Arizona OKs tax break for Apple sapphire glass plant

“The Gilbert Public Schools’ governing board on Monday voted 5-0 in favor of allowing a tax break for Apple Inc., meaning the tech giant can continue with its plans to open a manufacturing plant in Mesa,” Karen Schmidt reports for The Arizona Republic. “Monday’s vote came before a standing-room-only crowd and followed a brief meeting with no debate. By contrast, the five-member board was unable to reach a decision during an hour of contentious debate at a Nov. 12 board meeting.”

“The fate of the high-profile deal potentially worth hundreds of jobs seemed to hang in the balance, with the school district being the last of eight governing entities needed to approve a property reclassification that would entitle the premier tech company to a tax break,” Schmidt reports. “Officials earlier lauded Apple’s Nov. 4 announcement that it was buying the now-vacant First Solar Inc. building at Signal Butte and Elliot roads. The move is expected to pour $1 billion into the economy and bring 700 permanent and 1,300 temporary construction jobs to the Valley.”

“The board’s inability to reach a consensus during its Nov. 12 board meeting worried Valley boosters and community members,” Schmidt reports. “Two board members were in favor and two were opposed. The board president, Staci Burk, often the swing vote on the board, told The Arizona Republic on Thursday that she was in favor of the deal.”

MacDailyNews Take: Sheesh, these are no-brainer votes. You can always ID the real idiots when these type of votes come up. Communities should pray to have the chance to vote yea to bring Apple investment and Apple jobs to their area, not to mention utilize currently vacant buildings.

Let’s see, $1 billion, 700 permanent jobs, 1,300 temporary construction jobs, all of the taxes (sales, property, etc.) that each of those workers will pay, plus a large building will be maintained or nothing but the empty building we currently have sitting there slowly rotting. Duh, how should we vote?

This is when smart voters note the names of the clueless and vote accordingly in the next election.

“Board member Jill Humpherys, who was in favor of the deal since the beginning, said since last Tuesday’s meeting she had received 450 e-mails from the community in support of the deal. Board member Julie Smith had originally stated she was against the proposal because she didn’t believe in tax breaks for large corporations,” Schmidt reports. “Board member Daryl Colvin, who had said he was against the deal, said Monday night that after meeting with officials he now believed it would be beneficial to taxpayers. Humpherys charged that Smith’s and Colvin’s qualms were motivated by ‘political ideology.’ Burk apologized for the delay in the vote and said she had ‘appreciated hearing from the governor.'”

Read more in the full article here.

MacDailyNews Take: Wonder if Julie Smith and Daryl Colvin appreciated hearing from the governor, too? Probably not so much.

Related articles:
Apple paid $6 billion in U.S. federal income taxes, 1/40th of all corporate income taxes collected by U.S. government in 2012 – January 5, 2013
Reno City Council unanimously approves 79% tax break for Apple data center – June 28, 2012
Why authorities waive rents and taxes to land Apple Retail Stores – May 20, 2012
Travis County approves tax incentives for Apple’s Austin campus expansion – May 2, 2012
Apple gets 15-year property tax exemption for $250 million data center in Prineville, Oregon – April 20, 2012
North Carolina Senate approves tax law change for Apple Inc. in 40-8 vote – June 2, 2009

Incentives to lure Apple’s sapphire glass plant to Arizona revealed – November 19, 2013
Analyst: Sapphire likely to be used in new small form factor Apple device (Think iWatch) – November 8, 2013
GTAT able to supply sapphire for over 30 million iPhone screen covers due to Apple funding – November 8, 2013
Apple’s iPhone 6 could feature unmatched sapphire glass display – November 7, 2013
Why Apple’s new sapphire manufacturing agreement is a big deal – November 7, 2013
GT Advanced Technologies spikes on sapphire deal with Apple – November 5, 2013
Apple expands ‘Made in USA’ efforts with sapphire glass factory in Arizona, creating over 2,000 jobs – November 4, 2013
Apple strikes sapphire supply deal with GT Advanced – November 4, 2013
Gorilla glass maker Corning enters into strategic partnership with Samsung Display – October 23, 2013
Sapphire glass may be used in 2014 iPhone Retina display, sources say – September 18, 2013
Vertu COO: Apple investigated sapphire crystal displays, but found them infeasible at this time – June 13, 2013
Corning’s Gorilla Glass vs. sapphire for mobile touch displays – May 28, 2013
Apple’s next iPhone screen could be made of Sapphire – May 2, 2013
Steve Jobs, steel balls and Corning’s Gorilla Glass (with video) – January 11, 2013

25 Comments

  1. It isn’t as much of a no-brainer as you suggest. The Phoenix metro area contains a lot of cities, so the workers may not live and pay taxes within the City of Mesa or the Gilbert School District, but somewhere else. Similarly, the economic benefits will be generalized all over the region, but only the residents of Mesa will be waiving tax revenue. The residents of Phoenix, Glendale, Tempe, Chandler, Scottsdale, etc. will receive the benefits without bearing any of the costs. Mesa will be required to provide emergency services and transportation infrastructure to the plant without full compensation. The waived revenue will have to be made up somehow, necessarily by charging other taxpayers a little more than they would otherwise pay.

