Archive for November, 2012

Study: ALEC’s Jobs Advice Fails States

November 28, 2012

Image

Washington, DC—A new study finds that state tax and regulatory policies recommended by the American Legislative Exchange Council (ALEC) fail to promote stronger job creation or income growth, and actually predict a worse performance.

Since ALEC first published its annual Rich States, Poor States study with its Economic Outlook Ranking in 2007, states that were rated better have actually done worse economically.

Those are the key findings of “Selling Snake Oil to the States,” a study published today by Good Jobs First and the Iowa Policy Project and freely available online at http://www.goodjobsfirst.org/snakeoiltothestates.  It was released at a press conference the same week ALEC holds its annual fall meeting in Washington, DC. 

“We tested ALEC’s claims against actual economic results,” said Dr. Peter Fisher, primary author of the study. “We conclude that eliminating progressive taxes, suppressing wages, and cutting public services are actually a recipe for economic inequality, declining incomes, and undermining public infrastructure and education that really matter for long-term economic growth.”

The study dissects the methodology used by ALEC’s lead author Arthur Laffer and his co-authors. It finds that their arguments and evidence range from deeply flawed to nonexistent, consistently ignoring decades of peer-reviewed academic research. Instead, Laffer et al repeatedly engage in methodologically primitive approaches such as two-factor correlations and comparing arbitrary small numbers of states instead of all 50.

The study finds that the composition of a state’s economy—whether it has disproportionate shares of high-growth or low-growth industries—was a far better predictor of a state’s relative success over the past five years.

“State corporate income taxes average less than one-fifth of one percent of the average company’s costs.” said Fisher. “The ALEC/Laffer studies would have state leaders ignore site-location basics and disinvest public goods that benefit all employers.”

Good Jobs First is a non-profit, non-partisan partisan resource promoting accountability in economic development and smart growth for working families. It was founded in 1998 and is based in Washington, DC. The Iowa Policy Project is a nonpartisan, nonprofit organization promoting public policy that fosters economic opportunity while safeguarding the health and well-being of Iowa’s people and environment. It was formed in 2001 and is based in Iowa City.

 -30-

Tracker Surpasses 400 Programs As It Captures More Local Data

November 19, 2012

The Good Jobs First Subsidy Tracker database reached a new milestone as the number of programs from which it draws information passed 400. Tracker now has more than 247,000 entries from 409 programs in all 50 states and the District of Columbia.

Most of the latest additions are the results of our effort to obtain data from cities and counties. Given that localities are far behind states in putting subsidy information online, most of what we gather is unpublished information obtained via informal and formal open records requests to economic development agencies.

The localities for which we have just added such information are: Albuquerque, Baltimore; Kansas City, Missouri; Columbus, Ohio, Grand Rapids, Michigan; Janesville, Wisconsin; and Bloomington, Indiana.

We also got unpublished data on Alaska’s Oil and Gas Production Tax Credits and Louisiana’s Gulf Opportunity Zone bond program. The latter is technically a federal program, but the bond allocations are made by the Louisiana State Bond Commission.

Here’s a complete list of the recent additions:

