In this memo the
president ofviva-Tech, a high-tech medical equipment firm, recommends
closing its small assembly plants and centralizing its operations at one location-
in the city of Grandview.To support this
recommendation the president points
out certain attractive demographic features, as well as the town''s willingness to allow
Viva-Tech to operate there without paying
property taxes for the fmt three years.
However, careful scrutiny of the
evidence reveals that it provides little credible support
for the president''s recommendation.
To begin with, the fact that Grandview''s adult population is larger than that of
any other locale under consideration is scant evidence in itself that Grandview
would be the best location for Viva-Tech. Perhaps Grandview''s adult residents are
not skilled to work in the medical equipment industry. Or perhaps a large portion
of its residents are retired. Or perhaps virtually all of its residents are already employed
in jobs that they would be unwilling or unable to leave to work atviva-Tech.
Without considering and eliminating these and other possible reasons why Viva-
Tech might have difficulty finding enough suitable employees in Grandview, the
president cannot rely on the fact that Grandview has a large adult population to
bolster the recommendation.
Furthermore, the fact that the earnings of the average Grandview worker are
comparatively low does not necessarily mean that Viva-Tech could minimize labor
costs by employing Grandview residents, as the president suggests. It is entirely possible
that this low average wage is attributable to a high percentage of jobs requiring
low-level skills. This scenario would be particularly likely if a large portion of
Grandview''s workers are teenagers and college students. In fact, the low average
wage in Grandview is further evidence that Grandview residents do not possess the
sorts of high-tech skills that would command a higher wage and that Viva-Tech might
require among its workforce.
A final problem with the argument involves Grandview''s willingness to forego
payment of property taxes for the first three years. Admittedly, this evidence lends
some measure of support to the recommendation. However, the president ignores
the possibility that other cities under consideration would be willing to make similar
concessions, or provide other equally attractive financial incentives. The president
also overlooks the expense of property taxes over the longer term. Lacking evidence
to the contrary, it is entirely possible that Grandview''s property-tax rates are otherwise
comparatively high, and that in the longer termviva-Tech''s property-tax liability
would be greater in Grandview than in other locales. Until the president accounts for
these two possibilities, I cannot be persuaded that Grandview is the best location for
Viva-Tech from a property-tax standpoint.
In the final analysis, the recommendation ofviva-Tech''s president is not well supported.
To strengthen it the president must provide detailed demographic evidence
showing that a sufficient number of Grandview residents would be able and willing
to work inviva-Tech''s high-tech environment. A proper evaluation of the recommendation
requires more information about Grandview''s property-tax rates vis-a-vis those
of other locales under consideration, and about the willingness of these other municipalities
to provide their own financial or
tax incentives to Viva-Tech.
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