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A Tale of Two State Investments

  |   By: Wesley Vaughn     |   Opinion

The news of Huntsville landing a Remington gun-manufacturing plant was cause for state-wide celebration earlier this week. The plant is expected to hire 2,000 employees and create almost $90 million in state and local revenue by 2024.

The cost of luring Remington to Huntsville was $68.9 million in state and local incentives. A sizable price tag for sure, but still a profitable investment if it creates the expected $90 million in state and local revenue in 10 years. If Remington happens to renege on its expected hiring, the company will have to repay Huntsville’s incentives. It’s a pretty smart deal.

I like those numbers, and I like seeing the state and local governments working together successfully. But I also like crunching the numbers.

Since the Remington move may come at the cost of an upstate New York plant, many decided to rub it in New York Gov. Andrew Cuomo’s face. Cuomo, who said “extreme conservatives … have no place in the state of New York” last month, also signed the SAFE (Secure Ammunition and Firearms Enforcement Act) Act into law last year. Alabama Republicans, thus, saw the Remington announcement as proper punishment for Cuomo.

But Gov. Cuomo has made considerable local investments, and the different economic development agendas of Gov. Cuomo and Gov. Bentley are what interest me. It’s impossible, for now, to argue that one strategy trumps the other, but it’s helpful to compare them side by side.

The state of New York will invest $1 billion in the Buffalo region over the next ten years — modeled after the successful $1 billion investment in Albany‘s nanoscience industry. Those billion-dollar investments represent 1.1% of New York’s  $90 billion annual budget.

Alabama’s investment — excluding local investment — in the Remington plant will be $54.22 million over ten years, which is about 0.72% of the state’s annual budget.

So despite the large discrepancy in total dollar figures, both investments hover around 1% of each state’s annual budget.

The theory behind each investment is what’s most different. Gov. Cuomo is investing in infrastructure and services to improve the Buffalo region in order to spur job creation and attraction. Gov. Bentley is investing in an out-of-state company to bring jobs to the North Alabama region in order to spur job creation and revenues.

Notice the slight difference? New York is investing locally; Alabama is investing in a corporation with the expectation that it, in return, invests locally. However, to Alabama’s benefit, Remington’s employment will be a tangible success indicator for its investment. The success of the Buffalo region will be much harder to attribute to New York’s investment.

New York’s similar investment in Albany certainly paid off, though. The state’s $1 billion soon attracted $6 billion in private investment — a 600% return on investment. Even Alabama’s most optimistic estimates for the Remington plant are a 285% return on investment in 20 years.

Again, I applaud Gov. Bentley et al. for securing 2,000 jobs for the state, and I sincerely hope that the Remington plant blows past all expectations and catalyzes the North Alabama economy.

But, if Alabama ever wants private investment to come calling without the need to write a check first, it must start investing locally. Dedicating 1% of the state’s annual budget over 10 years to one of the state’s regions is financially feasible and will create permanent results — not just a manufacturing plant.

Follow Wesley on Twitter at @WesleyVaughn

Wesley Vaughn has a master's in city planning. He believes in Birmingham, Nick Saban, and his foreseeable marriage to Anna Kendrick.