Archive for the ‘Clawbacks’ Category

New Model Legislation from Good Jobs First

October 10, 2012

Washington, DC, October 10, 2012 — Good Jobs First today released an updated version of its model state legislation to make economic development subsidy programs more accountable and effective. It can be found at: http://www.goodjobsfirst.org/accountable-development/model-legislation

 

“This model legislation is informed by our many years of grading the states on their economic development program rules,” said Good Jobs First executive director Greg LeRoy. “At a time when states must make painful budget decisions, taxpayer subsidies in the name of jobs should be transparent, fair and effective.”

“Our model language is derived from the best state and local laws Good Jobs First has found while issuing six 50-state “report card” studies, including Show Us the Subsidies, Money for Something and Money-Back Guarantees for Taxpayers,” said Good Jobs First research director Phil Mattera. “These are proven, common-sense safeguards that every state should consider as a baseline.”

The legislation is designed to apply to every major kind of economic development subsidy that a state legally enables and which in turn is administered by either the state or by local governments. They include: corporate income tax credits (for job creation or retention, research and development, film production, etc.); property tax abatements and reductions; enterprise zones; tax increment financing districts; training grants; loans and loan guarantees; sales tax exemptions and rebates, and others.

The model legislation has four parts:

Disclosure: company-specific annual reporting on the Web of the costs and benefits of every deal, including Unified Reporting of Property Tax Abatements and Reductions to disclose online when local property taxes are lost that would otherwise fund schools and other local services;

Job Creation and Job Quality Standards: to make sure the cost per job is not excessive and that public subsidies help to raise living standards, not lower them;

Clawbacks and Rescissions: to ensure that deals are carefully monitored and that companies pay subsidies back (or lose future subsidies) if they fail to deliver on jobs or other community benefits;

Unified Economic Development Budget: to provide state legislators with a full annual accounting of every kind of expenditure the state makes for jobs to make sure that any budget cuts are fairly applied to less-visible corporate tax breaks, not just appropriations such as grants or loans.

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Good Jobs First http://www.goodjobsfirst.org is a non-profit, non-partisan resource center promoting best practices in state and local economic development and smart growth for working families. Based in Washington, DC, it includes Good Jobs New York http://www.goodjobsny.org.

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Diebold Pushes Ohio Down the “PIT”

April 24, 2012

The recent announcement that Diebold, Inc. would be laying off hundreds of employees from its Ohio headquarters despite having received massive job retention subsidies designed by the state specifically for its benefit came as little surprise.  (We’ve seen it before with Sears, Dell, Boeing, ad naseum.)  The same day, Good Jobs First released “Paying Taxes to the Boss” a report in which we describe the disquieting economic development practice of states allowing employees’ personal income taxes (PIT) to be leveraged as corporate job subsidies.

Among the 22 programs we analyzed in our report is Ohio’s Job Retention Tax Credit (JRTC), which underwent controversial changes last year under the Kasich administration.  At that time, both American Greetings and Diebold were considering relocating their corporate headquarters out of the state.  In response to this job blackmail, Ohio legislators tweaked the JRTC rules to make the credit refundable for companies with a written offer of subsidies from another state.

In the end, Diebold signed a $55 million subsidy agreement (including $30 million in JRTCs) with the state in exchange for a promise to retain 1,500 workers and construct a new headquarters facility.  The catch?  Diebold employed 1,900 people in Ohio at the time the subsidy agreement was finalized.  One year ago our prescient friends at Plunderbund correctly predicted what would come next – the state would be subsidizing Diebold while the company slashed its workforce.  Last Thursday the company announced its intent to move 200 jobs to India, bringing its total state employment down to approximately 1,550 workers.

