Why you won’t see any New Mexico-style clawback in Arizona
Economic development officials in New Mexico are scrambling to claw back more than $1 million in economic incentives from Google paid from its closing fund.
“Clawback” is the term used when a public agency seeks to recover all or portions of economic incentives it paid to a recruited company if the company closes or relocates.
Google announced that it was closing its Titan Aerospace drone R&D company and moving it to the Bay Area. New Mexico paid out $1 million for the town of Moriarty to develop infrastructure and an unstated amount in workforce development training. The company had grown to 45 employees and was a significant employer around the Moriarty airport near Albuquerque.
If Google had acquired the company in Arizona and decided to move out of state, neither the state nor local agencies would be out a nickel in the deal.
Arizona sets up its incentives as reimbursements for companies after milestones are achieved. The Arizona Commerce Authority makes an investment in companies based on a return on investment. As companies hit milestones for numbers of jobs, capital investment and other factors, the agreed upon incentives are then paid out after the fact.
The ROI approach is the reason Arizona had no loss in the multimillion-dollar bankruptcy of GT Advanced Technologies and other companies that moved, closed or didn’t perform economically.
Economic incentives and closing funds are negotiated when companies look to locate or expand facilities in a particular city. The closing funds, in particular, are used to make a relocation fit economic parameters of a company and put “the deal” on par with other states. The incentives are usually amortized over a multi-year period, sometimes as long as ten years.
Since Arizona pays out only after the milestones are achieved, it is unlikely to ever have to think in terms of a clawback.
