We don’t understand all this Russell Investments economic development mumbo jumbo. But Paul Guppy sure does. Guppy is vice president for research at Seattle-based think tank the Washington Policy Center, and has made a career out of analyzing the economic movements of institutions that are so big and complex that it’s often impossible to see what they’re really doing. We asked our new friend Guppy to take a look at the recently released Tacoma Partnership proposal (thanks for scanning and putting that up for us, Dan). Guppy admits that he hasn’t really followed the drama that has ensued since Tacoma financial management behemoth Russell Investments announced that they might leave town. But he has spent years studying government spending and recently published a report called The Washington State Piglet Book: Connecting the Dots on How the Government Wastes Your Money.



“My first take actually leads me to ask a question,” he says. “Is this a tax shift, or a tax elimination?”



Guppy asks this question because a prominent part of the Tacoma Partnership plan involves phasing out the city’s business and occupation tax for international financial services firms. Russell isn’t Tacoma’s only international financial services firm, but it might as well be when calculating its percentage of the local tax burden. The plan proudly asserts that the elimination represents $16.5 million in tax savings for Russell, on top of $7.5 million in additional B&O tax credits.



What it doesn’t explain is who will pay the difference.



“If one tax payer ends up paying less, it usually means another tax payer ends up paying more,” says Guppy.



What’s even more interesting is Guppy’s assertion that Russell would be crazy to leave Tacoma given the so-called Russell Advantage outlined in the proposal. The Russell Advantage is really the Tacoma Advantage, and represents nearly $134 million worth of savings for Russell, mostly in the form of reduced cost of living for Russell’s employees, lower utility rates and eliminated relocation costs. For a company in the business of managing money, that kind of savings is almost too good to say no to.

“Really, as an obligation to shareholders, they have to say ‘Yes’ to this,” says Guppy. “It seems like Tacoma has several natural advantages. I would question the need for this special package.”



That special package includes tax breaks and investments that benefit Russell to the tune of $39.7 million. It also includes tax deductions for construction of a corporate headquarters thanks to a law signed recently by the governor that provides sales-and-use tax deferrals for companies building a new headquarters in a community empowerment zone — aka downtown Tacoma. That would add up to about $43 million in savings for Russell. Also, city officials, state officials, and Norm Dicks would work to secure $66 million in infrastructure investments to create an international financial services district downtown.



City officials contend that all this investment is worth the cost, insofar as losing Russell would hold devastating consequences for Tacoma’s revitalization. But given Guppy’s assertion that Russell executives would be crazy to leave simply based on Tacoma’s natural cost advantages, locals should consider whether or not to support officials’ financial services spending spree. Guppy points to a similar situation that involved billions of dollars worth of tax breaks and advantages offered to Boeing when it threatened to leave the state. The team that led that charge promised all sorts of economic benefits that would balance the cost of concessions to Boeing. Years later, many of the jobs and dollars promised haven’t materialized, says Guppy.



“This looks like a big giveaway to one narrow interest at the expense of the broader community,” he says.