Apparently our state government has been in another subsidy bidding war over a plant relocation, and fortunately it lost. Why the state government pulls together Defcon 5 activity levels to bring 80 jobs to a town of 4 million is just beyond me. But beyond my usual problems with subsidizing business relocation, which haven't changed from this post way back when I talked about relocation subsidies in the context of the prisoner's dilemma, I have three issues specific to our state's efforts to attract solar manufacturers:
- I am constantly amazed at the strategic planning that says Arizona residents should pay more taxes to promote a solar manufacturing industry because, uh, we have a lot of sun. That's roughly as logical as saying an FM radio maker should manufacture in NY City because they have a lot of radio stations. I suppose you could argue it would reduce shipping costs to solar using areas, but I can't believe that shipping costs dominate since most of the panels we buy in this country originated in Japan or Germany.
- Companies and industries that seek subsidies are like hot money in the investment world. Even if you attract it today, they will jump next week to another location that offers them more. We see it in this case, as AZ bought Kyocera's presence at one facility but can't afford the price to get them to build this new facility.
- The state's approach defies all business strategy, and is making a typical novice investment approach. Specifically, they are chasing the hot industry. Everyone is bidding for solar plants, so the price goes way up. This is why we have bubbles in housing and Internet, because people all pile into the same investment like lemmings. If I were to run a government business relocation strategy (which I most certainly would never do) I would be focusing on boring stuff no one subsidizes. We offered nearly 100% property tax abatement plus investment tax credits and can't get a solar plant. Instead we should be up in business hostile states like CA and NY getting rubber stamp makers and garage door manufacturers. Surely we could get 70 jobs a lot cheaper.