Who's says government can't create jobs? Cancel The title field is required!

1. Melvin Waldron

   

   43 posts
   
   6/19/2012 10:06 PM

   It likely won't bring new jobs to town, but a proposed expansion plan at Springfield's Kraft Foods plant would help maintain the workforce, a spokesperson for the company said today.
   
   Springfield City Council will consider a proposal Monday to approve a seldom-used form of tax incentive to help finance a $55 million expansion at its Springfield plant.
   The request, outlined in a bill due for public hearing at Monday's council meeting, would help the company buy new equipment and expand the product lines produced at its Springfield local facilities, which employ about 975 people.
   Joyce Hodel, a spokesperson for Kraft Foods, said the expansion would preserve those jobs, but likely wouldn't result in new positions at the plant.
   She stressed that the expansion plan is just a proposal and that many things, including the tax incentive request, need to be finalized before anything will be guaranteed.
   To do that, the city would issue bonds — to be bought and paid back by Kraft — and take ownership of the new equipment for 10 years.
   During that time, Kraft would pay only 50 percent of the normal property taxes on the new and upgraded equipment.
   "This project is competitive with other Kraft locations and the incentive is necessary in order for the project to locate in Springfield," city staff said in an explanation sheet attached to one bill.
   The planned expansion would be completed in three phases over two years, according to the explanation, and would include new pasta and cheese manufacturing equipment as well as improvements to equipment used to make familiar products such as Kraft Singles and Easy Mac Cups.
   The type of tax incentive Kraft is seeking, called Chapter 100 financing, has been used sparingly in the past.
   Council in 2008 authorized Chapter 100 financing for the BKD office building downtown; in December, council members gave initial approval to a plan to use Chapter 100 financing for a $65 million renovation project at the former Solo Cup plant, as well.
   Incentives planned for the Solo plant — said to be the largest vacant commercial property in the city — are significantly greater than what Kraft has requested, and include 100 percent tax abatement for 10 years followed by 50 percent abatement for 15 years after that.
   The city in the past has turned to an outside law firm to iron out the details of such complicated deals. A separate bill on Monday's agenda would require Kraft to deposit $50,000 with the city to cover attorney fees associated with the deal.
   
   
   While the article doesn't mention new jobs, I did hear on the radio some sound bite about new jobs needed to install the new equipment and handle the expansion.
   
   The city will basically sell bonds and give a tax abatement. I'm ok with it, my question is where are the private investment firms, equity firms, the Bain Capitals? Why aren't they supplying bonds or capital? Who needs them then? I know it can't be this simple, but I wonder what you all say?
   
   Mel

   
   Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
   
   
2. McCallum David K

   
   6/20/2012 7:06 AM

   Tax incentives have been going on forever Mel. What they did to encourage Kraft to stay, to expand to create more jobs is not new. I suppose in a roundabout way that is government helping the private sector expand and grow. That's what local governement's should do. About 3-4 years both Cabella's and Bass Pro Shop opened brand new stores in the area......both of the local taxing agencies granted TIF's to the two private sector companies to make selection more appealing. But it also deprives in this case the school systems of taxes for a finite period of years while these new facilties pay off their cost of construction. As long as they are successful, then its a win win for everyone. The Solyndra's of the world is what hurts.............good money thrown after bad.

   
   
   
   
3. Melvin Waldron

   

   43 posts
   
   6/20/2012 12:06 PM

   David,
   
   I know about tax incentives, and I agree sometimes it can hurt the schools. From the articles I read, it sounds like they will be getting the deferment on the value of the new equipment, so schools shouldn't be hurt from less tax revenue. That's if I am understanding the agreement correctly. In a way I agree with it, in another way, I can see they hold the local and state hostage to get the best deal. I guess in another word, why worry about tax rates, companies will find ways to cut their own rates anyway, so when people scream about how high we tax businesses, half the time it's just gibberish, in my opinion.
   
