By John C. Mozena
General Motors is closing its Arizona IT Innovation Center in Chandler, Ariz. and eliminating 940 jobs there in an object lesson on government “economic development” programs’ ineffectiveness in the face of business reality. The short and tragic history of GM’s subsidized hit-and-run in Chandler should be a wake-up call for taxpayers across the Valley and throughout Arizona about the way their elected officials are wasting massive amounts of money on economic development initiatives that act more like re-election campaigns than serious economic policy.
Government economic development programs rely on the idea that elected officials and bureaucrats are capable of predicting and planning for future economic conditions down to the industry and even individual corporate level. They certainly act like they’re capable of doing that; Chandler’s most recent annual financial report said, “Economic Development’s combined business attraction/retention efforts have supported projects that are anticipated to provide 984 jobs in Chandler within the next year and up to 1,543 jobs within three years.” If nothing else, GM’s elimination of 940 of what the company’s CIO once described as “the best IT jobs out there,” provided an object lesson that economic development agencies are no better at predicting the future – and often much worse – than anyone else.
The simple reality is that companies make site selection and employment decisions based on fundamental business factors, and most economic development subsidies do very little to change those decisions. GM competes in a complex and quickly evolving global automotive industry, so it’s not a surprise that something as relatively trivial to the company as a single IT center could be opened and closed within eight years in response to shifting business needs despite Chandler’s taxpayers having kept up their end of the bargain.
Chandler’s far from the first community to learn this lesson the hard way. Just ask the people of Lordstown, Ohio, where in 2019, GM announced the closure of an assembly plant despite having agreed to keep 3,900 workers on the lines there until 2027 in return for $60 million in state subsidies.
Of course, it’s not fair to single out General Motors as the problem, even just in Chandler. In its most recent annual report, Chandler disclosed $651,565 in economic development tax abatements. According to its most recent budget, for that kind of money the city could instead have set itself apart from other municipalities in the Valley by eliminating planning fees for developers, then gone on to forgive all library fees for everyone else. What good would that do? Well, in the most recent Area Development Magazine annual survey of what factors are most important to corporate site selectors, “construction costs” ranked fifth and “quality of life” second, while local tax breaks were far down the list in thirteenth place.
Yes, site selectors say twelve other site selection factors do more to determine where they build or hire than tax breaks or other subsidies do. That’s why the real-world evidence shows that there’s no meaningful connection between those subsidies and how many jobs are created in an area. What the evidence does tell us, however, is that politicians do measurably better on Election Day when they can take credit for subsidized “job creation” with taxpayer dollars.
In other words, these subsidy programs don’t really exist to create jobs. Rather, they exist to make voters believe that politicians are responsible for creating jobs. But by the time that the bills come due, the votes have been counted and everyone’s moved on or forgotten.
Hopefully, watching the “best IT jobs out there” disappear despite millions of dollars in subsidies will help voters realize that the only jobs being created with their tax dollars are the jobs of the politicians and bureaucrats who are posing for pictures at the ribbon-cutting ceremonies.
Until they do, we’ll keep seeing stories like this in Chandler and the rest of the Valley, throughout Arizona and across the United States.
John C. Mozena is the president of the Center for Economic Accountability