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$2.6 Billion Spent on Cleaning Up DC Rivers Must Address Local Job Creation

June 7, 2013

SinkorSwim_WebBoxOver the next decade, DC Water will use a regressive Impervious Area Charge (IAC) to fund $2.6 billion in needed water infrastructure investments. Middle- and low-income residents and neighborhoods will carry the highest burden of the DC Water fee increase that will pay for these improvements.

Despite the fact that the funding burden of these projects falls heavily on the most vulnerable residents, DC Water has not implemented a local hiring agreement, even though putting residents to work on the project may be the best way to reduce the harm of a regressive fee. These are among the findings of Sink or Swim? Who will pay and who will benefit from DC Water’s $2.6 billion Clean Rivers Project?, a study published this week by Good Jobs First.

More coverage of the report can be found over at the Washington Post and the Washington City Paper’s Housing Complex Blog.

Cities rarely spend so much — $2.6 billion — on infrastructure projects. A strong Community Benefits Agreement could make this public infrastructure investment provide a jobs stimulus benefit to District residents without spending an additional dollar. A proposed Community Benefits Agreement (CBA), like the District’s amended First Source Law, would establish a minimum percentage of work hours that must be performed by District residents, increasing to 50% over the next decade.

The report was commissioned by the Washington Interfaith Network (WIN) and The Laborers’ International Union of North America (LIUNA).

Among the major findings:

  • The impact of the IAC – measured as a share of 2013 property taxes – will be four- to five times greater for homeowners in poor neighborhoods than for those in affluent neighborhoods.
  • Small businesses, especially those east of the river, will feel a heavy burden from IAC fees. Office buildings on K Street will feel little impact.
  • There is no indication that District residents will benefit in proportion to their burden. Contractors on major DC Water projects currently employ more North Carolinians than residents from Wards 7 & 8 combined. Over half the contractor workforce lives outside Washington, D.C. and its immediate surroundings.
  • Continued failure to hire local residents will result in a massive transfer of wealth out of the District. We estimate that over the next thirty years, D.C. ratepayers will be billed $4.2 billion in IACs, including $1.1 billion from Wards 7 and 8 alone.

District residents will pay for these infrastructure investments through a regressive fee for the next thirty years. Low- and middle-income residents will be hit the hardest. These are neighborhoods that have historically been excluded from opportunities in construction careers; to not leverage $2.6 billion in public spending for District construction careers would represent a tremendous missed opportunity.

The Ongoing Economic Development Privatization Fiasco in Wisconsin

May 7, 2013

Wisconsin Governor Scott Walker must decide what to do with the scandal-ridden Wisconsin Economic Development Corporation (WEDC). Few options remain: ignore it, fix it, or declare it a failure.

The privatized economic development agency was created in 2011. Governor Walker proudly proclaimed that shuttering the state’s Department of Commerce and replacing it with a privatized entity would do wonders for job creation in Wisconsin. Good Jobs First wrote a report documenting the tainted track record of privatized economic development agencies throughout the United States. We warned that these quasi-government agencies frequently lead to unaccountable, opaque organizations spending too much taxpayer dough without jobs materializing. With the Governor’s rosy jobs pledges falling short and the WEDC embroiled in scandal, it appears that the agency is destined to be yet another case study highlighting what can go wrong when a public agency becomes privatized.

Last week another scathing audit by the non-partisan Wisconsin Legislative Audit Bureau found a slew of disturbing practices. This follows on the back of other issues previously reported on our blog. The issues read like a laundry list of everything agencies tasked with managing the public purse ought not to do:

  • Millions in taxpayer money went unaccounted for.
  • The law was broken.
  • Large amounts of taxpayer money were awarded to ineligible projects.
  • Questionable and inexplicable purchases appeared, including sports tickets and gift cards (a similar incident brought down disgraced Baltimore Mayor Sheila Dixon).
  • The agency turned a blind eye to recipients of public subsidies, even though the law required them to report publicly on their progress.
  • Staffers at the organization accepted some $55,000 in gifts during a six month period in 2011.
  • The agency failed to disclose to the public known conflicts of interest from an IT consultant awarded a no-bid contract.
  • The WEDC even went so far as to hire an auditor while that same company was negotiating a subsidy deal on behalf of a client with the agency.