Diebold’s reasoning for seeking job subsidies from other states is a perfect example of how PIT-based programs accelerate the race to the bottom.  The company claimed it was unable to compete after its chief rival, NCR Corp. relocated to Georgia with the assistance of the state’s Mega Project Tax Credit, yet another PIT subsidy spending program.  (For descriptions of Georgia’s many personal income tax diversion subsidies, see “Paying Taxes to the Boss.”)

The use of workers’ personal income taxes as corporate giveaways fuels already rampant interstate job piracy.  PIT diversions negate the benefits that economic development projects should have on diminishing state tax revenues.  At this rate, it’s not even helping retain jobs in Ohio.  The Diebold situation is proof of that.  Lawmakers should not need more evidence that this is failed economic development policy.

Unfortunately, its failure to generate real economic development hasn’t stopped more states from adopting this foolhardy practice.  Last year Oregon created the Business Retention and Expansion Program, a subsidy that will allow recipient businesses to receive the taxes of workers as forgiveable loans.

NYC Unleashes Decades of Subsidy Data

February 1, 2012

After years of nudging by Good Jobs New York and others, subsidy transparency in the Big Apple took a giant leap forward yesterday.

Thanks to the New York City Council and a bill sponsored by Brooklyn’s Diana Reyna, the New York City Industrial Development Agency released data on 623 discretionary subsidy deals. The new report – which includes data as far back at the 1980’s – is trend-setting for being in excel (not just in PDF format) and for including all currently subsidized firms. Previous reports were only required to include project for a seven-year window. Previously, GJNY transcribed this data from PDF’s to create its “Database of Deals” and we will merge the two databases giving New Yorkers of all stripes: advocates, community organizers, elected and public officials, journalists and academics a unique tool that shines a light on how discretionary subsides are allocated.

As we explained in October of 2011 when the bill was passed, New York City is on an up- swing with regards to subsidy transparency. The report, formally known as the Annual Investment Projects Report, includes 126 fields of data including:

  • Current employment, promised employment and employment at time of deal
  • The amounts and types of city subsidies used to date and remaining
  •   Amount of subsidies recaptured
  • Percentage of employees that are city resident
  • Percentage of employees offered health benefits

Combining new subsidy deals, extensive company-specific data in a downloadable, excel format makes what we believe, to be the country’s best local subsidy disclosure report. Though, as reported last month, New York State still has plenty of room for improvement.

Good Jobs New York will be reviewing the data in the weeks ahead and will report back our findings. In the meantime, we encourage you to do the same!

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.

Report: States Lack Sound, Consistent Policies to Enforce Job-Creation and Other Performance Requirements in Economic Development Subsidy Programs

January 18, 2012

Despite the fact that many economic development deals fall short on job creation or other benefits, states are inconsistent in how they monitor, verify and enforce the terms of job subsidies. Many states fail to verify that companies receiving subsidies are meeting commitments, and many more have weak penalty policies for addressing non-compliance.

These are the findings of Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs, a study published today by Good Jobs First, a non-profit, non-partisan research center in Washington, DC. It is online at www.goodjobsfirst.org.

“It is not enough for states to have good job-creation and other performance requirements on paper in their subsidy programs; they must also enforce them diligently and consistently,” said Good Jobs First Executive Director Greg LeRoy. “Strong standards and strong enforcement are inseparable in making sure subsidy programs are not mere corporate giveaways,” added Philip Mattera, research director of Good Jobs First and principal author of the report.

Using a scoring system covering performance standards and enforcement, Money-Back Guarantees rates 238 programs in 50 states and the District of Columbia on a scale of 0 to 100. Other findings:

  • Ninety percent (215) of programs require companies to report on job creation or other outcomes. Yet in 31 percent of those programs, the agency doesn’t verify the data.
  • Three-quarters (178) of the programs use penalties such as recapture of benefits already provided (clawbacks) and the recalibration or termination of future subsidies. Penalty provisions in 84 programs are weakened by the fact that their implementation is discretionary or allows exceptions.
  • Only 21 programs publish aggregate enforcement data; 38 list non-compliant companies; 14 list penalized companies.
  • The states with the highest averages are Vermont (79) and North Carolina (76); the lowest: District of Columbia (4) and Alaska (19).

