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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!

Posted in Corporate relocations, Economic Recovery, Hidden Taxpayer Costs, Job Piracy, Jobs, Sales Tax, Sprawl, Subsidies, Tax Increment Financing | 4 Comments »

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.

Posted in Clawbacks, Corporate relocations, Job Blackmail, Job Piracy, Jobs, Subsidies | Leave a Comment »

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!

Posted in Clawbacks, Disclosure, Jobs, New York, Property Taxes, Sales Tax, Subsidies | 1 Comment »

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.

Posted in Clawbacks, Illinois, Jobs, Subsidies, Tax Increment Financing | Leave a Comment »

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!

Posted in Clawbacks, Jobs, Subsidies | 2 Comments »

Report: States Spend Billions on Economic Development Subsidies that Don’t Require Job Creation or Decent Wages

December 14, 2011

States are spending billions per year on corporate tax credits, grants and other economic development subsidies that often require little if any job creation and lack wage and benefit standards covering workers at subsidized companies. These are the key findings of Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs, a study published today by Good Jobs First, a non-profit research center based in Washington, DC. It is available at www.goodjobsfirst.org.

“With unemployment still so high, taxpayers have a right to expect that economic development investments create significant numbers of quality jobs,” said Good Jobs First Executive Director Greg LeRoy. “If subsidies do not result in real public benefits, they are no better than corporate giveaways,” added Good Jobs First Research Director Philip Mattera, principal author of the report.

Money for Something rates the performance standards and job quality requirements of 238 key subsidy programs from the 50 states and the District of Columbia. Each is rated on a scale of 0-100.  Findings:

  • Only 135 programs have a performance standard relating to job creation, job retention or training of a certain number of workers.
  • Fewer than half (98) of the 238 programs impose a wage requirement, and only 53 of those are tied to labor market rates. Only 11 of the wage requirements raise pay levels by mandating rates somewhat above existing market averages. Wage requirements vary from just above the federal minimum to more than $40/hour in limited cases.
  • Only 51 programs require that a subsidized employer make available healthcare coverage, and only 31 require an employer contribution to premiums.
  • The states with the best average scores among their programs: Nevada (82), North Carolina (79) and Vermont (77). The worst: the District of Columbia (4), Alaska (5) and Wyoming (10).

Policy recommendations:

  • Every subsidy should contain job creation, job retention or training requirements strengthened by provisions barring employers from shifting existing jobs from other facilities and mandating that jobs be kept in place for a minimum period.
  • Every job in a subsidized facility should be covered by a wage standard that raises pay above market levels. They should also offer health coverage in which the employer contributes to premium costs.

Posted in Job Quality Standards, Jobs, Subsidies | Leave a Comment »

Most Texas Enterprise Fund Job Grantees Failed to Deliver in 2010

November 9, 2011

Source: Texans for Public Justice, 2011.

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

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

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

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

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

Posted in Disclosure, Jobs, Subsidies | Leave a Comment »

No Job Subsidies for Companies That Discriminate Against the Unemployed

September 2, 2011

Should taxpayers subsidize companies that refuse to even interview unemployed workers? Of course not!

Yet despite the fact that tax breaks are invariably justified in the name of reducing unemployment—not to mention the fact that more Americans have been unemployed for longer periods of time in this Great Recession than any downturn since the 1930′s—it’s legal for companies getting subsidies from states, cities or Uncle Sam to turn away applicants just because they are currently unemployed.

This callous treatment of the unemployed is outrageous but true: as the National Employment Law Project (NELP) documented recently (confirming news reports), dozens of companies and some of the nation’s most prominent job-search websites are routinely posting job ads that explicitly say applicants “must be currently employed.”

NELP rightly emphasizes how many job seekers there are for every job opening. We would add that, given higher rates of unemployment among people of color and younger workers, excluding unemployed applicants can only worsen discriminatory patterns.

If major economic development subsidies were reformed to prohibit this practice, it would greatly benefit millions of unemployed Americans. That’s because federally funded programs such as Industrial Revenue Bonds, Workforce Investment Act grants, and Community Development Block Grants are ubiquitous—as are state-enabled subsidies such as property tax abatements and investment tax credits.

Another federal remedy has also been proposed: House and Senate versions of the Fair Employment Opportunity Act of 2011 (already with 35 House co-sponsors) would prohibit companies and employment agencies from refusing to consider applicants solely because they are unemployed. In a recent radio talk show, President Obama endorsed the legislation.

