Wednesday, January 27, 2016

GE Relocates to Boston and Collects Millions

By Jim Vaughan, Senior Fellow
Did Owen tip the scales for Boston in the competition for General Electric’s new headquarters?

Owen is the geeky young programmer featured in the self-deprecating advertising campaign promoting GE as a 21st century digital industrial company.

In the ads, when Owen says he will be “writing a new language for machines so trains, planes, even hospitals can work better together,” his classmates respond with condolences and baffled stares. Such is the challenge when you’re trying to transform a company that traces its history back to Thomas Edison and the first light bulb into a “digital industrial company.”

In reality, engineers, coders, programmers and designers are increasingly the jobs GE is trying to fill —“building the software and analytics to bring together the power of machines, big data and people”—and that makes Boston, with 55 colleges and universities, a preferred location.

Plus Massachusetts spends more on research & development than any other region in the world, and Boston attracts a diverse, technologically-fluent workforce focused on solving challenges for the world.

“We want to be at the center of an ecosystem that shares our aspirations,” said CEO Jeff Immelt. So the 123-year-old company is moving from its 1970s corporate campus in Fairfield, Conn. to “the dynamic and creative city of Boston.”

It’s a good bet that Owen and the millennials he represents are more likely to be found in or attracted to Boston’s Seaport District—a dense, vibrant, walkable city center—than to suburban Connecticut. So look for GE to be more competitive for top talent.

But in spite of all of the reasons that made Boston GE’s top choice, GE sought and will receive incentives and subsidies from Boston and the Commonwealth of Massachusetts to the tune of $145 million! This to a company that is valued at more than $250 billion.

Boston recently landed another headquarters facility. Silicon Valley software design giant Autodesk is moving its architecture, engineering and construction division from Waltham, Mass. to a new location in the Seaport District. 

Autodesk is a smaller company—No. 862 on the Fortune 1000 while GE is No. 8—and it’s bringing 170 jobs against 800 for GE. But landing Autodesk was a good deal for Boston.

According to Boston officials, Autodesk is not receiving any incentives to move to the city.

In a CityLab column from The Atlantic, Richard Florida concluded, “The reality is that these incentives are a drop in the bucket for a company like GE. In fact, GE turned down reportedly bigger incentive packages from states like New York. Ultimately, all these incentives really do is take money out of the pockets of Boston and Massachusetts taxpayers—money that could and should be used to reduce poverty and improve education in the city and state’s many disadvantaged neighborhoods.

“Perhaps it’s finally time for the federal government to step in and stop the incentive madness. In the meantime, GE could always do the right thing and give the taxpayers back their money. For a company that wants to be seen as both cutting-edge and a good corporate citizen, such a move would set an important precedent.”

I’m with Florida on this one.