Archive for the ‘Missouri’ 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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Missouri Seeks Cease-Fire in Kansas City Border War

July 2, 2014

borderwar01-1200xx900-506-0-85A bill signed this week by Missouri Governor Jay Nixon has the potential to solve one aspect of the wasteful jobs border war currently ravaging the Kansas City metropolitan economy: the use of state subsidies to fuel intra-regional business relocations.  Senate Bill 635 would prohibit the state’s business subsidies from being awarded to businesses relocating within the two-state metro area from Kansas to Missouri.  However, the law will only go into effect if Kansas enacts a companion law limiting its own use of state business incentives in the Kansas City metro within the next two years.

The legislation was sponsored by state Sen. Ryan Silvey (R-Kansas City), who called the practice of subsidizing companies to hop the border “senseless.”  The bill also had the support of the Kansas City Chamber of Commerce, which stated that it was one of its “highest legislative priorities.”  One of the most vocal supporters of the effort to end the border war is a coalition of metropolitan business leaders, who in 2011 submitted an open letter to governors in both states demanding a cease-fire on the use of subsidies for intra-regional relocations.  And in June, while awaiting Gov. Nixon’s signature on SB635, the business coalition again appealed to both leaders in an open letter:

“For the last several years, both states have followed a destructive practice of encouraging a cross border job shuffle. This has cost taxpayers hundreds of millions of dollars and it has generated little or no new economic activity. Neither state is a winner in this game as one state loses tax revenue while the other state forgives it.”

For its part, Kansas has signaled little interest in supporting a companion bill, citing the need of local suburban jurisdictions to pursue their own economic development agendas.  This is an ironic position to take, given the extent to which state subsidies have interfered in metropolitan economic dynamics in the region.  The best way to allow localities to pursue their own economic development agendas would be for both states to stop providing ammunition for the border war.

Kansas’s PEAK Subsidy Fails Performance Audit

October 3, 2013

bummer for the sunflower stateA Kansas state legislative audit of the controversial Promoting Employment Across Kansas (PEAK) subsidy program found that it is inadequately managed and that previously approved deals exceed the program’s spending cap.

Clawback readers may recall that PEAK is no stranger to controversy – it is Kansas’s most used subsidy in the bitter jobs war with Missouri that continues to ravage the Kansas City metropolitan economy. PEAK diverts the state personal income tax withholdings of employees as a subsidy to those workers’ employers.  It was enacted in 2009 to compete with Missouri’s similarly structured Quality Jobs tax credit, and has unfortunately inspired copycat programs in other states.  (For more information, see Good Jobs First’s 2012 report on personal income tax diversion subsidies, Paying Taxes to the Boss.)

Despite its poor program disclosure, in 2012 the Kansas City Business Journal was able to determine that PEAK was subsidizing short border-hopping company moves primarily in the counties around Kansas City.  At that time, 44 of 55 participating businesses were located in either Johnson or Wyandotte Counties. The list of subsidized businesses included the headquarters of movie theater company AMC Entertainment, which was sold by Bain Capital to a Chinese company shortly after its PEAK award was approved.

The audit provides clear confirmation of PEAK fueling the border war.  Legislative auditors found that all but a handful of PEAK awards were given to companies relocating into JohnsonCounty.  Of the 1,550 jobs represented by companies in JohnsonCounty, all but 110 came directly from Missouri.

More disturbingly, the audit revealed that in general, “officials have prioritized getting companies into the program rather than monitoring and measuring program results.”  Specifically, auditors found that:

  • Assessing the benefits of the PEAK program is difficult because the Department of Commerce has not compiled meaningful information on the program.
  • The department’s data were incomplete because many companies had not submitted the required quarterly and annual reports.
  • The data were also incomplete because the department had not processed companies’ quarterly reports that were filed.
  • The department had not sufficiently verified the self-reported data it compiled in its information system.

The state revenue loss due to the PEAK program has grown from $2.7 million in 2010 to an estimated $12.5 million in 2012.  Among the most damning findings of the audit is the fact that the Department of Commerce has exceeded the statutory financial cap that limits awards made through the program to $6 million annually.  Commerce authorized $7.5 million in PEAK credits for fiscal year 2013.  This has ignited an embarrassingly amateur debate between the department and the legislative audit office over whether the cap is cumulative or annual.

Although disappointing, these findings shouldn’t come as a surprise to those who beat the jobs war drums in Kansas.  Their rush to engage with Missouri’s equally irresponsible fiscal behavior has produced an all too familiar result.

Missouri Gives Rick Perry a Taste of His Own Medicine

August 30, 2013

Texas Gov. Rick Perry has been spending much of his time lately traveling to other states with the overt aim of luring their companies and thus poaching their jobs. In the run-up to his recent trip to Missouri, Gov. Jay Nixon and other state officials have been seeking to turn the tables on Perry.

Click on the image to listen to Gov. Perry ad

Click on the image to listen to Gov. Perry’s ad

In Missouri television and radio ads paid for by a public-private group called TexasOne, Perry criticizes Nixon for vetoing a tax cut bill while enticing Missouri businesses with talk of Texas’s lack of a state income tax and limited regulation of business. In a response, Missouri Secretary of State Jason Kander wrote to Perry advising him that “instead of launching a wholesale public relations effort,” he should “spend time asking Texas business owners if there’s anything [he] can do to help their companies move forward.”