    Now I would agree that the incentives ultimately represent a good deal for the region, but I don’t pay taxes in Mesa. I am somewhat surprised that MDN is so enthusiastic about an income-transfer program like this. Welfare is only a bad thing when the recipient isn’t the richest corporation in the world?

    1. Oh, and by the way, Apple isn’t the recipient of anything. They will pay less taxes. For Mesa, those “less taxes” are still better than no taxes.

      Mesa gets more money than it would have. Mesa gets jobs. Apple gets a factory. It’s win-win-win.

      1. Here’s the thing, you just have no way of knowing. You sit and preach that it’s win-win-win, and yet the cost and income projections aren’t available to you, so it’s nothing more than guesswork on your part. Just like MDN makes a flash judgment on this issue without knowing all the facts.

        The point is still valid that Mesa absorbs the costs alone and may not be compensated enough at the proposed lower tax rate. If that’s the case, no sane official is going to support that plan, nor should they. Unless maybe they’re pressured by the governor to do so. Certainly, for the state, it’s a win. But until you or MDN can show the numbers and how it’s a bone-headed no vote, how ’bout refrain from stating your opinion as fact.

        1. Mesa absorbs what costs? The costs of collecting zero tax from a vacant property?
          Jobs are good. In fact, they are awesome. Our government (federal, state and local) should stop inhibiting jobs and start allowing them.

      2. Under this deal, Apple is the recipient of tax favoritism. Every other company in Mesa that is paying the standard tax rate is paying a higher rate than Apple. How is that fair?

        I thought that government was supposed to leave businesses alone?

        I thought that government was not supposed to pick winners and losers?

        I thought that we were supposed to support small businesses?

        Local and state governments should not get into bidding wars for companies. Far too often, the locality loses on the deal and the company fails to live up to its promises. And even if the deal is a net win, as it should be in this case, it still shifts some of the relative tax burden to the small and medium sized businesses who do not have the might of Apple, but collectively contribute vastly more jobs to the local economy. And what about the companies who have been based in Mesa for years, growing and adding jobs and contributing to the community?

        The is just a continuation of the big guys getting the breaks – big companies, big investors, big wigs. The rules seem to be different for these guys even though they already have many advantages over the small businesses and the common person. I don’t agree with the people who rationalize this as a good thing. In my opinion, a locality should establish a stable, competitive tax structure and stick with it. Businesses value stability.

        1. Under this deal, instead of $0.00 taxes in a defunct building, they will draw more taxes. Yep, it is a “discount” in comparison ot other companies but your vision is limited to “equal” rates. As large as Apple is, its discounted rate will still provide MORE income in taxes than those who may pay a higher “rate”. IF Paying 10% of $100,000 is $10,000 for a smaller company, that would be WAY less that say Apple paying 5% on 10 million ($500,000). You are so worried about equal rates that you can’t see the advantage of offereing 5% on much more income.

          The fact that 5% (and these are made up figures but still representative of the ratios) 5% on 10 million may be enough (with a good? city council) that the rate could be lowered for the companies with $100,000 / 10% rate.

          There are enough cities and states that are MORE than willing to give a different rate as AZ did to get the jobs and added income. IF you are so concerned that ALL companies pay equally, you will end up living in a higher tax rate and lower income area simply because that attitude will keep big companies away.

          1. I understand the math. But the “net gain” math doesn’t make it right anymore than the low star votes on my MDN post make my opinions wrong. Local and state governments bidding on companies is a losing deal in the long run.

            Establish a reasonable and stable tax structure and provide an attractive place for people to live with good educational opportunities, and businesses will locate there. Any company that chooses your locality because of a tax break is not a loyal, long term prospect. Show loyalty to the companies that were founded locally, that grew locally, that supported the community for decades.

            Have you ever been a good and loyal customer for years, only to see a company offer new customers a cut-rate deal? Did you ever request similar consideration, only to face rejection until your took your business elsewhere or, at least, threatened to do so? How loyal were you after that? How motivated were you to invest more in that business relationship?

