When politicians talk about "wins" in economic development, they are apt to overstate their own roles and underplay the business fundamentals that drive decisions by companies.
Except, of course, when the public investments go bad.
In New Orleans, state officials are now trying to get back more than half of the almost $2 million in incentives Louisiana gave Gameloft in 2011. The video game developer was promised the incentives to open its New Orleans operation, but it ultimately fell short of hiring goals and closed the Crescent City office.
Gameloft had peaked at 40 employees at its Canal Street development studio when it closed, officials with Louisiana Economic Development said. But a 10-year agreement with the state required Gameloft to have 121 employees during 2017 and eventually reach 146 workers by 2021.
Paris-based Gameloft in 2011 was the leading publisher of mobile games, with titles that included such well-known properties as Harry Potter, Lego and Spider-Man.
This is a cautionary tale about all the incentive programs, because renting a relationship is always a risky business. In Gameloft's case, the lack of hiring in New Orleans certainly reflected what Don Pierson, the state's industry hunter, called a fiercely competitive industry.
Pierson also noted that a number of other digital media companies — also benefiting from taxpayer incentive programs — are still doing well.
We hope that they do and continue to do so. But incentives alone won't win the day.
The state and IBM announced in September that IBM's 572 jobs had fallen short of 800 promised by mid-2017 in a much-touted incentive agreement.
That setback represents a bigger piece of change. In exchange for 800 jobs at IBM's Client Innovation Center in downtown Baton Rouge, the state and East Baton Rouge Parish offered an incentive package worth nearly $147 million over 17 years. Four years into the agreement, roughly $57 million in grants and tax refunds have been spent.
Instead of penalizing IBM under terms of the agreement, the state gave the company two more years to reach the promised employment level in 2019 and imposed harsher financial penalties if it doesn't.
Still, the fundamentals in such a fast-changing business are more important. In Gameloft's case, the company has been shedding workers to cut costs since a hostile takeover of Gameloft by Vivendi SA in 2016. That is something over which the state has little control.
But what is not recognized enough by officials is that every dime spent on incentive packages is taxpayer money taken from schools, roads, colleges, quality of life — the things that will make economic progress in a place possible.
Companies are basically extorting incentives from cities and states by flashing the prospects of new offices. What's happened with Gameloft and IBM should shape the thinking of the governor and lawmakers who are currently grappling with a state budget quagmire in a special session at the State Capitol. There are many reasons why the state government's books don't balance in Louisiana. One culprit is lavish industrial incentives that cost taxpayers a fortune and don't live up to their promise.
When something sounds too good to be true, it usually is.