Archive for the ‘Sprawl’ 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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New Jersey Subsidy Overhaul Scraps Cost Controls and Accountability

September 19, 2013

Fallout from Hurricane Sandy and this month’s tragic boardwalk fire are not the only costs that New Jersey taxpayers will face in the coming years – Governor Chris Christie has signed off on a massive overhaul of the state’s business subsidy system that will cost the state plenty.

The Economic Opportunity Act of 2013 consolidates New Jersey’s biggest subsidy programs into two programs that will likely cost more than the largest five currently do.  Gone are the Business Employment Incentive Program (BEIP), the Urban Transit Hub Tax Credit, and the Business Retention and Relocation Assistance Grant (BRRAG) tax credit.  The state will now award job subsidies to companies through the Economic Redevelopment Growth Grant and the Grow New Jersey program.  Supporters of the Act argue that streamlining and simplifying New Jersey’s subsidy system will enhance the business climate of the state, but the legislation is seriously deficient in the matter of accountability.

This is not to say that the state’s previous subsidies were without problems.  In its nearly two decades of use, BEIP awards have cost the state over $1.5 billion.  At one point, the New Jersey Economic Development Authority was even issuing bonds in order to meet its BEIP debt obligations to subsidized companies.

Recently the Christie Administration has accelerated its subsidy spending, amounting to more than $2 billion awarded to companies in the last 3 years alone through a combination of programs.  Over half of that amount was spent through the once-credible Urban Transit Hub Tax Credit program, a subsidy designed to spur development near transit stations.  With the support of Gov. Christie, the pool of credits available for the program was expanded and quickly exhausted, with many of the awards going to companies making short in-state moves.

The two remaining subsidy programs are deeply flawed.  The Economic Redevelopment and Growth Grant (ERG) program, enacted in 2008, diverts more types of tax revenue away from public coffers than any other tax increment financing program in the nation.  One of the first awards made through this program was a bailout for the struggling Revel Casino in Atlantic City – a project so financially toxic that Morgan Stanley walked away from its nearly $1 billion investment in the development.  (Revel has since declared and emerged from bankruptcy.)

Ironically enough, the other surviving subsidy, Grow New Jersey, was enacted to appease suburban and rural areas that had lost jobs through headquarters relocations subsidized by the out-of-control Urban Transit Hub Tax Credit program.  Since the first application was approved in April 2012, the state has awarded an average of $22.2 million per month to New Jersey businesses.

Unsurprisingly, in their new iterations, Grow New Jersey and ERG lack aggregate cost controls.  There is no annual or program-wide cap for use of either subsidy, virtually ensuring that New Jersey’s economic development spending spree will continue unchecked.  The potential costs to the state are immeasurable; fiscal analysis of the bill conducted by the Office of Legislative Services concluded that “the bill will produce an indeterminate multi-year State revenue loss” but it “cannot project the direction or magnitude of the bill’s net fiscal impact on the State and local governments.” There is a   $350 million maximum subsidy per company but business eligibility criteria have been loosened.

Aside from the potentially astronomical costs to the tax-paying public, the Economic Opportunity Act of 2013 introduces a host of other accountability problems to the state’s subsidy system.  Chief criticisms include the inclusion of retailers as eligible recipients, the removal of the state’s long-standing prevailing wage requirement for subsidized facilities, the elimination of the requirement that subsidized businesses pay a portion of health care benefit premiums, the allowance for businesses to count part time employees toward job creation requirements, and the high probability that both subsidy programs will accelerate suburban sprawl in the state.

In spite of the Christie Administration’s unprecedented spending on business subsidies over the past three years, New Jersey’s economic recovery lags behind most of the nation.  At last count, the state unemployment rate was 8.7 percent, earning it a ranking of 43rd in the country.  More unchecked spending on business subsidies is surely no remedy for the state’s employment problem.  The definition of insanity is doing the same thing over and over again and expecting different results, an adage unfortunately lost on Gov. Christie and New Jersey’s lawmakers.

Study: “Job Sprawl” Still Subsidized Despite Four States’ Modest Reforms

September 11, 2012

Four states’ efforts to curb “job sprawl” by altering economic development subsidies have had little effect on transit ridership, land use patterns or site location decisions, according to a report released today by Good Jobs First.

Attempts by officials in California, Illinois, Maryland, and New Jersey to break down “policy silos” and make job subsidies location-efficient have failed. Some of the policies were weak to begin with; others got watered down or ignored, and one got rapidly deregulated.

These are the key findings of Breaking Down Silos Between Economic Development and Public Transportation: An Evaluation of Four States’ Modest Efforts In Making Job Subsidies Location-Efficient,a study published today by Good Jobs First, a non-profit, non-partisan research center based in Washington, DC. In its review of the four states’ location efficiency policies, the report recommends restricting economic development business subsidies to transit corridors. Good Jobs First further recommends establishing clear program goals, requiring regular evaluation of location efficiency policies, and requiring subsidized companies to participate in transportation demand management programs. The full report is available at www.goodjobsfirst.org.

