Chiquita Cuts Deal That a Monkey Would Love
Chiquita Brands International (NYSE:CQB) might as well have rewritten its iconic jingle, like this:
"I'm Chiquita Banana and I've come to say, if you want me in your state, you're gonna have to pay.
"State and local tax breaks are the easy things; but if you want to keep your jobs, remember, cash is the king."
Chiquita could not make a monkey out of Ohio with this song and dance. So the banana giant is leaving Cincinnati, where it's been based for nearly a quarter century. And it's going to Charlotte, N.C., where economic development officials have put up more than $22 million of incentives.
In Charlotte, Chiquita will find itself at home with other well-known corporate welfare projects, including Bank of America (NYSE:BAC) and the wreckage of Wachovia, which was salvaged by taxpayer-rescued Wells Fargo (NYSE:WFC).
Chiquita has been looking at office space in the NASCAR Plaza, which faced foreclosure proceedings last year. But few involved in the deal have stopped to consider what kind of additional disaster might unfold if a Chiquita executive snidely drops a banana peel on the floor of the NASCAR Hall of Fame, like Chim-Chim in "Speed Racer."
Meantime, there's no telling when Charlotte's $22 million gamble will pay off.
Rob Nichols, spokesman for Ohio's Republican Gov. John Kasich, told me it would have taken more than a decade to recoup the money that Chiquita wanted in order to stay in Cincinnati.
"We had to be able to justify that their incentive package would be a benefit to our taxpayers," Nichols said. "This one would not have benefited Ohioans quickly enough to justify that kind of money."
Chiquita promises to bring Charlotte somewhere between 375 and 417 jobs, sometime over the next 11 years. These jobs will pay an eye-popping average of $107,000 a year, but that average is skewed by the top bananas, including CEO Fernando Aguirre, whose compensation totaled $5.6 million last year.
What Charlotte is mostly getting is a flashy consumer brand to put in the vacant spaces of its NASCAR Plaza. And what Chiquita is mostly getting is a better airport so its executives can more easily visit their banana republics.
Chiquita was likely to move closer to a better airport, anyway, after a dramatic decline in Cincinnati's international air service. So it put on a beauty pageant where the most beautiful thing was the public's money.
In the end, Charlotte's $22 million kept Chiquita from moving to Atlanta or south Florida, which is actually a bit closer to its banana republics.
The Chiquita deal is actually quite typical in the tribal games between regional economic development authorities. A CEO I know in California recently told me he gets calls every week from a slick, eco-devo huckster offering to rescue his company from his financially ailing state.
What if every CEO in every state said, "Give me some more of that money or I'll move the corporate headquarters to Tiny Town?" Isn't it shameful enough when professional sports team owners do it?
Ohio has seen enough of this already. "It's a race to the bottom," said Zack Schiller of Policy Matters Ohio, a left-leaning think tank in Cleveland.
This year alone, Ohio gave American Greetings (NYSE:AM) incentives worth $93.5 million after the company threatened to move 2,000 jobs to Chicago. It gave Bob Evans Farms (NASDAQ:BOBE) incentives worth $17.4 million to stop it from moving 150 jobs to Texas.
And it gave Diebold Corp. (NYSE:DBD) incentives worth $56 million to keep it from shipping 1,900 jobs to North Carolina or Virginia.
Also this year, Ohio gave $8 million to Omnicare (NYSE:OCR), enticing the pharmaceutical care provider to move 500 jobs from northern Kentucky to Cincinnati. And it gave Marathon Petroleum (NYSE:MPC) a 75%, 15-year tax credit to retain yet another 1,650 employees.
"An individual state, if it cuts a deal well enough, may benefit over time," Schiller concedes. "But the net of it is not going to be a more prosperous country. It's really just reducing the resources that will be available to make all the necessary investments that are particularly under stress right now."
Cities and states have been mindlessly playing this game for decades, often without ever quantifying whether it's even been worth it. Monkey see, monkey do. At least Charlotte is getting bananas.
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at email@example.com or tellittoal.com)