Nixon also responded to Perry with his own radio spot arguing that the Texas ads are misleading and that, in fact, Missouri has a better tax system and business climate than the Lone Star State. Nixon criticized the Missouri Chamber of Commerce for hosting Perry.

Missouri media also reacted to the Texas campaign. St. Louis radio station KTRS refused to play the Texas ads, and the St. Louis Post-Dispatch produced its own version saying “Come to Texas… four million people who work [here], live in poverty….We have the lowest percentage of high-school graduates in America but we still manage to produce more toxic waste than any other state. So come to Texas and get a career in fast food….”

Good Jobs First has extensively covered the economic war among the states in several of our blog posts (for example, see Greg LeRoy’s primer for journalists) and in our  Job-Creation Shell Game report, in which one of the case studies is dedicated to Texas. In the report, we found that “interstate job moves have microscopic effect on state economies.” Specifically, under Perry’s first seven years in the office only 0.03 percent of Texas jobs base annually came from corporate relocations. We recommended that state governments should spend time and money to encourage start-ups and to support expansions in their states, not to waste money poaching jobs from each other.

Community Wins in Missouri

December 17, 2012

Congratulations to community groups in Columbia, Missouri on their win last week preventing most of the city from being designated “blighted” to create massive property tax abatements.

Photo credit: Charles Minshew/KOMU, via Flickr. “Columbia residents discuss EEZ concerns: Columbia resident Shari Korthuis (right) discusses the latest version of a map of the city’s Enhanced Enterprise Zone with Nancy Wood and Jeff Memmer at a meeting at Parkade Center in Columbia, Mo., on Wednesday, March 14, 2012.”

Photo credit: Charles Minshew/KOMU, via Flickr. “Columbia residents discuss EEZ concerns: Columbia resident Shari Korthuis (right) discusses the latest version of a map of the city’s Enhanced Enterprise Zone with Nancy Wood and Jeff Memmer at a meeting at Parkade Center in Columbia, Mo., on Wednesday, March 14, 2012.”

A year and a half ago, the Regional Economic Development Inc. (REDI) board proposed to create an Enhanced Enterprise Zone, or EEZ, that would cover most of Columbia (at one point, the Columbia City Council approved a 49-square-mile EEZ; later, the Council repealed its decision). Missouri EEZs (there are 124) allow certain companies to receive 50 percent local property tax abatements and state tax credits for investing and creating jobs. The program also requires zones to be designated as blighted.

A coalition of community groups (including the Columbia Climate Change Coalition, Grass Roots Organizing, and the local chapter of the Women’s International League for Peace and Freedom) opposed the fake blight designation. They spoke during REDI meetings, contacted media, and organized an informational community meeting with Good Jobs First’s Greg LeRoy and more than 80 participants. Using state EEZ disclosure data captured in Subsidy Tracker, LeRoy noted that EEZ credits were dominated by agricultural food processing companies that, of course, need to be close to Missouri’s abundant farmlands.

After months of grassroots pressure, the REDI board last week surrendered, asking the Columbia City Council to drop the plan, citing “lack of community support” as the main reason for its decision.

Newspaper Rips Missouri Economic Development Practices

September 21, 2012

The St. Louis Post-Dispatch ran a scathing editorial  this week criticizing Missouri’s economic development practices.

The occasion for the criticism was the announcement by state Attorney General Chris Koster that his office was bringing criminal charges of theft and securities fraud against the CEO of a company called Mamtek that had received financial assistance from the state through the issuance of industrial revenue bonds. The CEO, Bruce Cole, was accused of using a portion of $39 million in bond proceeds to prevent foreclosure of his Beverly Hills house. Those proceeds were supposed to finance an artificial sweetener factory Mamtek had proposed to build in Moberly, a small rural community in central Missouri. After Mamtek failed to make bond payments and after the collapse of the whole project in 2011, Moberly defaulted on its bonds.

The editorial criticizes Missouri state and local economic development agencies for failing to do an adequate background check before authorizing the bond issue. “[Mamtek] failed,” the newspaper says, “because nobody, including Moberly officials and the state Department of Economic Development did their work. … Nobody was very eager to do the due diligence that would have shown the deal to be bogus.” The editorial points out that both Democrats and Republicans are guilty of subsidy giveaways and both parties are responsible for “creating a climate where business is free from the kind of regulation that could weed out bad actors.”

Mamtek had also been approved for up to $17 million in several additional types of subsidies, including Missouri’s controversial Quality Jobs program, which allows companies to retain state taxes withheld from the paychecks of new workers (Good Jobs First criticized this and related programs in our Paying Taxes to the Boss report last April).

The Post-Dispatch editorial points to an audit of Quality Jobs showing that the number of jobs that participants in the program created was far below the number they had projected (out of 45,646 originally estimated jobs, only 7,176 materialized).

The editorial uses the shortfalls of the Quality Jobs program to make a broader point about the foolish way in which the state tried to encourage job creation. It calls the Mamtek incident  a symptom of “an economic develop strategy, at state and local levels, that relies on promises and demands little accountability. The state this year will pay out a record $629 million in tax credits to wealthy developers, corporations and investors, while money is being cut for schools and health care. Local governments cannibalize each other to make tax incentive finance deals that steal from schools and create few net new jobs.”

We couldn’t have said it better.


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