“When states fail to align economic development subsidies with public transit investments, the result is state-sponsored job sprawl,” said Good Jobs First executive director Greg LeRoy. “Making more jobs transit-accessible is the most powerful way to give carless workers more job opportunity and all workers a healthier commuting choice.”

Founded in 1998, Good Jobs First is a non-profit, non-partisan research center promoting accountability in economic development and smart growth for working families.  Headquartered in Washington DC, it has a project office in New York.

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!

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.

Subsidized Job Flight in Ohio

July 7, 2011

Study: Companies Get Subsidies to Move, Mostly Leaving Hard-Hit Areas in Cleveland and Cincinnati Metro Areas

Cleveland, Ohio, July 7, 2011—One hundred and sixty-four companies were given lucrative property tax breaks as they moved facilities around within the Cleveland and Cincinnati metro areas.  The subsidized relocations, affecting an estimated 14,500 workers, were overwhelmingly outward bound and by many measures fueled suburban sprawl, especially in the Cleveland region.

By dispersing jobs away from the urban cores, the relocations worsened inequalities in wealth and opportunity. They moved jobs away from areas hardest hit by plant closings and with higher rates of poverty, unemployment and people of color to more affluent and less diverse areas. Most also moved to locations that are inaccessible via public transportation, denying job opportunities to carless workers and denying thousands more any commuting choice.

Ominously, Ohio’s economic development programs are becoming much less transparent, denying taxpayers the ability to see how their job investments are performing—or where.

Those are the key conclusions of Paid to Sprawl: Subsidized Job Flight from Cleveland and Cincinnati, a study released today by Good Jobs First at a press conference in Cleveland. The study is available at www.goodjobsfirst.org.  Funded by the Ford Foundation, it is the largest study of subsidized relocations ever performed in the United States.

“Ohio’s enterprise zone program is so loose it has been perverted,” said Greg LeRoy, the study’s lead author. “It has become pro-sprawl, which is tragic given that it was originally created to revitalize older areas.” The study also examines Community Reinvestment Areas, a program succeeding enterprise zones.

To remedy these problems, the study recommends that the state encourage the creation of cooperation systems among local officials and anti-poaching protocols like those in effect in Montgomery County (Dayton) and Summit County (Akron) and that being debated in Cuyahoga County (Cleveland).  To reverse declining transparency, the study recommends that all economic development deals’ costs and benefits be disclosed online. It also recommends that proposed deals should be ineligible unless they are accessible via public transportation. Finally, regional revenue-sharing would reduce tax-base competition and complement a cooperation system.

Founded in 1998, Good Jobs First is a non-profit, non-partisan research center promoting accountability practices in economic development and smart growth for working families. Headquartered in Washington, DC, it has a project office in New York.

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.

Colorado Proposal Would “STIF” Taxpayers

March 4, 2011

Buckingham Square Mall, Aurora, Colorado

The Colorado Senate is evaluating a risky new development subsidy proposal that passed in the House last week.  House Bill 1220 would, for the first time, allow the diversion of incremental state sales tax revenues to back bonds used to finance road construction for new retail projects.  Specifically, the bill would permit sales tax increment financing (STIF) to be used for projects that have been approved by the state department of transportation but lack dedicated state funding to secure federal highway matching funds.

The policy problems inherent in this bill are many.  STIF is designed to subsidize retail projects, ignoring the fact that they are not a very effective form of economic development.  Building new stores doesn’t grow the economy – it only shifts consumer spending from one place to another.  Providing subsidies to move low-wage retail jobs around a metro area is a waste of taxpayer funds.  The East-West Gateway Council of Governments (St. Louis metro region) found in its January 2011 study that the region had spent $4.6 billion subsidizing retail development between 1990 and 2007.  During that period, 5,700 new retail jobs were created in the metro area, at an apparent cost of $370,000 per job.

STIF makes a poor economic development tool for other reasons as well.  Sales tax receipts are unpredictable, especially during leaner economic periods.  Determining the value of the incremental increase in sales tax revenues is nearly impossible if assessors attempt to estimate how much retail spending is “new” and how much was merely cannibalized from nearby retail establishments.  STIF also promotes the fiscalization of land use—the unwise practice of letting tax revenue considerations control planning decisions.  California repealed STIF in 1993 to avoid this problem.  Colorado’s proposal is worse because it would only subsidize new retail developments that rely on highway access, making it biased against existing retailers in urban centers.

Another important consideration is that Colorado can’t afford to sacrifice the existing sales tax revenues that it would lose to STIF-subsidized development.  As a TABOR (Taxpayer Bill of Rights) state, Colorado cannot raise new revenues without statewide voter approval.  This is likely the reason that the development lobby is seeking this subsidy in the first place.  As a result of the economic recession and TABOR, Colorado’s fiscal crisis is so dire that the state cannot afford to fund highway transportation projects despite the fact that federal matching funds are on the table.

HB 1220 would sidestep the appropriations process for funding highway construction, shortchange the state’s sales tax revenue collection, subsidize the relocation of low-wage jobs in suburban fringe areas, and contribute to the growing list of dead malls in Colorado.

