What Price for Arnold Can Plant Expansion?

Backs are being slapped and hands gripped in Arnold, Missouri to celebrate Anheuser-Busch’s plan to expand the Metal Container Corp. can plant in Arnold. The project will cost $70 million to $80 million and add about 20 jobs. This sounds pretty cool, and local politicians are scrambling to take credit, but let’s take a closer look at this deal.

To swing this deal, Arnold, known statewide as a pioneer in using eminent domain to give land to a developer for the Arnold Commons project, gave A-B a 20-year tax abatement. That means the company won’t have to pay property taxes on the expansion for 20 years after it is built. I believe this applies to Jefferson County taxes as well. The project will also get state Quality Jobs tax credits. Note that while the $70-80 million number is all over the headlines, no figure is given for the cost of these subsidies.

I understand that such incentives for businesses are de riguer these days. Almost no projects like this get built without some sort of government largesse to sweeten the pot. But how necessary were these credits, really? Here are some reasons I think they might not have been:

• Over the past two years, A-B has spent $5 million modernizing the Arnold plant. Are they going to close the plant so soon after making that investment (that is the ultimate fear here).
• This is one of five A-B can plants in the US (the others are in Jacksonville, Florida; Mira Loma, California; Newburgh, New York; and Windsor, Colorado). What are the chances that, if they do consolidate plants, they’ll close the one closest to the main brewery, especially when the ties between A-B and St Louis are frayed by the companies sale to international conglomerate InBev?
• According to A-B, this project is  “part of Anheuser-Busch’s October 2011 announcement to invest $1 billion in its facilities nationwide over the next three years.” So investment was going to happen in a lot of places. This is not to say Arnold necessarily could have gotten away with offering no credits whatsoever (although that is possible), but did they even try to drive a hard bargain? Normally, politicians fall all over themselves to offer cash to development projects, assuming that, if they don’t, another town will. So I suspect a better deal could have been reached, but was not attempted.
• All this to-do is for only 20 jobs, plus however many construction workers are kept temporarily busy. Is there a threshold below which incentives won’t be offered? 10 jobs? 5 jobs? 1 job?

Imagine how much money governments could save (or more accurately, how much less money they would forgo) if every city stopped giving freebies to businesses. We’d probably have a distribution of jobs similar to what we have now, without all the expense. States and cities would compete based on tax rates, unionization rates, availability of labor, infrastructure, and other criteria. Handing out incentives is just a way for governments to maintain policies that hurt the economy (high taxes, closed shops) by basically waiving them or mitigating them on an ad-hoc basis whenever a developer comes along. And a way for politicians to say they created jobs.