Crony Capitalism

Crony Capitalism: Taxpayers Forced to Fund Virginia Brewery

Government handouts leave a bitter taste.

|

The way public officials acted last week, you would have thought they'd already had a long quaff of Stone Brewing Co.'s strongest. The company's decision to place a brewery in Richmond "really puts Virginia on the map," Gov. Terry McAuliffe enthused.

According to Richmond Mayor Dwight Jones, while Richmond is already "one of the coolest cities … we're about to get a whole lot cooler."

Make no mistake: The announcement that Stone chose Richmond as the site for its first brewery east of the Mississippi is great news. The launch will create almost 300 jobs, generate $74 million worth of investment, and help revitalize a part of the city that has struggled to go from shabby to chic. Cheers and toasts all 'round.

But at the risk of behaving like the skunk at a beer-garden party, we shouldn't let the moment pass without noting that the incentives the brewers will get are substantial. Richmond is issuing $23 million in bonds to build the brewery and an additional $8 million to build the restaurant. Stone also will get a $1.5 million economic development grant and a $500,000 sustainability grant.

McAuliffe—who installed a kegerator with Stone brew in the Executive Mansion—is kicking in $5 million from the Governor's Opportunity Fund, aka the Official Slush Fund of the Commonwealth. No surprise there. Virginia's future governor put his GreenTech Automotive plant in Mississippi because that state offered more of other people's money, and "I have to go, obviously, where they're going to put incentives."

Supposedly, Stone will pay back the debt for the brewery. Details as to how—or if—the other $8 million will get paid back are a little sketchier. The Jones administration has shown less than a robust commitment to transparency. The details about every angle of this deal should be fully disclosed. The public also should receive regular reports about loan repayments. That certainly would be better than learning details later on, in yet another report from City Auditor Umesh Dalal.

Oh, and the Richmond Economic Development Authority will oversee construction of both the brewery and the restaurant. Washington's heavy-handedness has rendered banks gun-shy, but does the city have to act as both the banker and the lead contractor?

When deals like this are struck elsewhere, they're often referred to as crony capitalism. Tea party types point to case studies such as Solyndra to indict the Obama administration for engaging in it. But these days everyone plays the game. Tennessee offered Volkswagen a $274 million package this year. Nevada is giving Tesla more than $1 billion in tax breaks. Boeing got several billion from Washington state.

And by now most people are familiar with the way financially strapped metro areas go deeper into hock to build swanky new stadiums for billion-dollar sports teams and their millionaire owners and players. Often the teams wrangle such deals by threatening to pull up stakes, pitting cities against one another in a bidding war waged with public dollars—dollars the cities almost never recoup.

Reportedly, Stone considered 200 proposals from 20 states. Columbus, Ohio (another finalist city) offered a package that included $3.3 million in tax breaks and similar incentives. Norfolk wouldn't disclose what it offered. A Norfolk spokesman, applying free-market terminology to the circumvention of free-market economics, said doing so would hurt the city's "competitive advantage."

Yet according to a story in last week's Richmond Times-Dispatch, Stone executive Steve Wagner says other factors determined its final decision: water supply, wastewater capacity, and proximity to suppliers. If that's true, then Richmond should have been able to land the brewery without the handouts. It's bad enough to think officials felt they had no choice but to offer Stone public inducements. It's even worse to think the inducements were unnecessary.

The special favors conferred upon Stone must make central Virginia's longtime craft brewers gag. Companies like Legend Brewing Co., Hardywood Park, and Triple Crossing have not always gotten the red-carpet treatment from City Hall themselves. Now they will watch their hard-earned tax dollars help a competitor. If that leaves a bitter taste in their mouths, you could hardly blame them.

After all, craft brewing is one of the great entrepreneurial success stories of the past few decades. For the longest time, America's beer industry was dominated by a few big corporate brewers that produced little but watery swill. By the early 1980s the U.S. had only a few dozen breweries, owned by even fewer companies. It was a dishwater wasteland.

But a few small entrepreneurs who loved good beer thought there might be a market for it. By fits and starts, the craft brewing industry got off the ground. Slowly it grew. Now the U.S. boasts more than 1,500 breweries that lovingly produce everything from sturdy eisbocks to thick, chewy porters that look—but certainly do not taste—like pints of used motor oil.

