Subscribe to Here’s the Deal, our politics newsletter for analysis you won’t find anywhere else.
Thank you. Please check your inbox to confirm.
Leave your feedback
American companies have often moved manufacturing plants in search of cheaper labor or easier access to raw materials. But inside the U.S., states are competing with each other to attract new companies and the jobs they bring. In turn, corporations leverage their position to shop around for the best deals and tax incentives to relocate. NewsHour Weekend Correspondent Christopher Booker reports.
For more than 40 years, these two buildings tucked away in the leafy enclave of Fairfield, Connecticut housed the headquarters of one of the largest manufacturers in the United States General Electric. But a year ago, GE announced it was moving to Boston and taking 200 high-paying jobs with it.
Mike Tetreau is Fairfield's First Selectman, the town's top elected official.
You've got one side saying that, "nah, they were planning it all along. There's nothing we can do." On the other side, you have people saying, "no. You're to blame. It's a bad tax environment. We forced them outta Connecticut."
GE was one of Fairfield's top taxpayers: paying $1.6 million in property taxes in fiscal year 2016. GE still has more than 4,000 workers in other Connecticut facilities, including 600 re-assigned from headquarters. But the departure is a blow for a state already struggling with tremendous fiscal liabilities.
Catherine Smith is Commissioner of the Connecticut Department of Economic and Community Development.
The reality is the 200 jobs that are moving from Connecticut to Boston really aren't going to make or break the economy here in Connecticut. But I would say that the symbolism, the perception that changed with the GE decision is certainly a challenge for the state and something that we've been wrestling with a bit.
Connecticut is wrestling with contradictory economic forces. It's home to 13 billionaires, and the state has the highest per capita income in the country. But it also has the highest per capita debt — the state is 23 billion dollars in the red. And its pension fund for teachers and state workers is one of the country's most underfunded.
In 2014, George Mason University economists ranked Connecticut dead last of the 50 states in fiscal health.
A lot of not-so-good choices in front of us. But we have to make the hard choices.
In the past two years, Connecticut governor Dan Malloy and the state legislature have chosen to make deep cuts in education and construction projects and laid off more than 1,000 state employees.
The state also raised its personal income tax add added a surcharge that effectively raised the 7.5% corporate tax rate to 9% for the state's largest companies, one of the highest rates in the U.S.
In a June 2015 email to the staff GE CEO Jeff Immelt had complained about Connecticut raising its taxes "five times since 2011." Immelt told employees, the company had formed "an exploratory team to look into the company's options to relocate corporate HQ to another state with a more pro-business environment."
Massachusetts offered GE $145 million in incentives to move including: purchasing these two warehouses as GE workspace, granting up to $25 million in property tax relief from the city of Boston, and possibly improving local road and parking infrastructure.
GOVERNOR CHARLIE BAKER:
It was a pretty good deal for GE, but it was also a pretty good deal for the state and for the city.
Massachusetts governor Charlie Baker helped negotiate the deal.
When we heard they were looking for, possibly relocating their headquarters, I think, we simply felt that with the ecosystem we had here — and with the colleges and universities we had here — it would be a mistake for us not to at least give it a try and see what happened.
How closely does Massachusetts monitor the fiscal playing fields of other states and particularly states that are home to Fortune 500 companies?
Well, we're in a competition, and we know that, with lots of other folks. I mean, we've had governors come up to Massachusetts to make a pitch to companies here about why they should be in their states.
Baker, a Republican, cooperated with Boston's Democratic Mayor, Marty Walsh, on the pitch to GE. The two men had cemented their relationship during the record breaking winter of 2015, when storms dumped over 9 feet of snow in Boston.
The GE people actually said to us at one point that one of the things that really impressed them about the bid from Boston was the fact that there really wasn't an inch of daylight between the city and the state on anything.
The company also says, moving its headquarters is part of a strategic transformation into a "digital industrial company," producing the analytical technology required in large industrial products, like its own aircraft engines, train locomotives, and gas turbines.
GE vice-president Ann Klee, who oversaw the negotiations behind the Massachusetts move, says the Boston region offers a steady stream of the talent the company needs to make the transformation it says it requires.
