Archive for the ‘Disclosure’ Category

DC Subsidy Transparency Leads to Campaign Finance Reform

March 27, 2015

On the heels of a terrific NPR-station exposé, the District of Columbia has become the first large U.S. jurisdiction to enact campaign finance reform thanks to job subsidies becoming transparent.

moneybags

In 2011, the D.C Fiscal Policy Institute convinced the DC Council to require an annual Unified Economic Development Budget (UEDB, a key Good Jobs First reform). Better than most UEDB’s that report only program costs, DC’s UEDB was how DC began online recipient disclosure for all subsidy transactions worth more than $75,000 in any fiscal year. It was a landmark moment in economic development transparency: District subsidies are now posted online in a single place for all to see.

When the data came online in 2012, WAMU reporters Julie Patel and Patrick Madden began investigating rumors that big campaign contributors were also getting big subsidies. Their 2013 series, “Deals for Developers, Cash for Campaigns,” mashed up campaign finance reports with subsidy deals. The results shocked many: over a decade, 10 big developers had given more than $2.5 million in campaign contributions to political candidates and then received nearly a third of the District’s $1.7 billion in subsidies examined. Despite strict campaign finance laws capping such donations, developers skirted the law by forming multiple LLCs and donating to candidates from each of them—the “LLC loophole.” Madden and Patel built a timeline that found such campaign donations were also timed noticeably close to subsidy award, suggesting an influence connection.

Timing of Campaign Contributions & Awarding of Subsidies (credit: WAMU)

 

So thanks to economic development transparency, the District learned it had a massive campaign finance loophole. Council members were outraged and eventually passed a bill in 2013 to close the LLC loophole. The new law went into effect in January 2015 and LLC bundling is no longer legal. Before the loophole took effect, numerous developers rushed to make significant contributions. Unfortunately, political consultants are already suggesting the law be defeated by trusted campaign staffers to run Political Action Committees (or PACs) which can take unlimited campaign contributions after the Citizens United decision.

While subsidy transparency can reveal influence and loopholes and spur officials to act, ethics in government need more than local campaign finance reforms. Mashing up subsidy disclosure data and campaign finance records can change the public discourse and allow citizens to demand greater ethics from their elected representatives.

Report: District of Columbia Job Subsidy Practices In Need of Improvement; Lag Behind Nearby Jurisdictions

February 11, 2015

 

Washington, DC—Despite the District of Columbia embracing four leading best practices, other basic economic development standards and safeguards remain absent.

WebBox_ABetterDealfortheDistrict_FINAL_Feb6Broadly, the District has four major shortfalls:

  • failure to set job creation and job quality standards,
  • lax reporting on project outcomes,
  • failure to enforce existing standards, and
  • the need for an online transparency database.

The report is available at:

http://www.goodjobsfirst.org/ABetterDealForTheDistrict

Despite such shortcomings, experience shows that the District can rapidly change course. For example, recent enhancements raised D.C.’s ranking on job subsidy transparency from dead last to 26th among the states in a 2014 Good Jobs First national report card study.

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GASB Finally Prepares to Step Up! And Who is GASB, You Ask?

October 7, 2014

For many years, we at Good Jobs First have criticized GASB—the Governmental Accounting Standards Board, or “GAZ-bee”— for failing to require state and local governments to disclose economic development subsidy spending in a uniform way.

It appears that’s finally about to change, and if it does, it will be hard to overstate the significance of the news.

As the group that has been successfully shaming states and cities to disclose on subsidies all these years, with our 50-state and 50-locality “report card” studies, and as the group that has been collecting all the public data—and also lots of previously unpublished data—in our Subsidy Tracker database, we are intimately familiar with the irregularities and gaps that exist in these vital public records. And we have long shown how to fix them in our model legislation.

First, a quick primer on GASB: it is the public-sector counterpart to the Financial Accounting Standards Board, or FASB, which issues private-sector accounting rules. Each body oversees its respective set of rules, which are constantly under review and improvement, known as Generally Accepted Accounting Principles, or GAAP.

Adhering to GASB, cities, counties, states (and other government bodies such as school boards and sewer districts) must account for their finances in conformity to GAAP if they want to receive ratings from the major credit ratings agencies (Moody’s, Standard & Poors, Fitch), which they must earn if they wish to sell bonds.