Stone Brewing is a proud part of that inspiring story. All of which makes it rather too bad that an appropriate inscription over its new brewery might be one of Barack Obama's more infamous lines: "You didn't build that."

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

37 responses to “Crony Capitalism: Taxpayers Forced to Fund Virginia Brewery

  1. NYC Reasonoid Meet-Up!

    Important Update – New Date

    When: Wednesday, 10/22/14, 6:00PM
    Where: Rattle N Hum
    14 E 33rd St
    http://www.rattlenhumbarnyc.com/home

    1. see my comment in MLs

      1. I am around and have lots of free time. Let’s work on it closer to the date.

        1. kewl beans

  2. this will affect my purchasing decisions. Since there is so much variety I can easily avoid stone…too bad too cause I like Arrogant Bastard.

    1. I like AB, and they’ve got some good IPAs, but most of their beers are too smokey for my taste.

    2. Goddammit! I drink Kentucky bourbon or vodka 99% of the time. When I drink beer, I drink Stone. I love Arrogant Bastard, and the IPA. The anniversary brews they make each year are good (especially this year’s). But fuck them for this shit.

      1. I think more of everyone’s disgust should be directed at the politicians. They are the ones that are confiscating and using taxpayer money in this manner, not the capitalists.

        As a capitalist, you’d be foolish to not consider anything/everything that would help you generate a higher return on your capital. If a moron politician comes stumbling through your door with incentives and tax breaks, well, you pull out the chair for him to sit down in.

        The taxpayers, if they don’t like this, can vote the politicians out of office.

        1. Fair enough. But I’d be curious to see who initiated the scheme. Did the pols contact Stone first? Or did Stone contact a politician first? It matters.

          1. Most/all states have some kind of Economic Development bureaucracy that exist to pimp the state and if they are smart (yeah, I know, that’s a stretch…) are keeping an eye out for companies that are seeking to expand/move etc.

            On the other hand, I would bet that it is the companies themselves that seek this out, knowing that these Economic Development bureaucracies exits.

        2. That’s true, but that doesn’t mean it isn’t still kind of slimy to try and beat your competition, not by making a better product, but by playing politics.

          1. It is BOTH that are guilty. Social pressure based upon subjective reasons is a legitimate market force. In theory, if the companies that use the stick over the carrot (rent seekers) see a decline in business due to their actions then it is possible they would decline those incentives to increase their profits. A more immediate example is Uber/Lyft. I will take them out of principle (I used to take Jitneys too) because their product is at least as good AND satisfies my own subjective reasons. Fuck taxis and fuck Stone. If I lived in MS I would add Fuck MS Pols as well.

          2. I don’t disagree at all. I’m just trying to point out that capital follows the path of greatest return. To the extent that it involves rent-seeking they will do it, especially if pols are stumbling over themselves to throw money that isn’t theirs at companies so they can go back to the electorate and say “Look at the jerbz I brought to our state!!”.

            1. frog meet scorpion.

              A truism to be sure but I would like to delude myself into thinking it doesn’t have to be that way.

      2. Goddamnit indeed. Stone is my favorite brewer.

        1. My friend, who relatively recently discovered he is a libertarian went to a Stone Tap Takeover last week. I wonder if I should break his heart and pass along this news.

        2. Victory has recently won me over completely. They make a really nice pilsner on top of thier IPAs, but the recent kicker for me was trying their Oktoberfest. I haven’t generally liked Oktoberfest styles but I found it excellent.

          1. I’ve yet to try a Victory and not like it, except for that skunked pack of Summer Love but I can’t blame that on them. Lagunitas is in that sphere as well, and I’ve had a lot of luck with Left Hand, Southern Tier, and Brooklyn.

            Brooklyn’s Oktoberfest is the best for my money, though I can’t seem to find it anywhere this year. They also make my preferred pumpkin if you’re into that sort of thing.

            1. I’ll look for the Brooklyn Octoberfest and try it. My favorite pumpkins are Shipyard and Harpoon UFO…I’ll try the Brooklyn as well.

