As the recession drags on, municipalities struggling to fix roads, fund schools and pay bills are increasingly rescinding tax abatements to companies that don't hire enough workers, or that lay them off or close up shop. At the same time, they're sharpening new incentive deals, leaving no doubt what is expected of companies and what will happen if they don't deliver.
"We will roll out the red carpet as much as we can, (but) they are going to honor the contract," said Brendon Gallagher, an alderman in DeKalb, Ill., where Target Corp. got abatements from the city, county, school district and other taxing bodies after promising at least 500 jobs at a local distribution center.
So when the company came up 66 workers short in 2009, Target got word its next tax bill would jump almost $600,000 — more than half of which goes to the local school district, where teachers and programs have been cut as coffers dried up.
The newfound boldness comes from communities and states that have long bent over backward to lure companies and jobs by offering abatements and other incentives — to the tune of an estimated $60 billion a year in the United States, according to the Washington-based economic development watchdog group Good Jobs First.
The willingness to write — and enforce — so-called "clawback" provisions comes even as companies across the country struggle and against a broader backdrop of governments getting tough on business practices.
What's more, the recession has communities thinking about how the tax breaks they dole out will play with residents who have grown increasingly angry at the thought of anything that hints of corporate welfare.
Skeptical of 'handouts'"The public is a lot more aware of tax abatements, and there's a climate of skepticism about what can be perceived as corporate handouts," said Geoff McKimm, a member of the Monroe County Council in Indiana.
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