On how economic development really works…

September 12, 2008

Back when I was a daily business reporter, one of the stories that I periodically had to write (or edit) had to do with some new company coming to town and discovering the joys of Bradenton or New Haven or East Fishkill. There was the big press conference with all the local politicos lined up to cut the ribbon. And, more often than not, it seemed that this big news was timed to coincide with local elections.

I thought about this last night while skimming through the 10-Q that Barnes & Noble (BKS) filed yesterday. One of the footnotes had to do with Barnes & Noble’s purchase on June 26 of a distribution center in South Brunswick, NJ from the state’s Economic Development Authority. The company paid $21 million for the facility and the equipment. Barnes & Noble had been leasing the facility and the lease was set to expire in three years.

So I went looking for the original press release announcing the deal. I couldn’t find it, but I did find this story from an economic development publication that seems to have the same sorts of gushy language you’d expect to see in the press release, including this one:

“In the case of Barnes and Noble, the company looked at three different states,” said Jack Rosenfeld of GPU Energy. “But the New Jersey economic development authority offered them some creative financing options that included a lease-back and $32 million in bonds.”

Over the years, the deal has been mentioned in passing in Barnes & Noble’s filings, but not with enough detail to really figure out who’s getting the better deal here. That’s usually how these sorts of things work. There’s the big press conference and then the details of how much this is really costing are buried. My bet, however, is that Barnes & Noble did better than the taxpayers of New Jersey here.

Granted, this is just the way the economic development game has been played and likely will continue to be played. There’s always a company looking to move. And there’s always a politician looking to show his (or her) job-getting prowess by throwing some tax dollars at the company.

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For those footnoted readers in the Bay Area, I’ll be speaking at the CFA Society of San Francisco on Sept. 25 with two other fantastic bloggers, Paul Kedrosky and Eric Savitz about how financial blogging is impacting the markets. There’s more information here. It should be a lively panel, so hope to see you there. And there’s the added bonus of Continuing Ed credit.

Image source: Georgia Tech

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