   The main reason I brought this story up was that Kraft wanted the city to issue bonds to help pay for the upgrades. My question is, why didn't Kraft turn to the private sector to get financing for this? Heck they are sitting on trillions of dollars. Maybe Kraft has money it's sitting on, and is just using the bond vehicle to get the tax incentives, couldn't Kraft issue bonds, or some financial institution? Doesn't private equity do things like that? I have to admit I'm not as knowledgeable about all that financial stuff as I should be. Looking for answers.
   
   Mel

   
   Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
   
   
4. McCallum David K

   
   6/20/2012 12:06 PM

   I do not know the particulars and you probably have more insight on this than I but I assume because they have the city over a barrel somewhat. We can leave, we can add XXX number of new positions, we add this much to the local economy.....any number of reasons. Perhaps going to the private sector to raise capital would not have been as lucrative to Kraft. Everyone, you, me and business is always looking for the best deal. The city can always say nothanks

   
   
   
   
5. Wahlin Scott B

   
   6/20/2012 12:06 PM

   The municipality can provide tax incentives that the private equity firm cannot.

   
   
   
   
6. Jon Gansen

   

   1 posts
   
   6/20/2012 1:06 PM

   Scott Wahlin, CGCS said: The municipality can provide tax incentives that the private equity firm cannot.

   
   It is exactly what a private equity firm would do if involved to increase their own bottom line. Ask for tax incentives and other things like building sites, utilities etc. Kraft could easily afford to do this but this is business and what local government needs to do to retain business.

   
   
   
   
7. Wahlin Scott B

   
   6/20/2012 1:06 PM

   Jon Gansen said: Ask for tax incentives and other things like building sites, utilities etc.

   
   
   Not to mention roads, bridges, public health and safety, schools and libraries, emergency services, parks and recreation - all the socialisticky stuff!

   
   
   
   
8. Jon Gansen

   

   1 posts
   
   6/20/2012 4:06 PM

   Scott Wahlin, CGCS said:

   Jon Gansen said: Ask for tax incentives and other things like building sites, utilities etc.

   
   
   Not to mention roads, bridges, public health and safety, schools and libraries, emergency services, parks and recreation - all the socialisticky stuff!

   
   
   Your so close Scott. That is not your so called sticky stuff. That is what will attract business, the amenities the community has to offer along with a workforce base. Just like you or I we will settle down take a job in an area that we will be most comfortable or attracted to, whether that is wage vs. cost of living, good neighborhoods and schools, recreation and climate. Cities and states compete for industry and business, they are for profit (If they make a profit they stay in business) and whether its to stay or move depends on incentives whatever they may be.
   
   socialsticky stuff = individual entitlements expecting government (taxpayers) will feed, cloth, house and entertain you when you are physically and mentally able to.

   
   
   
   
9. McCallum David K

   
   6/21/2012 6:06 AM

   No that is exactly what local and state governments should do. Provide the necessary services to operate them from the taxes collected from its citizenry..........pretty simple stuff.

   
   
   
   
10. Melvin Waldron

    

    43 posts
    
    6/21/2012 8:06 AM

    I guess my main reasoning for posting this was, government was taking such a bashing for bail-outs, loans, jobs, and all the like, while private capital seemed to be just sitting on the sidelines, yet being praised for being so important to the business community.
    
    Here government gives tax abatement's which I have mixed feelings about, because it's businesses asking for help, the upside is it creates and keeps jobs, while the downside is with the abatement's does enough revenue come in to provide the services, sometimes extra services created by the demand for them or higher use rates on items such as roads, so more maintenance. But I see it is providing an economic boost, of course if I was to ask my city for a loan to redo my kitchen, which puts a couple people to work, am I going to get it? Of course not. But the other issue is we cut back on social services, such as welfare or unemployment benefits, yet that money is put back into the economy also. I guess my point is, why is one so objectionable while the other is not? I know I would prefer not to have to give out welfare or unemployment benefits, but how would those people survive? I did see something that I liked, the cost of child care is crazy, single parent families who would go out and make minimum wage would get assistance to pay for child care. They work hard and get a small raise, if lucky a buck an hour? Then they would loose all of that assistance, where is the encouragement to work harder? If social programs were developed to reward rather then just give, maybe it would be more acceptable?
    
