Archive for December, 2012

Nike Runs Away with New Oregon Tax Giveaway

December 20, 2012

NikeTown, OR, USAOregon Gov. John Kitzhaber must have missed this month’s major New York Times investigative series on business subsidies.  Less than a week after the nation’s paper of record reported that such subsidies are a “zero sum game,” Gov. Kitzhaber called the Oregon legislature into a one-day special session to pass the Economic Impact Investment Act, a corporate tax giveaway custom-tailored for Beaverton-based sportswear retailer Nike, Inc.  The rushed deal and special session were announced last Monday, just four days before the legislature was to consider the bill, and a publicly available version of the proposed legislation was not made available until Tuesday.

HB 4200, which passed the legislature handily on Friday and was signed by Gov. Kitzhaber this week, allows Nike to determine its tax responsibility to the state through the controversial Single Sales Factor (SSF) apportionment method for the next 30 years, whether or not Oregon enacts tax reform during that period.  Nike had expressed interest in expanding in Oregon, but the company reportedly expressed to the Governor that it needed “tax certainty” to commit to growing in the state.  (Make sure to see the Oregon Center for Public Policy’s excellent take on what would constitute true “certainty” when it comes to taxes.)

In its original form, the legislation would have allowed the state to grant guaranteed SSF tax breaks through the Economic Impact Investment Act for a ten-year period, and those deals would have lasted for up to 40 years.  The few accountability amendments passed during the one-day session shortened the amount of time the governor has to strike these tax deals to one year, while also reducing the period during which the tax break lasts to 30 years.

While the bill requires that Nike and any other company vying for the special tax deal invest $150 million and create 500 new jobs, it is silent on wages and other job quality standards.  Significantly, the new law fails to set a meaningful term during which qualifying jobs must be retained by Nike or any other company approved for the sweetheart deal.  It appears that the last 20 years’ worth of basic accountability reforms – now standard practice for most states – are unknown to Oregon’s lawmakers.

The lack of accountability provisions are not the only controversial aspect of the new giveaway.  The Oregonian reported this week that despite the extraordinarily compressed period the legislature was given to consider the bill, the state has been secretly negotiating the deal, termed “Project Impact,” since last July.  You can read the state’s non-disclosure agreement with a company called EMK (presumably a site location consulting firm contracted by Nike to pressure the state) here.

Oregonians are not the only constituency to express concerns about the new law.  Intel, Oregon’s other major corporate employer, was reportedly involved in several heated exchanges with Nike over a particular provision of the original legislation that would have prohibited it from benefiting from the same deal based on the fact that it is already receiving considerable subsidies through Oregon’s Strategic Investment Program.  Unsurprisingly, that provision was removed from the bill.

Oregon, unfortunately, has no such guarantees that economic conditions and fiscal obligations will remain exactly the same in the decades to come.  There are no promises the state can make that protect its residents from change, and this new giveaway means that Oregon cannot rely equally on all businesses and individuals to contribute fairly in the future.

After Audit Reveals More Trouble Calls to Disband Wisconsin Economic Development Corporation

December 18, 2012

A new audit at the scandal-plagued Wisconsin Economic Development Corporation (WEDC) has many calling for the agency to be dissolved.523px-Capitol_Madison,_WI

Mike Ivey, a prominent columnist at the Wisconsin Capital Times, suggests that the state could have avoided this mess if it had followed the advice of Good Jobs First. He writes: “The agency designed by Gov. Scott Walker to replace the old Commerce Department was simply over its head, short-staffed and filled with political appointees with no experience in handling large amounts of public money. But Wisconsin could have avoided a lot of those problems altogether if it had heeded the advice of Good Jobs First, a Washington, D.C.-based watchdog group that warned of the pitfalls of public-private partnerships like WEDC two years ago.”

This warning came in our January 2011 report Public-Private Power Grab. We had written this at a time when several governors, including Walker, were publicly considering privatizing their economic development agencies. In reviewing how things turned for states that had previously taken that step, we found issues of misuse of taxpayer funds, excessive executive bonuses, conflicts of interest in subsidy awards, questionable claims about job creation and entrenched resistance to accountability.

Wisconsin went ahead with the creation of the privatized WEDC. It now turns out that the WEDC failed to adequately account for some $56 million in loans made to companies. It also was chided by the federal government for mishandling $10 million in federal grant money. The CEO and CFO of the agency have already resigned. Watchdog groups, like WISPIRG, have found the WEDC sliding backwards on transparency issues as well.

The WEDC turns out to be another example of the pitfalls privatizing economic development.