And that just wasn't Connecticut. A place that's what we call "in the flow of ideas." And that's in a city where you have a great, you know, energy, access to talent, an ability to attract and retain talent, people want to move into cities. That's what we're seeing with millennials. And so we looked at at the move from that perspective. How would we get into an ecosystem of innovation? Which is what we found in Boston.
The new GE headquarters — including this 12 story office tower — will take up about 100,000 square feet less than the space of the old Connecticut buildings.
We think about the talent we're bringing in. Lots of coders, software developers, technologists. So when we think about our new headquarters, this is not your grandmother's headquarters.
I think that Jeff Immelt realizes that there is a different mindset.
Boston Globe business reporter Jon Chesto has written about the deal.
He talks about it a lot, about, "I don't wanna sit in an office where I can look out the window and see deer running by." He says, "I wanna walk out the office and get" yeah, I think he used the expression, was, "punched in the face by some MIT geek who can do my job better than me." And there's a lot of smart people within a three-mile radius of where, where their headquarters is now.
GE has now joined a roster of large companies leveraging better deals for themselves from states.
Food processing giant Conagra, the maker of Chef Boyardee and Slim Jim, moved its headquarters from Omaha, Nebraska to Chicago with a collection of undisclosed tax incentives from Illinois.
Newell Brands, which makes Sharpie pens and Rubbermaid products, moved from Atlanta, Georgia, to Hoboken, New Jersey, with a $27 million tax incentive package.
Hotel chain Marriott stayed put in Maryland after it was promised a $62 million dollars in incentives.
Competition between the states overall is extremely high. Companies that have their presence here in the state get calls from North Carolina, South Carolina, Texas, so we have governors that come into the state to try to recruit companies away. So it's incredible intensive. My own personal view, and I think our governor as well, is that it's not necessarily beneficial for us to be using state tax dollars – which is what we do for their financial incentive programs that are offered, like GE got out of Boston – it's not necessarily beneficial for us to be luring companies away. Rather, we focus on really growing the companies that are here.
Has there been any local pushback or blowback? I mean, I read a few op-eds here and there that said, "oh, you know, GE is a multi-billion dollar company. They don't need this type of money put before them."
There are certainly people who have said that they don't think GE should, you know, get any incentives. And I understand where they're coming from. But if you talk to most people who pay attention to this sort of thing and study these kinds of things, having a company like GE here in Boston and in Massachusetts is gonna pay back 10 times over in a whole variety of ways.
Do you think Connecticut could have done more to prevent GE from leaving? CATHERINE SMITH: It's my view, based on a lot of interaction with GE and with the community in which they operate and with some of the employees, that GE. Was on a road to make a change. I think that decision actually was made long before we got into conversation with them. By the time we got a chance to talk to them, I think the die had already been cast.
Last fall, Connecticut offered another major employer — Sikorsky Aircraft — a $220 million incentive program to keep it from relocating. In return, Smith says Sikorsky promised to spend $700 million a year on Connecticut-based companies that supply their production.
But the state's fiscal woes continue. The Office of Fiscal Analysis is projecting a $1.4 billion budget shortfall next fiscal year. Last month, the state asked Fairfield after cutting about $4 million from its 2016 budget to cut an additional half million.
We have a significant drop in revenue from the state that we have to make up by either tax increases or expense cuts. So I know Fairfield was successful, and vibrant, and very much alive before GE came here and we're gonna have to continue to grow, and learn to get over that. And realize there's life beyond GE.
Watch the Full Episode
Christopher Booker is a correspondent and producer for PBS NewsHour Weekend covering music, culture, our changing economy and news of the cool and weird. He also teaches at Columbia University’s School of International and Public Affairs, following his work with Northwestern's Medill School of Journalism in Chicago and Doha, Qatar.
Connie Kargbo has been working in the media field since 2007 producing content for television, radio, and the web. As a field producer at PBS NewsHour Weekend, she is involved in all aspects of the news production process from pitching story ideas to organizing field shoots to scripting feature pieces. Before joining the weekend edition of PBS Newshour, Connie was a Peace Corps volunteer in Thailand where she trained Thai English teachers.
Support Provided By:
Additional Support Provided By: