Archive for the ‘Hidden Taxpayer Costs’ Category

Report: Sprawling Job Piracy among Cities and Suburbs Can Be Ended

July 10, 2014

Denver Illustration191px

Washington, DC – The most common form of job piracy-among neighboring localities in the same metro area-can be ended, as agreements in the Denver and Dayton metro areas have proved for decades. The agreements prohibit active recruitment within the metro area, and they require communication and transparency between affected development officials if a company signals it might move.

Those are the main conclusions of a new study released today by Good Jobs First. “Ending Job Piracy, Building Regional Prosperity,” is online at www.goodjobsfirst.org.

The study finds that even regions like the Twin Cities, with revenue-sharing systems intended to deter job piracy, have rampant job piracy because they lack the procedural safeguards Denver and Dayton have. Multi-state metro areas like Kansas City suffer the problem on steroids because state subsidies fuel the problem.

Career economic development professional staff-not elected officials-are best suited to institute anti-piracy systems, although politicians and the public generally should be educated about the value of such agreements. Information-sharing about companies considering relocation is also key. And states need to amend incentive codes to stop requiring local subsidies to match state awards, to deny state monies for intra-state relocations, and to deny eligibility for such relocations to locally administered tax increment financing (TIF) districts. These changes will deter job piracy and promote regionalism, the study concludes.

“The anti-piracy agreements we describe focus on economic development professionals communicating openly with each other in a transparent system,” said Leigh McIlvaine, GJF research analyst and lead author of the study. “When local officials cooperate for the benefit of the metro area, they can better focus on attracting investment and jobs that are truly new.”

“We know from previous studies that intra-regional job piracy fuels job sprawl, harming older areas, communities of color and transit-dependent workers,” said GJF executive director Greg LeRoy. “By favoring retention, anti-piracy agreements help stabilize employment in areas that need help the most, and areas that provide more commuters the choice of transit.”

Good Jobs First is a non-partisan, non-profit group promoting accountable development and smart growth for working families. Founded in 1998, it is based in Washington, DC.

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The Affordable Care Act’s Employer Penalty Gap

September 3, 2013

walmart_jwj_subsidiesAlong with the scandalous number of the uninsured, one of the biggest healthcare outrages in the United States has been the ability of large companies employing low-wage workers to avoid providing decent group coverage, letting those employees enroll instead in public programs such as Medicaid.

Those programs were meant for poor people not in the labor force or those working for marginal employers.  In the absence of any legal obligation to provide workplace coverage, giant corporations such as Wal-Mart exploit the public programs and thus shift costs onto taxpayers. A recently updated report by the Democratic staff of the U.S. House Committee on Education and the Workforce estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year in Medicaid costs.

One might think this is going to change under the Affordable Care Act that is gradually taking effect. While the law contains a requirement for individuals to have coverage, there is no real employer mandate to provide that coverage to workers. Instead, the ACA imposes penalties on certain employers for failing to provide affordable and inadequate coverage. Yet there are no fines levied when a boss pushes a worker onto the Medicaid rolls.

In fact, the ACA’s provisions encouraging states to expanded Medicaid coverage, while a good thing for the uninsured, will make it easier for low-wage employers both to avoid providing group coverage and to escape penalties for that refusal. This is worth keeping in mind when businesses complain about the supposedly onerous employer penalties in the ACA—penalties whose implementation the Obama Administration announced in July will be delayed for a year.

The ACA’s employer penalties have a very narrow scope. They will apply only when an employee of a firm with 50 or more full-time workers (the law’s definition of a “large” employer) seeks non-group coverage from an insurance company through one of the new state Exchanges and the employee qualifies for a premium or cost-sharing subsidy based on his or her household income. Those individual subsidies are available only for workers whose household income is between 100 and 400 percent of the federal poverty line (FPL) for their family size and whose employer either fails to provide any group coverage or provides coverage that is unaffordable or inadequate.

This means that employers of people earning less than the FPL or more than 400 percent of the FPL face absolutely no risk of penalties for failing to provide decent coverage, while the workers in those income ranges are denied subsidies from the Exchanges. Those earning less than the FPL may or may not be eligible for Medicaid, depending on the state. Those earning more than 400 percent of the FPL are not eligible for Medicaid in any state.

