Are State Manufacturing Credits for Solar Justifiable?

There are few things that get me so mad as governments throwing the peoples’ money around.

All sides have their constituencies. It’s a completely bipartisan exercise.

The program that upsets me most is the “manufacturing plant incentive.” It’s usually a package of tax breaks and outright grants or loans designed to bring a manufacturing plant into a specific location.

Let’s be clear. The plant is going to go in anyway, because it makes economic sense. This is money offered by local governments to keep plants from going to other, nearby jurisdictions.

An example is the Kia autos plant in West Point, Georgia, about 70 miles from my home. Some $410 million in government aid went to create 2,500 assembly jobs in 2006 – $160,000 per job

Georgia’s competition for the Kia plant was just over the state line in Alabama, which is now drawing in supplier locations on the cheap. Besides, these are low wage manufacturing or warehousing jobs that can disappear as fast as they appeared. As I will demonstrate.

If you’re into economic development, I believe a better way to play is to support higher education, research and entrepreneurs. That way, when it’s time to go into production your governor is cashing checks instead of writing them.

Makers of solar panels and thin film solar cells are now at the point where they can play this game. Governments are lining up to give them your money like it’s a carnival.

Just to be clear. This is not a partisan rant. I’m going to now give you examples from both parties and both sides of the ideological divide.

In Wisconsin, outgoing Democrat Jim Doyle  (left, above) recently used $28 million in incentives to lure the W Solar Group from California to Wausau, Wisconsin.

The company claims it will build a $300 million factory and create 620 jobs over five years – that’s about $45,000 per job. But don’t feel too sorry for California. Manta.com says W currently has sales of less than $1 million a year and has four employees.

This is, at best, a crapshoot. The state is capitalizing this company. Are governors supposed to be investment bankers? But let’s be fair. W is moving lock, stock and barrel to Wausau. In theory there are some good paying research and management jobs to come from this.

Our other contestant today is Republican Haley Barbour (right, below). He has pushed through a bill loaning $75 million, plus tax breaks, to bring Stion Solar Panels into an abandoned Sunbeam factory (also built with state-backed loans)  in Hattiesburg.

The company will share the building with what is now a Red Cross relief center. (Sunbeam originally had the whole thing, back in the day, when a previous Governor opened state coffers to bring its appliance manufacturing there.)

Barbour proudly notes there may be 1,000 jobs coming in, paying an average of $43,000 each. Not counting the tax breaks, that’s $75,000 in government money loaned for each $43,000 job. And unlike W, Stion is staying where it is, in lovely San Jose.

So is the heavy lifting, the management, the research effort, the profits.

It’s a great deal, for manufacturers. Sunbeam thought it a good deal when it moved in, too. Then it went bust in about 7 years, according to the Hattiesburg paper.

How long might Stion last? Maybe decades, maybe less. Barbour will be long gone before the day of reckoning – he’s drowning in confetti right now (along with outgoing Gov. Doyle).

As a solar energy advocate, three cheers.

As a taxpayer? I think it stinks.

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Dana Blankenhorn has covered business and technology since 1978. He covered the Houston oil boom of the 1970s, began making his living online in 1985, and launched the Interactive Age Daily, the first daily coverage of e-commerce, in 1994. He has written for a host of off-line and online publications including The Chicago Tribune, Advertising Age, and ZDNet. He has covered PCs, networks, telecommunications, cable technology, Internet commerce, the Internet of Things, Open Source and Health IT, He began covering alternative energy at his personal blog, Danablankenhorn.com, in 2007.

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