THE BLOG
01/18/2012 02:42 pm ET Updated Mar 19, 2012

Municipalities and States Pander for Jobs, Taxpayers Lose -- Again

And the winner is -- Cornell University by a nose. But Stanford University was not far behind after bolting out of the gates along with seven others universities competing for the same prize. The prize is a 99-year lease and monetary incentives from New York City to build a technicality-focused campus there. Taxpayers, of course, are in last place, the losers. They will ultimately pick up the tab.

Not to be outdone, Ohio is offering an estimated $700,000 over four years to promote growth in its technology industry. The original proposal, sponsored by state representatives Jay Goyal and Sandra Williams, called for a $1 billion bond issue over a five-year period. And while it might attract industry from outside of Ohio, and create jobs, other states are competing for the same jobs and also offering incentives -- paid for by their taxpayers.

State and municipal officials say they would rather not kiss-up to organizations by offering them incentives to create jobs. Yet, states and municipalities continue to offer more and more money to seduce companies to choose their communities over the others. And of course, we, the taxpayers pick up the tab.

"I am not a fan of incentives," Mark Huey told me during a business meeting of consultants in southwest Florida last month. He is the new executive director of the Sarasota County Florida's Economic Development Corp. "But it is part of our world," he added.

On January 11, the Sarasota Herald-Tribune cited the cost of incentives to keep an unnamed medical billing company from leaving town and taking its jobs elsewhere. The company currently has 148 employees and promises to add 217 more jobs over four years if the municipality incentivized them to stay. If approved, taxpayers will pony-up as much as $400,000.

According to the article, the medical billing company may be willing to shelve its planned move to Hillsborough County, Florida, a county that is adjacent to Sarasota. Alternatively, the medical company is threatening to move to Louisiana State, if Sarasota does not pay them not to.

My own interpretation is that if Sarasota County's payola is high enough, and others do not outbid them, the company will stay in Sarasota for now. And so goes the bidding wars.

Kathy Baylis, Huey's predecessor at the Sarasota EDC told me, "Incentives typically are one of the last things discussed and are not always appropriate for many of the businesses we assist." In other words, Sarasota touts its world-class beaches, skilled labor force and superior lifestyle before throwing money at companies to relocate here. Even when incentives are offered, "The incentive is not received until the company has created the jobs or made the investment to which they commit," she added.

Last year, there was a similar brouhaha over Jackson Laboratory, a company with facilities in several states, considering an additional one in Florida. This was of course, if Florida paid them $100 million. But Florida's new governor Rick Scott nixed the idea bringing the bidding war to a screeching halt.

Perhaps Scott's refusal to pay Jackson Laboratory to move to Florida throws down the gauntlet for other states to pick up. But will they?

Author and columnist G.D. Gearino writes, "If ever there were a slippery slope, the practice of throwing public money at private business in the name of economic development is it." He warns, "Once it begins, it's hard to stop."

North Carolina, for example, has out-incentivized Florida and seduced several boat builders to relocate in the Tar Heal State. How does Florida get North Carolina to end monetary incentives for its boat builders to stay put? How does Sarasota County tell Hillsborough County to leave the medical company in Sarasota alone? How can Sarasota even be sure that the medical company really wants to move in the first place? Or is the company simply gaming the system to extract its fair share of incentives from Sarasota?

"The relationship between municipal officials and corporate executives resembles nothing so much as that of a seller and buyer haggling prices at a Middle Eastern rug bazaar," says author Gearino. "Local leaders may start out with large ambitions and noble intent, but in short order they find themselves offering six-figure bribes to companies to move."

Ending these incentive games begins with America's taxpayers telling their elected officials that they have had enough --- hasta las narices! They do not want their money spent to relocate companies by pitting their state or municipality against another.

Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA's 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender.