If you needed another sign that Iowa’s economic development incentives are out of whack, get a load of this baloney.
Kraft Heinz is closing the world’s largest bologna plant, which employs about 1,400 workers at the Oscar Mayer works in Davenport, Iowa. The company plans to build a $200 million, state-of-the-art plant that will need just 475 workers.
In return, the company could get $20.75 million in state and local assistance. That works out to nearly $43,700 for every job Kraft Heinz agrees to keep. (About 200 of the jobs pay less than $37,000 a year, according to the state’s contract with the company.)
The deal represents a new low in the out-of-control race to keep or attract employers.
Incentives were once solely used to reward companies that actually created jobs. But then the state gave aid to companies for “retaining jobs,” such as investing in new equipment for their factories, even if no jobs were added.
Now the state is giving Kraft Heinz $4.75 million, and the result is a net loss of 900 jobs. But Debi Durham, director of the Iowa Economic Development Authority, declared victory and argued that without the incentives, Iowa would have lost everything.
And Durham expects more deals like this because the state is desperately trying to hold on to anything as companies combine and cut costs.
Kraft Foods and Heinz joined in July, and its owners — Brazilian-based equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway — began squeezing $1.5 billion in annual cost savings through 2017. The cuts include closing seven plants and ending 5,000 jobs.
When the deal was announced, Deutsche Bank foresaw the coming carnage and compared America’s favorite billionaire to the rapacious investor in the 1987 film “Wall Street”: “How would this ‘merger’ have been reported if you swapped the popular, cuddly Warren Buffett with Gordon Gekko?” analysts mused in a note to clients.
Should taxpayers assist in a plan to put profits over people? Should Kraft Heinz — a company with $6.4 billion in revenues — get financial help from a state that’s projected to take in $7.054 billion in fiscal 2016?
Iowa also awarded Kraft Heinz $750,000 in research and development tax credits. For what? To build a better bologna? This company produces such nutritionally rich “food” as ketchup, Lunchables, Velveeta and Jell-O.
Or will the R&D investment go toward increased automation to reduce the number of processing jobs?
Enough. The Iowa Legislature should re-examine tax breaks in the next session. Iowa leaders cannot reform incentives on their own, but they can take the lead. Our congressional delegation can work together to end the national bidding wars. We can ask presidential candidates their plan to stop the madness.
We can stop taking the crumbs of corporate deal-making and feeling lucky to get anything.
We can stop feeling helpless, as Davenport Mayor Bill Gluba sounded on Thursday as his city considered a $16 million incentive package: “It’s a sad commentary on modern-day capitalism that you have to give up property tax money, which is used to fund our schools, for jobs. But if you don’t do it, we don’t have the jobs to pay our taxes.”
A winner of a deal? More like a wiener.