Recommendations:

  • Recipients should always be required to report on job creation and other benchmarks—and the data should be verified.
  • Agencies should penalize non-compliant recipients. Performance-based programs should operate without penalties only if recipients are required to fulfill all requirements before receiving subsidies.
  • Penalty systems should be not be weakened by exceptions or discretion on whether to implement them. Agencies should publish online data about enforcement.

Job Shortfalls Everywhere—So Who’s Watching the Store?

January 16, 2012

Today as America honors Dr. Martin Luther King, almost one in six African-American workers are officially unemployed. Let us remember: the full name of the 1963 event for which he is best remembered was The March on Washington for Jobs and Freedom (emphasis added).

Jobs are front and center today as well, as politicians justify economic development subsidies in the name of jobs, often while citing those suffering high unemployment. Yet we at Good Jobs First have been struck by the spate of journalistic investigations and state government reports finding that many subsidized deals are failing to deliver.

At a time when states are making painful budget cuts, they must be able to recoup taxpayer investments when deals fail. That’s why this Wednesday we will release Money-Back Guarantees for Taxpayers: Clawbacks and Other Enforcement Safeguards in State Economic Development Subsidy Programs. It is the largest study ever performed looking at whether states monitor and verify job-creation claims—and whether they can recapture, or claw back, subsidies when companies fail to create or retain as many jobs as promised.

Consider a sampling of recent job-shortfall news:

Alabama—The Birmingham News reported last winter that, after giving three large companies “wiggle room” on job shortfalls, the state or local governments clawed back money from Louisiana-Pacific, International Shipholding Corp., and U.S. Pipe and Foundry Co.

Connecticut—The state’s Department of Economic and Community Development’s 2010 annual report revealed that in 31 out of 70 audited business assistance contracts, companies failed to meet their job creation targets. The Department has not revealed whether it clawed back money from any of the 31 companies, and if so how much.

Florida—After reviewing data released by Florida officials on subsidy deals dating back to 1995, the Orlando Sentinel calculated three months ago that only about one‐third of the projected jobs had actually been created.

Georgia—The Atlanta Journal-Constitution reported last summer that four subsidized companies that either closed or laid off many workers had not been penalized, that “companies are rarely penalized,” and that the state’s revenue Department monitors outcomes but will not disclose any data about them. Summarizing what it could tell about $469 million in subsidies given out between 2003 and 2009, the AJC concluded: “taxpayers can’t gauge how effectively all the money has been spent, or whether the expenditures were even necessary.”

Illinois—The Chicago Tribune, using the state’s top-rated transparency website, reported last winter that, over nine years, companies awarded Illinois’ costly Economic Development in a Growing Economy (EDGE) tax credits were failing to qualify for them 52 percent of the time, and two-fifths of the projects never qualified for any credits. And as we blogged earlier this month, the state legislature and Gov. Pat Quinn were jolted in December when they gave Sears a massive new tax break to retain its headquarters—and days later, the chain announced more financial losses and more than 100 store closures, putting a cloud over the Illinois jobs.

Indiana—WTHR-TV’s 13 Investigates unit looked into Gov. Mitch Daniel’s claim of 100,000 jobs starting in late 2010. In its much-honored “Reality Check: Where are the Jobs” series, it exposed deals that never broke ground and others that fell far short on jobs or failed altogether. The series provoked the state’s privatized economic development agency to commission an audit of almost 600 deals which found so few jobs that WTHR concluded only 38 percent of the claimed jobs had so far materialized.

Iowa—An investigation by Des Moines Register two months ago found a sharp increase in the number of Iowa companies failing to deliver on subsidized jobs. As many companies had defaulted on tax credit contracts in the most recent fiscal year as the previous three years combined, it found. It also found that the state’s recoupment and renegotiation activity was up.

