Archive for May, 2013

Examining Local Subsidy Transparency

May 30, 2013

Study: Big Cities and Counties Fail to Disclose Costly Job Subsidies

Washington, DC, May 30, 2013 — Two-thirds of the economic development subsidy programs run by the nation’s largest cities and counties do not use the web to report which companies are receiving the tax breaks and other forms of financial assistance. Among the third of programs that do practice online transparency, most do so poorly, failing to disclose the dollar value of the subsidies. An even smaller number reveal key outcomes such as how many jobs were created.

These are the central findings of a report released today by Good Jobs First, a Washington, DC-based non-profit research center on economic development accountability. The report, Show Us the Local Subsidies, is available on the Good Jobs First website at http://www.goodjobsfirst.org/localsubsidies.

“While a handful of cities enable taxpayers to see the costs and benefits of every deal, we were disappointed by the poor state of transparency in most major localities,” said Leigh McIlvaine, a research analyst at Good Jobs First and principal author of the report. “Taxpayers in those cities and counties deserve better.”

The report is part of an ongoing effort by Good Jobs First to track and promote online transparency of economic development subsidies awarded to businesses for job creation and/or retention. It is a companion to our 2010 study Show Us the Subsidies, which graded online disclosure practices by state programs. (Local governments account for about half of the $70 billion spent annually by states and cities for economic development.)

“Most major localities are far behind state governments when it comes to job-subsidy transparency,” said Good Jobs First executive director Greg LeRoy. “We hope that our new report will inspire them to improve their disclosure practices.”

Show Us the Local Subsidies looks at transparency in the country’s 25 most populous cities and 25 most populous counties. Thirty-six of those localities have locally-controlled economic development subsidy programs. One or two major programs in each were graded for a total universe of 64. Key findings:

  • Among those 64 programs, only 21 (located in 16 jurisdictions) report recipient company names online.
  • Even among those programs that do disclose, costs and benefits are mostly still missing. Only 10 of the 21 programs report the dollar value of the subsidies initially awarded, and only 6 report actual disbursements. Only 4 programs report jobs actually created, and only 9 report other outcomes such as wages.
  • The best disclosure practices are in: Memphis/Shelby County, Tennessee; New York City; Austin, Texas; and Chicago. These jurisdictions stand out for company-specific data with costs, benefits and more.
  • Among the 20 large localities still failing to disclose are Broward County (Florida), Charlotte, Cook County (Illinois), Dallas, Harris County (Texas), Los Angeles (both city and county), Miami-Dade County (Florida), Philadelphia, and San Francisco.

Good Jobs First evaluated the 21 programs with disclosure on a scale of 0 to 100 based on their inclusion of: basic recipient information; subsidy commitments; subsidy outcomes ; and user-friendliness and accessibility. Three “bonus” categories worth up to 15 additional points include: the span of disclosure years; reporting of outcomes in addition to job creation; and the use of maps to demonstrate the location of subsidized projects.

“Taxpayers have a right to know where their investments in job creation went and whether they are paying off,” McIlvaine said. “Clearly, localities can disclose such basic information, and do so in a comprehensive, intuitive, and accessible manner by embracing the best practices we document here.”

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Bosses for Buses

May 29, 2013

For Release Wednesday, May 29, 2013
Contact: Greg LeRoy 202-232-1616 x 211

“Bosses for Buses”
Study: Employer Support for Transit is Surging Locally but Fractured Nationally

Washington, DC—American employers are organizing and winning better public transportation in many metro areas. Major employers such as universities and hospitals and coalitions of businesses help explain why state and local ballot initiatives for transit consistently win more than 70 percent of the time.

Yet at the national level, there is not a unified corporate voice for transit; this has been especially evident during three recent federal debates that affected this vital public service. Instead, there are disparate voices speaking only to selected aspects of transit.

Local business coalitions—united by geography—are mostly powered by companies that depend on transit, whereas national advocacy is dominated by companies that make a business selling to transit agencies. As well, there are competing priorities within public transportation circles, such capital budgets versus operating funds.