The same is true for corporations of all kinds if they wish to satisfy shareholders, sell debt, or even get foundation grants. Indeed, Good Jobs First’s auditors have to certify us as GAAP compliant in our annual financial statement. All of which is to say: the influence of GASB and FASB is enormous and ubiquitous; they are the arbiters of sound United States bookkeeping standards that protect investors, taxpayers, and consumers every day. (Both are part of the non-profit Financial Accounting Foundation.)

Now, GASB is preparing rules that say: to meet GAAP, governments will have to publish an annual accounting of the revenue lost to economic development subsidies. The proposed wording of these rules has not been issued; all we have are board-meeting minutes of a low-profile process spanning more than two years, as GASB gathers information and debates how best to achieve this new standard.

GASB is using the term “tax abatement” as an umbrella term (not just specific to local property tax exemptions) but “a reduction in taxes… in which (a) one or more governmental entities forgo tax revenues that [an individual] taxpayer otherwise would have been obligated to pay and (b) the taxpayer promises to take a specific action that contributes to economic development or otherwise benefits the government(s) or its citizens.” This would appear to also cover state corporate income tax credits and state or local sales tax exemptions, but apparently not tax increment financing.

As part of that process, GASB even commissioned a survey that included citizens groups, county board members and bond analysts. Tellingly, the bond analysts said they are most keen to see both current and future-year costs. For cities like Memphis, where we recently found that Payments in Lieu of Taxes (or PILOTs) cost the city almost one-seventh of its property tax revenue, such losses are apparently becoming bigger concerns for bond investors.

GASB will have a three-month comment period on its proposed rules starting next month (November).

For all the cost-benefit debates featuring inflated ripple-effect claims that beg the more fundamental issue of cause and effect, we have always said: the only thing that can be said for sure is that development subsidies are very expensive, so costly that they undermine funding for public goods that benefit all employers. Therefore, at the very least, taxpayers have the right to know the exact price of every deal and every program (and the outcome of every company-specific deal). GASB now appears to be moving to make some form of standardized disclosure of tax-break costs a reality for reporting periods after December 15, 2015 (and sooner on a voluntary basis).

Some important details remain to be clarified. Based on the board minutes, it appears that GASB will propose giving governments the option of disclosing individual deals or only programs costs in the aggregate (the latter option would be far inferior). We’ll know for sure when the draft standards are published sometime this month. Good Jobs First will publish a detailed analysis of the draft when it comes out.

But for now, the big picture is simply huge: the body that effectively controls how taxpayer dollars are accounted for is finally catching up to the Wild West of record-keeping known as economic development incentives.

Tesla: New Technology, Same Old Subsidy Charade

September 9, 2014

Tesla Motor’s shameful subsidy competition for its battery factory is wrapping up to a close in a state known for big gambling.  The Nevada Governor’s Office of Economic Development (GOED) announced last week it had assembled a breathtaking package for the proposed “Gigafactory” totaling as much as $1.3 billion in tax breaks.  Governor Brian Sandoval has called the legislature into a special session starting this week to approve the deal, which is unprecedented in size in Nevada.  Included are new transferable tax credits based on the electric vehicle manufacturer’s hiring and investment, plus extensions of existing business, sales, and property tax abatement programs that would allow Tesla to operate completely tax-free in the state for ten years.  (The majority of the subsidy package lasts for twenty years.)  If approved in its current iteration, the megadeal will be among the 15 most expensive state subsidy packages in U.S. history.

powered by subsidies

 

Two weeks prior to this announcement and in anticipation of a subsidy shakedown by Tesla, Good Jobs First coordinated with groups in the five states named by Tesla to compete for the battery factory. Along with Arizona PIRG, the California Budget ProjectProgressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, and Texans for Public Justice, we issued an open letter calling for transparency and cooperation between states forced into a subsidy bidding war for the battery manufacturing jobs.  Media response to this effort was strong, but state lawmakers bound by non-disclosure agreements common to secret site selection negotiations did not comply with our requests.

Aside from the subsidy terms, the only information made public about the pending Nevada deal consists of overly optimistic job-creation talking points.  During last week’s press conference Gov. Sandoval told attendees that 22,000 new jobs would be created by the project and that the total economic impact would be $100 billion over the 20-year subsidy term.  6,500 new direct permanent positions will purportedly enjoy an average wage in excess of $25 per hour, according to the Governor’s office.  A day before the special session is rumored to begin, the economic impact study informing these extravagant economic figures has not been presented for public review and the economic projections are being challenged.  Economist Richard Florida believes 3,000 permanent positions are more likely, and estimates the total job creation impact at 9,750 – less than half of the 22,000 claimed by GOED.