Penalties may also not apply when “large” employers fail to provide affordable coverage to those in the 100-400 percent of FPL range. That’s because some of those workers will for the first time qualify for Medicaid if they live in a state that accepts the optional federal incentives in the ACA for expanding Medicaid eligibility.

Some concern has been expressed about the potential coverage gap for those low-income families which are not eligible either for an Exchange subsidy or Medicaid, but much less attention has been paid to what amounts to an employer penalty gap.

A primary aim of the ACA is to reduce the ranks of the uninsured, but the rejection of a single-payer system means that workplace-based coverage needs to be strengthened. That should have meant a rigorous employer mandate. Instead, the ACA went with a pay-or-play system whose penalties turn out to be full of holes. Companies such as Wal-Mart may thus find it easy to continue shifting healthcare costs onto the public.

At the state level, one of ways activists have sought to fight such cost-shifting has been to push for disclosure of data showing which companies account for the most enrollees in Medicaid and other public plans. Such lists have been published for about half the states, with Wal-Mart or McDonald’s typically appearing at the top.

The ACA will require “large” employers to file reports indicating whether they provide group coverage, but it appears these reports will not be made public. Not only does the ACA fail to impose a real employer mandate; it also misses an opportunity to shame those freeloading employers which expect taxpayers to pick up the tab for their failure to provide decent coverage to their workers.

Note: This an a shortened version of a piece originally posted in the Dirt Diggers Digest.

Subsidizing Union Avoidance at Wal-Mart and Nissan

June 7, 2013

walmart-strike-300x168Most Americans have been made to believe that they have no stake in private sector labor issues. Unions, we are told, are irrelevant to the working life of the vast majority of the population, whose economic fate is supposedly being determined solely by their employers or by individual skills in maneuvering through the labor market.

This narrative, however, is being challenged by organizing campaigns that are taking on two giant corporations – Wal-Mart and Nissan – and showing that collective action is not defunct. And two reports related to the campaigns show that not only the workers involved, but also taxpayers in general, have a stake in their outcome.

For the past 30 years, Wal-Mart has fought bitterly against the efforts of its employees to organize for better pay and benefits. It showed no hesitation in firing workers who supported union drives and routinely closed down operations where successful representation elections were held.

A new wave of non-traditional organizing by Making Change at Walmart and OUR Walmart has revived the prospects for change at the giant retailer. Strikes have become a frequent occurrence at Wal-Mart stores in recent weeks, and large numbers of Wal-Mart workers and their supporters have been converging on Bentonville, Arkansas to make their voices heard at the company’s annual meeting.

A recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce is a reminder that taxpayers are put in a position of subsidizing the low wages and poor benefits that the Wal-Mart campaigners are protesting. The study, which updates a 2004 report by the committee, reviews the hidden taxpayer costs stemming from the fact that many Wal-Mart workers have no choice but to use social safety net programs—such as Medicaid, Section 8 Housing, food stamps and the Earned Income Tax Credit—that were designed for individuals not in the labor force or those working for small companies that failed to provide decent compensation, not a leviathan with $17 billion in annual profits.

The Democratic staff report estimates that today the workers in a typical Wal-Mart Supercenter (Wisconsin is used as the example) make use of programs that cost taxpayers at least $904,542 a year and possibly as much as $1.7 million. Since Wal-Mart has more than 3,000 Supercenters in the U.S., plus hundreds of other types of stores, those costs run into the billions.

Nissan has been following in Wal-Mart’s footsteps in Mississippi, where it opened a large assembly plant a decade ago. The plant brought several thousand direct jobs to the state, but the problem is that many of the jobs are substandard. The company makes extensive use of temps, who are currently paid only about $12 an hour.

In response to the use of temps as well as issues concerning the conditions faced by regular employees, Nissan workers have been organizing themselves with the help of the United Auto Workers. Rather than accepting labor representation, as it does in numerous other countries, Nissan is seeking to intimidate workers using the usual toolbox of union avoidance techniques such as threats and bombarding workers with anti-union propaganda.  The workers, however, have been bolstered by strong community support from groups such as the Mississippi Alliance for Fairness at Nissan.