As Good Jobs First documented in 2008 in Uncle Sam’s Rusty Toolkit (co-published with NELP and others) five of the most common federal job subsidies lack many of the taxpayer safeguards that are becoming increasingly common at the state and local level, such as online disclosure of company-specific costs and benefits, money-back guarantee clawbacks, Job Quality Standards, location efficiency and green building standards.

To that list for both the states and the feds, we would add: no discrimination against applicants just because they are unemployed!

Posted in Economic Recovery, Federal Job Subsidies, Jobs, Subsidies | Leave a Comment »

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.

Posted in Clawbacks, Corporate relocations, Disclosure, Jobs, New York, NYC post 9/11 resources, Subsidies, Taxes | Leave a Comment »

Expiration of Stimulus Funds Means Higher Costs for Higher Education

June 15, 2011

(This post originally appeared on the States for a Transparent and Accountable Recovery blog).

A couple months ago, I detailed in this space how the end of federal stimulus support is putting the squeeze on states’ K-12 education budgets, forcing school boards across the country to grapple with teacher layoffs, larger class sizes, fewer school programs and shorter school days.  But the pain isn’t only being felt by K-12 teachers and students; it also extends to public university students and their families, many of whom are facing major hikes in tuition and fees as Recovery Act funds for higher education come to an end.

As the Pew Center on the States’ Stateline news service explains, lawmakers facing severe budget crunches have “targeted higher ed because it’s easier to cut — legally, politically and logistically — than K-12 schools, roads, prisons or health care.”  As a result, “higher education continued to bear the brunt of state budget cuts in 2011.” These cuts, necessitated in large part by the expiration of stimulus funds, have forced public colleges and universities to raise tuition rates, often dramatically:

  • As Stateline noted, state support for the University of Washington has been cut from $400 million to $200 million, causing tuition to “rise by at least 16 percent next year.”
  • State budget cuts have “prompted a 20 percent increase in tuition at Arizona State University,” according to Stateline.
  • The Associated Press reported that the Florida state legislature has “approved an 8-percent tuition increase and most if not all” of the state’s 11 public universities “are expected to seek the board’s permission for an addition 7 percent, the legal limit.”  The spending cuts, the AP notes, “are due almost entirely to the expiration of federal stimulus funding the universities have received in the current budget year.”
  • In a separate article, the AP noted that the chancellor of the Tennessee Board of Regents cited “the evaporation of federal recovery act funds” in announcing that “[s]tudents attending Tennessee colleges and universities could see a tuition increase of 9.5 percent or more this fall.”
  • As the Boston Globe recently reported, the University of Massachusetts’ Board of Trustees has approved a plan that “will increase tuition and fees by 7.5 percent, meaning the average in-state undergrad will pay $11,838, an $826 increase from the academic year that recently ended.”  According to University officials, “the fee hike was necessary mainly because a federal stimulus program, which provided $38 million in funding this year, has ended.”
  • Wright State University in Ohio has raised tuition to the 3.5 percent state cap ($273 per year) to help offset the largest reduction in state funding in the school’s history, the Dayton Daily News reported. In response to these state budget cuts, which “come mainly from a loss of federal stimulus money that was not replaced,” the University of Cincinnati has also raised tuition to the cap, Miami University and Ohio State University are expected to do the same, and less expensive community colleges are seeking state lawmakers’ approval to raise tuition rates more than 3.5 percent.

A college education has long been recognized as a path to financial security, but with tuitions on the rise, more and more prospective students may lack the resources they need to make the dream of attending college a reality. Higher costs also impact those who are struggling to find work; in periods of high unemployment like today, many people go back to school to retool and gain new skills, but higher tuition rates may take this option off the table for those with more limited means.  Then there’s the big picture: Making college less affordable seems like precisely the wrong thing to do in an increasingly competitive global economy where those nations that invest in a skilled and educated workforce have the best hopes of future prosperity.

For all of these reasons, steep tuition hikes at traditionally affordable public institutions could exacerbate our economic troubles.  But that’s precisely the situation we find ourselves in as the Recovery Act moves into the rearview mirror with no more federal support in sight.

Posted in Economic Recovery, Jobs, Recovery Act | Leave a Comment »

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