Massachusetts—A large Boston Globe investigation last winter looked into 1,300 subsidy projects, large and small, that had promised to create jobs. “Hundreds of the projects delivered fewer jobs than promised, and some companies actually slashed employment. Many firms won subsidies for projects they were set to build without state assistance; in some cases, incentives that were approved long after the projects were underway or complete. And many got generous packages though they agreed to create only a handful of low-paying jobs.”

Minnesota—An investigation by The Minneapolis Star Tribune last winter found that that one‐fifth of the companies receiving subsidies in the Gopher State from 2004 through 2009 did not meet their hiring commitments.

Missouri—The Kansas City Star earlier this month examined 91 projects over six years in the state’s Quality Jobs Program. While acknowledging that some deals take years to pan out and that little of the awarded $311 million had been paid out yet, it found that about five out of six deals had not yet met their job goals and total job creation was only one fourth of the projected total.

New Jersey—An independent consultant’s evaluation of the state’s big-ticket Urban Enterprise Program last winter found such poor results that that taxpayers got back only eight cents per dollar invested. It called the program “bureaucratically cumbersome and costly to operate,” and said it “has yielded inconsistent and uncertain quantifiable results in terms of business expansion and job creation in the State’s urban areas.”

New York—The Alliance for a Greater New York (ALIGN) reported two months ago that 274 projects subsidized by Industrial Development Agencies around the state had failed by the time the projects ended in 2009. Instead of creating 21,113 jobs, the companies lost 4,957 jobs. Another 11,000 jobs were lost at firms subsidized for job retention.

North Carolina—The Charlotte News & Observer reported last month that more than 30 percent of the state’s 139 Job Development Investment Grants have been withdrawn or terminated due to lack of promised jobs or investment.

Ohio—Attorney General Mike DeWine issued a report three weeks ago that revealed 48 percent of subsidized companies had failed to meet their pledges for job creation, job retention, or other performance requirements. It named 200 shortfall companies that had received grants, tax credit awards or other subsidies totaling more than $82 million. Clawback details were mixed. And as Good Jobs First detailed in a report last July, the quality of Buckeye State disclosure has been deteriorating, making it harder for taxpayers to track outcomes.

Rhode Island—The Providence Journal reported last summer that for two years in a row, the state has issued a report required by an accountability law, but leaving out job-creation numbers. The state filings detail costs—$127 million given out over three years—but leave out the benefits. Both state reports also failed to include an independent analysis of program effectiveness that is required by the accountability law, reported ProJo.

South Carolina—The Associated Press (headline: “SC gov using inflated job list in employment boast) incurred the wrath of Gov. Nikki Haley when it reported last summer that her commerce agency provided four different job-creation totals—and that some of the listed jobs did not result from any state aid. As well, one large group (750 more jobs at an Amazon warehouse) resulted from a tax-break deal the state legislature enacted over her opposition. Separately, the Greenville News reported last May that the state had clawed back only twice in five years (and one was initiated voluntarily by Michelin).

Texas—Texans for Public Justice last fall examined 115 deals of the state’s controversial Texas Enterprise Fund (TEF) program. Among 65 projects in 2010, it found most were non-performing (37 percent), terminated (17 percent), troubled (11 percent, usually due to job shortfalls), exhibited fraud (8 percent, including some of the program’s largest grants that had deceptive job claims), or weak (2 percent, for claiming jobs that predated the TEF contract).

Wisconsin—An investigation by Gannett last November found that 40 percent of companies in Wisconsin that completed job‐creation tax credit contracts during the past five years failed to hire as many people as they had promised.

So many failed deals beg the question: are cash-strapped states watching the store? Are they able to recover money from non-performing companies?

For the answers, stay tuned this Wednesday!

