Archive for September, 2012

Newspaper Rips Missouri Economic Development Practices

September 21, 2012

The St. Louis Post-Dispatch ran a scathing editorial  this week criticizing Missouri’s economic development practices.

The occasion for the criticism was the announcement by state Attorney General Chris Koster that his office was bringing criminal charges of theft and securities fraud against the CEO of a company called Mamtek that had received financial assistance from the state through the issuance of industrial revenue bonds. The CEO, Bruce Cole, was accused of using a portion of $39 million in bond proceeds to prevent foreclosure of his Beverly Hills house. Those proceeds were supposed to finance an artificial sweetener factory Mamtek had proposed to build in Moberly, a small rural community in central Missouri. After Mamtek failed to make bond payments and after the collapse of the whole project in 2011, Moberly defaulted on its bonds.

The editorial criticizes Missouri state and local economic development agencies for failing to do an adequate background check before authorizing the bond issue. “[Mamtek] failed,” the newspaper says, “because nobody, including Moberly officials and the state Department of Economic Development did their work. … Nobody was very eager to do the due diligence that would have shown the deal to be bogus.” The editorial points out that both Democrats and Republicans are guilty of subsidy giveaways and both parties are responsible for “creating a climate where business is free from the kind of regulation that could weed out bad actors.”

Mamtek had also been approved for up to $17 million in several additional types of subsidies, including Missouri’s controversial Quality Jobs program, which allows companies to retain state taxes withheld from the paychecks of new workers (Good Jobs First criticized this and related programs in our Paying Taxes to the Boss report last April).

The Post-Dispatch editorial points to an audit of Quality Jobs showing that the number of jobs that participants in the program created was far below the number they had projected (out of 45,646 originally estimated jobs, only 7,176 materialized).

The editorial uses the shortfalls of the Quality Jobs program to make a broader point about the foolish way in which the state tried to encourage job creation. It calls the Mamtek incident  a symptom of “an economic develop strategy, at state and local levels, that relies on promises and demands little accountability. The state this year will pay out a record $629 million in tax credits to wealthy developers, corporations and investors, while money is being cut for schools and health care. Local governments cannibalize each other to make tax incentive finance deals that steal from schools and create few net new jobs.”

We couldn’t have said it better.

Striking Chicago Teachers Highlight TIF

September 14, 2012

This past week, the Chicago Teachers Union (CTU) strike has been making national headlines. But what major media outlets have overlooked is the role of tax increment financing (TIF) in worsening the fiscal situation for the Chicago Public School (CPS) system. The strikers, however, are making an issue of it. As Good Jobs First has documented time and again, TIF and other subsidies frequently divert property taxes away from school districts.

In Chicago, as well as Illinois generally which has about 1,000 active TIF Districts diverting over $1 billion each year, the problem is particularly severe: 10 percent of Chicago property tax revenues are diverted into TIF coffers. The CTU estimates that at the end of 2011, Chicago had $831 million in unallocated TIF funds sitting in bank accounts. Nearly half that money would have otherwise gone to schools. That number is also far bigger than the $700 million budget shortfall CPS had for the 2011-2012 school year which remains relatively unchanged for 2013. Instead, TIF monies are frequently utilized as subsidies for corporations.

Yesterday, thousands of teachers picketed a Hyatt hotel which had received $5.2 million in TIF subsidies chanting “give it back.” Speakers gave impassioned arguments against the use of TIF. The choice was not a coincidence: Penny Pritzker, a billionaire whose family owns the Hyatt chain, is also an appointee to the Chicago Board of Education.

Protestors contend that the TIF money used on the hotel would have been better spent on improving the education system. As one protestor commented, “I think it’s really important to bring awareness to the fact that, according to what I found out, $5.2 million has been given to developers [to build the Hyatt hotel]… That’s money that could have gone to classrooms, and computers, so many other things.”

Ultimately, all Illinoisans should also care about TIF in Chicago and elsewhere. The burden of school funding lost because of TIF property tax diversions is likely being made up for by all Illinois taxpayers.

