Capitol Beat OK

Dell retrenches, but ranks among highest Quality Jobs recipients

Dell Computer Co. has received Oklahoma’s third highest total of Quality Jobs Program cash since 2005– $19 million — despite posting a net job loss of almost 500 since its 2004 Oklahoma arrival, Oklahoma Tax Commission records show.

It was bested only by Tinker Air Force Base’s Air Logistics Center and ConocoPhillips, which received $36.9 million and $21 million respectively for the same six-year period.

The Air Logistics Center and ConocoPhillips both achieved net increases in new jobs, the report shows.

Dell’s Quality Jobs companies beat out such firms as Chesapeake Energy Corp., Bank of Oklahoma, Devon Energy, Hertz Corp, the Oklahoma City Thunder, York International, IBM, Wiltel Communications, (of Tulsa’s Williams Cos.) U.S. Cellular Corp., Prepaid Legal Services Inc., Halliburton Energy and Sandridge Energy Corporation. 

If a business can sustain a new jobs payroll of at least $2.5 million, the state refunds at least 5 percent of its payroll taxes in cash.

Companies max out of the program in 10 years unless they form another legal entity creating new jobs, said Oklahoma Department of Commerce Program Director Richard Schwalbach. He said creation of multiple legal entities is allowable under program guidelines and can extend Quality Jobs cash reimbursements.

The Commerce Department administers the program. The agency requires monthly jobs reports of program participants so it can immediately cut off or increase cash reimbursements based on actual payroll taxes the companies paid that month.

Dell’s primary operation was to receive money based on creation of 2,000 jobs. However, Dell received its peak payment of $4.5 million in 2008 – the same year layoffs began, tax commission records show.

A company does not have to repay Quality Jobs money if it lays off or reduces its workforce, or closes its operation, said Schwalbach.

“There is a feeling on the part of some people that if a company in Oklahoma receives incentive money, that we should be vindictive if they leave,” he said. “Our standpoint at the Department of Commerce is, why the hell would they want to come here, and then have somebody come back at them [for repayment].”

He said that would damage economic development efforts to attract industry to the Sooner State.

“They’ve gotta live, … they’ve gotta breathe, … they can’t operate in a vacuum. A lot of times companies consolidate. You take your success and you take your lumps and you move on.”

Dell’s total employment of its original Oklahoma operation, Dell USA #1, stood at 1,078 by the 2011 fourth quarter, down from over 2,000 in 2005. Dell USA #2 has so far recaptured 448 of the jobs lost by the Dell USA #1. 

Starting in 2006, it also began collecting Quality Jobs Cash and will extend payments a year. The second legal entity went a long way toward helping Dell reach that $19 million mark because the company reported the jobs were more highly paid, triggering higher cash rebates per job.

Dell – and any other company meeting critera – can create additional legal entities if it reports it is creating new jobs, officials say. 

News reports indicate the OKC Dell jobs have included sales workers, managerial positions, computer professionals and call center employees.

The Oklahoma City Council sweetened Dell’s incentives with creation of a Tax Increment Financing District, which, for an extended period of time, relieves a company of certain property and sales taxes to help develop its new campus.

Dell’s TIF district was designed to relieve it of $250,000 to $1.5 million in sales and property taxes annually because it located in a blighted area, 3501 SW 15 St. The TIF assistance could be lengthy. City officials reported they might need to float up to $30 million in bonds which might help fund the rest of the commitment for the 120-acre campus and 120,000-square-foot building. 

The state also paid for training Dell’s new employees through its CareerTech Training for Industry Program, news reports said.

But Dell has been in a major retrenchment mode according to company founder Michael Dell’s reports to shareholders. 

From 2008 to 2010, corporate revenues fell from $61 billion to $52.9 billion.

Since 2008, Dell has shuttered its flagship Austin manufacturing plant, laying off 8,800 workers; and closed its Ottawa (Canada) call center, eliminating 1,200 workers. It also in 2010 slashed its Tennessee and North Carolina workforces, but refused to cite numbers.

The Quality Jobs Program paid $60 million to companies in 2011, show state tax commission records.

Over the past 19 years, Quality Jobs Act officials say it is among Oklahoma’s most powerful jobs incentive programs, and has paid out over $700 million to participating companies.