Those are the key conclusions in a major study released today by Good Jobs First cataloging the many kinds of businesses that support public transit and the diverse ways they express that support. “Bosses for Buses” is believed to be the most wide-ranging study ever published on the subject; it was released at a national tele-press conference and is available at http://www.goodjobsfirst.org/bossesforbuses.

“The remarkable local support for transit demonstrated by so many employers is truly heartening,” said Greg LeRoy, executive director of Good Jobs First and lead author of the study. “But the lack of a unified corporate voice on federal transit issues is equally disheartening. It begs the big-picture question: when will the growing corporate consensus for transit outside the Beltway translate into stronger action inside the Beltway?”

The study finds most promising the formation and growth of business-led groups in specific metropolitan areas,  as well as some outstanding individual large employers—often “eds and meds,” or universities and hospitals. And every day, tens of thousands of employers subsidize transit use—or facilitate the use of pre-tax income for monthly transit fare cards or commuter van pools.

At the national level, many businesses that sell goods and services to transit agencies belong to the American Public Transportation Association (APTA), the voice of big-city transit agencies. The study also describes how employers participate within the Community Transportation Association of America, the Association for Commuter Transportation, and Best Workplaces for Commuters.

Aspects of the 2009 federal stimulus, the belated 2012 reauthorization of the surface transportation act, and the big January 2013 federal income tax compromise all bore upon transit, yet none drew a unified corporate voice for transit service. Nor has there been corporate support for federal aid to shield transit operations from the catastrophic national wave of service cuts, fare hikes and route abandonments seen since 2008.

The study profiles outstanding networks and companies:

  • Washington University in St. Louis, which has anchored Citizens for Modern Transportation, a winning coalition, and has long promoted and subsidized transit use by its workforce and student body;
  • Cleveland Clinic and University Hospitals of Cleveland, the city’s two largest employers, which led the successful campaign for the HealthLine, one of the nation’s most successful Bus Rapid Transit (BRT) lines;
  • Friends of Transit in the Phoenix metropolitan area, a winning spinoff of the Greater Phoenix Chamber of Commerce, with its “Transit Means Business” campaign grooming the next generation of business leaders for transit;
  • The Baton Rouge General Medical Center, which joined with other employers and a faith-based community group to win a 2012 ballot initiative that will over time double the amount of bus service there;
  • Amalgamated Transit Union Local 726 on Staten Island, New York City, which organized riders and businesses to win dedicated bridge bus lanes, larger buses, and a fare cut that more than doubled ridership;
  • Move LA, a large business, labor and environmental coalition that has won legislation that will nearly double the size of Los Angeles County’s fixed-guideway transit system;
  • Ameriprise Financial, an investment services firm in Minneapolis that was the biggest early supporter of Metropass, enrolling 47 percent of its 6,000 downtown employees in the program’s first month;
  • Purple Line Now!, a business-backed coalition that is now winning a sorely needed arc-shaped light rail line connecting inner-ring suburbs and four subway “spokes” in the Maryland counties that straddle Washington, DC;
  • Transportation Management Association of Lake-Cook, a longstanding transportation demand management project with “Shuttle Bug” service linking corporate office parks and campuses north of Chicago with transit;
  • McCaffery Interests, a Chicago-based integrated development firm that specializes in large, mixed-use transit-oriented development (TOD) projects;
  • United Streetcar of Clackamas, Oregon, rebirthing the long-lost streetcar manufacturing industry in the United States with good union jobs and high domestic U.S. content; and
  • “Third-party administrators” such as WageWorks and Edenred that manage the business of collecting pre-tax income and providing monthly transit pass cards. This obscure niche industry has recently undergone a great deal of consolidation, and with the Association for Commuter Transportation, it advocates to ensure that federal tax benefits for transit are at parity with those for parking.

In sum, the study finds corporate support for transit in America to be remarkably broad and diverse, but also highly fragmented. Just when market forces and energy policy beg for a unified national employer voice for growing and improving transit service, what we find instead are disparate voices speaking only to selected transit issues.

“Public transit is far too important to be left only to those companies that make their business selling to transit agencies,” concluded LeRoy. “Far more numerous—and deserving to be heard—are those employers that depend on transit for their workforces. When will they organize nationally?”

