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KITTLE: Economic incentives chase more ludicrous than college coach bidding war

By   /   December 11, 2012  /   No Comments

By M.D. Kittle  | Wisconsin Reporter

It’s another sad story of love and loss.

University of Wisconsin-Madison head football coach Bret Bielema last week shocked Badger Nation when he announced he was leaving Wisconsin to lead the University of Arkansas Razorbacks.

In true incentives chase fashion, U.W. Madison Badgers football coach Brett Bielema takes a sweeter deal in Arkansas.

Arkansas, it seemed, wanted Bielema in the worst way. The troubled but potential powerhouse Southeastern Conference football program (*see Bobby Petrino and how a motorcycle accident can be just the beginning of a man’s problems) will pay Bielema a base salary of $3.2 million annually for the next six years. The successful but national championship-deprived coach also could make another $700,000 in incentives, plus the usual perks – free cars, posh golf course memberships, the cast members of Deliverance on speed dial (Yes, I know the movie is based in Georgia, but if you’ve ever heard Razorback fans squeal like a pig, you know it’s close enough).

Arkansas’ football program also generously paid $1 million to buy out Bielema’s contract – a penalty for leaving early.

To be sure, the Arkansas contract is more money for Bielema, the handpicked successor of Badgers legendary former coach and U.W. Athletic Director Barry Alvarez some seven years ago. Big B. was making about $2.6 million in total compensation at Madison following his latest sweetened contract extension.

But Bielema says he wants to go where he can win a national championship.

His story, and that of just about every other semi-successful college football coach, reminds me of the dance that is today’s economic development.

It’s a story of love and loss.

A community pours in its money, its time, its affection, wooing a big-name business with big incentives and a sweetened pot of all kinds of giveaways. So many heart-broken each time they lavish a company with love, affection and cash only to see said company run off to some greener pasture willing to shower the business with more gifts.

Like star coaches, incentive whoring businesses go where the action is – where they can win.

Perhaps no investigative report in recent years better illustrates the problem with the incentives chase and crony capitalism than the New York Times outstanding series, United States of Subsidies, examining business incentives and their impact on jobs and local economies.

The Times investigation paints a picture of a Wild West-style shoot-out between states, throwing an ever-increasing pile of taxpayer money at businesses in pursuit of the economic development brass ring.

Nationally, the Times review found more than $80 billion in freebies are annually handed out to companies — from tax breaks to zero-interest loans to walking around money. Through a variety of public funding sources at the federal, state and local levels, Wisconsin spends at least $1.53 billion per year on economic incentives programs.

Beyond the Times findings that Wisconsin public entities – like so many others around the U.S. – don’t do a very good job of tracking giveaways and the jobs companies are supposed to keep or create, the moral of this story ultimately is buyer beware.

Case in point: Janesville and General Motors. GM, having been awarded at least $1.77 billion since 2007 from 200-plus grants in 16 states, tops the list of the Times reports’ $100 Million Club, a list of 48 companies pocketing $100 million or more in economic incentives.

Janesville and the state of Wisconsin chipped in, too. But when tough times hit, GM shut down its Janesville plant. The automaker, like its brethren, has closed a lot of plants in recent years, keeping most of the incentives it claimed for a promise of creating or maintaining jobs. GM, of course, had no problem pocketing a big portion of the $80 billion of an auto industry bailout, a package paid for by taxpayers who, as of September, were owed $25 billion from GM and its former financing firm, according to the Washington Post.

Sometimes, the sweeteners go to long-time friends, like Menomonee Falls-based retail giant Kohl’s Department Stores, which effectively told Wisconsin, Give me some sugar or I’ll find another Sugar Daddy.

Kohl’s, after picking up $62.5 million in state tax credits for the promise of staying put and creating up to 3,000 jobs and retaining another 4,500, had this to say:

“While it was always our preference to remain in Wisconsin, Kohl’s took the needed time to study all of our options, including an assessment of developing a campus outside of the state,” CEO Kevin Mansell said in a release.

The award is second only to the $65 million the state offered Mercury Marine in 2010 to stay in Fond du Lac after the manufacturer threatened to take its ball and play somewhere else. Then-Gov. Jim Doyle created the tax credit program in the 2009-11 budget to keep such loyal friends at home.

Some might call that bribery. Others see it as extortion. While others call that economic development.

It’s not our fault, says Kohl’s. Checking the incentives chest from time to time is what shareholders expect.

“While we were never looking (to leave Wisconsin), we were definitely prepared to grow the new jobs in another state,” Mansell said in an interview earlier this year. “We were prepared to do that if that was the right answer.”

Football coaches, like Bielema do the same thing – they look for better deals, bigger money, better opportunities. We all do.

But there’s an arguable difference between Bielema and some other big-name college football coaches and programs: They don’t involve the taxpayer in their search for greener pastures.

A spokeswoman for the University of Wisconsin-Madison made that point very clear. Asked by Wisconsin Reporter whether any part of Bielema’s salary was paid for by taxpayers, Amy Toburen said, no. She said the coach’s base salary of $400,000 comes from the university, but is derived through program revenue such as ticket sales and income from media contracts.

“The remainder of his compensation came from gifts or other revenue given to the University of Wisconsin Foundation specifically designated for use by athletics,” the spokeswoman said.

In short, boosters and ticket holders pay for a salary that is more than five times that of the person charged with running the university.

Arkansas, too, gushes that no taxpayer dollars were hurt in the signing of Bielema.

“The University is very proud that our Athletic Department is one of only a handful of departments nationally that is self-supporting and does not rely upon appropriated tax dollars or student fees to operate,” wrote Jeffrey P. Long, Arkansas vice chancellor and director of athletics, in a contract proposal letter to Bielema.

In the economic development incentives chase, a lot of businesses have no qualms leaning on taxpayers to help them stick around or move away. And communities nationwide seem more than willing to play by these ludicrous rules.

It’s kind of like a football game where one team is forced to play without a functioning offensive line or a quarterback – kind of like the Badgers under Bielema for much of the year.

Better cash that check quick, Bret.

Contact Matt Kittle at mkittle@wisconsinreporter.com

Edited by John Trump at jtrump@watchdog.org

Click here to LEARN HOW TO STEAL OUR STUFF!

M.D. Kittle is national First Amendment reporter at Watchdog.org. Contact him at mkittle@watchdog.org.

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