Yogurt plant opens, Idaho leaders celebrate crony culture

Friday, December 21st, 2012

SUBSIDIZED SUCCULENCE: Chobani snatched more than $50 million in government handouts for its Twin Falls plant.

By John Seiler | Watchdog.org

TWIN FALLS – Idahoans pride themselves on rugged individualism and Red State free-market principles. But the reality is that many of their businesses and politicians are just as eager to grab federal tax dollars as anyone in California or New York.

This is shown dramatically by the crony capitalist subsidies lavished like a heaping pile of nut, marshmallow and graham cracker toppings on the Chobani yogurt facility in Twin Falls that opened earlier this week.

“In November 2011, the New York-based Greek yogurt maker Chobani announced plans to build a multimillion dollar manufacturing facility in Twin Falls, Idaho, with plans to hire 400 people,” reported State Impact, part of National Public Radio. The facility’s grand opening was Monday. “New numbers show the yogurt maker hired fewer people than expected, and collected more subsidies than first reported.”

The promised 400 new jobs turned out to be just 300. Twin Falls City Manager Travis Rothweiler promised that another 200 jobs still are forthcoming.

Whatever happens on the jobs front, Chobani slurped up $55 million in federal, state and local grants. That’s $183,333 per job created so far.

According to Chobani founder and CEO Hamdi Ulukaya, for every job directly created, another 6.6 other jobs indirectly are supposed to be created in Idaho.

“The state expects the total economic impact of our business there to be $1.3 billion,” he said.

As they say in Chobani’s New York base: Such a deal!

A major part of the public spending, $36 million, comes from what’s known as “tax-increment financing.” TIFs essentially take tax money from a new development and feed it back into the development. It seems magical. Except that means that tax money is not going to schools, roads, police, fire and other city services, which then must be subsidized by cutting the services to everybody — or increasing taxes on those outside the TIFs.

“While cities often claim that TIF is ‘free money’ because it represents the taxes collected from developments that might not have taken place without the subsidy, there is plenty of evidence that this is not true,” according to a 2011 study by Randal O’Toole of the libertarian Cato Institute. The study’s title: “Crony Capitalism and Social Engineering: The Case Against Tax-Increment Financing.

The study found that “developments subsidized by TIF would have happened anyway in the same urban area, though not necessarily the same location.” This seems especially the case for Idaho, whose business climate is fairly friendly, as shown by all those California tax exiles. “By eliminating TIF, state legislatures can help close current budget gaps and prevent cities from taking even more mon­ey from these urban services in the future.”

TIFs commonly are used for urban renewal in so-called blighted areas, although “blight” often means low-income areas coveted by developers. But some states have made more creative use of TIFs.

“Idaho, for example, allows cities near state borders to create TIF districts if they are at a com­petitive disadvantage with cities in neighboring states­,” O’Toole’s study found. “The city of Post Falls used this to justify putting 40 percent of the land area of the city in a TIF district. Yet according to the Idaho State Tax Commission, Idaho’s overall tax burden is significantly less than Washington’s. It seems likely that Post Falls’s TIF districts attracted more business away from nearby Idaho cities, such as Coeur d’Alene, than from Washington state.”

O’Toole’s study also found that TIF property tax revenues soared to $52 million in 2009 from $20 million in 2000 — a 11.4 percent annual increase. That $52 million amounts to $33 for every resident, or $132 yearly for a family of four. That’s not a sack of potatoes.

O’Toole also penned a 2011 study for the Idaho Freedom Foundation specifically about the Gem State: “Theft as Urban Renewal: Why Idaho Should Repeal the Local Economic Redevelopment Act.”

He calculated the cost of TIFs for services in Idaho in 2009:

  • $16 million lost from school property taxes
  • $14 million lost from police
  • $3 million lost from highways
  • $2 million lost from fire departments
  • $1 million lost from junior colleges
  • 2 million lost from “libraries and various other urban services.”

Basically, as the Chobani subsidy shows, TIFs sadly are another case of the city slickers from the Big Apple and Washington, D.C. gulling the locals.

Contact John Seiler at WriteJohnSeiler@gmail.com

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