Pritzker’s role on the board of education and Hyatt’s TIF funding are not the only reasons that labor is unhappy with Hyatt. A Unite Here campaign called Hyatt Hurts has been calling attention to what it alleges are unfair labor practices at the company and calling for a boycott.

We hope investigative journalists everywhere take notice: TIF has caused serious budgetary harm in Chicago and deserves more serious scrutiny in every school district.

Study: “Job Sprawl” Still Subsidized Despite Four States’ Modest Reforms

September 11, 2012

Four states’ efforts to curb “job sprawl” by altering economic development subsidies have had little effect on transit ridership, land use patterns or site location decisions, according to a report released today by Good Jobs First.

Attempts by officials in California, Illinois, Maryland, and New Jersey to break down “policy silos” and make job subsidies location-efficient have failed. Some of the policies were weak to begin with; others got watered down or ignored, and one got rapidly deregulated.

These are the key findings of Breaking Down Silos Between Economic Development and Public Transportation: An Evaluation of Four States’ Modest Efforts In Making Job Subsidies Location-Efficient,a study published today by Good Jobs First, a non-profit, non-partisan research center based in Washington, DC. In its review of the four states’ location efficiency policies, the report recommends restricting economic development business subsidies to transit corridors. Good Jobs First further recommends establishing clear program goals, requiring regular evaluation of location efficiency policies, and requiring subsidized companies to participate in transportation demand management programs. The full report is available at www.goodjobsfirst.org.

“When states fail to align economic development subsidies with public transit investments, the result is state-sponsored job sprawl,” said Good Jobs First executive director Greg LeRoy. “Making more jobs transit-accessible is the most powerful way to give carless workers more job opportunity and all workers a healthier commuting choice.”

Founded in 1998, Good Jobs First is a non-profit, non-partisan research center promoting accountability in economic development and smart growth for working families.  Headquartered in Washington DC, it has a project office in New York.

Subsidy Tracker Adds Data from Alabama to Hawaii

September 5, 2012

Subsidy Tracker, the Good Jobs First database of economic development subsidy awards to companies, is continuing to expand its inventory of local programs while filling in some state ones as well. Data on a dozen programs has just been uploaded, bringing Tracker’s coverage to more than 227,000 awards from 368 programs in all 50 states and the District of Columbia.

The newest additions are of three types.  First, there are statewide compilations of subsidies given out at the local level: Alabama’s Industrial Development Grants; tax increment financing in Nebraska and Oklahoma; and Tennessee’s PILOT agreements. Second, we have a couple of state programs: Hawaii’s Employment and Training Fund Statewide Grants and Louisiana’s Motion Picture Industry Development Tax Credits.

Finally, there are some datasets on specific local programs: property tax abatement data from the Kansas cities of Lawrence and Manhattan as well as Fort Worth and Dallas County in Texas; Cincinnati’s Property Investment Reimbursements; and the city of Virginia Beach’s Economic Development Investment Program.

The information was obtained in several cases from newly discovered online documents; in all but one of the rest we obtained unpublished data from government agencies. The Louisiana film subsidy data was obtained by the Louisiana Budget Project, which agreed to let us use it as well.

For ready reference, here is a list of all the new datasets:

Alabama: Industrial Development Grant (2007-Jan 2012)
Hawaii: Employment and Training Fund Statewide Grants (2007-2011)
Kansas: Lawrence property tax abatements (2011)
Kansas: Manhattan property tax abatements (2011)
Louisiana: Motion Picture Industry Development Tax Credit (2009-2011)
Nebraska: Local tax increment financing (2011)
Ohio: Cincinnati Property Investment Reimbursement (2001-Aug 2012)
Oklahoma: Local tax increment financing (2011)
Tennessee: County PILOT agreements (2011)
Texas: Dallas County property tax abatements (1988-2011)
Texas: Fort Worth property tax abatements (2000-Jun 2012)
Virginia: Virginia Beach Economic Development Investment Program (1991-Jun 2012)


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