BOSTON (CBS) — Is General Electric, mere months after the highly-touted move of its corporate headquarters to Boston, considering layoffs and spending cuts here?
So says a report by Reuters. And while it’s unclear what will happen, if GE winds up falling short on the commitments it has made in exchange for about $150 million in state and city subsidies, it wouldn’t be the first time that’s happened around here.
We’ve had our share of notorious cases of expensive bets government made on private-sector businesses that came up snake eyes. Back in 2008 then-Gov. Deval Patrick green-lighted nearly $60 million in subsidies and tax breaks for Evergreen Solar of Marlboro. Three years later they were gone for greener pastures, taking 800 jobs with them.
And who can forget the fiasco of 38 Studios, the video-game company founded by former Red Sox pitcher Curt Schilling, that pocketed a $75 million loan from Rhode Island but quickly went belly up.
States and cities don’t place these risky bets for laughs. Competition for new investment is fierce, between states and with foreign countries. And sometimes it works.
Look at Vertex Pharmaceuticals, occupants of that big, shiny building down the Seaport. Since 2011 they’ve received more than $80 million in state subsidies. In that time, they’ve grown from 500 to 1,700 workers, good jobs at good wages.
And without tax breaks, two other big local employers – Fidelity and Raytheon – might have left town in the mid-1990s, although their performance on jobs here since then has been mixed.
So do these big subsidies make sense?
Gov. Charlie Baker and Boston Mayor Marty Walsh spun the deal with GM as a loss leader of sorts, a regional branding initiative they hope will attract other businesses and spur industrial development. We’ll see. The city reportedly has clawback provisions in place to recoup some of its investment if GE can’t keep its promises; the state does not.
So while this game – known to its critics as “corporate welfare” – may be one we have to play to stay competitive, it’s a risky and costly one. A 2013 study of so-called “megadeals” like the GE package found the average cost to the taxpayer of each job created was $456,000.