Analysis: What do you think taxpayers deserve for an investment in a public company – 5%, 10%, 15%? In the world of Wall Street, the return on investment for a large capital expenditure is generally a minimum of 8%. Why would you put shareholder money at risk for anything less?
Well, you the taxpayers– the shareholders of the State of Oklahoma, if you will– should be asking what the expected return on investment is if state leaders give Panasonic $950 million to put a battery plant for electric vehicles in Pryor. That’s apparently the new Panasonic request, upping the previous incentive of $700 million by another $250 million!
I’m all for chasing high-paying jobs but an in-depth financial analysis is still paramount. A great investment bought at too high a price is, in the end, a bad investment.
By this Tulsa financial planner’s calculation, if Panasonic meets its commitment of 3,500 jobs, at an average of $53,000 per job, payroll will be $185,500,000. For Oklahoma tax rates, it is common to use 11.3% to determine resulting tax revenue from income and sales taxes, which in this case yields $20,961,500 per year. It would therefore take Oklahoma 45.32 years to make its money back in tax receipts from the corporate welfare for Panasonic!
Granted, if a massive cottage industry of additional business sprouted in NE Oklahoma as a result of Panasonic, then maybe the huge investment would be worthwhile. But by my count, that would have to result in another 123,624 jobs very fast to recover the investment in 10 years.
Wouldn’t it be better to take $1 billion and give $100,000 grants to 10,000 true Oklahoma companies to help them grow in revenue, scale, and jobs? If each company could just grow ten jobs over five years at $50,000 per year the new payroll would be $5 billion with tax revenue of $565,000,000, and the total investment would be paid for in seven years instead of 50!
Hopefully, state leaders will get a very thorough financial analysis for such a huge giveaway to a public company and then look at how to invest in true Oklahoma companies that will grow jobs that are here to stay.
About the author: Mike Mazzei, CFP®, MPAS®, is the President of Tulsa Wealth Advisors. A Certified Financial Planner professional, and Master Planner Advanced Studies, he created The Financial Freedom Process™ to help individuals leverage their wealth in order to help them achieve their lifetime visions. Mike is a former Oklahoma State Senator (Dist. 25 in Tulsa) & OK Sec. of Budget. He is the proud husband to Noel and father to 5 great kids.