Three States Called Upon to Reclaim T-Mobile Subsidies

Three States Called Upon to Reclaim T-Mobile Subsidies
April 30, 2012

Phil Britt

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois. (read full bio)

Good Jobs First, a national resource center on economic development accountability, has called on officials in Kansas, Oregon, and Texas to explore all possibilities for recapturing taxpayer subsidies awarded to T-Mobile call centers the company has announced will be shut down in those states, putting several thousand employees out of work.

T-Mobile, the nation’s largest telecommunications company, has been struggling financially to the extent its owner, Deutsche Telekom, sought to sell the company to AT&T. The $39 billion deal was scotched by the Federal Communications Commission and the Department of Justice, however, partially over concerns, ironically, the merger would negatively impact jobs. The millions of dollars in taxpayer subsidies granted T-Mobile have angered Good Jobs First because of the company’s reneged promises it would provide long-term jobs.

“Subsidized companies that destroy jobs must compensate taxpayers,” said Good Jobs First Executive Director Greg LeRoy. “The days are gone when firms could take the money and later shut down operations with no consequences.”

3,300 Jobs Eliminated
Good Jobs First reports a total of $14.2 million in state and local subsidies were allocated at four of the locations now slated for closing: Brownsville, Texas, $5.3 million in subsidies; Frisco, Texas, $3.7 million; Lenexa, Kansas, $3.9 million; and Redmond, Oregon, $1.3 million.

T-Mobile had a choice, LeRoy says: “T-Mobile USA could have kept these jobs in the United States, many funded by U.S. taxpayer dollars, and instead shut down its operations in the Philippines and Honduras, where the company has sent more than 6,000 jobs. Instead, the jobs of 3,300 U.S. workers have been eliminated.”

The issue goes beyond Kansas, Oregon, and Texas, according to Andrew Schrage, co-owner of Money Crashers Personal Finance in Boston, Massachusetts. “Call centers in Maine received more than $7 million in tax breaks and government assistance, and according to local union groups they cut about 300 jobs late last year,” he said.

Whether these organizations should have received the funds to begin with is debatable, Schrage added. “The pros and cons are similar to those of the economic stimulus plan over the past couple of years,” he said. “In this situation, I don’t recall hearing anything about the cell-phone industry being hit hard by the recession, so I doubt that the funds were truly necessary.”

Empty Promises
Schrage says this disappointment of expectations is common.

“It's important to examine the statistics regarding government subsidies and job creation. A 2007 study examined 25 companies in Wisconsin that received roughly $80 million in government subsidies. The actual number of jobs they created as a result of the subsidies fell short of their stated goal by a whopping 40 percent, which is a telling statistic as to the viability of government subsidies in general,” he said.

“When you look at all the extenuating circumstances regarding T-Mobile, the company most certainly should pay that money back with interest,” he added. “It’s nothing short of corporate hubris that T-Mobile is eliminating domestic jobs while keeping international call centers afloat.”

‘You’re Screwed’
Schrage says the entire verification and follow-up process regarding government subsidies and promised job creation is lacking. “A responsible federal agency would be one that is devoted to holding corporations to their word when they accept government funding. If they fall short of their goal for job creation, a prorated amount of the subsidy should be paid back,” he said.

“Also, stronger and more specific language needs to be included in these subsidy agreements so the taxpayers know exactly what they are supposed to get in return for the investment of public funds,” Schrage added. “Lastly, these government agencies hold significant responsibility for these issues as well. That is, before any money was ever disbursed, they should have done greater due diligence to decide whether what they were requesting in job creation was actually feasible. An empty promise holds no value.”

Shel Horowitz, author of Guerrilla Marketing Goes Green and several other books on business and business ethics, said via email, “Using free-market principles, the real question is what was the contract and is T-Mobile violating it. If ‘yes,’ certainly the governments should be seeking reparations. I find it very disturbing when two parties enter into a contract, and the one says, ‘Oh, sorry, we didn't really mean it, you're screwed.’”

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois.

Phil Britt

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois. (read full bio)