For anyone paying attention to the super-hyped “Gigafactory” site selection competition, the announcement that the company had selected Reno, Nevada came as no surprise.  Although Tesla has maintained over recent months that it was also negotiating terms with Arizona, California, New Mexico and Texas, it broke ground outside Reno early this summer.  The location is proximate to lithium mining operations, boasts freeway and class 1 rail access, and is less than a day’s drive from the Tesla assembly plant in Fremont.  Storey County, Nevada – Tesla’s future home – is famous in the state for approving industrial permits in less than a month.  In hindsight, Tesla’s unusual announcement that it intended to break ground in several sites is starting to appear disingenuous.

What exactly the company has been seeking over the past few months is more of a mystery.  Tesla has announced, at various points during this period, that it wanted laws changed to allow direct sales of its cars to consumers, as is the case in California.  It emphasized that the most important factor for launching the Gigafactory was expedited permitting, so Tuscon, Arizona issued Tesla an unsolicited blank building permit in July.  Initially mum on the topic of economic development subsidies, (and well after reports surfaced of a $800 million subsidy offered by San Antonio, Texas) CEO Elon Musk announced last month during a conference call that he expected the “winning “ state to ante up a $500 million investment for the battery factory.

In the context of all of this messaging on the company’s priorities, the size of the subsidy offered by Nevada is all the more confounding.  During last week’s press event in Carson City, Musk repeatedly stressed that incentives were not among Tesla’s most important considerations in its location decision.  What remains unanswered is why Nevada was compelled to offer more than double the $500 million subsidy originally sought by Tesla.  Until the veil is lifted from secretive corporate incentive negotiations, the public will be left out of the critical conversations that determine the who, where, and why of business subsidy decisions it is forced to fund.  In the meantime, many questions remain as the state’s lawmakers move toward a vote on the largest subsidy package in Nevada history.

Multiplying Megadeals

September 8, 2014

intel-ra-overheadjpg-4a39e7d62752a00aNevada’s $1.3 billion package for Tesla’s battery “gigafactory” is another in a seemingly endless series of giant subsidy deals that state and local governments have been made to think are the only way to attract major investments.

It comes on the heels of a $2 billion deal given to Intel in exchange for a commitment to expand its chip operations in Oregon (photo). Even California, which has tended to avoid the megadeal game, recently gave $420 million tax credits both to Lockheed Martin and to Northrop Grumman in connection with their competing bids to handle a big bomber project for the Air Force.

These are among 19 large subsidies announced in 2014 and eight from the second half of 2013 which Good Jobs First has just added to our Subsidy Tracker as part of an update to the research we did last year for our Megadeals report. We also added 27 older deals, most of them as a result of our decision to expand the definition of Megadeals to all those with a value of $60 million or more (the previous threshold was $75 million). The 54 new entries bring our total universe of Megadeals to 298, whose history — both in terms of number per year and total value per year — can be seen in the following charts.

 

Number of megadeals per year Sept 2014

Total dollar value of medageals per year Sept 2014

It’s clear that the trend toward more Megadeals we identified in our report is continuing. The spike in 2013 reflects the record-setting $8.7 billion deal Boeing got in Washington State. The number of deals during the eight months of this year is already approaching the full-year totals for recent years, and the dollar total is already ahead of 2012’s figure. A full list of our 298 Megadeals can be downloaded here.

The Megadeal additions are only part of the updates we’ve just made to Subsidy Tracker. My colleague Kasia Tarczynska collected nearly 7,000 additional basic  entries from 60 programs in 13 states, including the first disclosures made for programs such as the new California Competes tax credit and the South Carolina Film Production Incentives. See the Update Log for a list of all the additions.

We’ve also continued the process of parent-subsidiary matching announced earlier this year with the introduction of Tracker 2.0. We just uploaded matches for more than 100 additional parent companies, bringing the total to 1,415.  We have linked these parents to 35,000 individual entries whose aggregate dollar value equals 77 percent of all the entries in Tracker.

Megadeals may be marching on, but they cannot escape our scrutiny.

Ask Tesla’s Elon Musk to Open-Source His Subsidy Demands

September 3, 2014

Good Jobs First has launched a petition through MoveOn asking Tesla CEO Elon Musk to open-source his ≥$500 million subsidy demands.

Sign the petition here.