  • Alaska: Oil and Gas Production Tax Credits (2009-2010)
  • Indiana: Bloomington Sustainable Partnership Grant (2009-2011)
  • Indiana: Bloomington Urban Enterprise Zone Incentives (2009-2011)
  • Louisiana: Gulf Opportunity Zone Program (2006-2011)
  • Maryland: Baltimore Development Corporation Brownfields Program (2012)
  • Maryland: Baltimore Development Corporation Business Assistance Programs (2005-2010)
  • Maryland: Baltimore Development Corporation Loan Program (2005-Oct 2012)
  • Maryland: Baltimore Development Corporation PILOTs (2003-Oct 2012)
  • Maryland: Baltimore Development Corporation TIF Projects (2003-Oct 2012)
  • Maryland: Baltimore Enterprise Zones (2005-Oct 2012)
  • Michigan: Grand Rapids Brownfield Redevelopment Program (2005-Oct 2012)
  • Michigan: Grand Rapids Industrial Facilities Property Tax Exemptions (2005-Oct 2012)
  • Michigan: Grand Rapids New Personal Property Exemptions (2005-Oct 2012)
  • Michigan: Grand Rapids Obsolete Property Rehabilitation Act Exemptions (2005-Oct 2012)
  • Michigan: Grand Rapids Renaissance Zone Extensions (2005-Oct 2012)
  • Michigan: Grand Rapids Tool & Die Renaissance Zones (2005-Oct 2012)
  • Missouri: Kansas City Enhanced Enterprise Zone Local Property Tax Abatement (2009-Aug 2012)
  • Missouri: Kansas City LCRA Property Tax Abatement (2009-Aug 2012)
  • New Mexico: Albuquerque Industrial Revenue Bonds (2008-Aug 2012)
  • Ohio: Columbus Downtown Office Incentive (2009-2011)
  • Ohio: Columbus Enterprise Zone (2009-2011)
  • Ohio: Columbus Jobs Growth Incentive (2009-2011)
  • Wisconsin: Janesville Development Opportunity Zone Tax Credits (2009-Oct 2012)
  • Wisconsin: Janesville TIF Forgivable Loans (2009-Oct 2012)

Terms of Engagement After Sandy

November 12, 2012

Photo credit – Eliud Echevarria: FEMA News Photo.

Sandy and the surges of water that accompanied her didn’t discriminate in terms of which lives, homes and businesses they devastated. People of all income levels and companies of all sizes were hard hit. Thousands in New York, New Jersey and Connecticut remain without power, hampering the relief effort. All of this is to say: there’s a long road ahead and communities must work with decision-makers now to create a plan for allocating reconstruction financial resources.

After past disasters such as the 9/11 attacks and Hurricane Katrina, Congress created federal assistance programs that became dominated by those that needed it least: large corporations and luxury housing developers. It’s safe to assume these interests, the typical beneficiaries of “disaster capitalism,” are trying to influence similar legislation after Sandy.

Post-September 11, 2001 federal resources helped firms that already had vast resources—such as Bank of America, Goldman Sachs and Morgan Stanley—or “small businesses” like boutique brokerage houses and law firms (see Good Jobs New York’s Database of Deals for more information). As recently reported by our Good Jobs First colleagues, in the wake of Hurricane Katrina, most of Louisiana’s allocation of the federal Gulf Opportunity Zone Bonds went to giant petrochemical companies not located in the hardest hit areas.

Here are some suggestions on how to do it right this time:

Do help small businesses get back on their feet quickly with a minimum of red tape. This includes helping them deal with private insurance carriers. Provide technical assistance that helps them firm up their operations by making them more sustainable.

Don’t prioritize luxury housing. Real estate interests made sure that 9/11 Liberty Bonds for Lower Manhattan had so few strings attached that they fueled housing for the fabulously wealthy and no new affordable housing construction.

Do focus on the needs of residents and small businesses most affected. Subsidies and/or other land-use policies shouldn’t displace existing or future generations from working and living in healthy, affordable neighborhoods. Private Activity Bonds after Hurricane Katrina were available to such a large geographic area that those who needed resources the most were left with little access to these funds.

Don’t ignore the needs of low-income workers. The 9/11 attacks had a huge direct impact on the financial sector of Lower Manhattan, but they also had a severe ripple effect on low-income workers; think of the baggage handlers at the airports, retail workers in Lower Manhattan or restaurant employees in Chinatown. Before Congress in 2007, Interfaith Worker Justice testified that after Katrina, loose regulations lowered wages and greatly undermined job standards.

Do subsidize projects that create high-road employment in both the construction industry and for permanent jobs. If recent reports are any indication, there are decades’ worth of employment opportunities. Many of the areas swept away or without heat and hot water are home to the poor and working class and between 70,000 and 80,000 residents of the New York City Housing Authority have been impacted by the storm. If these people don’t have decent -paying jobs to return to, it will have devastating long-term impacts on the economy

A message to Katrina victims from some community groups engaged in 9/11 rebuilding still rings true after Sandy: Officials at all levels of government, particularly in Congress, must consider four things before creating reconstruction subsidy programs:

1) Programs must be created using broadly democratic and transparent planning principles.

