A lucrative deal the city of Twin Falls handed out to energy bar-maker Clif Bar to entice the company to bring a bakery to town contains corporate handouts amounting to more than $25 million.
The city announced the agreement, which will bring a 300,000 square-foot facility and at least 250 jobs to Twin Falls, on Oct. 17. Clif Bar, which produces and sells energy bars, plans to spend at least $90 million on the facility, but the company could expand its total investment to $160 million. According to a 2012 report in the San Francisco Business Journal, the company had revenues of $340 million in 2011.
Local and state officials are thrilled with the project, but at least one state lawmaker believes there’s no need to hand out taxpayer cash to corporate entities. “That, to me, is not free enterprise,” argued state Rep. Lenore Barrett, R-Challis. Barrett, a veteran in the Idaho Capitol, says cities are emulating the overspending federal government in order to attract businesses.
“What in the world did we do before we went down this path?” she pondered, adding that much of the American economy was built without financial handouts from taxpayers.
City officials feel differently. “We are very excited to welcome another strong partner to Twin Falls,” said Twin Falls City Manager Travis Rothweiler.
The incentive package includes millions of dollars from local and state sources.
Here’s a rundown of the total package:
• Twin Falls Urban Renewal Agency: $18.9 million initial investment to fund land acquisition and certain infrastructure improvements, including water and sewer facilities.
• Twin Falls: $3.5 million to fund a water storage facility. The city also waives building permit fees, which means hundreds of thousands in lost revenue.
• Idaho Department of Commerce: The department will provide at least $800,000 for site improvements, but has invited the city to apply for another $1 million from the Idaho Community Development Block Grants program.
• Idaho Department of Labor: $4 million for worker training reimbursements.
State Sen. Lee Heider, R-Twin Falls, said he is “thrilled” with the project. Heider told IdahoReporter.com that he acknowledges the upfront costs are hefty, but he expects a return on the investment.
“In the long term, I think this will have great benefits for Twin Falls,” Heider said. “I’m very pleased with what they’re doing.”
Rothweiler told NPR in Boise that the city will recover its investments through the company’s property tax payments.
Some programs involved in handing out taxpayer cash to private businesses have numerous failures along with successes. Since 1996, the Idaho Workforce Development Fund, for example, handed out more than $5 million to companies that eventually closed their doors. The state did not recoup its money in the instances.
Just more than 100 miles to the east, the city of Pocatello logged a huge investment failure after it spent more than $900,000 to purchase property for a solar panel production facility. The state also invested in that project and lost more than $870,000.
Barrett said officials handing out lucrative incentive packages put taxpayer dollars at risk. “They want it so badly, they don’t care about the risk,” Barrett said of the jobs that come to cities after investments.
Heider holds “mixed emotions” about the topic. He says the enormity of the investment makes him skittish, but he knows the formula, as evidenced by previous city deals. Last year, for example, the city handed out more than $25 million to Chobani, a Greek yogurt manufacturer. The company spent more than $450 million on the production center, which checked in at more than 1 million square feet.
More than 300 jobs came with the plan. Heider holds the plant as an example of investment success. “It’s come back to us in spades,” he said.
Yet, critics of these types of investments and urban renewal projects say that these activities only breed more handouts.
“Once one hotel, office building, or housing complex is built with TIF subsidies, developers are not likely to want to build competing projects without similar subsidies,” wrote Randall O’Toole, a policy analyst with the Cato Institute, a free market think tank based in Washington, D.C.
O’Toole wrote a policy paper in 2011 calling for urban renewal reform, noting that projects like this steal tax funds from other government services.
“Second, new developments impose costs on schools, fire departments, other urban services, so other taxpayers must pay more to cover those costs or accept a lower level of services as services are spread to developments that are not paying for them,” he wrote.
Clif Bar plans to break ground on the new facility in April 2015.