              1. Shipyard is fantastic and I also really like the Rogue Farms pumpkin. If you are in Houston at the right time (the right time being yesterday), Saint Arnold makes a pumpkin ale called Pumpkinator that is amazing. Usually sells out in half a day. I managed to get my 3-bottle limit at the gun last night after risking not leaving work early.

    3. Probably fewer non-crony options than you think

      The Olde Meck article is pretty sad. I remember the politicians falling all over themselves courting Sierra Nevada and New Belgium in an attempt to further NC’s high position as a major brewing state in the southeast. Then to learn it was cronyism as usual, and the state can’t even trim away some of the simple red tape, shameful. To literally see your money go to the competition that’s heartbreaking.

  3. I can barely see the words on the page through the thick layer of smug.

    1. Would Smug be best as the name of a microbrew stout, porter, or IPA?

      1. It really depends. I have had some double IPAs that have a heavier feel than some stouts, and some stouts and porters that feel pretty light. I wish I knew all the right lingo.

        1. Does heaviness imply smugness? I would think the pretentiousness of those who drink it would be the defining quality of Smug beer. I think something brewed by Trappist monks should take up the label.

          1. FUCK YOU WITH A HOT POKER!

            I drink WestVlet. I have been there three times. I love Trappist beers. I have neither a beard not wear glasses. A smug hipster I am not. I approach all beer objectively. I even drank some of the swill that was offered up in Moscow.

            As for a Smug beer…it is clearly an IPA. Only true snobs will pucker their entire face on a dry hopped Double IPA and claim they are superior.

            1. QED

              1. grrrr

                I am not smug I am ANGRY at being lumped in with smug assholes. I support all choices in beer even if I don’t personally like them.

                Smug are the assholes that think you MUST drink craft beer. I think (while I personally do not like them) that Mega brewers are pretty good at their job and serve a market. They also accomplish something no craft or home brewer can and that is epic consistency. I also don’t base my opinions on those of others around me. I like Belgian Beers because after extensive research they are the best tasting to me.

                1. I support all choices in beer even if I don’t personally like them.

                  Smug are the assholes that think you MUST drink craft beer. I think that Mega brewers are pretty good at their job and serve a market.

                  This right here. There’s nothing wrong with taking down a pitcher of Miller Lite or Bud while watching football with your buddies, though I prefer to start the day with something fancier.

                  I also don’t base my opinions on those of others around me. I like Belgian Beers because after extensive research they are the best tasting to me.

                  Totally agree. I can’t fathom the idea of seeking out reviews. Takes the fun out of going to liquor store and getting a six pack of something new.

              2. Yeah, the Trappist beers, while awesome, definitely have the smuggest devotees IME.

                Funny thing about IPA’s: despite (because of?) their ubiquity, I don’t know anyone that considers it their first-choice style except for me. The reviews I get are usually along the lines of, “yeah, I tried it. It’s an IPA. Tastes like all the others. Not bad, but I wouldn’t go out of my way to get it again”

            2. It’s a slow day at work.
              Smug Trappist Ale

            3. It’s a slow day at work.
              Smug Trappist Ale

  4. I’d really like to see the government get out of the business of subsidizing businesses, and stop naming public buildings and sites after current and former government officials, dead or alive.

    Then again, I’ve always wished to be about an inch and a half taller achieving a clean six feet, but that ain’t happening either.

    1. Hey man, I was 5′ 10.5″ before it was cool.

  5. Oh good, tax handouts to a company from outside VA to compete with our already growing local brewery industry. I’m gonna keep drinking Devil’s Backbone.

    1. Blue Mountain is quite good if you haven’t had it yet. Dark Hollow and Local Species are my favorites.

  6. The buckyballs exceeds at stress relief with its exclusive tangible feeling only buckyballs can offer. Similar to an endless piece of bubble wrap the buckyballs makes a calming ? as you shape it .The dynamic magnetic balls of the buckyballs can be used productively to alleviate stress. Many admit that magnets can be useful to health .The most calming attribute of the buckyballs is when it forms.

Please to post comments

Comments are closed.