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In picking winners and losers, state and local government picked a loser in Hoku

In picking winners and losers, state and local government picked a loser in Hoku

Wayne Hoffman
August 26, 2013
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August 26, 2013

Over in southeastern Idaho is a financial mess, an example of failed government reach into the marketplace, and one that every citizen and business in the state of Idaho paid for. Whether you live in Nampa, St. Maries or Sandpoint, you paid for Hoku’s failure in Pocatello.

Strange that your politicians (city, county or state) aren’t talking about it. Especially given that so many politicians were racing to discuss it just a few short years ago. They told us the Hoku’s polysilicon plant was going to bring jobs, jobs, jobs. Officials from the city of Pocatello, the county of Bannock and the state of Idaho rolled out the red carpet. They issued statements and jumped for joy. And they doled out the dollars.

Gov. Butch Otter gave a shout-out to Hoku in his 2007 State of the State message: “I’m pleased to announce today that Hawaii-based Hoku Scientific has agreed to open a plant in Pocatello for manufacturing solar modules and polysilicon for the solar energy and integrated circuit markets,” Otter told lawmakers. “The company is investing $250 million and will create over 200 jobs with a payroll of more than $10 million a year.”

Pocatello gave the company a 67-acre plot of land for 99 years at a rate of $1 per year. The city had paid nearly $1 million for the land. The state of Idaho shelled out $870,000 in corporate subsidies, including money for public infrastructure to accommodate the plant, fencing and right-of-way acquisition. Most of the money went to workforce training funds for Hoku employees; the state had committed $950,000 for the worker training program, but spent closer to $651,000. Money for the training funds comes from a portion of payroll taxes paid by Idaho employers.

Hoku has since declared bankruptcy, owing creditors $1 billion. The plant is shuttered. No one knows what’s going to happen next. It’s possible the whole investment will be scrapped, or some other company will come in and utilize the property. Officials haven’t done much defending of Hoku or the government’s investment in it, mostly because the media haven’t asked them to do so.

Every groundbreaking and ribbon-cutting brings out the politicos. The reverse isn’t true for bankruptcies and project mothballings. Government bureaucrats and elected officials want to pose for pictures at the groundbreaking. They’re nowhere to be found when the project collapses.

Taxpayers paid for a failed economic venture. Supporters of such economic meddling will argue that the investment in infrastructure and employees never goes away, and so nothing is lost. But there’s no guarantee the infrastructure will ever be utilized, or that the workforce training paid for by taxpayers will ever yield a return on investment in the form of higher-paying jobs. Indeed, the workforce training program that Idaho utilizes is notoriously ineffective, and by the state Department of Labor’s own account, yields verifiable results just 40 percent of the time.

Hoku is another example of why the government shouldn’t be actively participating in the economy. The government shouldn’t pick which companies to help and force the rest of us to pay the bill. The government should leave the marketplace alone, and let companies prosper or fail on their own merits.

And when the government strays into the marketplace, gambles with taxpayer money and loses, the politicians and bureaucrats who made the decisions should own the failures and explain themselves to us, the people who paid the bills.

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