Mapping Job Subsidies: Becoming Easier in More States

February 15, 2011

As those who follow Good Jobs First know, since 2000 we have issued several studies mapping the geographic distribution of company-specific economic development subsidy deals—and then analyzing them for their pro-sprawl bias.

We are proud of the methodology we pioneered in creating these studies and have freely given away our data and advice to others seeking to replicate the work. These studies were tedious: we obtained lists of subsidy deals using state Freedom of Information laws and then spent months either obtaining street addresses or cleaning up the addresses provided.

So we are glad to announce new progress: in their online disclosure websites, states are increasingly including the street addresses of economic development deals. More than $3 billion per year among 15 states is now geocodable!

To be sure, the ease with which these street addresses can be copied or downloaded varies a great deal. But the truth is: it is becoming easier than ever to map where states and cities are subsidizing the creation or retention of jobs. And once you have project sites mapped, you can juxtapose them with numerous criteria like those we have used: poverty, race, tax-base wealth, population density, whether the worksite is served by public transportation, whether jobs are being created in communities hardest hit by plant closings and mass layoffs, etc.

Here, derived from our recent study, Show Us the Subsidies, are the state economic development programs we found with street addresses online:

States, Program(s), Most Recent Cost of Program

Arizona – Enterprise Zone Income and Premium Tax Credits – $10,943,276

Colorado – Job Creation Performance Incentive Fund – $6,097,056

Connecticut – Jobs Creation Tax Credit (aka New Jobs Creation Tax Credit) – $10,000,000
Connecticut – Manufacturing Assistance Act – $20,182,448
Connecticut – Urban and Industrial Site Reinvestment Tax Credit – $89,000,000

Illinois - Economic Development for a Growing Economy (EDGE) Tax Credit – $23,534,000
Illinois - Enterprise Zone Program – $112,767,000
Illinois - IDOT Economic Development Program – $4,820,496
Illinois - Large Business Development Assistance Program – $5,699,922

Indiana – Economic Development for a Growing Economy (EDGE) Tax Credits – $61,600,178
Indiana – Hoosier Business Investment Tax Credit (HBITC) – $107,011,548
Indiana – Skills Enhancement Fund (SEF) – $1,186,925
Indiana – Twenty-First Century Research and Technology Fund (21 Fund) – $16,264,300

Kentucky Business Investment (KBI) Program – $33,500,000
Kentucky Enterprise Initiative Act – $21,500,000

Louisiana – Enterprise Zones – $60,564,631
Louisiana – Industrial Tax Exemption Program – $946,890,819
Louisiana – Quality Jobs Program – $43,435,275

Michigan – Brownfield Redevelopment Credits (aka Brownfield Zone Credits) – $78,200,000
Michigan Economic Growth Authority (MEGA) Tax Credits – $105,600,000
Michigan’s Advanced Battery Credits (MABC) – $300,000,000

Minnesota – Job Opportunity Building Zones (JOBZ) – $32,799,000

North Dakota – Development Fund – PACE loans and Regional Rural Revolving Loan Fund – $5,564,016

New York – Brownfield Cleanup Program – $624,000,000

Oklahoma – Quality Jobs – $60,607,522

Rhode Island – Corporate Income Tax Rate Reduction for Job Creation – $21,256,182
Rhode Island – Enterprise Zone Tax Credits – $715,187
Rhode Island – Motion Picture Production Tax Credit – $8,112,990

Texas Economic Development Act (Ch. 313) – $282,900,000

Washington – Aircraft Pre-production Expenditures B&O Tax Credit – $6,200,000

Total – $3,100,952,771

For more information on mapping job subsidies, contact Leigh McIlvaine or Tommy Cafcas.

California Targets EZ Program for Elimination

February 15, 2011

Facing a budget hole estimated at $28 billion, the administration of California Gov. Jerry Brown has proposed program cuts that have economic development officials panicking.  The Enterprise Zone program, which subsidizes in-zone businesses with hiring tax credits, deductions, and exemptions, is a prime target for revenue-starved California.

The program’s history is controversial.  A host of research has thoroughly debunked the claim that EZs have a significant impact on job creation.  (See the Public Policy Institute of California, whose study we covered on this site in 2009;  the state Legislative Analyst’s Office in March 2010 and again this year; and most recently, the California Budget Project.)  In its February report, the California Budget Project describes a number of troubling aspects of the program:

  • The cost of EZ tax credits and deductions has increased by 35% per year on average since its inception.
  • 70% of EZ tax credits to go corporations with assets of more than $1 billion.
  • The EZ hiring credit does not require the creation of new jobs (many recipients simply relocate jobs).

Only one study has been released in recent years in defense of the EZ program.  A 2009 study released by USC’s Marshall School of Business reported favorably on the economic effects of the program.  (This study is not available online.)  It was rebutted by Robert Tannenwald, then a Senior Fellow at the Center on Budget and Policy Priorities, who stated that the study’s findings “fly in the face of empirical evidence and economic theory.”

Whacking the EZ program would save the state $343 million this year.  That figure increases to $600 million annually in just two years’ time.   Elimination of a program that has negligible impact should be an easy decision for the state legislature.  These funds would be better spent in an economic development program with a proven track record.


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