    The other reasons was, here we have made private capital so important to the business community and it is, but then why do businesses go to the government then to have bonds sold and the like? I guess I was looking for acknowledgement of the fact, instead of the typical comments made from the same tired talking points.
    
    I see both have their places so why is their continued complaining about one or the other? Yea Solyndra turned out bad, but one out of how many investments did the government make that went good? If anything I think governments take less risk. The bonds that Kraft wants the city to sell locally is a special deal the city created, they have certain criteria the project needs to meet. I'm fine with that, and as long as the process is transparent and doesn't negatively impact services and especially the schools, I'm good with it.
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
11. James Schmid

    

    1 posts
    
    6/21/2012 9:06 AM

    Kraft had a gross profit of over 19 Billion last year. Kraft could build their own 50 million dollar factory if they wanted to. Kraft is in the business of making money, so if the city wants to give them free money it would stand to reason that Kraft would take it. If Kraft wanted to get money from other sources (private equity firms as you mention) they would pay a much higher price. Kraft has no reason to involve private equity in a situation like this.

    
    
    
    
12. Sandy Clark

    

    0 posts
    
    6/21/2012 10:06 AM

    While thinking about how the government can create jobs, realize that it takes something like three to four private sector employees being taxed and producing to create one government job. Without the private sector paying taxes along with everyone else, you would not have the funds to run government jobs. Of course you can have all the government jobs you want if you just keep printing money and allow to deficit to grow as we are now. Just look at the European countries if you want to have more government jobs than private sector. The only socialized country that currently works is Norway due to revenue from oil production.

    
    
    
    
13. Michael Vogt

    

    2 posts
    
    6/21/2012 11:06 AM

    Mel:
    
    I don't understand why government should be in private business at all, and pick the winners and losers with tax incentives and next to free money for years. Big business and government is edging out what made this country great, the small business entrepreneur.
    
    Mel, what happened with a Missouri tax funded business in Moberly this last spring? Just another example of tax money propping-up business, that's not capitalism!
    
    Just another veiw point.

    
    
    
    
14. Melvin Waldron

    

    43 posts
    
    6/21/2012 11:06 AM

    James Schmid said: Kraft had a gross profit of over 19 Billion last year. Kraft could build their own 50 million dollar factory if they wanted to. Kraft is in the business of making money, so if the city wants to give them free money it would stand to reason that Kraft would take it. If Kraft wanted to get money from other sources (private equity firms as you mention) they would pay a much higher price. Kraft has no reason to involve private equity in a situation like this.

    
    
    In a way James, you make my point in that Kraft (and it could be any large company) in a way ends up holding a local government (or any government entity) over a barrel to get the tax breaks they want (like I have said I don't so much have a problem with it as long as cuts don't have to be made to give the tax break, in the long run the taxes could go up due to a higher value of the asset, depending on how taxes are figured)........Maybe if the tax rate structure was different there wouldn't be a need to give them abatement's. So really the private equity firms are there for the smaller companies that can't hold a government entity hostage so to speak? But hey this is all ok, but my god those welfare recipients.......
    
    I know the business provides jobs so it produces something but compare that to the cost of food stamp programs and all the like, those thing are a drop in the bucket compared to what the tax breaks cost us from providing roads, bridges, fire and police along with education, maybe if we did a better job with that we wouldn't have the need for so much welfare type programs? Of course now I'm just more or less venting then trying to discuss or fix a problem, or trying to make things simpler, that's my opinion anyways.
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
15. James Schmid

    

    1 posts
    
    6/21/2012 12:06 PM

    Melvin Waldron, CGCS said:
    
    In a way James, you make my point in that Kraft (and it could be any large company) in a way ends up holding a local government (or any government entity) over a barrel to get the tax breaks they want
    
    

    
    
    Mel-
    
    I don't see it that way. The business is obligated to do the best job it can for it's shareholders ( from 401k investors, mutual funds, and everybody else who owns a share). When it looks for a place to increase production, whether it be a new factory, or expansion of an existing facility, they need to look at the costs involved. Different areas have different tax rates. They would be fools to exclude that information from their decision making process. If certain locales make the decision that attracting Kraft's production to their area is desireable and want to find ways to do so then they do so. What does that have to do with Kraft? They have to build a factory somewhere, and its their job to do it at the lowest cost.
    