My colleagues and I at Good Jobs First recently issued a report commissioned by the UAW documenting the extent to which Nissan has enjoyed lavish tax breaks and other financial assistance from state and local government agencies. We found that the subsidies, which were originally estimated at around $300 million when the company first came to the state in 2000, have mushroomed to the point that they could be worth some $1.3 billion. That works out to some $290,000 per job. Noting the over-dependence on temps, we state that Mississippi taxpayers are paying “premium amounts for jobs that in many cases are far from premium.”

Although it was outside the scope of our report, it is clear that the Nissan temps, like the Wal-Mart workers, are also generating hidden taxpayer costs through their use of safety net programs. And we have previously documented that Wal-Mart frequently gets the kind of economic development subsidies Nissan is enjoying in Mississippi.

Whether through hidden taxpayer costs or job subsidies, the public is frequently put in the position of aiding companies like Wal-Mart and Nissan that disregard labor rights while failing to pay their fair share of the cost of government. Perhaps the interests of taxpayers and workers are not so different after all.

Reposted from the Dirt Diggers Digest

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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?

Colorado Governor Doesn’t Buy Sales Tax Giveaway

May 10, 2012

Westernaires and Color Guard in Downtown Denver opening the National Western Stock Show

Advocates of accountability and fiscal responsibility in Colorado recently achieved a major victory when Governor John Hickenlooper vetoed a controversial economic development bill.  SB 124 was designed to amend the state’s existing Regional Tourism Act, which allows Colorado’s Economic Development Commission to award portions of sales tax revenue as a subsidy to projects deemed important enough to attract out-of-state tourism dollars.  If signed by the Governor, it would have increased the number of allowable projects this year from two to six.

The bill was made all the more contentious by the fact that the Economic Development Commission is currently in possession of an application for the existing Regional Tourism subsidy from Gaylord Entertainment Co., which is constructing a massive hotel-convention center complex in Aurora, Colorado.  The complex, located close to Denver International Airport, has been criticized for its potential to leech convention center business from Denver.  Confirming these fears, the announcement by the Western Stock Show–a Denver institution for over a century–of its intent to relocate to Aurora gave the issue a public symbol in the media.  The Gaylord complex is already approved for a tax increment financing (TIF) subsidy by the city of Aurora and has applied for an additional $170 million in sales tax TIF subsidies through the state’s Regional Tourism Act.

Concerns over intra-regional competition for jobs and tax revenues was not lost on Gov. Hickenlooper, who in his veto letter stated: “the [Regional Tourism Act] does not contemplate…projects that are likely to serve only the interests of a particular community.”  The Governor’s decision also reflected his concern that politicizing subsidy-awarding process would reduce the program’s effectiveness and accountability.  “This [veto] will help ensure the state sales tax increment revenue is used appropriately, and that the EDC is awarding projects that will in fact drive tourism and economic development…we want to ensure that the RTA process remains competitive, resulting in the most ‘unique’ and ‘extraordinary’ projects being approved,” he wrote.

TIF subsidies derived from property tax are used liberally in Colorado by local governments, but the use of sales tax revenues as a subsidy has been restricted thus far.  Recent years have brought multiple ill-informed efforts to deregulate and loosen rules on the TIF-ing of sales tax.  Many of these proposed tax giveaways have been beaten back by a coalition of groups led by the Colorado Fiscal Policy Institute, which successfully defeated a number of wasteful business tax credit and subsidy bills this session.

Congratulations to our allies on their hard-earned victory!

Study: Poverty Wages at BWI Create Hidden Taxpayer Costs

November 7, 2011

Many workers providing food and retail service at Baltimore Washington International Thurgood Marshall Airport (BWI) are paid so little that they and their families depend on Medicaid, the Maryland Children’s Health Program, and food stamps, according to a study released today.

The study, entitled “Behind the Counter at BWI: Engine of Development or Pocket of Poverty?” was issued today by Good Jobs First at www.goodjobsfirst.org.

