When Airbus announced its plans in July to construct a $600 million aircraft assembly plant in Mobile, observers scrutinized the $148 million pledged in cash and tax incentives.
Some wondered if international contracts were now open to the highest bidder.
That’s definitely not the case, says Sam Addy, UA’s director and research economist for the Culverhouse Center for Business and Economic Research (CBER). Although Addy wasn’t one of the Ph.D.’s who ran the numbers for state officials considering the 1,000-worker plant’s impact, he says Alabama got a good deal.
“I think what they provided for this one is good. The aspect of incentives that people often talk about is, ‘Are we using tax dollars prudently?’ That depends. That’s why they use studies to decide whether it’s worth it or not. You can think of taxes as funds that we use to provide services – either directly, or by investing those funds to provide even better services for the future.
“Typically, people pay too much attention to the incentive,” says this associate dean for research and outreach. “It’s usually not the decider for the firm. The firm is making hundreds of decisions. The incentives are just gravy on top.”
Mobile’s assets, including its port, air, rail, highways, and established workforce (including onsite European Aeronautic Defence and Space Company engineers) were likely the major factors leading Aerobus to select Brookley Aeroplex as its first U.S. assembly plant, Addy says.
To explain to the uninitiated how such decisions are made, Addy equates industrial shopping to apparel purchases. A mall visitor handles multiple items, scrutinizing color, fabric, weight, price and design, and may even try something on. Consumers process purchases, he says, much like officials determine the best use of tax dollars and executives determine the best place to “land” their companies.
“All of that is data. You are gathering data, and trying to make the best decision.”
Much of the data gathering for government leaders is done by research economists. Although Culverhouse researchers weren’t involved in running the numbers on Airbus, Addy says recruited firms often consult his Center after production begins, to assess their real economic impact and see if those numbers meet or exceed projections.
“When we do economic impact studies for companies, they are almost always different from the initial estimates. This helps us see whether leadership made a good decision. Hindsight is 20/20, but I think what they provided for this one is good.”
That brings up another factor companies consider when evaluating sites.
“The University System is considered an asset for most of these big companies,” says Addy. In addition to contracting with UA and other schools for economic studies, corporate neighbors rely on educators for consultation on everything from engineering to workforce development.
Since the University’s research network -- from business analytics to real estate, information technology to accounting – is used by firms across the country, students also benefit from professor-gathered data. Instructors glean workforce information from these studies, helping them prepare the next generation to land meaningful jobs within an international economy.