Longform

Sumitomo Wrestling

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Muckamucks from both Intel and Motorola, two of Sumitomo's biggest customers, also lobbied on Arizona's behalf. And powerhouse Valley development lawyer Grady Gammage Jr., who owns a substantial stake in the development where the plant is slated to go up, is said to have done his share of behind-the-scenes flesh-pressing.

The usual lineup of official economic-development types did their best to court the company, too. The Arizona Department of Commerce, Phoenix's Community and Economic Development Council, the state Land Department and the Greater Phoenix Economic Council all went to work convincing Sumitomo to come to the Valley.

Despite officials' claims to the contrary, it was probably not the money that brought Sumitomo here, after all. Large corporations rarely make incentives their first priority when picking a site; factors such as market access, quality of life, labor costs and the local regulatory environment figure much more prominently in their thinking, according to recent surveys of corporations.

And Sumitomo executives have admitted that their decision to move here was prompted by more than just money. The relative inflexibility of environmental laws in Oregon, the company's first site choice, had a lot to do with the decision, they say. So did the approach of the bad-weather season there, which would have delayed construction.

Even so, Phoenix and Arizona offered quite an economic bonanza to Sumitomo-Sitix Corporation, the subsidiary that will actually produce silicon wafers here. Here's how the deal stacks up:

The city will pitch in $8 million in infrastructure improvements--streets, water and sewer lines--leading to the plant's 105-acre site near Tatum Boulevard and Union Hills Drive. City officials say the improvements would have been needed anyway, and their installation was simply accelerated.

That claim, however, seems to be disputed in a July 21 letter to deputy city manager David Garcia from the city's Water Services Department.

The letter, attached to a list of improvements needed at the site, reads in part, "Please note that revised ... water and sewer demands provided by Sumitomo are considerably higher than the numbers used previously to estimate infrastructure requirements."

Bing Brown, a spokesman for the city's Water Services Department, says the letter simply refers to requirements that increased sooner than anticipated, and that the same capacity would ultimately have been needed in the area--if not at the plant site--regardless of whether Sumitomo developed there.

The city also promised to sponsor Sumitomo's application to create a free-trade subzone at the site. If the federal government approves the application, Sumitomo will not pay any duty on goods shipped into or out of the country. Sumitomo executives say they don't know how much money that will save the company. Because the factory will be outfitted with extremely pricey manufacturing equipment from Japan, though, the savings promise to add up to a bundle.

Still, those benefits are not the frosting on this cake.
Approval of the free-trade subzone--which is almost assured--would also mean that the company's annual property taxes will be slashed by about 80 percent--from $13.7 million to $2.7 million.

It is this incentive--perhaps more than any other aspect of the deal--that has riled taxpayers and businesspeople alike. Over the 99-year life of the lease, Sumitomo will receive direct property-tax subsidies of about $1.1 billion. Assuming a 6.5 percent interest rate, the total value of those savings at the end of a 99-year lease of state land to Sumitomo would be roughly $86 billion.

Chris Estes, a local activist who sits on the planning board in the neighborhood where Sumitomo's factory will be built, says forking over that much money to one of the world's biggest companies is absurd.

"We're paying for everything," he says. "Once again, we have the little guy bearing the burden for a giant corporation. Small-business owners should be outraged.

"The average taxpayer will have to make up the difference."
The state did its share to lure the company here, too. The Arizona Department of Commerce offered about $450,000 in state job-training funds to the company--in effect, offering money to the world's largest silicon-wafer manufacturer to teach people how to make silicon wafers. Also, the department has offered the company help in obtaining a $100,000 grant for infrastructure improvements at the site.

The state Land Department got into the act, as well, putting together a package to lease the state-owned site in record time--despite that, for months, neither Phoenix nor other state agencies would tell the Land Department whom it was preparing the lease for.

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Dave Plank