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.