            Governments should not be in the business of cutting deals for businesses. Our elected officials will get screwed nearly every time, meaning we, the citizens will get screwed. And, along the way, the special tax treatment for the few will alienate the rest.

            It isn’t enough to have a flat tax. You apparently want a regressive tax for selected businesses.

    2. Your comment is completely without merit. The tax breaks are temporary. They are $10 million, and the city is expected to bring in an additional $105 million over 5 years.

      In addition, the property will be valued significantly higher, resulting in higher property taxes (which includes school taxes). The workers at the plant, some of whom will live in Mesa, will be good paying jobs, and virtually all workers at the plant will pay for goods and services in Mesa, such as gas, food, etc.

      Will the surrounding communities benefit? Sure. But you’re also forgetting about the increased ability of the development agency to bring more businesses to the area by showing off Apple as a new and valued major business which located in Arizona.

    3. So charge a Workplace Tax.

      I pay taxes in the city in which I work, even though I live 20 miles away.

      You’re also neglecting the Sale Tax increase that will arise from the workers taking lunches and shopping after work, the businesses that will inevitably spring up around the factory to accommodate the workers’ lunch/after-work needs, and the significant increase in property taxes that will arise from turning a vacant building into a place of production (which also increase property values, and thus taxes, of surrounding buildings as well).

  2. Communities should pray to get screwed by yet another monolithic corporation that has bought off the politicians? Yeah right. Now wonder so many idiotic Limbaugh spewings are posted here.

    1. Wow, what a moronic and completely uniformed post. Name one business which would turn down the opportunity to spend $10 million (actually just not receive it) to get back $105 million in 5 years?

      Go hug your DoDo.

    2. This is the kind of mentality that is bankrupting areas like California, Detroit and Chicago. They think job-creating companies should pay for everything and more — including bloated government bureaucracies with overpaid and underworked employees.
      Mesa is getting jobs — something this whole country needs and Darwin is pissing on the deal. With friends like Darwin, who needs enemies?

      1. Precisely correct. People and businesses thrive in spite of “the Darwins of the world”, except in areas like you mentioned. In those locations, an excess of moronic ideology like Darwin’s destroys -or at the very least, severely hampers – incentive, entrepreneurship, innovation, and productivity. Some us understand those things as “jobs”. Darwin doesn’t.

  3. In many countries and regions, it’s standard practice to offer tax breaks in order to lure substantial employers to an area. These tax breaks are available to a wide range of companies and are normally for a limited duration.

    It’s a very effective way to rejuvenate areas that would otherwise be unattractive to developers and when one large employer moves into such an area, there are many spin-off companies that subsequently either flourish or spring up, which would not otherwise have been viable.

  4. In all the arguments above, comparisons have been made stateside. What is missing is the reality of the now situation, right now, jobs have been exported to China and elsewhere because of the US Gov. stand on taxing business.
    Right now, business financial HQ’s are elsewhere in low tax havens because of:- see above.
    Right now Arizona is not receiving tax receipts however small from Apple inc. therefor the current rate of taxes business’s pay is high.
    If Apple inc. starts to pay taxes even at the discounted rate, the extra tax income could go a long way to subsidize the current tax being paid by local business in lieu of the discount offered to Apple inc. By the same token, the increase in income to local business should see those local business pay more tax as a result. The entire US should then see an small spike of improvement as jobs begin to return from China and elsewhere. If the States then improve educational standards and start to produce highly skilled motivated workers from this extra tax revenue, that should see the acceleration of the return of those jobs as the cost of imports drops and the revenue from exports increase.
    What is needed right now is a sense of giving up a sense of entitlement now to secure the future well being of not just the local governments, but the people and the country as a whole.
    Are we capable of such a sacrifice?

    1. If cutting tax rates is so good, then cut them across the board for all businesses, not just a few big guys with clout. Don’t pick winners and losers and rationalize that error through tax averaging.

  5. I live in a community that offered incentives to Power Computing, a licensed Mac clone maker. Apple cancelled the license and the plant was never built. The property has been granted three subsequent incentives, all of which fell through. So it is still vacant. Without the distortions to the market that favored large subsidized projects, it would have been developed decades ago by smaller businesses.

    A few years later, Apple planned a call center in our county. There was a huge dispute, the governor intervened, and the incentives were granted. The center was built… in Ireland, because changed economics made the local project nonviable.

    Apple subsequently expanded in an adjacent county, which will collect all the taxes when the incentives end. However, most of the workers live in our county, where we spend more on serving single-family homes than we collect from them in revenue. Taxes on existing homes and businesses have been raised to provide services to the new residents (not just Apple’s workers, but a lot of others attracted by incentive programs). Not altogether a win-win for us.