Community Wins in Missouri

December 17, 2012

Congratulations to community groups in Columbia, Missouri on their win last week preventing most of the city from being designated “blighted” to create massive property tax abatements.

Photo credit: Charles Minshew/KOMU, via Flickr. “Columbia residents discuss EEZ concerns: Columbia resident Shari Korthuis (right) discusses the latest version of a map of the city’s Enhanced Enterprise Zone with Nancy Wood and Jeff Memmer at a meeting at Parkade Center in Columbia, Mo., on Wednesday, March 14, 2012.”

Photo credit: Charles Minshew/KOMU, via Flickr. “Columbia residents discuss EEZ concerns: Columbia resident Shari Korthuis (right) discusses the latest version of a map of the city’s Enhanced Enterprise Zone with Nancy Wood and Jeff Memmer at a meeting at Parkade Center in Columbia, Mo., on Wednesday, March 14, 2012.”

A year and a half ago, the Regional Economic Development Inc. (REDI) board proposed to create an Enhanced Enterprise Zone, or EEZ, that would cover most of Columbia (at one point, the Columbia City Council approved a 49-square-mile EEZ; later, the Council repealed its decision). Missouri EEZs (there are 124) allow certain companies to receive 50 percent local property tax abatements and state tax credits for investing and creating jobs. The program also requires zones to be designated as blighted.

A coalition of community groups (including the Columbia Climate Change Coalition, Grass Roots Organizing, and the local chapter of the Women’s International League for Peace and Freedom) opposed the fake blight designation. They spoke during REDI meetings, contacted media, and organized an informational community meeting with Good Jobs First’s Greg LeRoy and more than 80 participants. Using state EEZ disclosure data captured in Subsidy Tracker, LeRoy noted that EEZ credits were dominated by agricultural food processing companies that, of course, need to be close to Missouri’s abundant farmlands.

After months of grassroots pressure, the REDI board last week surrendered, asking the Columbia City Council to drop the plan, citing “lack of community support” as the main reason for its decision.

New Jersey’s Revel Casino May Fold

December 7, 2012

Revel CasinoNew Jersey’s embattled Revel Casino received more bad news this week.   State Senate President Stephen Sweeney has called on the Division of Gaming Enforcement to investigate the Casino’s “precarious financial position.”  Despite the fact that it has been operating at a loss in 2012, Revel management has claimed that its inability to make good on its construction debts and city property tax bill is a result of Hurricane Sandy.  Predictions that the casino will fold are growing louder.

The controversial project was awarded a $261 million tax subsidy by the state in 2011 to assist its investors in leveraging additional financing to complete its stalled construction.  While this recent news bodes poorly for investors and the state’s Economic Development Authority, it may be a relief for existing casinos in the region that are forced to compete with massively subsidized new development.

Summing Subsidies

December 6, 2012

detectiveMy colleagues and I at Good Jobs First were excited at the publication of the New York Times series on the “United States of Subsidies,” since it brings a great deal of attention to a problem — corporate abuse of economic development assistance — that we have been working on for more than a decade.

We were also pleased to see the online database that the Times posted to go along with the articles. We had provided a copy of the master spreadsheet for our Subsidy Tracker database to Louise Story, the author of the series, and she made extensive use of it. Although the Times obtained some information from other sources, it appears that about 98 percent of their company-specific listings come from Subsidy Tracker. (SEE UPDATE BELOW.)

Now that we have had a few days to examine the Times database, we see that there are some flaws in the way the paper used our data.

First, a few words on Subsidy Tracker. In recent years, a growing number of states began to put company-specific information on at least some of their economic development awards—grants, tax credits, tax abatements, etc.—online. This was often in response to the subsidy accountability movement that we and our allies have built.

The problem was that these disclosures usually happened via hard-to-find reports and web pages that were often difficult to search even when you did locate them. Good Jobs First decided to collect all these disclosures and combine them into one national search tool. We introduced Subsidy Tracker in December 2010 with 43,000 listings from 124 subsidy programs in 27 states.

Over the following two years, we have expanded that to the current total of 247,000 listings from 409 programs in all 50 states and the District of Columbia. That expansion was not due entirely to wider official online transparency. Using open records requests, we also obtained unpublished data on scores of additional programs (the total is currently 89). By posting this information to Subsidy Tracker, we became, in effect, the original online disclosure source for these programs.

In recent months we’ve begun applying this approach to city and county subsidy programs, which are far behind their state counterparts in terms of online disclosure.