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Subsidies to Campaign Contributors in NC and DC

May 20, 2013

Two recent investigative news reports, one in North Carolina and another in District of Columbia, provide useful examples of how major campaign contributors often end up receiving substantial subsidies or special tax treatment.

Click the image to go to the WAMU website

Click the image to go to the WAMU website

The News & Observer in North Carolina published a series of articles called “Missing Money” that examined the state’s tax subsides. One of the articles looked at ties between lawmakers and subsidy recipients. For example, two large hog and poultry processors each contributed $100,000 to a state senator who introduced a bill making the materials they purchased to build their animal housing exempt from sales taxes. Although the contributions were far in excess of legal limits, the processors were not prosecuted.

WAMU, an NPR affiliate in the District of Columbia, has begun a series of reports called “Deals for Developers.” The “Day 1” part exposes connections between political campaign contributions and subsidies.

The investigation shows that one-third of the $1.7 billion in public money paid out over the last decade has gone to the ten developers who contributed the most to local political campaigns. In total, those who received subsidies contributed more than $2.5 million and received subsidies worth some $641 million.

To avoid the city’s limits on campaign donations, the radio station found that developers contributed money through multiple shell companies as well as their employees and family members. Sadly, only a small fraction of the subsidies, about five percent, went to the neediest neighborhoods in the city. (Make sure to check out the station’s table of campaign contributions and subsidies and an infographic examining the connections.)

These two investigations were possible because of the growing transparency of economic development subsidies. North Carolina has done well on Good Jobs First transparency reports and Washington, DC not too long ago started disclosing its subsides. We hope to see similar investigative reports coming from other parts of the country, but for now we congratulate The News & Observer and WAMU on their exceptional work.

Posted in Campaign contributions, Disclosure, North Carolina, Subsidies, Washington DC | 1 Comment »

Study: Nissan’s Mississippi Subsidies Top $1.3 billion

May 17, 2013

Good Jobs First has just published a report (commissioned by the UAW) showing that the subsidies provided to Nissan by state and local governments in Mississippi amount to more than $1.3 billion–far more than has been previously reported. 

The report can be found on our website: A Good Deal for Mississippi?

Here’s an excerpt:

Over the past decade Nissan has created thousands of manufacturing jobs in Mississippi. While the Japanese automaker has spent considerable amounts of its own money, it has also received huge amounts of financial assistance from taxpayers at the local and state levels.

In this report we document the many varieties of economic development subsidies the company has been offered, among them corporate income tax credits, rebates of withholding taxes, site preparation and infrastructure grants, training grants, and property tax abatements. In all, the value of the state and local subsidies offered to the company in Mississippi is some $1.3 billion, considerably more than has been reported.

The Advantage Jobs payments offered to Nissan in Mississippi are part of a controversial category of subsidies in which an employer gets a rebate of a portion of the state withholding taxes deducted from the paychecks of workers. In an April 2012 Good Jobs First report entitled Paying Taxes to the Boss, we found that the 25-year, $160 million Advantage Jobs deal granted to Nissan was the largest withholding tax subsidy ever awarded.

Aside from the total amounts, the Nissan subsidies raise other issues. Mississippi legislators approved subsidies based on an overly optimistic cost-benefit analysis commissioned by the state’s development officials. Our report does not provide a full-blown alternative analysis, but it is clear to us that legislators were not given the complete picture on how much would end up going to Nissan.

Although they approved a package valued at $295 million, the real cost of the tax subsidies included in the deal made it worth hundreds of millions more. According to publicly available sources, the number of jobs created at the Nissan plant in Madison County has hovered around 4,500. With Nissan eligible for an estimated at $1.3 billion in assistance over the term of the subsidy programs, Mississippi taxpayers may end up paying around $290,000 per job.

Unfortunately, many of those jobs are not regular Nissan payroll positions. The figures from the state auditor show that around 20 percent are temps. In 2012, temporary employees started work at only about $12 an hour. Taxpayers have paid premium amounts for jobs that in many cases are far from premium. This, along with the fiscal difficulties we document in the community where the plant is located, suggests that the Nissan investments in Mississippi have provided a lot less net economic benefit than the company and public officials have claimed.

