Just posing the question of whether ConAgra Foods could move its headquarters from Omaha is enough to infuriate some people who were here in the 1980s, when the state passed generous tax and economic incentives to get the company to stay.
“I think Omaha and Nebraska have been darn good to ConAgra,” said Don Leuenberger, who served as Nebraska tax commissioner back when ConAgra was demanding big concessions or else. “If it comes down to a coin toss, I think we should get the benefit of the doubt.”
ConAgra’s gambit worked. In 1987 the state approved its first-aid package consisting of financial incentives for businesses, tax credits and other benefits. The Legislature had passed the measure after Omaha-based ConAgra threatened to leave for Tennessee, where such corporate incentives were pioneered and often practiced.
Fast forward to now, and ConAgra is a laggard in its industry whose chief executive is slashing expenses and selling off parts of the company.
That at least puts a question mark on the company’s future in the Omaha area, where it employs about 3,000 people. And that disappoints the government and elected officials who implemented and passed the state’s first corporate incentive laws, which came into being only after ConAgra’s threats to leave.
They hope if the decision is a close one on whether to remain in Omaha or not that the city and state get the benefit of the doubt.
“I hope it comes down to being about more than every penny and nickel,” said Don Wesely, a former Nebraska senator who argued against the incentives but ultimately voted for them.
“When the moment of truth came, even people like me who were skeptical supported them. At their moment of truth, I hope they remember that,” said Wesely, who later served as Lincoln’s mayor.
Pennies and nickels were important to ConAgra back in 1987. The company’s threats to leave its home came after a University of Nebraska-Lincoln study that said the packaged foods company could save $7.2 million annually by moving to a state, such as Tennessee, with an advanced system of incentives. At the time, $7.2 million represented 7 percent of the company’s profit for the 12 months that ended in September 1986, and less than 1 percent of revenue.
Leuenberger, the Nebraska tax commissioner at the time, was responsible for implementing the tax-credit programs that cut or eliminated state income tax for companies that applied for the benefits and were approved. He said the state was in trouble at the time, suffering the double whammy of a national recession and depressed corn and soybean prices.
Something, he said, had to be done to insulate Nebraska from the buffeting winds of global commodity prices, and retaining large employers in diversified industries was seen as the way.
All told, Legislative Bill 775 and related legislation granted generous benefits to companies that met certain qualifications, such as for hiring enough people or making a large capital investment. Among other things, the legislation:
» Authorized corporate tax credits for capital investment and job creation, along with exemptions on property taxes and equipment that included company computers and corporate jets.
» Reduced the personal income tax on the wealthy, which would include top business executives, by about 30 percent.
» Eliminated capital gains taxes on income from the sale of stock issued by a taxpayer’s employer; top corporate executives of publicly traded companies are typically large shareholders. Gains from the sale of ConAgra shares earned by company executives were thus exempted from state income tax.
ConAgra did not respond to requests for information on the dollar value of tax credits and other incentives it has applied for and been approved for over the years. Such information is not publicly available, with confidentiality for applicants guaranteed as part of the legislation. LB 775 and related laws have since been superseded by more recent business-incentive legislation.
Vard Johnson, the former Nebraska senator who served as chairman of the Legislature’s Revenue Committee, said he found himself advocating corporate welfare against his better judgment when ConAgra came calling for public aid. But he, too, saw the recession and moribund farm economy.
“I am a conservative Nebraskan myself,” said Johnson, who introduced the incentive legislation. “I swallowed my pride and resentment for them. I was offended by having to deal with the ConAgras of the world.”
But deal he did. Johnson, now 77 and living near Boston, said there were entire Nebraska towns that were depopulating as farm income and land values plummeted. Some small high schools, he said, were in danger of eventually not having graduating classes.
And ConAgra shouldn’t forget what the people, through their elected representatives, did.
“We should expect loyalty for standing by ConAgra,” Johnson said. “They owe us a debt of loyalty.”
But the fact is, no one should expect the board of ConAgra to look out for Nebraska the way Nebraska has looked out for ConAgra.
That’s because board members — the shareholder-elected directors at publicly traded companies who approve or disallow major management initiatives — have no obligation to Omaha or Nebraska.
Tax breaks and incentives or not, the regulations of the Securities and Exchange Commission require them to watch out for one thing and one thing only: the financial well-being of the company and, by extension, the shareholders who elected them.
“A board’s responsibility is to ensure the financial health of the company,” said Elaine Eisenman, dean of executive education at Boston’s Babson College and an expert on board governance and composition. “They are answerable to shareholders. These aren’t optional decisions. It’s the law, basically.”
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Correction: An earlier headline on this story stated that Omaha passed the corporate incentive lawns. The State of Nebraska passed the laws.