Despite all this effort, we recognized that we still could not claim to have captured anywhere near all the subsidy awards that have been made across the country. Not only did we still lack many programs, we also have irregular numbers of years of data among programs.  That’s why we have not yet built into Subsidy Tracker a feature that enables instant aggregation of all the awards going to a particular company.

Along with the remaining gaps in the data, there is much that needs to be done with regard to the listings we do have to allow accurate aggregation. This includes the standardization of the variations in company names in our source materials, linking of parent and subsidiary companies, and accounting for mergers and acquisitions. There’s also the problem that some states report subsidy amounts for single years and others for multiple ones. These challenges are all part of our future work plan.

After getting our raw data, the Times did not consult with us on exactly how it would be used. We thus had no opportunity to warn the paper against the perils of aggregation. Specifically, we were not aware of the paper’s plans to create what it calls its $100 Million Club.

It is with this listing that the pitfalls in the Times approach become most apparent. The companies that receive the largest subsidies often get them in the form of packages negotiated with state and local officials. These packages usually consist of awards from various programs and may also involve project-specific awards outside established programs. Some of these pieces of packages are not included in state disclosure channels. It is part of our plan to research packages through other means and add them to Subsidy Tracker as a separate category. We’ve already begun the process in the Key Deals section of the state pages of the Accountable USA section of the Good Jobs First website.

The Times supplemented the roughly 154,000 entries it took from Subsidy Tracker with about 2,000 listings the paper obtained on its own or from an expensive subscription service produced by a company called Investment Consulting Associates. This enabled the inclusion of entries that were gleaned from press releases but had not yet been reported in the official program lists we rely on for Subsidy Tracker.

Yet the $100 Million Club still ends up with numerous instances in which the totals understate the true amount the big subsidy grabbers have received.

For example, the Times lists a total of $338 million for Boeing, including $218 from South Carolina. Yet it has been estimated that the package Boeing got by locating a new Dreamliner assembly line in the Charleston area could be worth some $900 million.

Apple is said to have received a total of $119 million, yet the Times fails to include more than $60 million in subsidies the company got for a data center in North Carolina.

The Times $100 Million Club also misses some major recipients entirely, including Volkswagen, which got more than $500 million in connection with an assembly plant in Tennessee, and ThyssenKrupp, which got more than $1 billion in subsidies for a steel mill in Alabama.

And these only include deals dating back to 2007, which is the period the Times used in compiling its $100 Million Club. The larger Times database seriously understates the size of major deals that took place earlier. For example, it lists only $19.3 million for GlobalFoundries in New York State, even though the company took over a $1.2 billion deal originally offered to Advanced Micro Devices (which isn’t listed at all).

We applaud the Times for the great reporting that went into its United States of Subsidies articles, but the paper fell short when it came to the compilations featured in its database. Good Jobs First will continue to build our Subsidy Tracker tool and in the future will create what we hope will be a more accurate and complete version of a $100 Million Club.

(reposted from the Dirt Diggers Digest)

UPDATE

After this blog was posted, Louise Story contacted us with some concerns. She confirmed that 98 percent of the entries (a total of 152,729) in the Times database came from Subsidy Tracker, but she says the number of entries that came from other sources was actually 3,844 rather than the 2,000 we estimated. She added that in dollar terms, a subject we did not address in the blog, Tracker entries account for 67.3 percent of the total in the Times database. However, we cannot verify that number because the Times has not given us its underlying spreadsheet.

Story also believes that the blog should have mentioned the fact that she contacted me several weeks ago to say that the articles and database would be published soon and in effect told me about her aggregation plans. She did indeed contact me but gave the impression that her work was completed, meaning that an effort to suggest any changes in methodology would have been moot at that point.

Taxation without Employment: The Case for the District’s Strong Local Hiring Rules

December 4, 2012

DCJobsPlate

Washington, DC —Though D.C. taxpayers are supporting billions of dollars in development, out-of-state residents are reaping the benefits by capturing the lion’s share of construction employment, Good Jobs First concluded in Taxation without Employment: The Case for the District’s Strong Local Hiring Rules, released December 4.

City leaders could reduce unemployment in the District by strengthening enforcement of First Source hiring rules, the study authors concluded. First Source is a jobs stimulus law that mandates certain percentages for participation by District residents on construction projects receiving city funds. The study is available online at: www.goodjobsfirst.org/taxationwoutemployment

“The failure of area contractors to employ District residents is troubling,” said Thomas Cafcas, researcher at Good Jobs First and author of the report. “Too much money has been spent on public works, taxpayer-subsidized real estate development, and job training in the District of Columbia without adequate checks to make sure those public investments maximize job creation for the city.”

