Tuesday, November 14, 2017

Gabbo details

Here's what Governor Edwards and an assembly of VIPs told us yesteray afternoon about the DXC subsidy
About $25 million of the state's estimated $120 million in economic incentives for DXC is being targeted at the local higher education system. The money will go toward grants over five years for faculty, curriculum and other instructional resources linked to DXC.

The state also offered the company $18.7 million in performance-based grants payable over five years, a $2.2 million parking assistance grant and a $1.5 million demolition grant.

DXC will also take part in Louisiana Economic Development's FastStart program, which assists new or relocating companies in ramping up their work force.

The company is also expected to use Louisiana's Quality Jobs Program, which provides up to a 6 percent cash rebate on 80 percent of gross payroll for new direct jobs for up to 10 years. Starting July 1, 2018, the rebate will be available for 100 percent of gross annual payroll. The program also offers a rebate on capital expenditures or a 1.5 percent project facility expense rebate on the total capital investment, excluding tax-exempted items.
That's at the bottom so you have to read all the way past John Bel's and Mitch's and Michael Hecht's bullshit to get to it. None of them has the courage or the basic moral decency.. not that it requires much.. to say what is actually happening.

What is actually happening is the state of Louisiana is using taxpayer money to subsidize the profit-taking operations of a downsizing and outsourcing vector formed from the remnant bits of two other tech companies. DXC was formed this year out of a merger of parts of CSC and HP. Their strategy since that time has involved a series of big "cost-cutting" announcements designed to keep investors interested. These are mostly about slashing pensions, cutting staff, and "consolidating" real estate holdings. They're in New Orleans as part of that strategy.  
DXC, created earlier this year by the combination of CSC and Hewlett Packard Enterprise's Enterprise Service business, has been working to reduce its expenses since the merger.

On a conference call, DXC executives said cost-cutting efforts are proceeding according to plan, including workforce reductions, reducing real estate and facility expenses, and implementing "supply chain efficiencies and consolidations."
"We continue to achieve key merger integration milestones," president and CEO Mike Lawrie said. "We're executing our synergy plan, and we're on track to meet our targets of $1 billion of year-one cost savings, as well as a billion and a half [dollars] of run-rate cost savings exiting the year."

Lawrie said the company cut its costs by $110 million in the quarter, including reducing its workforce by about 4 percent.
The move to New Orleans demonstrates to shareholders an effort is being made to reduce labor costs
But in an earnings call to investors on Nov. 7, DXC chairman president and CEO John Michael Lawrie suggested the company would be opening new facilities in U.S markets where labor costs are lower.
This is accomplished in part because a tech company can afford to pay lower wages here, and in part because of the "incentive package" including a cash payroll rebate from the state.  Also, and this is important, they don't even have to actually ramp all the way up to "2,000 jobs" in New Orleans in order to meet their strategic goals.  All they really have to do is show the shareholders that they are executing a "synergy plan."

In other words, it means as much or more to DXC to announce that they are making this move than it does that they actually make it. It remains to be seen just how committed the company is to bringing "2,000 tech jobs" here. Next year they plan to hire 300.
DXC plans to fill 300 jobs — largely information technology and business positions — in 2018, then ramp up to 2,000 jobs over five years. Its local payroll is expected to exceed $133 million by 2025.
But, really, there's no need for them to go all the way there. The case of IBM's Baton Rouge Client Innovation Center isn't precisely analogous. But it is close enough to note that just because a company is willing to take advantage of your subsidy, this doesn't mean it's going to deliver everything you expect in return.

The DXC case, though, looks especially suspicious. The one thing that might be okay about it is it activates grant funding that can go toward STEM fields at local universities. But even that shouldn't be so tightly tied to corporate "partnership." But really, the primary beneficiaries are DXC and its stockholders. The secondary beneficiaries are our preening political idiots who take credit for "2000 tech jobs" in the face of practically zero critical thinking from our docile and booster-heavy media. The tertiary beneficiaries are probably real estate vampires in New Orleans.

Meanwhile, most New Orleanians, who are not in tech, and aren't going to "learn to code" all of a sudden, are left behind by a high profile economic development effort that basically ignores them. This is materially important but also symbolically important. It sends a signal as to which kinds of citizens the political leadership actually considers a priority. And, of course, our tax burden continues to fall heavily on poor people who disproportionately pay more than anyone through sales taxes, regressive fees, etc. The state is turning around and handing that money to DXC in subsidies. So you get an upward wealth redistribution effect on top of everything else.

In a Guardian op-ed this week about the so-called "Paradise Papers" story, Occupy Wall Street organizer Micah White  reminds us of the importance of thinking globally.
The fundamental lesson of the Panama and Paradise Papers is twofold. First, the people everywhere, regardless of whether they live in Russia or America, are being oppressed by the same minuscule social circle of wealthy elites who unduly control our governments, corporations, universities and culture.

We now know without a doubt – thanks to the incontrovertible evidence provided by the Panama and Paradise Papers – that there is a global plutocracy who employ the same handful of companies to hide their money and share more in common with each other than with the citizens of their countries. This sets the stage for a global social movement.

Second, and most importantly, these leaks indicate that our earth has bifurcated into two separate and unequal worlds: one inhabited by 200,000 ultra high-net-worth individuals and the other by the 7 billion left behind.
It is only when we see the larger context that we understand where we fit into this picture. In this  case the state and city are being used as pawns in, at best, an international downsizing strategy. At worst, they're being used as pawns in a stock primping strategy. Either way, it's at least in part dependent on questionable uses of public money.  And yet we're going spend the rest of the week watching every elected official (and candidate) pat themselves on the back for it mostly to cheering applause.  Be sure and congratulate them when you see them. They worked really hard on this.

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