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The cautionary tale of Coldwater Creek

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  • OPINIONState Journal EditorialsMore>>

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  • Successful privatization should inspire more reform

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    Friday, August 1 2014 1:48 PM EDT2014-08-01 17:48:52 GMT
    It’s not a stretch to say West Virginia once had the dubious distinction of having the worst workers’ compensation system in the nation.
    It’s not a stretch to say West Virginia once had the dubious distinction of having the worst workers’ compensation system in the nation.

For nearly 15 years, Idaho-based clothing retailer Coldwater Creek has operated a giant distribution center near Parkersburg. Unfortunately, the company has filed for bankruptcy and the distribution center is going to close. 

In addition to the lost jobs and lost opportunities, West Virginia and the Wood County Development Authority now have to deal with a 1 million-square foot warehouse and a host of financial issues. State leaders seem certain they will find a new tenant for the property, yet one has to wonder where we will be on the creditor list when Coldwater Creek begins the bankruptcy process. 

On a deeper level, why was the state so involved with this company in the first place? Retail is a fickle industry driven and affected by market factors that are incredibly difficult to navigate. Why did we invest so much, upwards of $13 million, over half of which is still owed to us? Was there any oversight on the state's end? 

If taxpayer money is used as investment capital, then these questions must be asked and answered. As we have said many times before, these kinds of peculiar deals are rarely a good idea. The reason behind them is pretty simple — state partnership usually eases West Virginia's restrictive tax structure on the companies involved. We see this and we have to ask, why not reform the entire system? 

In some cases one could argue the program works — Toyota Motor Manufacturing in Putnam County or Gestamp in South Charleston — but even then, would it not be more prudent to make the rules universal and give everyone a fair chance to compete? Picking winners and losers stymies true competition. Trotting out success stories makes for good headlines, but reality counter punches pretty hard when the plan goes off script. 

Economic development does not happen when state officials cook up ideas that shift the cost of doing business from a company to taxpayers. True, lasting, sustainable prosperity will take root in West Virginia only when government stops looking out for government and starts working for the people. 

That means a tax code that does not penalize reinvestment and growth, courts that prize fairness over politics and schools that adequately prepare our young people for the 21st century workplace. 

Putting taxpayers on the hook for millions of dollars is rarely a good idea. Watching our investment plummet down the rabbit hole of bankruptcy court and legal fees is one more reason on a long and detailed list of why the system needs to change.