BYD's e6. LA's promised to buy 10 and lease 20. (Credit: BYD)
LA wants jobs, and it wants them bad. The unemployment rate was running 12.4% in July. So Angelenos might be inclined to squint a little bit to see the bright side of spending federal stimulus money to subsidize short-term employment, or dishing out local tax breaks to convince a company to stay put.
But I have to admit to more than one uncomfortable cough reading Alfred Lee's provocative article in the Los Angeles Business Journal about what LA offered BYD, the Chinese electric car maker, in return for its North American headquarters. Something on the order of $5.2 million over five years? (It's an estimate by the Journal.)
The incentive package is made up of grants, lease guarantees, a tariff reduction, utility rebates and subsidies, agreements LA will buy BYD products, and put BYD cars on display at LAX.
The package was negotiated by First Deputy Mayor Austin Beutner, a former investment banker tapped by Mayor Antonio Villaraigosa earlier this year to be his “jobs czar.” He is also running the Department of Water and Power on an interim basis.
If the company creates about 100 jobs, the Journal estimates each one will cost taxpayers around $50,000. Beutner argues the price is a bargain compared with packages other cities offer.
For instance, the Journal notes, in 2005, Tennessee poached Nissan's North American headquarters from Gardena for about $150,000 per job. There are other examples richer than $50K a head.
You might ask why LA doesn't just cut 100 unemployed locals checks for $50 grand and call it a day. But then there might not be the hope - however tiny, however desperate - that BYD will return the love by building a manufacturing plant in Southern California, possibly, some day.
My guess and that of the rest of the people with a brain larger than Mr Deputy Mayor’s is that BYD is playing this deal for all it is worth. Why would a Chinese Manufacturer want to get involved in SoCal politics and wages when it is cheaper to send them from there?Further, the benefits for this deal if it ever happened due to emission standard and safety issues, are so far down the road that it is unlikely this investment would ever be recovered in 2010 dollars. Maybe the feds should try to negoriate some debt forgiveness and hope it all works out. The 5.2 million, which given the nature of the way it is being offered, is far from all real or easily estimated, is not necessarilyy all bad, but hope for the future is dim given the billions of people in China who need work at least as bad as Angelenos.