Connecticut Economic Development Subsidies Are Costly and Poorly Monitored

October 24, 2011

Connecticut’s major economic development expenditures are high in cost, poorly monitored and may be undermining the public goods that actually constitute the state’s competitive advantage for jobs.  These are the findings of a new Good Jobs First report released today.

The report entitled, Connecticut Economic Development Subsidies: Costly and Blunt, found that corporate income tax credits can have high cost-per-jobs figures (one cost taxpayers $169,667 per job) and that some companies getting subsidies don’t meet job creation promises. The report recommends that the state’s existing programs be thoroughly evaluated and that the state adopt better online transparency of costs and benefits before considering new spending.

Among the findings, we found:

  • Two-thirds of the state’s economic development dollars ($173 million in FY 2011) are spent outside the purview of the Department of Economic and Community Development (DECD) which, although it needs improvement, has more rigorous oversight standards than the other controlling agencies.
  • Some of the most expensive subsidies (such as research and development tax credits, the electronic data processing equipment property credit, and the fixed capital investment tax credit) are structured as uncapped, as-of-right subsidies and their eligibility requirements prevent the state from attaining the biggest bang for the buck.
  • Even for those programs that do officially have clawbacks, their application is unknown. An analysis of DECD’s 2010 annual report reveals that 31 business assistance contracts (out of the 70 contracts total) which underwent a DECD audit failed to meet their job creation targets. Combined, these companies were awarded nearly $86 million in subsidies. Unfortunately, DECD has not disclosed whether these companies, all failing state job audits, repaid subsidies. Taxpayers have a right to know whether a clawback occurred, and if so, how much money was recaptured.
  • Tax credits can have high cost-per-job figures and result in job losses. One subsidy cost taxpayers $169,667 per job created. The top ten most expensive subsidy packages cost taxpayers an average of $98,672 per job. Worse, in 2005 Connecticut’s Finance, Revenue and Bonding Committee commissioned a study which found that 14 out of the 24 studied tax credit programs led to net job losses.  For instance, the fixed capital investment credit created a net loss of 226 jobs.
  • DECD does not disclose the wages and benefits paid by each company utilizing subsidies. Annual reports, however, show that some companies received subsidies for promising to create low-wage jobs causing hidden taxpayer costs for employees which must rely on the public safety net system.
  • Most job creation promises made by companies receiving subsidies are not creating new jobs in Connecticut. Eighty percent of the job promises relate to retaining jobs from existing Connecticut businesses threatening to leave the state or shut down. Studies on job creation tax credits show that 70% or more of the credits awarded to recipients paid companies for jobs that would have been created anyways.
  • Many “new” Connecticut jobs are actually relocating a short distance from adjoining states. For instance, Starwood Hotels received $75 million to move less than 20 miles down the road into Connecticut from Harrison, New York. Some affected workers simply commute from out-of-state and therefore don’t pay Connecticut state income taxes, local property taxes, or state and local sales taxes. Shifting jobs in the same metropolitan area doesn’t grow regional economies.

Some 9/11 Subsidy Recipients Fail to Meet Job Goals; New York State Recaptures Funds

September 1, 2011

Pie Chart 1: The Largest JCRP Recipients

As the 10th anniversary of September 11th attack on the World Trade Center approaches, it is a good time to review what happened with the subsidies that were allocated to large firms to help them deal with the effects of that tragedy. It turns out that some companies that received those subsidies, including Goldman Sachs, failed to meet their job retention or creation goals, and some have had to repay funds to New York State.

Good Jobs New York has just completed an analysis of the Job Creation and Retention Program (JCRP), which was created in the wake of 9/11 to encourage major employers in Lower Manhattan to remain there and to encourage others to relocate to the area. JCRP, which is administered by the Empire State Development Corporation (ESDC) and its subsidiary the Lower Manhattan Development (LMDC) Corporation, has awarded about $304 million in Community Development Block Grants to 91 companies. These funds come from a special $2.7 billion allocation for various rebuilding efforts in Lower Manhattan after 9/11.