“Maryland taxpayers have already paid enormous sums to build, maintain and operate the state’s largest airport,” said Greg LeRoy, the report’s author and Good Jobs First’s director. “But hundreds of workers there remain mired in poverty wages and scant benefits that force them and their families to depend on social safety-net programs, creating hidden taxpayer costs.”

The study is based upon a survey of 175 non-union, non-supervisory food and retail workers at BWI. It finds that:

  • Typical pay is just $8.50 an hour for 36 hours per week—or just $15,912 a year—below the federal poverty line for a small family and far below a more realistic bare-subsistence budget published by Wider Opportunities for Women.
  • Almost two in five workers have no health insurance coverage at all, and of those with coverage, two in five depend on Maryland Medicaid.
  • Although seven-eighths of those workers with children report having them covered, almost two-thirds of those are dependent upon the Maryland Children’s Health Program (MCHP). (Both Medicaid and MCHP are state-administered and funded with federal and state dollars.)
  • More than one-sixth receive food stamps at an average rate of $300 per month.

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.

Colorado Stock Show Wants Bucks to Sprawl

September 1, 2011

The location of the future Gaylord convention center complex.

The already controversial proposal to construct a massively subsidized convention center complex outside Denver has become even more divisive following an announcement by the city’s long-running National Western Stock Show that it was considering relocating to the site.

The new hotel-convention center complex in Aurora County, currently under development by Gaylord Hotels, is located near the Denver International Airport.   It is receiving up to $300 million in development subsidies via tax increment revenues from Aurora, whose City Council just approved a blight designation for the 125-acre site, now completely vacant land.  The company has also applied for a raft of state subsidies that include $170 million in sales tax rebates over a 30-year period.

Concerns that the 1,500-room complex will leach convention center and hotel business and tax revenues away from Denver are turning out to be well-founded in light of the National Western Stock Show’s announcement that it is considering a site adjacent to the new development for its annual events.  The show, which is celebrating its 106th anniversary this January, is considered a Denver institution.  (Its Centennial celebration drew 727,000 people.)   Denver voters will need to approve $150 million in general obligation bonds to finance the show’s move to Aurora.  Complicating matters further is the fact that the show benefited from $30 million worth of voter approved bonds in 1989 to upgrade its current facilities at the Denver Union Stockyards.  Under the terms of that contract, the organization is required to stay at its current address in Denver until 2040.

The stock show’s announcement has roused a series of accusations from Denver electeds that the organization is in breach of its existing bond contract.  The contract stipulated that the stock show must maintain the upkeep of its facilities, which have fallen into disrepair according to city council members.   The stock show was additionally required to submit annual reports to the city.  Stock show officials state that these were submitted annually to the city’s Theatres and Arenas Department, but this has not stopped City Auditor Dennis Gallagher from accusing the organization of failing to provide his office with financial reports.

Gallagher recently released a statement lambasting the organization:  “I refuse to see our city, our downtown business, our convention center, our historical heritage and the welfare of Denver taxpayers sold down the river because of over-arching greed.”  Other officials have reacted in kind.  City Council President Chris Nevitt accused the show of “fail[ing] to live up to [its] end of the bargain.”  The heart of the issue was best expressed by Aurora resident Shirley Ney:  “As I look at this land out there, I do not consider this land as blighted,” she said. “I think it’s very valuable land … valuable agricultural land is being eaten up by urban sprawl across this country. This proposal adds to that sprawl.”

Sadly, the wisdom of this sentiment may be lost on the National Western Stock Show, which represents an entire industry dependent on agricultural land.  The problem of subsidizing the development of greenfields is twofold.  It exacerbates the problem of sprawling growth and its associated regional costs, while simultaneously providing an unnecessary financial incentive for businesses to withdraw from the urban core.  A stampede of Denver’s urban businesses to Aurora may become unavoidable when such extravagant development subsidies are involved.

