Marketplace is a public service newsroom powered by you. Give Now

States clamor to be home to Northrop

John Dimsdale Apr 9, 2010

States clamor to be home to Northrop

John Dimsdale Apr 9, 2010


Bill Radke: After 70 years in Los Angeles, defense contractor Northrop Grumman wants to move headquarters closer to its biggest customer, the federal government. But where to move exactly? Maryland, Virginia, D.C. — they’re all making a pitch, as Marketplace’s John Dimsdale reports.

John Dimsdale: No one’s confirming anything, but each local government is said to be dangling a package worth $20 [million] to $30 million to win Northrop. That includes property tax breaks and even paying moving expenses. The three districts covet the money Northrop’s 250 well-paid executives will bring — the houses they’ll buy and the sales taxes they’ll pay.

Matt Erskine: The cachet of a major corporate headquarters is a huge win.

Matt Erskine is with the Greater Washington Initiative:

Erskine: It creates a multiplier effect in terms of this region’s attractiveness to other businesses.

But with governments trying to cope with serious budget shortfalls, some locals wonder whether paying companies millions to relocate is worth it.

Charlie Cray with the Center for Corporate Policy says it’s become a corporate welfare arms race:

Charlie Cray: For a company that profited off of taxpayers to the tune of $1.7 billion last year alone, do we really want to subsidize them out of the budgets of communities that are suffering health cutbacks, education cutbacks?

Big corporate relocations are rare. Nine years ago, Chicago won Boeing’s headquarters with a $61 million bid. I asked University of Chicago economics professor Allen Samuelson whether getting the company to move from Seattle was worth it:

Allen Samuelson: No, not really. Could we have spent the $61 million on something else that would have had a higher payoff for the city, even if it’s hiring more police or improving the schools or planting trees or whatever? I think the analysis would suggest it wasn’t a particularly good investment.

But governments are starting to demand that companies deliver something in return, says Matt Erskine. Things like new jobs or buildings.

Erskine: So that if the performance measures aren’t met by the company, there are clawback provisions to be able to take back the incentive money if the agreement isn’t fulfilled.

The winning bid should be announced soon.

In Washington, I’m John Dimsdale for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.