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Subaru incentive deal announced ahead of state board vote

October 4, 2015

Indiana's business recruitment agency announced nearly $8 million of incentives last month for Subaru's planned major expansion of its Lafayette factory even though it will be months before the agency's board considers approving the deal.

The Indiana Economic Development Corp. said the tax credits and training grants have been offered to Subaru toward the company's $140 million project to boost vehicle production in Lafayette and add up to 1,200 jobs over the next two years.

The agency's board has a policy requiring all incentive packages of $3 million or more to be presented to the full board for approval, WTHR-TV reported.

Chris Cotterill, the agency's executive vice president, said he expected the board to vote on the package during its next meeting in December and that it isn't unusual for deals to be announced ahead of board action.

"More often than not, companies make an announcement after the board has given approval. But it can happen the other way, too," Cotterill said.

Greg LeRoy, director of the Washington-based economic development watchdog group Good Jobs First, said the Indiana agency's actions make it appear board approval is taken for granted.

"That suggests the board is rubber-stamping the staff's work and begs the issue of the board's actual oversight and authority," LeRoy said.

Republican Gov. Mike Pence is automatically the IEDC board's chairman under state law, and the governor appoints the nine other board members.

Subaru officials know that the state incentive package hasn't yet received final approval, although they expect that will happen at the board's next meeting, said Tom Easterday, Subaru of Indiana's senior vice president.

The company also considered Mexico for its expansion plans because of lower labor costs, but was swayed by the Lafayette factory's existing infrastructure, proximity to suppliers and the tax breaks, Easterday said.

"State incentives always play a role in helping to level the playing field," he said.

The expansion project is expected to boost production capacity by 100,000 vehicles a year from the current 300,000 at the Lafayette factory, which is Subaru's only assembly factory outside Japan. About 3,800 people now work at the factory that opened in 1989.

Former Republican Lt. Gov. John Mutz, who is a IEDC board member, said he was briefed over the summer by the agency's staff about the Subaru incentives and that the board's policy committee, of which he is chairman, discussed the package during a September closed-door meeting.

"I have every reason in the world to believe the board will approve it," Mutz said. "We'd be nuts not to in this case."

Mutz said he and other board members wouldn't approve financial incentives for a bad deal — even one already announced by the agency.

"If there was something I saw that I saw as a problem, I'd bring it up," he said. "But it's important to keep in mind, we have to be cognizant of how companies do business, and they don't always make their announcements around the schedule of our board meetings."

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