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Cost-benefit analysis

How badly does Missoula need DirecTV?


"New jobs. New jobs. New jobs."

It's the mantra that drives modern-day economic development. You hear it from chambers of commerce, from politicians, and most of all from huge corporations looking for tax subsidies. The problem is that the jobs, if they arrive at all, aren't always what they're made out to be. Ask folks in Kalispell what happened to the promises of new jobs made by Stream International in 2000. Stream, which operates call centers all over the world, promised Kalispell at least 500 new jobs if only the city would pony up million in incentives. The city did, the jobs came, and less than three years later, Stream began laying off employees. A few months after that, the company-and the jobs it promised-moved out of Kalispell.

The first beats of the "jobs" drum are being heard in Missoula this month with the news that satellite TV provider DirecTV is considering opening a call center in Missoula County Development Park. Recent headlines read "DirecTV may bring 800 jobs to Missoula," and "Missoula competing for DirecTV call center: Undisclosed town offering its own set of incentives to company." The news so far is that Missoula is in the hunt for the customer-service call center, but the incentive package county and state officials are offering the company apparently isn't as sweet as the one on offer by an "undisclosed" town.

Critics of such inducements say they are nothing more than a form of corporate welfare, pointing to Kalispell's Stream experiment as a prime example of why cities shouldn't be in the business of buying jobs.

"I didn't see at the time what the need for [a Stream call center] was," says economist Richard Barrett, a UM professor and co-author of Post-Cowboy Economics: Pay and Prosperity in the New American West. "My basic feeling is that if communities are offering these inducements for firms to come in because they are hoping that they are going to improve conditions in local labor markets, my sense is that local communities have very little power over the labor market."

Yet every year cities and states across the nation offer billions of dollars in taxpayer-funded subsidies to lure corporations to their communities. The inducements are touted as job creation tools and without them, proponents say, corporations would take their business elsewhere and (insert your city here) will be left behind. So municipalities are forced to compete, often blindly, for the chance to have a major corporation open a new factory or call center.

In the case of DirecTV, an international site location consulting firm called CB Richard Ellis is working on behalf of the company. Such firms specialize in finding the best place for companies to locate specific facets of their business. That means analyzing the labor force, tax climate, transportation infrastructure, utility costs, etc. of prospective sites. According to Greg LeRoy, author of The Great American Jobs Scam and founder and director of Good Jobs First, a national resource center promoting corporate and government accountability in economic development, Missoula's labor force is the primary factor attracting DirecTV, not the potential subsidies the company might wrangle from the state and county.

"Missoula is a desirable place to live, with a lot of overqualified, under-employed people," says LeRoy. "What's got you in the hunt, even though you don't have a vacant building to have a turn-key on, is your labor supply."

Dick King, president of the Missoula Area Economic Development Corp., says he's working with local and state officials to ensure that whatever inducements are offered to the company are fair to taxpayers and workers and that any deal includes "clawbacks" (industry jargon for money-back guarantees).

"All of the incentives are performance-based," says King. "They've got to perform in order to receive the incentives."

LeRoy says clawbacks are an important part of any deal to help cities insulate themselves against the possibility of companies pulling up stakes and leaving the city holding the bag.

But there are other serious issues to consider besides incentives and subsidies, says UM's Barrett. Economic growth, despite conventional wisdom, may not always be a good thing, he says.

"The thing that seems really ironic to me is that we just went through a mayoral election, and if you paid any attention to what everyone was fussing about, it was economic growth," Barrett contends. "Infill, open space, transportation, water quality, sewers...that's all about economic growth and trying to cope with the costs of economic growth."

If DirecTV chooses to set up shop in Missoula, company officials have said the call center will employ 400 people by the end of the first year, with the potential for up to 800 in the near future. According to the Department of Labor and Industry, Missoula's unemployment rate was 3.3 percent in September, and Barrett says DirecTV's call center wouldn't have significant positive impacts on unemployment or poverty.

Barrett says that in the end, policy makers need to take a hard look at whether Missoula really needs 800 new jobs to sustain a healthy economy. By creating more jobs, he says, the area may temporarily enjoy a more favorable labor market, higher wages and lower unemployment. But those benefits will eventually disappear as the area grows.

"I think the community does not recognize that it's dealing with problems associated with growth...they don't see that the inevitable result of jobs creation is more traffic on North Reserve, a tighter housing market, and higher rents," says Barrett. "When people move in to take advantage [of new jobs], whatever kinds of advantages are created by the new conditions get...eroded by the influx of people."

So why should the county consider enticing DirecTV to bring its jobs here?

"The million payroll over 10 years," says King. And "a trained workforce that would be available to other employers. A competitive benefit package."

If and when DirecTV does make an announcement, King thinks Missoulians will be surprised at how good a deal it really is.

"We wouldn't be this far if we didn't have reason to believe there are considerable economic advantages to the community," he says.

But with negotiations taking place behind closed doors, Missoula will just have to take King's word on that. Experts who've watched similar deals get cut elsewhere aren't as optimistic.

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