These findings just scratch the surface of what was uncovered. To dig into more of the juicy details, read the Audit Bureau’s full report here (summarized here).

Members of Wisconsin legislature, from both sides of the aisle, are calling for immediate changes (a rarity in Wisconsin politics these days). Sen. Robert Cowles, R-Green Bay, has stated that, “this audit shows there is a significant disconnect between our expectations of WEDC and the reality of their performance with regard to transparency and accountability.” The Senate Minority Leader sounded like Cassandra foretelling the fall of Troy: “This is what we were saying from the beginning… there needs to be more accountability… more reporting… When you create a pseudo-government corporation, you want to make sure that you’re having the benefits of both, not the downsides of both.”

Despite the outrage by members of the legislature, the agency has embarked upon a public relations campaign to defend itself. The new CEO of the WEDC continues to claim that it has corrected its old ways and that the agency had not made “intentional violations” of state statutes. Whether the new CEO has a firm grasp on the agency is questionable: he has been on the job only a short time. All three of his predecessors have resigned amid scandal: one was found to owe back taxes to the state; another took a more lucrative job at his old company just 24 hours after accepting the WEDC position; and the first head of the agency resigned after federal investigators found mishandling of HUD money.

Governor Walker has called for an emergency meeting of the WEDC to discuss the problems at the agency. Later this week, the legislature is set to vote on the WEDC’s budget. Will Governor Walker insist that the agency take the audit seriously and implement sensible reforms like those we called for in our 2011 report? Will the Governor ignore the troubling findings altogether? Or will he disband the privatized agency and reinstate the Department of Commerce as the flagship economic development organization in Wisconsin?

State Chamber of Commerce Favors Clawbacks, Job Quality Standards, Enforcement

March 11, 2013

Image_Maryland_Money

Last Friday, at the Maryland Senate’s Budget and Taxation Committee hearing, representatives from the Maryland Chamber of Commerce endorsed cornerstone Good Jobs First reforms. This includes attaching strings to taxpayer-funded economic development deals such as money-back clawbacks when companies receiving taxpayer money fall short. The Maryland Chamber even implied that these reforms should apply not only to economic development subsidy deals, but also public-private partnerships (sometimes called P3’s) such as the concessions operations at Baltimore-Washington International Thurgood Marshall Airport (BWI).

In our two recent 50-state report card studies, Money for Something and Money-back Guarantees for Taxpayers, we documented the growth of these reforms across the states. It has become common practice for state economic development agencies to incorporate clawbacks and job quality standards into deals, though many states still don’t do enough or apply standards unevenly. But as the Maryland Chamber said, it’s a big problem when these agreements aren’t being adequately enforced to protect taxpayer money.

Below is a transcribed passage of the audio from the Maryland Senate’s Budget and Taxation Committee hearing. We think it serves to show the strong support for reforms like job quality standards, clawbacks and enforcement of clawbacks, even from powerful business interests. This portion of the hearing occurs around 1:05 in the recording.

Senator Richard S. Madaleno, Jr. (D-18th District): While the vice chairman raised many of the issues that I wanted to raise, I just wanted to be clear that you are saying Mr. Palmer, you are saying that there are times when in a contractual relationship between the government and a business we can put strings…

Matthew Palmer, Senior Vice President of Government Affairs at the Maryland Chamber of Commerce: Absolutely.

Senator Madaleno: This is how we’re going to treat your workers.

Mr. Palmer: Right.

Senator Madaleno: And in the case when they don’t and they violate that we can have clawback? You support that structure?

Mr. Palmer: Absolutely. And I think that’s important. As [the ABC representative] talked about with these P3’s, the flexibility of whether it’s [the Department of Business and Economic Development (DBED)] or other places actually putting that into contracts, you know, putting those strings as you said, with those companies and being able to, when they don’t meet those, claw that money back. Say OK, you didn’t meet your needs. I think that is absolutely appropriate and they should be held to it. I think that’s the problem. And unfortunately, it seems to me, in some of these instances [as we have heard from the testimonies of  workers at BWI airport, Baltimore’s Inner Harbor and Hyatt], some of those companies were not held to those standards. So I think that’s a big problem.

