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The Watchdog: Luring a company with perks can go awry

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Dave Lieber, The Dallas Morning News

When city leaders lure a company like Amazon to town, elected officials sometimes give away the store. What I mean is, they may dangle rebates, tax discounts and other perks the rest of us never get.

Critics call it corporate welfare. Fans say it's smart economic development that allows cities to compete.

More than 200 cities are courting Amazon to host the giant's $5 billion secondary headquarters. With the promise of 50,000 new jobs, perks offered to the online shopping company pile up like packages on a porch.

But what happens when a company doesn't keep its promises of new jobs? What happens when a company uses the process to hopscotch from one city to the next, always looking for a better deal?

Officials are quick to brag when a company accepts a deal and moves into town. There's a happy groundbreaking ceremony. Then, eventually, a ribbon cutting to open a new building. Everybody lives happily ever after, right?

I want to tell you about one company that came to town with great fanfare. But when it left, not much was said. Until now. As The Watchdog will show in this cautionary tale, not every deal has a happy ending.

Meet Maxim

Maxim Integrated Products is a semiconductor manufacturer that moved to Farmers Branch in 2001 when it bought Dallas Semiconductor Corp. and the business campus it owned for about $2.5 billion. Its actual headquarters is in Silicon Valley.

The Lone Star Building in Farmers Branch was built by Maxim, a semiconductor company that sold the building and moved nearby to Addison.The Dallas Morning News
The Lone Star Building in Farmers Branch was built by Maxim, a semiconductor company that sold the building and moved nearby to Addison.
The Dallas Morning News

A decade later, Maxim announced a possible expansion on its campus near Belt Line Road and North Dallas Parkway. More jobs were promised.

Farmers Branch officials worked to keep the company. They offered a package of economic incentives at the city level. These included two types of grants and forgiving all building and development permit fees.

In return, the company promised to retain 800 Farmers Branch jobs with an average yearly wage of $90,000 for five years, create an additional 175 new jobs, spend $2 million to improve existing facilities and make $20 million in capital investments.

At the Dallas County level, commissioners approved a deal that gave Maxim a five-year 50 percent tax abatement on real and business personal property taxes.

After the deal was done, the city agreed with Maxim's request to change the name of the main street through its campus to Maxim Drive.

The groundbreaking on a $22 million "Lone Star Building" was supposed to show the company's commitment to Texas. But even before the 138,000-square foot building was finished, Maxim began shrinking. It started leasing buildings on its 18-acre campus to other companies.

The Lone Star Building ribbon cutting came in 2012. Seven months later the company moved from leasing to selling its buildings.

In 2015, as the city agreement ended, Maxim announced a change of plans. The company would sell its campus and move to leased office space.

Farmers Branch officials didn't see it coming.

"I remember getting the letter saying they were leaving, and everyone was shocked," Farmers Branch economic development director Allison Cook said.

The company waited until the final year of its agreement to make the move.

"They knew what they were doing," she said. "I'm sure it was all planned out, but no one knew it."

This wasn't the first time Maxim pulled this. A similar scenario played out in San Antonio where city and county officials promised the company a bag full of goodies, only to see Maxim eventually pull out of town.

San Antonio recently pulled out of the Amazon competition with top county and city leaders writing to Amazon, "Blindly giving away the farm isn't our style."

In Farmers Branch, the loss threatened the tax rolls. Value-wise, Maxim was the third largest company in town. Other cities jumped in the competition to steal Maxim away. Maxim got to play the game again.

More than $45 billion

Farmers Branch's list of possible giveaways to companies it wants to recruit includes 18 different perks, from grants, to sales tax exemptions and rebates, water and sewer rebates and even promises of DART transit passes.

One expert tells The Watchdog he counted the total value of economic incentives across the U.S. to be $45 billion a year in corporate giveaways. That doesn't include tax increment financing districts, of which Texas has many.

The expert, Timothy J. Bartik of the W.E. Upjohn Institute for Employment Research, says incentives have tripled since 1990. It's the way of the world, but he warns that perks can undermine the long-term tax base of a community.

The key, he says, is to make sure all agreements include claw back provisions so if a company doesn't keep its promises, governments can recoup money. Farmers Branch had that.

Farmers Branch finance director Sherrelle Evans-Jones says, "We looked into that business and I don't find any records that we distributed any incentive funds to Maxim. Perhaps an agreement was signed, but they never met the minimum requirements outlined."

Maxim spokeswoman Ferda Millan tells me the company's Farmers Branch location was underutilized and not cost effective. Moving to a smaller building and leasing space for 300 workers made more sense, she explains.

Better deal sought

What happened next? Several cities competed for Maxim. In what was called the biggest tech office deal in the region last year, Maxim moved a mile away to Addison to a new office building on the Dallas North Tollway, south of Belt Line Road.

The company promised Addison it would create new jobs, make capital investments and pay a high average wage. In return, the city promised a $50,000 cash grant and a business personal property tax reimbursement equal to half of the city's portion of taxes for the next 10 years.

Maxim hasn't asked the city for the cash grant because it didn't meet the requirements, says Orlando Campos, Addison's economic development director.

"In order to make money, you've got to spend money," Campos says of these deals. "We don't give the farm away, but we will provide an enticement to choose our community instead of another."

Meanwhile, Farmers Branch changed the name of Maxim Drive.

Another tech company owns the campus. Welcome to Qorvo Drive.

At least for now.

Staff writer Marina Trahan Martinez contributed to this report.

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