Ohio Proposal Would Lock Up Profits for Private Prisons

May 24, 2011

Ohio Gov. John Kasich, who pushed through legislation privatizing the state’s economic development functions, now wants to do the same for its correctional system.  The Governor has sparked a controversy by proposing the sale of six state-owned prisons (including one juvenile detention facility) to private corrections corporations, which would then operate the facilities under contract to the state.  The controversy set off by Kasich’s proposal was escalated when the House passed a budget bill that exempts the future prison owner-operators from paying state business taxes.

State Representative Matt Lundy has called the Governor’s proposal “insane,” stating that the plan is a “yard sale that would be the deal of the century.”  Rep. Lundy states that the proposal is a “profitization” masked as privatization.  The one-time proceeds to be gained from the sale of the properties – an estimated $200 million – will not solve Ohio’s long-term structural revenue problems, and the sale would not guarantee lowered costs in the future.

The practice of contracting out prison operations has its own troubled history.  Ethical issues notwithstanding (and these are numerous – see www.grassrootsleadership.org for more information), the fiscal benefits of contracting private sector companies to operate prisons have also been called into question.  A study by the Arizona Department of Corrections recently featured in the New York Times found that prisons operated by contractors cost taxpayers more per inmate than state-run prisons.  Policy Matters Ohio’s analysis of two existing prisons that are operated by contractors found little to no savings to the state.  Further, accountability and oversight problems are common with private contractors in the industry.  This is sometimes a result of the fact that private contractors reduce their operating expenses (and maximize profits) by trimming labor costs, whether by understaffing or cutting wages and benefits.  More job and wage losses can hardly be called beneficial to the state.

Given that the state stands to earn limited short term financial benefit by privatizing the prisons and can’t demonstrate savings from contracting out operations, the plan to exempt prison owners from major state and some local taxes is completely illogical.  This proposal is based on the notion expressed by House Finance Chairman Ron Amstutz that since the state doesn’t levy taxes on its own services, it shouldn’t tax businesses contracted to perform the same functions.  This is almost too nonsensical to bother rebutting.  According to this wacky logic, taxing the profits that a company makes from privatization would be unfair to those companies unfortunate enough to have to “compete” in the same market as the state government.  The Ohio House seems to have forgotten that it’s the government that creates this “market” in the first place.  Economically, this proposal amounts to little more than a massive subsidy to major private prison corporations – a subject about which Good Jobs First has written.  See our 2001 report Jail Breaks for more information about subsidies awarded to private prisons.

The proposal is being considered by the Senate this week.  Hopefully, the Senate’s collective memory is not as short as that of the House.  It might do state officials good to recall the scandalous history of the prison owned and operated by Corrections Corporation of America (CCA) in Youngstown in the late 1990s.  That facility was so thoroughly mismanaged that the state prison oversight committee called the company’s performance “ultimate failure in the primary mission and public promise of any prison.”  More information about CCA’s troubling past can be found in Corrections Corporation of America:  A Critical Look at its First Twenty Years, a joint publication of Good Jobs First’s Corporate Research Project and Grassroots Leadership.

With little short term income, no long term cost savings, and no new tax revenues to show for its proposal to sell and privatize the state’s prisons, Gov. Kasich’s plan should be called out for what it is:  a corporate giveaway.

K.C. Business Leaders Demand Cease-Fire on Wasteful Job Poaching

April 15, 2011

In an incredibly rapid private-sector response to our April Fool’s Day gag about that wonderful 50-state jobs truce, 17 prominent Kansas City-area business executives issued a letter this week urging the governors of Missouri and Kansas to stop offering subsidies to companies that are jumping the state line to create “new” jobs (no kidding!)

According to the Kansas City Star, the letter was not initiated by the Greater Kansas City Chamber of Commerce. A spokesperson for Kansas Gov. Sam Brownback basically said that state would press on. Missouri Gov. Jay Nixon is currently trying to convince AMC Entertainment not to jump the state line.

The paper also reported that the job-poaching wars have gotten worse since Kansas enacted a subsidy that allows employers to keep the personal income taxes of their employees (yes, you read that right), but then Kansas reportedly did that to defend itself against a similar Missouri giveaway…

Aside from the K.C. business leaders naïvely referring to their “unique bi-state community” (they’ve apparently not heard about New Jersey and Connecticut pirating New York City, or various Western states plundering Southern California, or northwest Indiana raiding Chicago, or [insert your favorite border job-war here], the letter is a lucid statement of the problem (if not a real solution). I especially like their point: “The losers are the taxpayers who must provide services to those who are not paying for them.”