    Don’t get me wrong. I think the Mesa incentives are a good investment for the governments involved and I would vote for them. They aren’t an unmixed blessing or a no-brainer, though, for individual taxpayer/voters in the area. During the early years of the project, it will be paying lower taxes, which necessarily means that the other businesses and homeowners will be paying more than they otherwise would do.

    Let us assume that situation lasts for five years. It will take at least an additional five years (probably more, because of present-value considerations) for the additional taxes paid by the project, resulting in lower taxes for other taxpayers, to fully repay the citizenry for their personal investment in the project. That assumes that the businesses and homeowners haven’t moved in the interim. A Mesa resident who retires to Sun City five years in will pay all the extra taxes but receive none of the tax benefits. Likewise for a small businessman who is forced to relocate or has gone out of business, in part due to the higher short-term taxes.

    As someone pointed out above, these aggressive incentives are only available to large companies, which means that they pay a smaller percentage of their income in taxes than smaller businesses–the very definition of a regressive tax structure. Those who are the most able to pay higher taxes, because they have higher incomes, are actually paying less. That differential distorts the free market in favor of big businesses and their wealthy owners.

    This is particularly noticeable in states without an income tax. Because middle-class folks spend proportionately more of their incomes on housing that is subject to property taxes and on sales-taxable items, they already pay at a significantly higher rate than upper-class folks. Because most incentives favor larger businesses, the smaller outfits that hire most of the workforce are at an economic disadvantage, paying higher taxes in the short term to finance incentives for their larger competitors. Ask a small-town businessman how he feels about Walmart.

    Again, I think these particular incentives are a good investment for Mesa and the other governments, but that does not alter the fact that incentives distort free markets and create a regressive tax structure. That takes them out of the no-brainer category.

    1. You cannot take business tax incentives and move it down the line to individual tax benefits for a particular resident. No municipality has any control over when or who moves in and out of its boundaries. That is the same argument that people without children use to claim they should not have to pay taxes for schools.

      You also don’t factor in the increased value of an operating plant vs. a vacant building. Active, thriving business areas attract more businesses, and vacant, declining areas do not.

      The fact is that Mesa is getting a closed facility put back into operation (and thus paying taxes), at a cost of $10 million. If Mesa’s figures are even half correct, it will gain $52.5 million in new revenue over the next 5 years.

      And if it doesn’t work? If Apple cancels the planned use for sapphire glass in iPhones/iPads? Then Mesa is no worse off because the First Solar plant is vacant anyway.

    2. Thank you for a well thought out repost! I concede a number of points you have articulated because the sad fact is that the people who ran this councils or local governments are not necessarily from a cut throat capitalist background. If they were, they would write clauses which would provide a disincentive for a business to move out after a minimum number of years on the site. Such a clause would be palatable if the success of the first business drew in many more business’s and therefor raised the local economy exponentially were then rewarded with a bonus one off 25% discount over another 5 years as an example but with the discount gradually decreasing so that in 20 years or so, there is no discount but the overall level of taxation is driven down for all business’s.
      Local government needs to think different and operate differently if they are to keep up with changing business environments.
      One more thing, as long as the caliber of personnel that is employed by the council is from the same educational standard that exists today as compared to that available in China, then there can be no hope of progressive change rapidly.

      1. With all of the localities bidding on companies to locate or relocate, your proposed clause would draw derisive laughter followed by rejection. There will always be a lower, more desperate bidder.

        Good luck with that.

        1. @ CrabbierApple:- Thank you for imitating me, that is indeed flattery!
          The proposed clause I outlined does not have to be downward, it can also be upward, read this link:- http://www.christianpost.com/news/apple-opens-new-store-in-grand-central-station-52847/
          Apple signed a 10 year lease that would charge them more rent than the existing shops to the MTA.
          Who is laughing now?
          Do you think that in 10 years time when the lease is due to expire there will be more higher or lower bidders to replace Apple at that spot? Or will Apple happily sign another 10 year lease?
          When Apple opened a store in Regent Street in London, the value of property in regent Street went up, the existing business’s did not complain as their footfall and therefor takings went up as well as a result of the Apple store attracting for shoppers to regent Street. the same thing has happened in Covent garden and in other localities round the world were Apple shops have sprung up. With a proven track record like that, it is easy to see why local governments wouldn’t bat an eyelid to offer Apple a bag of incentives to locate in their states.
          One more thing, Apple have opened multiple manufacturing plants across several states. Opening one in Arizona does not preclude them from opening another one in a neighboring state.
          Based on your two previous posts, I imagine because I don’t know, that you are one the old fashioned individuals who would needed a word from the governor in order to see the light?

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