Here are some of the highlights of our analysis:

  • Goldman Sachs which received $22.9 million of a $25 million JCRP grant, has not complied with its commitment to retain 8,100 jobs.  The state has not clawed back funds, but it will most likely not allocate the remaining $2.1 million the firm is due.
  • Approximately $13.4 million was recaptured from firms for not being in compliance with their agreements with the Empire State Development Corporation, (see Table 1).
  • Nine firms that were especially hard hit by the attack received a special allocation of $33 million in CDBG funds under the “New York Firms Suffering Disproportionate Loss of Workforce Program” (see table 2).

Table 1: Firms that had JCRP funds recaptured

As part of our analysis we obtained copies of 19 JCRP agreements between firms and ESDC. JCRP grants were allocated by the (ESDC) and/or its subsidiary, the (LMDC) but compliance falls under the ESDC. We have posted these documents here and have summarized their content in our Database of Deals along with summary information about the other recipients.

We also requested copies of the applications firms submitted for the JCRP funds, but some of them were unavailable because they had been destroyed, we were told, in a flood at ESDC offices. Missing applications included those of Goldman Sachs and American Express.

It is interesting that the applications submitted by HIP and Deloitte Consulting said the firms were under no immediate pressure to move but they received the grants anyway. Nearly all the applications we reviewed warned that the firms were considering moving their facilities to neighboring states; many said they might remain elsewhere in the city.

Goldman’s Subsidy Reach: Goldman Sachs, one of the largest beneficiaries of post 9/11 resources, has received $22.9 million of a promised $25 million grant. Goldman benefited tremendously from government incentives after 9/11, including Liberty Bonds and a special lease agreement with the Battery Park City Authority for its new office tower.  Details on Goldman’s subsidies are here. However, as of December 2010 Goldman was not in compliance with it job commitments. Employment was 8,100 in 2005 when its agreement was made but in 2010 the firm’s employment was 7,472. As of the end of 2010, ESDC had yet to recapture funds from Goldman Sachs but the firm will most likely not receive the remaining $2.1 million it was promised.

Whether Goldman Sachs needed subsidies to finance its move from one side of Lower Manhattan to the other no longer remains a mystery. Goldman’s agreement with the ESDC notes: “Goldman was not significantly impacted by the attacks of September 11th” and “The remainder of its facilities were not severely damaged or destroyed and no lives were lost.” However, the firm notes that it had to temporarily relocate employees and “experienced significant losses directly related to the overall economic impact of the attack…”

Banking on the Bank of New York: The largest JCRP grant of $40 million went to the Bank of New York. The Bank also benefited from a $90.8 million allocation of Liberty Bonds to FC Hanson for its building above Atlantic Terminal in Brooklyn. Details are available in our Database of Deals.

Deal with Deutsche: On 9/11 Deutsche Bank occupied two buildings impacted by the attack: 130 Liberty Street, directly across the street from the WTC and 4 World Trade Center. In return for keeping employees in Lower Manhattan, it received a $34.5 million JCRP grant. The redevelopment of the 130 Liberty Street site has hit several bumps, including the need for the negotiation skills of former US Senator George Mitchell to forge an agreement with the various interests (Deutsche Bank, New York State via the Lower Manhattan Development Corporation and insurers). In the end, the Lower Manhattan Development Corporation bought the building in 2004 and has spent approximately $277 million for acquisition, demolition and developing 130 Liberty Street with the expectation of turning the property over to the Port Authority of New York and New Jersey.

Demolition of 130 Liberty Street raised the ire of residents and local elected officials who were concerned that if it is not done properly, the contaminated building could be an environmentally hazardous project. In 2007 a fire killed two firefighters at the site.