    I think you have it backwards. If different cities /states / counties want to compete for jobs and want to offer incentives to companies to set up shop in their areas thats their business, and I don't think you can fault the business for that

    
    
    
    
16. Melvin Waldron

    

    43 posts
    
    6/21/2012 2:06 PM

    James,
    
    I'm not going to fault the business for it, just like businesses would shop other expenses. Yes they have to answer to shareholders, and most of us benefit through our 401's or whatever vehicles we invest in.
    
    As long as the government entity is being transparent in this and lets us know the cost to us in tax revenue at this time, but because of added jobs or whatever, we will gain x number of dollars more, then the abatement is worth the deal. "Or yes we will not take the extra taxes at this time for the value of the equipment but at the end of 10 years it increases the value of their asset by x number of dollars, this is when we the government entity will get our pay back." As I said before as long as things like education and such are not hurt, (I'm hoping that the abatement only amounts to what the city's share is, not the school district, now if the school district will not recognize the added property value but their share is not getting cut, that's fine too).
    
    But while we are looking at this from two different directions, I think we are agreeing that what the company and government entity have agreed to is not an issue. (although with some of my ranting it might seem that way).
    
    So then why did government investing take such a beating from so many on the right? No one has answered that question yet. (maybe it's because a bail out is a little different then this, but there are also investments in alternate energy and other businesses that private equity doesn't seem to want to take the risk on). I would also think that when some government workers are cut, does that hurt their ability to monitor and put together deals such as this? Maybe that 2nd deputy city manager is somewhat more valuable then we give credit for, and the extra 3 people in the economic development office?
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
17. Melvin Waldron

    

    43 posts
    
    6/21/2012 3:06 PM

    Michael Vogt, CGCS said: Mel:
    
    I don't understand why government should be in private business at all, and pick the winners and losers with tax incentives and next to free money for years. Big business and government is edging out what made this country great, the small business entrepreneur.
    
    Mel, what happened with a Missouri tax funded business in Moberly this last spring? Just another example of tax money propping-up business, that's not capitalism!
    
    Just another veiw point.

    
    
    Michael,
    
    I can get your point of view, and you are correct, small businesses do not get the big tax breaks that the big businesses are getting, and that I say could be a problem and issue, not everyone get's treated fairly and why? Because the big business has money to lobby and donate to political candidates. So really even though it seems the right wants to talk capitalism, they really don't want to walk the walk in some instances because they expect the government to help them out one way or another, either in tax breaks, incentives, less regulations (not all regulations are bad, don't see the big smog around many cities now like we did in the 70's), bail outs, or whatever. Or they say it's ok to go to the government because that's what's best for shareholders.
    
    Don't know all the particulars of the deal in Moberly, and aren't they trying to do something similar at Lambert in St. Louis? I guess sometime there are failers with government deals, just like in the real business world. With the big difference, it is using our tax monies. Where are the private equity firms that Gov. Romney talks about as the backbone of the economy when it came to projects like those? Maybe they were just smarter, or they thought the risk was too great?
    
    I guess what I'm saying now is, either the system needs to be fixed or stop bashing one side or the other, they are all part of the way we operate.
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
18. McCallum David K

    
    6/25/2012 7:06 AM

    Mel Solyndra is a perfect example of something private equity wanted no part of. Costly and little chance of a real return on investment for those putting up the money. The government stepped in and we the taxpayers picked up the tab and a 1000 employees were put on the street...........a good example of bad capitalism at work.

    
    
    
    
19. Melvin Waldron

    

    43 posts
    
    6/25/2012 9:06 AM

    David McCallum said: Mel Solyndra is a perfect example of something private equity wanted no part of. Costly and little chance of a real return on investment for those putting up the money. The government stepped in and we the taxpayers picked up the tab and a 1000 employees were put on the street...........a good example of bad capitalism at work.

