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| GTECH Deal Demonstrates Need for New Economic Development Strategies. |
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Rhode
Island Green Party Providence-- As large multinational corporations like GTECH pit state-against-state to compete for creating jobs, the results are subsidies and tax breaks that come at the expense of city coffers. "Rhode Island's business and political leadership were essentially forced to negotiate an excessively generous deal with GTECH." said Jeff Toste Co-Chair of the Green Party of Rhode Island (GPRI). "In the long run, property taxpayers will make up the difference of the 'true value' of the city's property that is not being paid by companies like GTECH. We need to reverse this national trend of tax stabilization to successful companies. We are playing follow the leader, and unfortunately the leader in this game is the race to the bottom." GTECH was founded in the early 1980s and has won the contracts to manage 29 of the 38 lotteries that run nationally and receives approximately five percent of every dollar ticket sold depending on income and specifics of each contract. GTECH prints the tickets for state lotteries, provides the software for the gambling devices, organizes the drawings, and trains convenience-store owners on how to run their computers. With approximately 300,000 lottery machines around the world the company has annual revenues of just under $1 billion. Howard Cohen is President and CEO of GTECH Holdings Corp. In 2002, Cohen earned $6,621,798 in total compensation including stock option grants from GTECH Holdings Corp in addition Mr. Cohen has another $4,630,000 in unexercised stock options from previous years. The GPRI acknowledges the fact that encouraging larger industries to do business in RI is part of an overall economic development strategy. Tapping potential revenue sources, such as development of vacant lots owned by the City of Providence, is generally a wise option. However, subsidies should be focused on the companies that truly need them; small local businesses that in addition to creating jobs provide other services that revitalize communities such as a reduction in fossil fuel use, cleaner water, and social responsibility in the community as a whole. "GTECH has a lottery deal with RI that will generate approximately $700 million for the company over the next 20 years." notes Riana Good, former Co-chair of the GPRI. "For it to receive an additional 25% break on property taxes, a reduction from $31.9 million to $23.9 million over the next 20 years --is unnecessary." "'In addition, there are no means to enforce local hiring, local buying or similar provisions in the GTECH agreement." Adds Linde Rachel Co-Chair of the GPRI. "More and more states and municipalities have started to institute what are called in the trade 'claw-backs'. In other words if GTECH does not create the jobs its promises, if it does not buy locally, or if it violates any of the other provisions in the contract, it should pay more "Rachael stated. "This is a practical aspect of sustainable and responsible economic development that is missing from the current agreement with GTECH." According to both RI General Law (R.I.G.L.) Chapter 44-3-9 (f) and Providence Code Of Ordinances Sec. 21-197, it is illegal to permit tax exemption or stabilization for any manufacturing, office concern or commercial concern relocating from one city or town within the state of Rhode Island to another. However, by classifying the deal as an 'expansion,' GTECH avoids these laws. In addition, according to R.I.G.L. Chapter 42-64-1, any 'project' of the RI Economic Development Corporation (RIEDC) is in effect exempt from RI law. "Without a new economic development vision that addresses the larger systemic issues, we have few options but to accept such deals," said Robert Hanson of the GPRI Coordinating Committee. " Rhode Island tax stabilization laws are in place to protect property taxpayers, and the federal government should make and enforce similar laws state-to-state. We need more leadership with a 'bottom up' approach to economic development that only subsidizes the businesses that truly need it. If not, states forced to follow this trend will, in the long run, give away more than they get." |
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