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 TIME CNN/AllPolitics CNN/AllPolitics with Congressional Quarterly

Arizona: What's that rotten smell in phoenix?

TIME magazine

It's not always easy being part of the global economy. It's especially not easy when your city offers corporate welfare to an overseas company to come in and pollute your neighborhood.

That's what happened last year, when Phoenix bent over backward to attract a silicon-wafer plant operated by Sumitomo Sitix of Japan. Ever since, complaints have rolled in from frantic residents. Complaints about the brownish plumes drifting from the plant smokestack, the rotten-egg odor that perfumes the neighborhood, the 10,000-gal. acid spill, the use of toxic chemicals in a residential area.

Maricopa County authorities responded by levying a $300,000 fine on the plant. Only $120,000 of that was a penalty. The company was asked to spend the other $180,000 trying to eliminate the rotten-egg odor and monitor the plant.

The company is part of the giant Japanese Sumitomo Group, which had annual revenues in 1997 of more than $120 billion--more than all but a handful of American companies. As for the $120,000, that worked out to about one-tenth of 1% of the enticements the company was given to move to Phoenix in the first place--an assortment of tax breaks, city services and other deals awarded by the city and state.

For the first five years, Sumitomo is paying $59,000 to rent the 105-acre site from the state. That works out to $562 an acre. Later, the rent rises to $2,048 an acre. Not bad for an area where an acre sells for $80,000 to $100,000.

In addition, the city of Phoenix came up with $7 million for water, sewer and street improvements. It also sponsored the company's application to have the plant site designated a foreign-trade zone by the U.S. Department of Commerce. That saved the company $4 million in local taxes in 1998 alone. That number could hit $10 million a year when the plant reaches full capacity.

Foreign-trade zones were created in 1934 "to create employment [that] might otherwise have been carried on abroad." But Sumitomo had already decided to build a U.S. facility in 1995; the only question was where.

How did all this come about?

With great stealth.

A "confidential memorandum" prepared in June 1995 by the Greater Phoenix Economic Council cautioned, "The company has made it very clear that it wants no more news stories in Arizona publications, and has asked us to assign a code name for the project."

And then there was the letter from the city assuring Sumitomo that the company would remain anonymous during the rezoning process. It read, "Sumitomo...will not need to participate in the rezoning process and will not be identified."

All that was in keeping with the tone set by then Governor Fife Symington in a two-page letter to Sumitomo in May 1995. The Governor assured the company that promised reduced real estate and other taxes would "have no mandated expiration date" and that acquisition of the site would be handled "expeditiously." "Our state," he promised, will be "your partner."

Two years later, Symington resigned from office, convicted of bank- and wire-fraud charges unrelated to Sumitomo, after he submitted false financial statements to secure millions of dollars in loans as his real estate empire was collapsing.

Today, Symington is free on appeal of a 30-month prison sentence. And parts of Phoenix still smell like a rotten egg.


Cover Date: November 23, 1998

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