First the Bombardier deal looked shaky in the Senate, but then the House passed it 125-16. However, it got killed in committee in the Senate. Only to be revived in scaled down form in the Senate and passed. Does this roller coaster have any more hills?
The original Senate bill would have granted up to $880 million in tax credits over 22 years to Bombardier if the maker of jet airplanes built a plant near Kansas City and employed at least 1,000 workers. The money was actually a loan in the form of tax credits, though, because it would have had to be paid back in the form of royalties on the passenger jets that were sold.
The scaled back version is for a mere $240 million over eight years. The new deal also requires that the money be paid back and that a 5.1 percent rate of return also be paid. The legislature hopes to find out this July whether the offer is a ripe enough plum for Bombardier to pick.
Charlie Shields (R-St. Joseph), the Senate Majority Leader, painted a rosy picture, with Bombardier employing 2100 workers and suppliers employing another 5,000. Shields predicted a $5 billion economic impact on the state.
But a couple of odd bedfellows, Jeff Smith (D-St. Louis) and Matt Bartle (R-Lee’s Summit) argued in the Senate that Bombardier might have the wrong kind of economic impact:
But opponents such as Matt Bartle of Lee’s Summit look at appraisals of the company’s health from some investment firms and finds recommendations that investors sell Bombardier stock. Fellow Senator Jeff Smith of St. Louis read the investment firm’s recommendations to fellow senators. The analysis says Bombardier has financial problems, has lost share of its segment of the airline market, and has a pension program that is under funded by $1.2 billion dollars.
Bartle says it’s clear the reason Bombardier wants Missouri’s tax credits is because it can’t raise funds on the capital markets as cheaply as it can get money from Missouri. “The capital markets know this is a stupid deal!” he shouts on the Senate floor.
Smith quietly agrees, “We’re the suckers.”
Those supporting the bill countered by reading more positive assessments from other investment analysts, but Smith argued that we have no business dispensing $240 million when we can’t even take care of former Medicaid recipients.
Meanwhile Bartle wondered why we would give such tax breaks to a French Canadian firm in preference to Missouri employers:
“Instead of giving a tax cut of a quarter billion dollars and spreading it across all Missouri employers – large and small and medium – we are giving it to one company,” Bartle said. “We are putting 240 million eggs in one basket.”
And not a well constructed basket at that:
“We don’t know the aircraft manufacturing business,” Bartle said. “We don’t know it’s prospects. We don’t know its overall health in the current marketplace. We’re buying $240 million of junk bonds.”
In my first posting on the Bombardier deal, I said that Shields “should tell the other senators how many Brooklyn Bridges they are buying here.” That was not an apt analogy. Nobody is running a deliberate scam here. It feels more like our legislators are amateurs sitting in on a poker game with the high rollers. And betting too much.
Jeff Smith gets credit for the title of this posting.