Tesla Motors is demanding at least $500 million in taxpayer subsidies, whipsawing AZ, CA, NV, NM and TX siting a huge battery factory.

If it’s really confident that such massive subsidies are justified, Tesla should release the five states from non-disclosure agreements and allow taxpayers to see the files.

Elon Musk: open-source your subsidy-application files and let taxpayers weigh costs and benefits!

 

Sign the petition here.

 

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New ProgressOhio Report: JobsOhio Unaccountable and Ineffective

May 29, 2014

ProgressOhioLogo_transp1

ProgressOhio released a report today questioning the accountability and effectiveness of JobsOhio, the privatized economic development agency created by Gov. John Kasich in 2011.  The organization found that JobsOhio “exaggerated its impact, funneled state money to companies that did not create or retain the promised jobs, and has a pattern of helping companies with ties to its politically potent governing board.”

The report was released in conjunction with a discussion hosted by the American Constitution Society.    ProgressOhio Executive Director Brian Rothenberg told the event audience that “JobsOhio is secret because it is private. But we still get glimpses of the toxic mix of public money and private gain.”

Read the full report here.

The Latest from Subsidy Tracker

May 28, 2014

detectiveEarlier this year, my colleagues and I at Good Jobs First introduced a major overhaul of our Subsidy Tracker database. The big change in Tracker 2.0 was the addition of parent company information for entries representing three-quarters of the total dollar value of the dataset. This allowed us to document for the first time the outsized share of subsidy awards received by big business.

In the past three months we have been enhancing the enhancements. We have increased from 965 to 1,294 the number of matched parent companies, which together are linked to more than 31,000 individual awards with a total value of more than $113 billion. Our parent coverage now extends to the full Fortune 1000 as well as the Fortune Global 500, the Forbes list of the largest privately held companies, the Private Equity International list of the top 50 private equity firms (and their portfolio companies) and the Uniworld list of the 300 largest foreign firms doing business in the United States.

Each parent company has its own summary page, which can be accessed through a drop-down menu at the top of the Tracker search form. These pages include cumulative totals for the subsidies received by the company and all its units and subsidiaries; the states in which it has received the most awards; and a list of all the individual awards that went into those totals. Those lists are sortable and downloadable, and they include links to pages with details on the individual entries.

Since the release of 2.0 we have added a variety of new features to the parent summary pages, including indications of the time period covered by the data and the following identifying information: the company’s ownership structure, the location of its headquarters and its primary industry group. (See below for a summary of what these identifiers show.) We have also begun to add other key info sources on the companies, beginning with links (where available) to the firms’ CTJ-ITEP Tax Dodgers pages and to our Corporate Rap Sheets.

Along with the parent pages, we’ve created summary pages for each of the states and the District of Columbia. They show cumulative totals, the parent companies with the most awards and a sortable and downloadable list of all the listings for the state. The top states in terms of cumulative disclosed subsidy awards are New York ($21 billion), Washington ($13 billion) and Michigan ($10 billion).

We have not neglected the task of gathering new data. Led by my colleague Kasia Tarczynska, our effort to find new online and unpublished data has during these past three months resulted in 13,000 new listings, bringing our total to 258,000. Kasia is getting ready to implement a plan for systematically filing FOIA requests for missing data with state and key local agencies.

NEW CUMULATIVE SUMMARY DATA FOR SUBSIDY TRACKER PARENT COMPANIES

Top Parent Companies:

  • Boeing: $13.2 billion
  • Alcoa: $5.6 billion
  • Intel: $3.9 billion
  • General Motors: $3.6 billion
  • Ford Motor: $2.5 billion

Top Industry Groups:

  • Aerospace & military contracting: $14.3 billion
  • Motor vehicles: $13.9 billion
  • Steel & other metals: $8.2 billion
  • Semiconductors: $5.7 billion
  • Oil & gas: $5.3 billion

Top States Based on the Location of Parent Company Headquarters:

  • Illinois: $16.2 billion
  • New York: $13.6 billion
  • Michigan: $8.4 billion
  • California: $8.0 billion
  • Texas: $4.5 billion

Foreign Countries Whose Companies have Received the Most Subsidies for their U.S. Affiliates:

  • Japan: $5.3 billion
  • Germany: $2.4 billion
  • Netherlands: $2.2 billion
  • Italy: $2.1 billion
  • Canada: $1.8 billion

Subsidy Tracker 2.0 has a wealth of new information. Check it out today.