Posted in Subsidies | 1 Comment »

Scrutinizing Georgia’s Deal-Closing Funds

May 10, 2013
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Click to see the AJC infographic

The Atlanta Journal-Constitution has just published a devastating critique of two deal-closing funds used by Georgia to subsidize companies that are expanding or relocating to the state.

Three reporters–Michael Kanell, Shannon McCaffrey and J. Scott Trubey–spent weeks at the Department of Community Affairs going over thousands of pages of documents relating to a decade of grants awarded by the Regional Economic Business Assistance (REBA) and Economic Development Growth and Expansion (EDGE) funds. The funds are allocated to local development authorities that pay for company-specific needs like new roads or sewer connections.

They found that 42 percent of subsidized companies failed to deliver the full number of promised jobs, but fewer than 4 percent of awarded grants were not distributed or were clawed back as a result of that underperformance. Overall, the paper found, nine out of ten promised jobs were created, but this figure was skewed by the fact that some companies created more jobs than they promised. Some of those firms, however, later closed down or had mass layoffs. Some companies received subsidies even though their financial situations were uncertain (AJC ran a separate article analyzing giveaways to “red flag” companies).

Despite the widespread underperformance, companies “can – and do – escape any penalty,” the article said. Georgia’s generous exemption policy allows companies to create only 80 percent of promised jobs before any penalty applies. Not long ago, the passing grade was 70 percent.

The article comes with an infographic that includes company names, number of promised and actually created jobs, and the subsidy amounts. This is the first public disclosure of REBA recipients; EDGE recipients have been disclosed on the OneGeorgia Authority website, and that data has been incorporated in our Subsidy Tracker.

In states like Georgia, where subsidy disclosure is generally non-existent or minimal, it is often only through such journalistic investigations that the public learns the truth about the state’s economic development practices. We congratulate the AJC on its great job.

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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?

Posted in Clawbacks, Hidden Taxpayer Costs, Jobs | 1 Comment »

Study: State “Business Climate” Rankings Based on Flawed Data, Have No Policy Value

May 1, 2013

Washington, DC—Prominent studies that purport to measure and rank the states’ “business climates” are actually politicized grab-bags of data. They have no predictive value and should not be used to inform public policies.

Those are the main conclusions of a new study published today by Good Jobs First. “Grading Places: What Do the Business Climate Rankings Really Tell Us?” is authored by Dr. Peter Fisher, an economist who has written extensively on economic development.

“When we scrutinized the business climate methodologies, we found profound and elementary errors,” said Fisher. “We found effects presented as causes. We found factors that have no empirically proven relationship to economic growth. And we found scores that ignore major differences among state tax systems.

“Given these underlying flaws, it is no surprise that the rankings wildly contradict each other and fail to predict which states’ economies will thrive,” concluded Fisher. “Instead, we note that the factors often have to do with the advocacy agendas of the groups.”

The study was released today at a national tele-press conference and is available at http://www.goodjobsfirst.  It examines: the Small Business and Entrepreneurship Council’s U.S. Business Policy Index; the Tax Foundation’s State Business Tax Climate Index; the American Legislative Exchange Council’s Rich States, Poor States: the ALEC-Laffer Economic Competitiveness Index; and the Beacon Hill Institute’s State Competitiveness Report.  Also examined are two representative firm models: the Council on State Taxation’s Competitiveness of State and Local Business Taxes on New Investment, prepared by the accounting firm Ernst & Young, and the Tax Foundation’s Location Matters, prepared with the accounting firm KPMG.

“Our study does not try to correct these rankings or present a new rating,” said Greg LeRoy, executive director of Good Jobs First. “Indeed, that is one of our main points: the needs of different businesses and facilities vary so much—and conditions vary so much between metro areas even in the same state—that the whole concept of a state ‘business climate’ is nonsensical. For only the third time in 27 years, the pseudo-social science of ‘business climate’ ratings has been debunked. We should lay aside these useless reports and debate the real issue: how to build a tax system that is fair, modern and relevant.”

Good Jobs First is a non-profit, non-partisan resource center promoting accountability in economic development. Founded 15 years ago and headquartered in Washington, it includes Good Jobs New York.

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