<font color=purple>Even a GOP Governor may find it necessary to raise taxes.<font color=black>
**************************************************
Alabama governor pushes tax increase to attract businesses, 7E7
By David Postman
Seattle Times chief political reporter
HUNTSVILLE, Ala. — Gov. Bob Riley has an economic-development plan with a twist. He wants to attract business with the largest tax increase in state history.
"It's a very pro-business tax proposal," he said of his $1.2 billion plan. That's twice as much as needed to balance the current budget.
He says businesses won't move here unless Alabama can climb out of its traditional spot scraping the bottom of national education rankings.
The plan has set off a battle between the bastions of Alabama's old economy — farming and timber — and those who buy the governor's vision for one of the country's poorest and least-educated states, including Mercedes Benz, whose Alabama luxury-SUV assembly line is the jewel in the state's recent history of economic development.
Riley has had some luck convincing Alabama businesses it's time to raise taxes. He even won over what people here call "the big mules," the industrial powers that for years kept a lock on the Legislature and prevented tax increases.
The economic-development pitch is not theoretical. The state is in the midst of trying to woo Boeing to Alabama. Or, to be exact, to add a 7E7 assembly plant to Boeing's space and defense operations that already employ 3,000 people in Huntsville and nearby Decatur.
Bill Smith, a coffee-company executive in Birmingham, is sure Boeing would approve of Riley's plan. "Boeing is a leader in the education-reform movement," he said. "They understand education, they understand what it costs, they understand how it should be structured. They have to look favorably on the things Governor Riley proposes to do."
A history of incentives
It seems counterintuitive. Most other states competing for the Boeing plant are talking about cutting taxes, no place more so than Washington, which approved $3 billion in tax breaks for the company and its suppliers if the plant is built in the state.
Alabama can compete with incentives. It has a 10-year history of generous packages that is giving the state a new industrial base of automobile plants. Mercedes decided in 1993 to build outside Tuscaloosa after being guaranteed $235 million in incentives, including help from a group of Alabama companies, the land for the factory and state-funded worker training.
In 2001, Honda began production at a $400 million plant near Birmingham that was built with $158 million worth of help, also including property, site preparation and training.
Hyundai will open a new plant in 2005, a decision reached after the state "was very devoted by offering us various tax benefits," an executive from the South Korean automaker was quoted as saying.
Those sorts of incentives lead Washington state officials to count Alabama among its toughest competitors for the 7E7 plant.
But Alabama economic-development officials acknowledge their biggest challenge is getting people to give up preconceived notions that the state is backward and barely educated.
Riley, who served six years in Congress before becoming governor, wants to pull the state from its education rut while creating a tax system that raises more from business and less from the poor.
His plan might not cost Boeing anything. As part of an incentives package, Boeing could be exempt from any increases under the governor's plan, said William Killingsworth, director of the Office of Economic Development at the University of Alabama at Huntsville.
Invoking football
"One of the biggest problems I'm having today is convincing Alabamans that we can be world class, we can be the best," Riley said. "I think there is a perception that because we have been 47th, 48th, 49th for so long that if we really concentrate we could move up to the middle of the pack, we could be average. But it doesn't take much for us to assume we could be the best in football. We know we can."
To invoke football shows how serious Riley takes his crusade.
"Coaching Legends Like Riley's Plan," said a headline in the Montgomery Advertiser. The recent endorsement of the former football coaches of Auburn University and the University of Alabama reads like the announcement of a superpower truce.
Bucking his party
The other perplexing thing about Riley's plan is that he's the one proposing it. Riley is a Republican with about the best conservative credentials one could get, including once being named the most conservative member of Congress.
The leadership of his party opposes the tax measure. He has had members of his Cabinet resign over his pro-tax stance.
The tax battle is cast in the largest of scales. Boeing may be the biggest deal in Washington state, or at least on Gov. Gary Locke's agenda. But in Alabama, the tax fight is about what Riley figures is a once-in-his-lifetime chance for a fundamental shift for Alabama.
Smith, the coffee-company executive, said the vote will be the most important one he casts in his life.
One of Riley's first stops on his tour to sell the tax package was to the Huntsville Chamber of Commerce. The city is a bit of an anomaly in Alabama, a high-tech center in the north, near the Tennessee border.
It happened almost by accident, in 1950, when Wernher von Braun and his corps of German rocket scientists were put here by the U.S. government, making Huntsville a rocket-development center that it remains to this day.
The Huntsville area, which boasts a state-of-the-art Boeing rocket plant in Decatur, is considered a potential 7E7 site.
Another is Mobile, to the south, because of its deep-water port on the Gulf of Mexico, airport and rail links.
Riley told the chamber the city is "to a large extent an oasis" amid the state's poverty and stagnant economy. But he hopes it can be a template for modernizing other parts of the state.
"Just a few years ago, no one would ever have dreamed that you could take cotton farmers in north Alabama and build a technology center that is the envy of the rest of the world," Riley said.
"Huntsville is not Alabama. It really isn't," said state Republican Chairman Marty Connors. "Huntsville is a purely federal town. It's all about federal politics and what's going on in Washington and defense spending and a lot of technical people."
'Real' Alabama
Connors says that in the real Alabama, people won't vote for such a massive tax increase.
"To put this in Alabama language, this tax could gag a mule," he said.
To find out what real Alabamans think, he suggests a visitor drive due south, to Arab, with instructions to pronounce it Ay-Rab, so as not to stick out too much.
It takes less than an hour to get to this real Alabama, past Huntsville's four Wal-Marts, across the Tennessee River, past fields of watercress and cotton.
"Proud of our past, Embracing our future," reads the sign at the Arab city limits, reflecting a common Alabama theme that a better future does not mean rejecting the past.
Arab is a town of about 7,000. Its few blocks of downtown seem tired and heavy on pawn shops, but there's a freshly repainted and refurbished diner, "The 50's Corner." There, owner Donna Wood, 40, who has lived in Marshall County all her life, has made the diner her own bit of economic redevelopment.
She says she knows Alabama has a tough time persuading outsiders to bring their businesses to the state.
"They think they're going to still find us running around barefoot in overalls and uneducated," she said. It turns out that Arab's schools have some of the highest test scores in the state.
Yet Wood says, "I don't think we're educating kids as well as we should."
But she's not convinced yet of Riley's plan. The anti-tax feelings run deep.
Connors, the Republican chairman, says that even though many business organizations have endorsed the governor's plan, that doesn't mean individual business owners will follow.
He doesn't see how raising taxes could be good for economic development.
"I don't know of any corporation that's told any of our governors that 'We don't want to locate in Alabama because your taxes are too low,' " he said.
Riley says he had other options. He could have avoided the tax increase by cutting hundreds of millions of dollars from the budget, or proposed raising taxes just enough to balance the current budget.
"Haven't we done too little for too long?" Riley asked the Huntsville chamber. "Haven't we accepted mediocrity for long enough?"
He asks the chamber to envision what the news would be if his plan is rejected.
"I want you to think what the headlines will be in the papers," he said. " 'Class sizes double.' 'Teachers laid off.' 'Alabama did not meet its obligations to the poorest among us.' 'Alabama continues a backwards slide.' "
David Postman: 360-943-9882 or dpostman@seattletimes.com
Copyright © 2003 The Seattle Times Company |