Recaptures and Clawbacks

Chart 2: Percentages of JCRP allocations recaptured

Each JCRP agreement includes a clawback provision that requires firms to return part of the grant if it does not create the jobs promised or if it moves jobs and/or operations out of New York City. Penalties are generally strongest in the first and second years of the deal. GJNY has long pushed for strong clawback provisions in economic development deals and is pleased to see this first public evidence of recaptures by ESDC. However, as chart 2 indicates, the actual percentage of money clawed back is low in many cases.

 

Grants for Employees’ Loss of Life: Ten firms received $33 million from a special allocation of CDBG funds from the New York Firms Suffering Disproportionate Loss of Workforce program. The lion’s share has gone to Cantor Fitzgerald; after merging with another JCRP program recipient, the firm is eligible to receive approximately $6.8 million more in JCRP funds. To be eligible for the program, firms have to have had “suffered a loss of life equal to at least six permanent employees AND at least 20% of its permanent workforce OR at least 50 permanent employees located in New York City.” Learn more about the program on the Lower Manhattan Development Corporation’s website.

Table 2: Recipients of the Disproportionate Loss of Workforce program. *Note: Recipients of this program were required to provide jobs data only for 2004 and 2005. Information for those that provided jobs data beyond these years can be found in our Database of Deals.

Jobs Reporting

GJNY has long advocated for an accountable and equitable use of economic development funds and believes, like many fiscal watchdogs and CEOs alike, that subsidies do not persuade location decisions of large firms in the finance and real estate industries. For companies to move or expand operations and create jobs, access to workforce, transportation and infrastructure, and a cluster of like-minded businesses guide location decisions more than taxes.

With that caveat and due to weak transparency on the state level, GJNY finds that a concise figure of job impacts remains elusive. A December 2010 report to the U.S.  Department of Housing and Urban Development claims 30,000 jobs were created or retained by 40 JCRP recipients that benefited from the LMDC allocation. This job count corroborates data we received from ESDC that tallies job totals for both agencies, approximately doubling the jobs cited in the HUD report. (Prior to the creation of LMDC, the ESDC allocated JCRP grants.) We encourage New York State to emulate recent transparency efforts like those at the New York City Industrial Development Agency.

Grants continue: In early August of this year, ESDC announced a $3 million JCRP grant for Oppenheimer & Co. Because this grant was announced so recently it is not in our database. More information about the proposal is available here.

See more: Information on other CDBG-funded economic development programs created after 9/11 – including several thousand recipients of the Business Recovery Grant (BRG), Small Firm Attraction and Retention Grants (SFRAG) and the special $8 Billion allocation of Private Activity Bonds (aka “Liberty Bonds”) –  are available in the Database of Deals and our Reconstruction Watch section of our website. There you will also find descriptions of various incentives being offered in Lower Manhattan from the City and State commercial subsidy program known as “the Marshall Plan.” In addition, in August 2011 the New York City Independent Budget Office released a summary of Federal Aid to New York City after 9/11.

Amazon Prevails in South Carolina

June 6, 2011

Amazon will be allowed to help its customers in South Carolina dodge sales taxes, after all. In a dramatic reversal, Palmetto State legislators approved a bill that gives the online retailer a five-year exemption from collecting sale tax from the state’s residents. The move revives Amazon’s plans for a $125 million distribution center in the state that is projected to create 2,000 jobs. Unfortunately, the bill does not include strong clawback provisions.

The legislation is a defeat for Amazon’s brick-and-mortar competitors, both small businesses and big-box retailers such as Wal-Mart that lobbied hard against the exemption sought by Amazon.

As we previously reported, the original promise to exempt Amazon from its obligation to collect sale taxes was made last year by then-Gov. Mark Sanford and was a part of a subsidy package that included $5 million in free land; $3,250 in tax credits for each job created; and property tax breaks on equipment.

Initially, the House rejected the deal but gave into political pressure stoked by Amazon’s decision to increase its job-creation projection by 750 jobs. Gov. Nikki Haley has opposed the deal, though she now says she will let the bill take effect without her signature.