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.

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.

Wisconsin Leaves Taxpayers in the Dark

October 18, 2012

A new report released by WISPIRG details the failure of the state of Wisconsin to properly disclose whether its lucrative corporate subsidies are providing the promised benefits. Among WISPIRG’s findings:

  • Just 2 out of 251 entries listed in the state’s subsidy database detailed the projected and actual outcomes for the 2009-2010 reporting period
  • $8.2 million of those subsidies had no reported benefits to Wisconsin taxpayers
  • The newly created public-private partnership, the Wisconsin Economic Development Corporation (WEDC), couldn’t account for how much the privatized state agency has recaptured from recipients failing to meet performance requirements. In their response to WISPIRG, the WEDC claimed that it lacked the staff resources to compile that information.

This isn’t the first time WISPIRG has weighed in on subsidy accountability. In 2007, the group successfully led an effort to improve the state’s subsidy reporting. The resulting Public Act 125 requires the state to disclose corporate subsidy data in a searchable database. Prior to the creation of WEDC, that information was published by the Department of Commerce. The WEDC has not posted Act 125 data on its new website. Instead, that site has a hard-to-find link to the now defunct Commerce agency’s website. The old database is obviously outdated compared to standard practices in other states such as Maryland.

WISPIRG recommends the state do a better job implementing reforms that would ensure taxpayers know which companies are getting a subsidy and whether the state did anything to verify job creation claims. “Taxpayers shouldn’t have to be auditors to find out if the economic development subsidies we fund are delivering bang for the buck,” said Alysha Burt, WISPIRG Program Associate and co-author of the report.  “Even state auditors couldn’t quantify the outcomes of these programs because the information isn’t there.  For all we know, millions of our tax dollars could be funding junkets to the Caribbean.” The WEDC could start by putting a better Act 125 database on its website and featuring it prominently on the main page.

All of this comes on the heels of a deeply disturbing letter sent to the WEDC by the U.S. Department of Housing and Urban Development accusing the state of mishandling federal economic development funds. Shortly thereafter, the head of the WEDC resigned. And a June 2012 report by the state auditing agency, the Legislative Audit Bureau, found that state agencies were regularly failing to submit required compliance reports. Worse, the audit found that the newly created WEDC is required to disclose less information to the public than the old Department of Commerce did.

As our January 2011 report showed, the risks of privatizing a state economic development agency can lead to less transparency and accountability for taxpayers. In many respects, Wisconsin appears to be making the same blunders as other states that have gone down the path of privatization: resistance to accountability, questionable claims about the effectiveness of the privatized agency and misuse of taxpayer funds. Better data could ease those concerns.

And there are also conflict of interest issues. The new private-public agency has past recipients of lucrative subsidies deciding how the agency should operate. Companies represented on the board of directors include Logistics Health and FluGen. Logistics Health received at least $3.25 million in tax credits and loans, while FluGen collected at least $2.25 million. Logistics Health didn’t meet its projected job creation thresholds. According to the Act 125 database, FluGen didn’t even have job creation requirements.

We hope that WISPIRG’s report will serve as a wake-up call to taxpayers and legislators in Wisconsin and elsewhere. Without adequately disclosing subsidies, their purported benefits and outcomes, taxpayers will be left wondering why they have fewer services and/or higher taxes.

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.

PIRG Releases Report on TIF in Chicago as 3 Major Companies Return $34 million to Taxpayers

January 31, 2012

Chicago has long endured damage to its budget from Tax Increment Financing (TIF) chicanery. But with Mayor Rahm Emanuel pledging to take on TIF reform, change may be afoot. A new report released today by the Illinois Public Interest Research Group (PIRG) demands better transparency and accountability for TIF in Chicago. This includes incorporating TIF into the city’s budget process, linking spending to economic development plans instead of political patronage, requiring better outcomes, measuring outcomes, utilizing clawbacks for failure to meet benchmarks, and ending TIF districts once the economic development goal has been achieved. Much of what PIRG is asking echoes suggestions made by a panel appointed by Mayor Emanuel that studied the city’s TIF problems. Many of these recommendations have not yet been implemented.

