Weekly Wire
Weekly Alibi Trashing Time

News Magazine Errs In Criticizing Intel, Economist Says.

By Christopher Johnson

NOVEMBER 16, 1998:  New Mexico State Department of Labor economist Gerry Bradley probably didn't take too long to throw his Nov. 9 edition of Time magazine in the garbage. Bradley thinks that a Time story characterizing as corporate welfare the tax incentives that Rio Rancho and Sandoval County offered Intel Corp. to build its Rio Rancho computer chip plant is, well, garbage.

The story, Bradley said, fails to recognize the high wages and nearly 6,000 jobs that Intel has brought to the area and the void those jobs are filling as high-tech federal government jobs become a smaller part of New Mexico's job base.

"I think the articles were trash," Bradley said. "What Time magazine sneeringly calls corporate welfare is what we call attracting our best private sector employers. When people say it is corporate welfare, I say, 'What is the alternative to bringing high-paying private sector jobs to the state of New Mexico?'"

Intel and Rio Rancho were mentioned in stories about what Time said was its 18-month investigation into corporate welfare. The articles suggested that tax breaks communities give to big corporations are nothing but a way of subsidizing jobs. The articles said that communities give away more money in tax breaks than the jobs pay and are worth.

Page 47 of the magazine said that the $10 billion in industrial revenue bonds that Intel got from Sandoval County in 1993 and 1995 were the "largest local-government bond offering in history."

Tax breaks and other incentives that Sandoval County offered Intel amount to a third of a billion dollars in public giveaways to the world's largest computer chip manufacturer, the articles said.

But Bradley and Intel spokesman Terry McDermott said the articles failed to mention what Intel has brought to the Albuquerque area. The two say the omissions are huge.

For instance, Intel employs nearly 6,000 people and has a yearly payroll of $250 million at its Rio Rancho plant, McDermott said. The company pays $40 million a year in state income taxes, donated $30 million to build Rio Rancho High School, bought $150 million worth of local goods and services in 1997 and has created more than 10,000 spin-off jobs by its presence here, McDermott said. Additionally, according to McDermott, Intel's employees performed more than 24,000 hours of volunteer service to the community in 1997 and pledged $383,000 to United Way.

"They did not go into depth to find out all of the good things that Intel does," McDermott said. "It is Intel's belief that IRB arrangement with Sandoval County was and will continue to be a good deal for New Mexicans."

The jobs that Intel has brought to the area, McDermott and Bradley added, generally pay from $30,000 to $35,000, far more than the average, $23,700 annual private sector job wage here.

"Those are above-average wage jobs for the area," McDermott said.

Time said that based on its review of income tax data, Intel has failed to boost the average wage in New Mexico. In the years before Intel's expansion, wages grew at a rate of 6.6 percent rate, Time said. However, four years after the expansion, wages have increased by 6.8 percent, the article said.

Bradley suggested that wage stagnation could be due to the layoffs and downsizing at the state's national laboratories, especially at Los Alamos National Labs. Lab jobs tend to be high-tech and high-paying, Bradley said.

McDermott also said that the Time articles might have given (improperly) the impression that local governments and taxpayers are paying off the $10 billion in IRBs. That's just not the case, McDermott said. Intel is paying back the $10 billion out of its earnings.

Industrial Revenue Bonds, or IRBs as they're called, work like this:

The local government puts its name to the bonds so the company getting them can take advantage of the government's tax-exempt status. The bonds are sold and the company uses the money from the sales to build plants and buy equipment. The company gets sales and property tax breaks for a specified number of years. It is the company, and not the taxpayers, that pays off the bonds.

"Some people are under the misconception that Sandoval County gave us that money in cash," McDermott said. "It could be mistakenly construed that Sandoval County gave companies money to come here."

Bradley said it is especially important that Intel's high-paying jobs are here because of the decreasing role the federal government's high-tech jobs are playing in the state's economy.

For instance, in 1987, just before the end of the Cold War, the federal government accounted for 5.7 percent of the state's jobs, Bradley said. In 1997, the federal government's share of the state's jobs had decreased to 4.3 percent.

Bradley also blasted those who say that companies like Intel bring low-paying jobs to the state.

"I'm a very big booster of the high-tech people," Bradley said. "People who say they are coming here for low wages are flat wrong. That is not happening. They are coming here and raising the wage level. They have put strong upward pressure on wages."

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