Limited attention is being paid to the terms of the company’s job promises. The final version of the bill requires Amazon to create 2,000 jobs by the end of 2013 and retain 1,500 jobs between the end of 2013 and January 1, 2016. If the company decides to lay off up to 500 workers after 2013, it will face no consequences. After January 1, 2016 (when the exemption expires), Amazon is not required to retain any specific number of jobs.

If the company does not meet job creation or investment ($125 million) obligations, the only penalty Amazon would face is cancelation of the exemption. There are also no wage requirements for the jobs, though Amazon is required to provide a comprehensive health plan for the workers.

It is disappointing that after the long battle, the legislature did not put measures in place that would truly protect workers and hold Amazon accountable.

Stung by Shutdowns, Massachusetts Debates Reforms

April 12, 2011

Recent job loss events in Massachusetts, though unfortunate for the state and its workers, may prompt passage of strong economic development accountability and clawback legislation that would apply to all economic development subsidies statewide.   Announcements by Evergreen Solar and Fidelity Investments – both major recipients of economic development subsidies – that the companies would be moving large numbers of jobs out of state have frustrated development officials, lawmakers and residents alike.

Evergreen Solar announced in January that it would shutter its Devens manufacturing facility and send over 800 jobs to China, despite the $58 million in job creation and development subsidies it received from the state.  Fidelity’s March announcement that it would be relocating approximately 1,100 jobs to two neighboring states from its Marlborough facility also came as an insult to the state; in the 1990s – at Fidelity’s urging and great cost to the state – Massachusetts altered its state tax code to apply single sales factor (SSF) corporate income tax calculation to mutual fund firms.  Weak accountability standards and a lack of safeguards in the state’s subsidy programs mean that Massachusetts will be able to recoup very little from Evergreen and nothing from Fidelity of the subsidies they received to create and maintain jobs in the state.

Executives from both companies were questioned by lawmakers last week about their acceptance of job subsidies and subsequent decisions to move jobs out of Massachusetts.  Evergreen Solar CEO, Michael El-Hillow, stated during the hearing that the company would not be repaying the $21 million it received as direct cash grants and tax credits from the state.  Fidelity’s major economic development subsidy, provided in the form of reduced corporate income tax responsibility through the SSF calculation, is impossible to recapture.  However, even some lawmakers who voted for the passage of SSF are now questioning its value to the state’s economic development efforts.  During the hearing Senator Mark Montigny, chairman of the Senate Post Audit and Oversight Committee, stated that he expected SSF “not to continue in perpetuity with no oversight” or accountability.

Prompted by these revelations,  the Massachusetts State Auditor issued a preliminary review of business tax expenditures this week.  She found that of 91 business tax expenditures, only 8 include a sunset clause, just 10 contain clawback provisions, and only 19 have public disclosure or accountability reporting requirements.  (Program sunsets, clawback provisions, and public disclosure are among the most basic and most critical aspects of key subsidy reforms supported by Good Jobs First.)   Massachusetts passed its first public disclosure law last year, which covers only the recipients of refundable or transferable tax credits.

This law, though a good first step towards strong public disclosure, is narrow and incomplete compared to other states’ disclosure practices.  It would be leapfrogged by S153/H2565: An Act to Promote Efficiency and Transparency in Economic Development, legislation currently being examined by the Joint Committee on Revenue.  Over 50 legislators, including primary sponsor Sen. Jamie Eldridge, are co-sponsoring the omnibus economic development reform bill.  Among its many provisions are the following major subsidy reforms:

  • Transparency, including spending transparency via a Unified Development Budget
  • Enhanced online disclosure of job creation and performance monitoring
  • Mandatory clawback provisions; and
  • Job quality standards

If enacted, the bill would protect Massachusetts’ future investments in economic development and ensure that companies can no longer take taxpayers’ money and run.


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