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Draft 1.1 -- Not for Distribution or Circulation • Subsidy Costs — What did it actually cost the government, in foregone taxes and infrastructure costs, to make the attraction happen? No comprehensive analysis of the public subsidy costs versus the benefits in Cabarrus County has yet been done. • Opportunity Costs —Could the same public money have created more jobs through local- business support? One report in Oregon found that the cost of creating a local- business job was one - thirtieth the cost of attracting an outside job. One of the most respected analysts of corporate attraction policies has been Professor Ann Markusen, director of the Project on Regional and Industrial Economics at the Humphrey Institute of Public Affairs, based at the University of Minnesota. Several years ago, she assembled the best analysts in the field to explore the validity of these critiques and to offer reforms. The resulting book of essays, Reining in the Competition for Capital (Kalamazoo, MI: W.E. Upjohn Institute for Employment Research, 2007), remains the best analysis of the field. In the opening essay, Markusen and Katherine Ness of the University of Illinois at Urbana - Champaign set out the problem by writing: "Incentive competition is on the rise. It is costly, generally inefficient, and often ineffective for the winning regions. " 4 Cabarrus Jobs Now, on its web site, argues that incentives are not subsidies. "The claim that incentive grants cost local governments money is false. Incentive grants are based on the increased value of the real estate and personal property that is the result of an employer choosing to locate or expand here." In fact, the vast majority of economists who study incentives reject this view, because it ignores opportunity costs. Specifically: What would have been the stream of public benefits that could have come from the same parcel of real property had it been developed without incentives? The claim that no one else would do anything with that parcel is an assumption, not a fact —and rarely the reality. Moreover, tax giveaways are immediate and guaranteed while taxes collected down the road are actually speculative, based on the success of the company. An appropriate cost - benefit calculation would discount the stream of benefits by the probability that they never will materialize. 5 Ann Markusen, ed., Reining in the Competition for Capital (Kalamazoo, MI: W. E. Upjohn Institute for Employment Research, 2007). 17 Attachment number 1 1 -4 Page 319