And contrary to the tone of a similarly naïve piece about Kansas City-area job wars that recently ran in the New York Times, there is hardly anything new about this problem. Indeed, some people would date it to the 1937 birth in New York City of the Fantus Factory Locating Service, the grand-daddy of the secretive, powerful site location consulting industry.

Read this letter!

Apr. 11, 2011

Letter from KC area business leaders to Missouri, Kansas governors on ‘economic border war’

This letter to Kansas Gov. Sam Brownback and Missouri Gov. Jay Nixon was signed by 17 of the area’s top business executives: David Beaham of Faultless Starch/Bon Ami; Michael J. Chesser of Great Plains Energy; Ellen Z. Darling of Zimmer Real Estate Services; Peter J. deSilva of UMB Bank; David Gentile of Blue Cross and Blue Shield of Kansas City; Greg M. Graves of Burns & McDonnell; Donald J. Hall Jr. of Hallmark Cards; Michael R. Haverty of Kansas City Southern; Daniel R. Hesse of Sprint Nextel; L. Patrick James of Quest Diagnostics; A. Drue Jennings, formerly of Kansas City Power & Light; Mark R. Jorgenson of U.S. Bank; Jonathan Kemper of Commerce Bank; Thomas A. McDonnell of DST Systems; Michael Merriman of Americo Life; Robert D. Regnier of Bank of Blue Valley; and Kent W. Sunderland of Ash Grove Cement.

Dear Governor Brownback and Governor Nixon:

The Kansas City community is experiencing an economic border war. State incentives are being used to lure businesses back and forth across the state line with no net economic gain to the community as a whole and a resulting erosion of the area’s tax base. We are asking that you direct your Departments of Commerce to develop parallel legislation to reduce this unproductive use of tax incentives. While your departments work on this legislation, we ask that you both mutually agree to a bilateral halt to the issuance of incentives for business relocations between the two states within the Greater Kansas City area. We recognize that previously offered commitments should be honored and retention efforts and job training efforts should go forward. Let us give you more detail.

Both states offer competitive incentives for attracting new businesses. We support these incentives. We know they are necessary to compete with other states. We believe these incentives were intended to attract businesses and new jobs from outside the state or region. However, because of our unique bi-state community, too often these incentives are being used to shuffle existing business back and forth across the state line with no net economic benefit or new jobs to the community as a whole. At a time of severe fiscal constraint the effect to the states is that one state loses tax revenue, while the other forgives it. The states are being pitted against each other and the only real winner is the business who is “incentive shopping” to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.

There are companies taking out short-term leases in hopes of taking advantage of the incentives more than once. This shuffle is a two-way street as one state lures businesses and the other responds in kind. Neither state will benefit as the stakes in this “economic arms race” continue to escalate, and we squander available tax incentives by fighting amongst ourselves.

Further, the effect of this economic border war is not only erosion of the tax base but a decrease in property values, and the chilling of community relationships on other important metropolitan issues.
We applaud an aggressive economic development effort by both states. However, we should measure success by new businesses and jobs from outside this area and the state, not from across the street. We need to compete with others … not each other.

We believe the directors of the Department of Commerce should examine the definition of “new jobs” for the granting of incentives. “New jobs” should be redefined to exclude jobs attracted to the states from counties bordering the state line in the Greater Kansas City SMSA and counties contiguous to those counties.

Greater Kansas City is unique in having a community equally divided between two states. Our community is interdependent. To compete we must cooperate. The use of these incentives is vital to attract new businesses to our region. We can’t grow this community if we’re using our incentives to steal from each other instead of attracting real new economic growth.

We ask that each state examine how incentives can be better used to grow our economy, and while that is being done, declare a moratorium on the use of incentives for relocations between states within the Greater Kansas City area. We do encourage continuing programs for job retention and job training that advance or maintain economic activity.

Thank you for your consideration.


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