    
    
    Sounds similar to the KC steel plant that Bain took over, was already in trouble from what I've read, they ended up declaring bankruptcy, Bain got their management fees, maybe still lost some investment money, and the government had to back the pension plan of the employees because it was guaranteed. Probably different amounts of money but I'm guessing it's similar. Out of work workers and the government/taxpayers picking up the tab.
    
    Tell me what is different between those two scenarios?
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
20. McCallum David K

    
    6/26/2012 9:06 AM

    Not familar with the KC plant failure. But I would assume (and that could be bad on my part) they had some type of pension plan in place before Bain took over. No idea how it was funded or what if any gaurantees it had. But in most bankruptcy some pennies on the dollars are recovered. Maybe not enough to make anyone whole but from Solyndra the top of the food chain got fed, the employees lost jobs and the American taxpayer picked up the tab for the whole meal.

    
    
    
    
21. Wahlin Scott B

    
    6/26/2012 10:06 AM

    Bain and Mitt made their money by raiding pension funds (borrowing against the assets of the company) before declaring bankruptcy. They made huge profits, the employees lost their jobs and taxpayers paid the tab, which includes the pensions.

    
    
    
    
22. Wahlin Scott B

    
    6/26/2012 7:06 PM

    David McCallum said: they had some type of pension plan .

    
    [youtube">http://www.youtube.com/watch?v=imouDc5u3as[/youtube">

    
    
    
    
23. Jon Gansen

    

    1 posts
    
    6/27/2012 2:06 PM

    Scott Wahlin, CGCS said: Bain and Mitt made their money by raiding pension funds (borrowing against the assets of the company) before declaring bankruptcy. They made huge profits, the employees lost their jobs and taxpayers paid the tab, which includes the pensions.

    
    
    
    Question for you Scott. Isnt it true those pension funds were underfunded to the tune of 44 million before Bain took over?

    
    
    
    
24. Melvin Waldron

    

    43 posts
    
    6/27/2012 2:06 PM

    Jon Gansen said:

    Scott Wahlin, CGCS said: Bain and Mitt made their money by raiding pension funds (borrowing against the assets of the company) before declaring bankruptcy. They made huge profits, the employees lost their jobs and taxpayers paid the tab, which includes the pensions.

    
    
    
    Question for you Scott. Isnt it true those pension funds were underfunded to the tune of 44 million before Bain took over?

    
    
    My question is whether it is true or not, if it was true why did Bain even mess with a company like that? What did they get out of it then when they did mess with it? Doesn't seem like that would be a smart business move to me.
    
    There must be more to this Venture Capitalism then I can fathom. I would sure like someone to explain that to me. I get the feeling it operates like the mob or something, they take their cut whether the company is making a profit or not. Instead of breaking legs they put the company in bankruptcy.
    
    Mel

    
    Melvin H. Waldron III, CGCS, Horton Smith Golf Course, City of Springfield/Greene County MO
    
    
25. Wahlin Scott B

    
    6/27/2012 3:06 PM

    Jon Gansen said:

    Scott Wahlin, CGCS said: Bain and Mitt made their money by raiding pension funds (borrowing against the assets of the company) before declaring bankruptcy. They made huge profits, the employees lost their jobs and taxpayers paid the tab, which includes the pensions.

    
    
    
    Question for you Scott. Isnt it true those pension funds were underfunded to the tune of 44 million before Bain took over?

    
    
    No, it is not. The pensions, capital and annual production potential were the collateral on the loans Bain took out on the company, then paid themselves.

    
    
    
    
26. Wahlin Scott B

    
    6/27/2012 3:06 PM

    [youtube">http://www.youtube.com/watch?v=f9osZGVqCUA[/youtube">

    
    
    
    
27. Peter Bowman

    

    11 posts
    
    6/27/2012 10:06 PM

    That'll get Republicans to change their mind and vote for Obama.