No Runny Eggs

(H/T – Brad Van Lanen)

Last night, the Fond du Lac County Board overwhelmingly passed a 0.5% countywide sales tax ostensibly to help finance a $50 million, 12-year, low-interest loan for Mercury Marine to help it move the 350 manufacturing jobs it currently has in Stillwater, Oklahoma to Fond du Lac. As Brad said, the devil is in the details:

• While there is no mention of whether a sunset provision was actually included in the final vote in the Fond du Lac Reporter story linked to above, an earlier Milwaukee Journal Sentinel story noted that there was no sunset provision in the version on the Board’s agenda.
• Why, you may ask? Let’s go back to the Fond du Lac Reporter. The total annual tax take is expected to be somewhere between $6.5 million and $7 million. The less-than-half of that that could potentially go to Mercury Marine goes out the door as follows:
  • $500 per job “retained” per year, or a total of $763,000 per year for all 1,526 jobs considered as the “baseline”.
  • $1,000 per job “created” per year, up to a total of 2,900 total employed by Mercury Marine (a maximum of 1,374 new jobs), for a maximum of $1,374,000 per year.
  • $863,000 per year to cover the difference between the 2% being charged Mercury Marine and the market rate that the county has to pay.

So, where’s the other $3 million-$3.5 million per year going? If the intent of the Fond du Lac County Board were to simply help out Mercury Marine, that excess money would be set aside for payment of the second 6-year period of the loan subsidy, and the sales tax would be sunsetted after 6 years.

Rather, it’s going into the general coffers to be burned on, in order, “economic development”, overall county debt reduction, and property tax relief. If you believe that there will be anything meaningful left for property tax relief, even after the loan is paid off, I’ve got a bridge to sell you.

Revisions/extensions (9:16 am 9/10/2009) – Given Mercury Marine is talking about adding only about 350 jobs, the subsidy would be worth about $1.98 million. That would make the spread between the subsidy and what the tax is taking in closer to $4 million-$4.5 million. Again, I don’t expect any real property tax relief, and though there might be a real effort to reduce the debt load which would lessen the tax load somewhat, I expect there to suddenly be $4 million per year in new spending in Fond du Lac County.

I would also like to address another element of the Fond du Lac Reporter FAQ – specifically the “how much per job” question. They counted the total maximum subsity to Mercury Marine over all 12 years, as well as included the existing employees, to get to the $12,400 per job estimate. It actually would be less per job if Mercury Marine only added the 350 jobs from Stillwater, but it would be far more than either that or the $20,000 per job that is supposedly the standard in these deals if one included just the “new” jobs ($67,900 per “new” job if only the Stillwater jobs were added, $23,600 per “new” job if Mercury Marine maxed out and added 1,374 “new” jobs).

Worse, since the other $3 million-$4.5 million per year sales tax collected by the county will most likely not be seen by the public in the form of tax relief, and the total $7 million per year will never be repealed as the scheme currently contemplates, it would be fair to include that number in the cost/benefit analysis. No matter how it is sliced, that would make the deal a raw one for the residents of Fond du Lac County.