Just 2.9 percent of all District workers are employed in the construction industry, a much lower percentage than residents of Baltimore, Boston, New York City, and Philadelphia. As a result, District residents access family-sustaining construction jobs at a lower rate than their peers throughout the Northeast, diminishing one important pathway through which low-income workers enter the middle class.

If District residents got their fair share of area construction jobs, study authors calculated 11,500 more District residents would be on construction sites, and DC’s coffers would benefit from tax revenue from an estimated $386 million in additional wages.

“This study clearly indicates that the District needs local hiring requirements,” said DC Councilmember Kenyan McDuffie (D-Ward 5), Chair of the Council’s Committee on Jobs and Workforce Development and advocate for creating employment opportunities for DC residents. “We have more than 30,000 unemployed men and women in the District, including 4,500 Ward 5 residents seeking work. Based on my conversations with constituents, I believe that many are ready to pick up a shovel and get to work – they just need a chance to prove themselves.”

Nearly one year ago today, Mayor Vincent Gray and the DC City Council strengthened the District’s First Source hiring rules.

Data show contractors on a variety of projects have made significant gains in hiring residents, but only when local hiring is made a priority. For example, Good Jobs First found that residents accounted for 64 percent of new hires and 42 percent of hours worked on one project where local hiring requirements were strongly enforced. On another project where local hiring rules had not been applied, residents accounted for as few as 10 percent of new hires.

Other key findings:

  • Data suggest that there are thousands of DC residents that could potentially benefit from greater access to construction jobs, including the working poor and unemployed residents.
  • In 2010, the District spent $112 million on job training for over 62,000 residents – nearly twice the unemployed population – but saw no change in unemployment rolls the following year. Failure to leverage training money with First Source job opportunities needlessly wastes taxpayer money.
  • A job on a single construction project can have lasting positive professional consequences for DC workers: construction work is often found through informal word-of-mouth referral networks.

Good Jobs First’s Subsidy Tracker Used in New York Times Reportage

December 2, 2012

Good Jobs First’s Subsidy Tracker Used in New York Times Reportage

Washington, DC, December 2, 2012—The database created by the New York Times to accompany its new series on economic development incentives draws heavily from Good Jobs First’s Subsidy Tracker search tool launched in 2010.

“We worked closely with the Times and are pleased to have contributed what appears to be a large majority of the company-specific information the paper used for its excellent online feature,” said Philip Mattera, Research Director of Good Jobs First and creator of Subsidy Tracker, which can be found at http://www.goodjobsfirst.org/subsidy-tracker

“Subsidy Tracker has become the best-practice standard for states to disclose their economic development spending,” said Good Jobs First executive director Greg LeRoy. “States as politically diverse as Tennessee and Maryland have publicly acknowledged our technical assistance in launching or improving their disclosure websites. We also know that high-level officials in more than 30 states have responded to our 50-state report-card studies on transparency, job creation and enforcement.”

In the Times’ methodology page and every search display page, the main sources of company data listed are Good Jobs First’s Subsidy Tracker Database and Investment Consulting Associates. The latter is an expensive subscription service covering fewer than 5,000 U.S. deals going back only to 2010, while Subsidy Tracker is free, has nearly 250,000 entries with some programs covered back more than a decade, and spans more than 400 programs in all 50 states and the District of Columbia. Subsidy Tracker also incorporates information from the Good Jobs New York database, which has more detailed entries on subsidies awarded in New York City.

Subsidy Tracker’s company-specific coverage also goes far beyond that of the Times’ database, which is limited to recipients of total subsidies in excess of $1 million. And whereas the Times aggregates the awards larger recipients received in each state into a single figure, Subsidy Tracker provides details on all the individual awards, including links back to official data sources and, when available, figures on the number of jobs and wage levels projected and/or created with each subsidy. When disclosed, Subsidy Tracker also provides project street addresses, enabling users to map and analyze the geographic distribution of the awards.

Much of the data in Subsidy Tracker first existed in far-flung sources and formats that were neither retrievable nor searchable. Much data had to be captured by customized software “scraping” programs.

Subsidy Tracker also contains previously unpublished data Good Jobs First obtained from state and local government agencies via open records requests. “Posting this unpublished data makes Subsidy Tracker, in effect, the original disclosure source for dozens of subsidy programs,” Mattera said. “We are continuing our effort to expand this portion of Subsidy Tracker’s inventory, especially with regard to city and county programs, which are far behind their state counterparts in terms of online availability.”

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.

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