Archive for April, 2009

Opening Week Problems for New York Yankees Go Beyond Blowin’ in the Wind

April 24, 2009

accu1

There’s more going on in The Bronx at the new Yankee Stadium opening week than just the now infamous wind tunnel that’s left fans aghast. Here’s a run down of news that’s probably kept the team’s public relations staff team very busy:

 

            The City’s Economic Development Corporation released job figures for the stadium but they raised more questions than answers. For example, how many Bronx residents were hired? What are the wages and benefits? As expected, most of the new non-construction jobs are seasonal so what is the economic impact of those short-term jobs in contrast to the billion dollar subsidy price tag?

             Assembly Members Richard Brodsky and James Brennan asked the New York State Supreme Court to have the Yankees comply with a subpoena as part of the Assembly’s investigation into the $1.3 billion the team received from the New York City Industrial Development agency in tax-free financing the new stadium. It seems the subpoena is having an effect as the Yankees might have to turn over documents.

             South Bronx residents and advocates joined clamoring Yankee fans on opening day to demand officials move more quickly to replace the over 22 acres of parkland where the new stadium now sits.

             New York City Comptroller William C. Thompson, Jr. released another audit showing the Yankees owe the city $68,000 in rent. Not paying the rent is a disturbing trend for the Yankees as previous audits by Thompson show they have underestimated the rent by about $3 million since 2002.

             And finally, the already dubious economic multiplier effect of the new stadium is in serious doubt since the priciest seats are empty.  What are the restaurants, parking garages and concession stands in the stadium to do without rich fans?

Tax Expenditure Reporting – An Essential Policy Tool

April 21, 2009

According to a new report by the Center for Budget and Policy Priorities, nine states are leaving lawmakers in the dark by failing to publish any sort of tax expenditure report. This group includes: Alabama, Alaska, Georgia, Indiana, Nevada, New Jersey, New Mexico, South Dakota, and Wyoming. The report notes that even among those states that do publish tax expenditure reports, most have major gaps in information.

CBPP explains how a well designed and properly implemented tax expenditure report is an essential policy tool. It recommends that all state taxes are included, and stresses that reports should be published regularly, incorporated into the budget process, and available online. Armed with a better understanding of the true cost and effect of tax expenditures, lawmakers can make more informed spending decisions.

In Georgia, one of the nine states failing to publish a tax expenditure report, the House of Representatives is currently considering a bill that would lead to greater transparency and accountability in state tax policy. Senate Bill 206, which passed the Senate in early March, would require tax expenditure review as part of state budget reports. The Georgia Budget and Policy Institute (GBPI), a member of both the SFAI and EARN networks, supports this bill. According to GBPI Executive Director Alan Essig, “The bipartisan support for SB 206 shows that the principles of good government are held by both political parties…Although there may be honorable disagreements over policy, there is agreement that policy decisions should be made based on accurate and timely information. SB 206 gives policy makers such information.”

The Georgia Department of Audits and Accounts and the Pew Center of the States (PCS) also support SB 206. PCS, a division of the Pew Charitable Trusts, has partnered with the state of Georgia for a year-long program to strengthen government policy and performance by building a system to analyze state spending data.

Coalition Continues Push for Full Disclosure in Recovery Act

April 20, 2009

The Coalition for an Accountable Recovery (CAR), co-chaired by OMB Watch and Good Jobs First, is continuing its effort to get the Obama Administration to adopt broad disclosure policies in connection with the $787 billion American Recovery and Reinvestment Act (ARRA). CAR has just submitted comments on the latest draft policies issued by the Office of Management and Budget (OMB) on the data collection that will take place for ARRA contracts and grants.  The data will form the foundation of the disclosure that the administration has vowed to provide through its Recovery.gov website.

recoverydotgov

CAR acknowledges that significant progress has been made in the two months since President Obama signed the law, but we argue that the proposed OMB procedures need clarification and adjustment.

One of the biggest issues is the scope of the required reporting. We recommend that OMB collect data from all entities (excluding individuals) that receive a contract or award involving ARRA funds—whether it comes directly from the federal government, from a state agency or via a subcontract or subaward from a federal or state contractor or awardee. The cutoff would be any payment of $25,000 or less. Only through such extensive reporting, we maintain, will it be possible to get a complete picture of ARRA money flows and economic impacts.

To enable this process, we argue that every recipient of ARRA funds should enroll with the federal government’s Central Contractor Registration system and be assigned a unique identification code.

Since job creation is the paramount objective of ARRA, we recommend that all recipients be required to report on the number of jobs created or saved. Since job quality is as important as job quantity, we also argue that recipients should be required to report data on average wages and health insurance coverage.

Apart from job issues, we urge OMB to ensure that agencies collect other relevant performance data on the impacts of ARRA spending.

To add an additional level of openness, we recommend that OMB require that all Recovery Act RFPs, contracts (with any necessary redactions), bids and waivers be made available to the public, including those involving contracts and grants awarded by the states.

We also ask that OMB expand the amount of data that federal agencies include in their weekly financial reports and that they provide electronic data feeds to the public.

With steps such as these, we believe, the Obama Administration can live up to its promise to provide unprecedented transparency and accountability in this massive expenditure of taxpayer funds.

Audit of DC’s CAPCO Program Reveals Few Jobs Created

April 7, 2009

auditedThe District of Columbia’s Certified Capital Companies (CAPCO) Program is under intense scrutiny following the release of a damning performance report by District Auditor Deborah K. Nichols. The audit alleges that CAPCO program expenditures of $76 million (only $22 million of which was actually invested in businesses) have resulted in the creation of just 31 jobs since its inception in 2004. Further, the audit found that the number of DC residents employed by CAPCOs actually declined by two during that period.

