case, if the jobs are $20k jobs, you damn well want to be sure you're guaranteed that they'll stick around for 8 years or more. $40k, four years, etc.
All of this being back-of-the-envelope math, of course...
Jul 21, '06
I have no idea why when they spend $5M to bring in jobs (Mr Chisholm forgot to include workers buying houses and paying prop taxes, buying more cars/meals/clothes and creating more jobs.) Yet we throw the same money at a park in SoWa or extra tram money and no one notices.
You want to compare new schools and public buildings in Hillsboro vs. Portland before you complain about lost taxes.
Jul 21, '06
Think of the hundreds of construction jobs (probably union) that will build this plant. Think of the hundreds of jobs (at about 40K per year) that will work at this plant. Then think about the millions of dollars that Oregon and its cities have wasted recently (Portland's water billing system comes to mind).
By the way, this post originally endorses an Illinois system for monitoring the use of public money. I am trying to not giggle. I wonder which Chicago waste management company has the contract to operate the public disclosure website.
10:52 p.m.
Jul 21, '06
(Mr Chisholm forgot to include workers buying houses and paying prop taxes, buying more cars/meals/clothes and creating more jobs.)
Huh? Read the entire comment before you retort... To recap, I wrote this:
OTOH: You do also get some property tax benefit when that employed person owns property, plus they spend their income on things that create more taxable income for others, yadda yadda.
Jul 21, '06
Don Smith contends that all we have to do is remove a bunch of regulations and business will flock to our state. So Don, which regulations do we need to get rid of?
Maybe a majority of Oregonians support these regulations, inasmuch as many of them protect our health, environment and rights as citizens.
Jul 22, '06
Here's a thought: getting Genentech to come to Oregon is a first step in attracting other biotech companies who will offer more jobs, use Oregon brain power, and so on.
Jul 22, '06
It sickens me that these out-of-state companies think that just because they hire 300 or so people that they can take advantage of our state. Don't they know about our proud agricultural heritage? I say that we tell Genetech to take a hike. Then, we should turn that land in organic farms that are farmed by Oregonians to produce food for Oregonians--and only Oregonians.
We all know that corporations don't pay their fair share. Why would we want any more here? And if the unions aren't allowed in to guaranteed family wages, then they can't find the door fast enough. Send the corporations back to California!
Jul 22, '06
Chuck Seketoff -
State officials denied our request under a law that allows Genentech to declare that the information is confidential until all negotiations with the state are completed.
Thank your for finally writing about an topic - public disclosure laws - on this blog that really matters. If you happened to read the inane thread about WiFi, where everybody had something to say but no one seemed to catch on that the big issue, you'll understand what I mean. As they argued about whether this was a good thing, or if MetroFi was just taking the provincial rubes (how about Genentech?), not one indicated that perhaps the most important thing to come out was that one of the most active posters cheerleading the deal, and who had the least substantive responses to substantial criticisms of the deal, claims to have been a community representative who signed an NDA not to reveal any of the salient business details about the actual financials of the private business involved or how that business put a valuation on the subsidy PDX proposes to offer. paulie is another good example of this kind of truly uninformed citizen who just has to say something that suggests just how clueless s/he is with regard to how central the public's right to know is when it comes to citizens exercising their responsibilites in a representative democracy.
This issue is precisely where little K and the so-called Dems/progressives we send to Salem prove they are anything but good Democrats, or even good citizens in our representative democracy. At this point in our history, when corporations and government are merging in a fascist way hardly seen previously to exploit and disempower people, we should be demanding that little K and House/Senate Dems either publicly commit to passing the strongest public disclosures laws in the country, or simply refuse to vote for them.
There is no stronger American value, since the people are supposed to be the government, nor big-D Democratic value than embracing transparent government and public disclosure. And speaking as a Democrat, there are no worse Democrats than every single House and Senate Democratic representative and little K who let any provision in any law that limits the public's right to know what their government is doing in their name as in ORS 285A. Candidates claiming they will defend core Democratic values who want to get elected/re-elected can easily earn the votes of true Democrats by simply committing to this most American and Democratic value, and thus have no legitimate argument that this is one we have to keep quiet about to win.
And to all you MSM journalists who get your guilty pleasures reading here, this is a chance for you to get some deserved props: You could do us an educational service by anonymously posting information about how much time and money the MSM (even in the NW) has expended defending public disclosure laws and the public's right to know so that the folks here can learn something about this battle and who has actually been the biggest problem. As much as I don't think the MSM has done a good job of standing up for the public's interests in many respects, it is important to acknowledge that this is one area where almost alone they have put in serious time and effort with little gratitude from even the kind of folks who post here that proffess to hold the public's right to know as an important governing value. (And I'm not in the MSM, but I have made some friends in MSM around this issue and related political work along the way.)
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