2) The allocation of funds must prioritize the creation of good jobs and building sustainable neighborhoods.

3) Programs must focus on fiscal stewardship by rebuilding infrastructure and public goods that will help existing businesses rebound and foster new ones.

4) Programs must incorporate clawback provisions to make sure that recipients (especially large firms) live up to those job-creation requirements. Some of the largest recipients of 9/11 funds had grants withheld or were forced to repay them after laying off workers.

Some might argue that these safeguards will slow the recovery from Sandy. We think the opposite is true: if loose rules allow big companies with the most lobbyists and consultants to hog the trough, the neighborhoods hit hardest will get short-changed and suffer longest.

Lessons from Katrina in Dealing with Sandy

November 12, 2012

The many billions of dollars needed to repair the devastation caused by Hurricane Sandy in the New York metropolitan area will come from many sources.

Among those will likely be new tax-exempt private-activity bonds authorized by the federal government. Such bonds provide low-cost financing because the interest they pay is exempt from federal, state and local income taxes.

Already, the Council of Development Finance Agencies has issued a call for the creation of Hurricane Sandy Recovery Bonds.

Such an initiative would, as CDFA acknowledges, be patterned on the Gulf Opportunity Zone Bonds enacted by Congress in 2005 to help the economies of Louisiana, Mississippi and Alabama recover from Hurricane Katrina. The three states were given a total of $14.9 billion in GO Zone bond allocations.

So how did GO Zone bonds work out for the Gulf states?

Not very well. Soon after the GO Zone process began, Good Jobs First published a report commissioned by Interfaith Worker Justice that warned of pitfalls in the way the program was structured. We pointed out that because Congress qualified large swaths of the three states for the financing, areas that were not hit hard by the storm would get a disproportionate share of the assistance. We also predicted that big portions of the funding would be gobbled up by large corporations.

Unfortunately, our concerns turned out to be valid. According to data we’ve just obtained from the Louisiana Bond Commission, Orleans Parish (i.e. New Orleans) used only 3.3 percent of the state’s GO Zone bond allocation, while most of the money went to parishes that are dominated economically by the petrochemical industry, both those in “Cancer Alley” between New Orleans and Baton Rouge and those in the southwestern part of the state.

The Bond Commission data also make it clear that some giant corporations did, in fact, get outsized allocations. For example:

  • Marathon Oil got $1 billion for a refinery project in St. John the Baptist Parish;
  • Nucor got $600 million for its steel operation in St. James Parish;
  • Exxon Mobil got a total of $522 million for three projects in East Baton Rouge Parish; and
  • Valero Energy got $300 million for a hydrocracker at its refinery in St. Charles Parish.

Some big companies went to the GO Zone trough multiple times. International-Matex Tank Terminals, which operates bulk liquid storage facilities, received a total of $490 million for eight different projects. Westlake Chemical Corporation, whose products include polyvinyl chloride and plastic food wrap, received a total of $439 million for six different projects.

We predict now that, absent targeting safeguards, Hurricane Sandy Recovery Bonds would follow the same pattern. They might very well go to some of the same giant petrochemical corporations that do business in Louisiana for their New Jersey facilities or to megabanks in Manhattan that may not have suffered serious storm damage—and in any case can afford to pay for their own recovery.

This can be avoided by intentionally targeting the assistance to the hardest-hit areas and to small businesses which need the most help accessing low-cost credit.

We will be monitoring these developments through our Good Jobs First affiliate Good Jobs New York, which has been the leading watchdog on the reconstruction funds that flowed into New York City in the wake of the 9/11 attacks. These funds had many of the same injustices as GO Zone bonds. Of the $8 billion in triple tax-exempt private activity bonds specially enacted by Congress for Lower Manhattan, more than 20 percent, or $1.65 billion, went to Goldman Sachs alone for its new headquarters building.