Connecticut’s Open Data Website Leads Nation in Adopting Economic Development Transparency Best Practices

April 1, 2014
Screenshot taken from Connecticut's new Open Data website

Screenshot taken from Connecticut’s new Open Data website

Those looking for a model on how to disclose economic development deals should start their search in Connecticut. No joke: Connecticut is cutting edge when it comes to taxpayer transparency on economic development.

Yesterday, Governor Dannel Malloy launched a new website called Data.CT.gov which aggregates numerous datasets that were previously unavailable or difficult to find. Included in this portal are many economic development programs we have doggedly watched and evaluated for transparency and accountability. Our January 2014 study ranked Connecticut 14th on job subsidy transparency: the states’ new website is a clear improvement that would have boosted their ranking into the top ten nationally had it been in use when we ranked all 50 states.

The Governor’s new transparency efforts came to fruition through two executive orders: one creating the website and the other instructing the state’s economic development agency to compile a searchable electronic database of subsidy information.

What makes the Connecticut website such a great model?

  • Clean Data: Often state agencies put up data in a haphazard fashion. Misspellings, data irregularities, and so forth make the data less useable. Worse, sometimes agencies put up data in static, unsearchable PDFs, not databases which contain the same information. When Good Jobs First imports data into our 50-state Subsidy Tracker database, this sort of messy data requires a great deal of clean-up. It’s clear that Connecticut has taken the time to ensure the data isn’t messy.
  • Relevant Data: The Connecticut portal also includes extremely important data that other states frequently forget to include. These fields include things such as clawback amounts, contract date timelines, job benchmarks, the result of a jobs audit, the amount of a subsidy awarded, the amount of a subsidy disbursed in each year, and the facility address. Including these data fields meets many of Good Jobs First’s best practices recommendations. In fact, the only data that really seems to have been omitted from the database is information about the wages and benefits of subsidized jobs (see here).
  • Data Tools: Another open data best practice is to allow users to easily search through the data. The database includes built-in mapping tools, filters, and charts. As the screenshot above illustrates, taxpayers can now easily see on a map all film tax credit recipients that were issued tax credit amounts greater than $1 million.
  • Downloadable Data: Connecticut doesn’t hamstring users like it used to with a single big PDF. Now the data is available in a variety of easy to download formats including XML, CSV, and, of course, Excel spreadsheets.
  • More Data: Frequently states spend a great deal of time disclosing data about a few major programs, but forget to disclose information about other economic development programs. This database includes tax credits, grants, loans, and other economic development tools. For more discussion about tax credit disclosure, see our previous blog on the topic. Connecticut’s data also includes previously undisclosed data about programs. For instance, it includes street addresses for film tax credit recipients.
  • Potential taxpayer savings: In the long run, the database will also save Connecticut taxpayers money. Frequently, Freedom of Information Act (FOIA) requests cost the government great resources in responding. But the new website will include frequently requested FOIA data. In addition to staff time saved, the enhanced ability for more citizens to know how their tax dollars are being spent will prevent waste, fraud, and abuse and enhance accountability.

We encourage you to go on the website and give it whirl: https://data.ct.gov/Business/Tax-Credit-Portfolio-Point-Map/megq-7hbv

Accountability Updates in Oregon

March 20, 2014

intel sign

Two new reports released this week by watchdog groups in Oregon show mixed results for accountability of the state’s economic development subsidies.

OSPIRG released Revealing Tax Subsidies 2014, an update to its previous evaluation of how well the state is complying with its three year old transparency law.  While the state has improved its disclosure since OSPIRG’s last assessment, especially for large controversial programs, the group found that the state is still failing to report key information for 14 of the 19 subsidies covered by the law.  In particular, many of these under-disclosed programs are missing information about the economic outcomes (e.g. jobs, wages, or investment) ostensibly generated by these subsidies.

Lacking such information, it is impossible to know whether the colossal corporate tax subsidies documented this week by the Institute on Taxation and Economic Policy and Citizens for Tax Justice are actually doing the state any good.  The Oregon Center for Public Policy announced yesterday that at least 24 (and probably many more) of the state’s most profitable corporations included in that report have paid no state income tax in recent years.  Oregon has a minimum corporate tax, but companies are able to dodge their tax responsibility with economic development subsidy tax credits.

Read the full OSPIRG report here and see OCPP’s reporting on corporate tax dodging here.  The ITEP/CTJ national study is available here.


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