Nichols has recommended that the program be terminated based on the CAPCO program’s lack of effectiveness in achieving the economic development goals sought by the District and its severe deficiencies in management by the Department of Insurance, Securities and Banking (DISB). The audit found that DISB:

  • Failed to verify information presented in Qualified Business applications;
  • Failed to conduct mandated annual reviews of CAPCOs;
  • Certified businesses to participate in the program that did not meet CAPCO requirements;
  • Failed to encourage CAPCOs to invest in businesses that complied with CAPCO’s investment strategies; and
  • Failed to establish a standard to measure the economic impact of the CAPCO program.

The CAPCOs themselves allegedly engaged in a host of unsavory activities too numerous to cite here, but included are doozies such as one company investing equity in its own subsidiaries. Even if management deficiencies are disregarded, CAPCO programs nevertheless have insurmountable structural problems in the way that they incentivize (or fail to incentivize) actual economic development.

Professor Julia Sass Rubin, a community development finance expert at Rutgers University, says that CAPCO programs are “an extraordinarily expensive and inefficient way…to pursue economic development.” At a recent District of Columbia Council Committee Roundtable to explore the audit’s findings, Councilmember Michael Brown argued that there must be counterexamples to the failed CAPCO programs in many states. Rubin’s response: “There isn’t any example where it’s not inefficient.”

Post-Standard Database Sheds Light on Empire Zone “Winners”

April 7, 2009

The Syracuse Post-Standard recently published an updated, on-line database titled “Empire Zone Winners,” which exposes taxpayer losses from this broken subsidy program. For years, advocacy groups and elected officials have called for the program’s end, or at least major reforms.

The Post-Standard’s database lists Empire Zone tax breaks that 4,990 businesses expected to claim on their 2007 taxes. The database is searchable by geographic area (broken into Empire Zones) and for each company includes: its rank in NY (in terms of the amount of credit given), the amount of tax credits for 2007, the number of full time jobs at the company, the number of new jobs created in 2007, average wage, total payroll, and total investment.

In New York City, a number of projects demonstrate the program’s dysfunction in providing tax dollars for few or no jobs and little or no investment, for low-paying jobs, and, sometimes, to bad employers. Among the many:

Blauners, LLC, a real-estate investment company, in Hunts Point, Bronx, expected to claim $1.26 million for only three jobs with an average wage of $8/hour. That’s about $420,000 per job. To add insult to injury, the company only invested $231,819 at the site.

B & H Foto in North Brooklyn expected to claim a large credit of $2.6 million for 190 jobs with an average wage of $9/hour, with an investment of only $913,640. Last week, the company settled an EEOC lawsuit by agreeing to provide $4.3 million to Hispanic workers who were denied promotions and paid less than their non-Hispanic counterparts.

FC Gowanus Associates, which shares the same parent company as the developer of Brooklyn’s controversial Atlantic Yards project, expected a smaller tax credit of about $174,000, but like a number of other companies, it had zero jobs, and zero investment when claiming the credit.

Last week, state legislators agreed to some basic reforms, including disallowing incentives for some companies that did not invest at least as much as they received in tax breaks, and ending the program one year ahead of schedule, on June 30, 2010. Yet, despite action to scale back the program, New York City has taken efforts to expand it by allowing certain projects outside of Empire Zones to nevertheless secure Empire Zone benefits. Given the nature of some of the projects in the Post-Standard’s database, this doesn’t seem like the wisest use of taxpayer funds.

Questionable Projects Promoted for Stimulus Funding in New York

April 2, 2009

Atlantic Yards

Atlantic Yards

The New York State Economic Recovery and Reinvestment Cabinet has compiled a list of projects submitted by municipalities, organizations and individuals for possible funding under the American Recovery and Reinvestment Act (ARRA). While a project’s inclusion on the list does not, according to the cabinet, imply “acceptance, validation or certification of any project,” it does mean the projects may be up for consideration.

At least two of the New York City projects that appear on the list are eyebrow raising, and they demonstrate the importance of keeping millions of eyeballs on the Recovery Act: Atlantic Yards in Brooklyn, and a “South Bronx Development Initiative.”

The controversial Atlantic Yards project has already received hundreds of millions in taxpayer subsidies, and its developer, Forest City Ratner, claimed last year that the project needs more. The news that Forest City Ratner would likely seek ARRA funds broke in February, and prompted an on-line petition with almost 3,000 signatories who feel that “Any allocation of stimulus to Atlantic Yards at this point would not only further reduce the project’s already unacceptable standard of accountability, it would deprive the people of New York City investment in urgently needed public works.”

The “South Bronx Development Initiative” is a new proposal, but its priority is clearly not to serve existing local residents, considering that its major features include film studios, 4-star hotels, and luxury condos. The project also includes a shuttle to the train station near the controversial new Yankee Stadium.

While most of the projects have a requested dollar amount associated with them, these two are among the few where the listed amount is zero. It is unclear whether this means those who submitted the projects have not yet finalized an amount they want to request, that they simply are not disclosing any amount at the present time, or something else. Further complicating matters is that it is unknown who submitted these projects to the state. On his Atlantic Yards Report, Norman Oder reports he was told that a “citizen” submitted the Atlantic Yards project and that it was not an official request.

Despite this uncertainty, one thing is for sure. States are starting to compile lists and it’s up to all concerned residents and taxpayers to check them twice.


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