In response to PIRG and other criticisms, Mayor Emanuel has pledged an improved transparency portal, better than the one we discussed last May, which was already a vast improvement.

And yesterday, to our surprise, recipients of major TIF subsidies have decided to return $34 million to the city. These recipients include the Chicago Mercantile Exchange (CME), CNA Group and Bank of America. CME’s subsidies were enabled by a controversial new state law. It’s not clear exactly why these recipients are choosing this particular moment in time to return subsidies, but reports indicate that shortfalls on job creation pledges and negative publicity may have played a role.

With 10 percent of Chicago’s revenues tripped up in TIF spending, it is clear that Chicago needs more transparency and accountability on TIF.

Mapping Job Subsidies: Nearly 2,000 New Deals Ready for Mapping

January 31, 2012

As states increasingly bring economic development deals into the sunlight, they are increasingly also doing so in ways that allow users to map the geographic distributions of those subsidies. Of the 116,000 entries in our Subsidy Tracker database, nearly 33,000 deals in 16 states can now be mapped to an exact address, while about 55,000 deals can be mapped to the nearest city. With new data online and ready for mapping, especially unpublished data just obtained from the state of Massachusetts, we encourage our followers to take our data and make the most of it.

As those who follow Good Jobs First know, since 2000 we have issued several studies mapping the geographic distribution of company-specific economic development subsidy deals—and then analyzing them for their pro-sprawl bias.

We are proud of the methodology we pioneered in creating these studies and have freely given away our data and advice to others seeking to replicate the work. These studies were tedious: we obtained lists of subsidy deals using state Freedom of Information laws and then spent months either obtaining street addresses or cleaning up the addresses provided.

Improved state disclosure systems combined with our Subsidy Tracker tool have trimmed many of the difficulties from that process allowing citizens and journalists to analyze deals for a wide variety of issues: poverty, race, tax-base wealth, population density, whether the worksite is served by public transportation, whether jobs are being created in communities hardest hit by plant closings and mass layoffs, etc.

As more states put subsidy data online in a downloadable and mapping-friendly format, we will continue to grow Subsidy Tracker and mash up geographic data in new ways.

Most Texas Enterprise Fund Job Grantees Failed to Deliver in 2010

November 9, 2011

Source: Texans for Public Justice, 2011.

A new Texans for Public Justice report (available here) finds that most of Governor Rick Perry’s Texas Enterprise Fund (TEF) projects failed to deliver on their 2010 job promises. The study analyzes compliance reports filed by 65 companies that received $350 million to create Texas jobs in 2010.

“Governor Perry’s jobs’ stimulus program is a classic example of government waste, fraud and abuse,” said Texans for Public Justice Director Craig McDonald. “The Enterprise Fund has an alarming rate of defaulting on the Governor’s jobs promises.”

A summary that Governor Perry’s office published in August suggests that $440 million in taxpayer TEF grants have created 59,600 Texas jobs. Perry claimed in an October presidential debate that TEF has produced 54,600 jobs. Putting aside five TEF projects that TPJ asserts are fraudulent job claims and a sixth project that appears to be undergoing an audit, TPJ found evidence that TEF had created 22,349 jobs by the end of 2010. That number amounts to 37 percent of the job claims made by the Governor’s Office.

Analyzing the 65 TEF projects, the new report found that:

  • 24 projects (37 percent) failed to deliver on their original 2010 job promises;
  • 17 projects (26 percent) complied with their 2010 job commitments;
  • 11 failing projects were terminated prematurely (17 percent);
  • 7 projects are troubled (11 percent), usually because they defaulted on 2010 job pledges but covered the shortfall with job credits earned by exceeding their job targets in past years;
  • 5  projects (8 percent) were found by TPJ to fraudulently claim that they created more jobs than they actually did (this category includes most of TEF’s largest grants); and
  • One project claimed “new” jobs that had hiring dates predating its TEF contract.

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