Location Bidding
United Airlines announced its competition to select a town for a new billion –dollar aircraft-repair base. The bidding for the prize of 7,500 jobs paying at least $25 per hour was fast and furious, with Orlando offering $154 million in incentives and Denver more than twice that amount. Kentucky’s governor angrily rescinded Louisville’s offer of $300 million, likening the bidding to “squeezing every drop of blood out of a turnip.”
When United finally selected, from among the 93 cities bidding on the base, the winner was Indianapolis and its $310 million offer of taxpayer’s money. But in 2003, with United near bankruptcy, and having fulfilled is legal obligation, the company walked away from the massive center. This left the city and state governments out all that money, with no new tenant in sight. The city now even owns the tools, neatly arranged in each of the 12 elaborately equipped hangar bays. United outsourced its maintenance to mechanics and a Southern firm, which pays a third of what United gave out in salary and benefits in Indianapolis.
What are the ethical, legal and economic implications of such location bidding wars? Who pays for such giveaways? Are local citizens allowed to vote on offers made by their cities, counties, or state? Should there be limits on these incentives?
Location Bidding
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Institution
United Airlines and Indianapolis situation are unfortunate as far as the financial state of the company and the economic set-up o the town are concerned. United Airlines suffered bankruptcy, which is the most lethal factor in the life of any business organization. The negative effects felt by Indianapolis, which include skewed marginal returns on capital, high maintenance costs and under-prioritization of other economically viable options, are part of the collateral damage. The situation should be treated as an economic accident, and none of the parties should be forced to pay for such giveaways (Wiltschko, 2010).
Whereas the local citizen should be empowered to air opinions and exert influence on offers made by their cities, the policymakers, technocrats and economic experts should be allowed to exercise their duties without intervention. Most of the citizens have no economic understanding required in weighing and predicting the viability of opportunities and bids. This is why a balance should be struck to ensure that the economic experts are allowed to exercise their skills and authority freely in economic matters while still engaging the local citizens (Anderso...