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Business Ready Communities or Corporate Welfare?

The Wyoming Business Council (WBC) enables a number of programs that funnel tax dollars to private companies. When the WBC asked the State Loan and Investment Board for a $1.35 million grant for a Wyoming town to benefit a private company, McGinley Orthopaedic Innovations, the Board rubber stamped it, as expected.

This is but one example of a corporate welfare program that increases the incentive for private businesses to lobby for government handouts rather than going to a bank or a venture capitalist. This practice puts tax dollars at risk and makes unqualified government actors the misallocators of resources in the economy. Investment is a function that rightly belongs to entrepreneurs who put their own money at risk and think twice beforehand.

In this example, the Town of Glenrock requested $1.35 million from state taxpayers to purchase and improve a building already occupied by McGinley Orthopaedic Innovations, a precision medical device manufacturer. Part of the grant would even buy tools for the company. The company’s handout however, is larger still as the Town of Glenrock is chipping in an additional $90,000 and Glenrock’s economic development office an additional $10,000.

Dr. McGinley says the spending will create 12 jobs in its first five years for engineers and for sales and administrative support. The total amount of public money spent on this project is $1.45 million, or about $121,000 per projected job.

Is the company putting up any money at all for the building, equipment and utility upgrades? Yes, $50,000. Paying $121,000 per job is a bad deal for taxpayers but leveraging a $50,000 private investment to get that $1.45 million is a great deal for Dr. McGinley.

The State Loan and Investment Board rubber-stamped this deal. The board, composed of Governor Mead, Treasurer Mark Gordon, Auditor Cynthia Cloud, Secretary of State Ed Murray and Superintendent of Public Instruction Jillian Ballow, waxed supportive of this high tech investment in the state.

While high tech investment in the state is great, no one asked if the company could get private sector funding. However it turned out the startup funds for this venture did come from the private sector. So if this is such a great idea, wouldn’t the private sector continue funding it? No one asked whether the city’s investment crowded out private sector investment opportunities either.

So is this a good deal for taxpayers? The company is not only getting a building but specialized equipment such as a lathe, an electrical discharge machine and grinders. As Secretary Murray said, these seem like specialized fixed assets. Should Dr. McGuinty decide to leave Glenrock, what would happen to the equipment?

No worries, claims Glenrock Mayor Doug Frank. The equipment funded by the grant will be part of the building and while sophisticated, would work with other applications. In the unlikely case this company didn’t do well, Mayor Frank said the town will have a facility it could retool. Now the mayor wants to get the town into the high tech retooling business?

How else might town officials benefit from this spending? Seems the company will be paying lease payments, but wait! These payments will go toward the purchase of the building should the company decide it wants to stay. Another score for the company at the expense of taxpayers.

Given that some of the highest elected officials in the land are cheerleaders and rubber-stampers of these corporate welfare schemes, cutting this wasteful program will be an uphill battle. Instead of encouraging more companies to feed at the taxpayer trough and misallocating scarce resources, our elected officials should reject all corporate welfare schemes.

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Comments 3

Guest - Al Anderson on Wednesday, 30 March 2016 16:14

The WBC grant and interest free loans to Melvin Brewing in Alpine are just as outrageous. Most of this brewery's output is sold out of state which allows Melvin an exemption on state malt beverage production taxes. Moreover, the hires have come from out of state. Now they are looking for someone (the state?) to build a road and parking lot for the facility. Congrats Melvin, you are chosen the winner!

The WBC grant and interest free loans to Melvin Brewing in Alpine are just as outrageous. Most of this brewery's output is sold out of state which allows Melvin an exemption on state malt beverage production taxes. Moreover, the hires have come from out of state. Now they are looking for someone (the state?) to build a road and parking lot for the facility. Congrats Melvin, you are chosen the winner!
Guest - Al Anderson on Wednesday, 30 March 2016 16:32

Cheyenne Brewing Company, Prairie Fire Brewing in Gillette you lose!

Cheyenne Brewing Company, Prairie Fire Brewing in Gillette you lose!
Guest - Al Anderson on Wednesday, 13 April 2016 10:00

Here is how Melvin is obtaining road improvements, of course another WBC handout.

Alpine requests a $2,873,798 Business Committed grant for the purchase of 3.6 acres of undeveloped land and the construction of a 20,000 square-foot building to house Grand Teton Distillery, which is currently located in Driggs, Idaho. The project will also extend and upgrade an existing road to the property, and extend an 8-inch water main loop to improve fire suppression supply and system reliability. The project will create 30 jobs, make 8.3 acres available for future development in Alpine and improve access for the Melvin Brewing plant and Palisades Lake, a local recreation area. (Board recommends funding up to $1,500,000 for infrastructure limited to road, water and the purchase of 3.6 acres of undeveloped land)

Here is how Melvin is obtaining road improvements, of course another WBC handout. Alpine requests a $2,873,798 Business Committed grant for the purchase of 3.6 acres of undeveloped land and the construction of a 20,000 square-foot building to house Grand Teton Distillery, which is currently located in Driggs, Idaho. The project will also extend and upgrade an existing road to the property, and extend an 8-inch water main loop to improve fire suppression supply and system reliability. The project will create 30 jobs, make 8.3 acres available for future development in Alpine and improve access for the Melvin Brewing plant and Palisades Lake, a local recreation area. (Board recommends funding up to $1,500,000 for infrastructure limited to road, water and the purchase of 3.6 acres of undeveloped land)
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