GJNY is urging that Sandy aid programs be structured intentionally so that small businesses get priority over giant ones and that accountability and sustainability principles be applied. Let’s take lessons from Katrina and 9/11 so that Sandy reconstruction money does not repeat those troubled histories.

UPDATED Hurricane Sandy Recovery Dollars–How to Make Them Count

November 2, 2012

Boat meets Metro-North Railroad in Westchester County, Photo credit: MTA Photos, Flicker

As New York, New Jersey and Connecticut begin the painstaking process of recovering from Hurricane Sandy, experts are estimating that the cost of cleaning up and rebuilding may top $50 billion. It’s likely— considering the dire state of roads, subways, bridges, commuter rail and other infrastructure–that the figure will escalate.

Using past disasters as an example, we can also expect that big business will seek to dominate the conversation and benefit most from the use of relief and rebuilding funds.

Billions of dollars in federal economic development aid was made available to New York after the attacks of September 11, 2001. Left out of much of the allocation and all of the decision-making were small businesses and low-income residents, especially in nearby areas of Chinatown and the Lower East Side. Much of the cash grants went to large business or wealthy “small” businesses like hedge funds and brokerages with few employees. Billions in Liberty Bonds went to building luxury housing in Lower Manhattan  and new headquarters for powerful financial firms like Goldman Sachs.  Good Jobs New York tracked these funds as part of our Reconstruction Watch project and in our Database of Deals.

How does this bode for an impending flood of rebuilding aid for the area? The answer is good and bad. Technology could be a great democratizer, and opportunities to educate taxpayers about proposals and get feedback are widely available. While acknowledging the existence of the digital divide, it has lessened dramatically since 9/11. Town halls, literal and virtual, are more accessible, (expect opinionated New Yorkers to chime in loudly once electricity is back online).  The bad part is that powerful business interests will be using their influence with policymakers to set the agenda while the rest of us are still preoccupied with recovering from the storm.

This week New York City announced two Hurricane Sandy recovery programs. A loan program capped at $10,000 for small firms and tax breaks for large firms spending more than half a million dollars on rebuilding. There are also “swing” spaces available in Brooklyn and The Bronx for displaced firms. Right out of the box, it looks like little has changed: small firms offered more debt and big firms with big checkbooks get tax breaks.

UPDATED Sunday, November 4: The New York City Economic Development Corporation (EDC) alerted us to the following:

We will update this post as new details emerge. For more information and how to apply for these programs or to help visit the EDC’s Back to Business webpage.

Keeping in mind that these programs will most likely evolve and new ones created, we urge officials to use this tragic storm to make accountability, equity and transparency central to rebuilding our communities:

  • Prioritize small businesses over giant ones.
  • Hold public hearings and allow citizens to help shape how funds will be allocated.
  • Post data on the web about which companies are receiving aid, whether there are any conditions on that assistance and whether those conditions are met.
  • Use resources to leverage high-road job standards (good wages and benefits).
  • Require funds for rebuilding to be sustainable for the environment and for future storms.  Wise public investment now will pay off in the future.
  • Include stringent work-safety rules.
  • Include clawback – money-back guarantee – provisions. This is especially important when it comes to large firms, which often make extravagant job-creation promises and then fall short.
  • Existing transparency practices should be maintained, or even improved, for storm-related subsidies.

The allocation of discretionary economic subsidies has become more transparent in New York City in recent years (a fuller explanation is here), yet policies that include democratic planning principles is badly lacking in New York City and many surrounding areas. There is a long road of rebuilding ahead and public funds must be used efficiently. To help ensure this, leaders must bring community members to the table while decisions are being made.

If history is any gauge, the interests of big business have already landed on the table of decision makers. But there’s still time to create a future that gives priority to the creation of good jobs for people that need them and the rebuilding of sound infrastructure for all.


Follow

Get every new post delivered to your Inbox.

Join 49 other followers