Archive for June, 2013

Don’t Mess with Texas?

June 26, 2013

Texas’ three-decade old anti-littering slogan seems to capture the essence of being a Texan. With such a strongly worded slogan adorning road signs throughout the state, it is unsurprising then that the state is also an ardent enforcer of its economic development agreements. Communities throughout Texas are known to claw back subsidies when jobs or wages do not meet the standards agreed upon. Even the Texas Enterprise Fund, controversial as it might be, tells the public how much it has taken back from companies that do not comply. But recent events in Austin, Texas are beginning to make us question whether Texas is living up to its “Don’t Mess with Texas” reputation when it comes to enforcement of economic development agreements.

An Austin developer building a luxury Marriott hotel failed to follow the terms of the agreement by meeting wage standards. The City of Austin initially recommended enforcing the terms of the agreement, but now it appears that the city may reverse course and let the developer keep the subsidies without meeting the agreed upon wage requirements. The Austin city council will vote on the matter later this week.

We at Good Jobs First think it is imperative for the City of Austin, and cities throughout the U.S., to enforce the terms of its economic development contracts, not just because not doing so would diminish the taxpayer bang for the buck, but also as a matter of civic pride. Texas’ reputation as a place where economic development agreements are taken seriously is rare: don’t ruin your brand.

Posted in Uncategorized | 1 Comment »

A Cease-Fire in the Kansas City Interstate Jobs War?

June 24, 2013

Update 6/24/13: Two more companies seek subsidies by jumping the Missouri-Kansas state line: General Electric from Raytown. Mo., to Overland, Kan. and A.B. may from Leawood, Kan., to Missouri. Read Kansas City Star columnist Yael T. Abouhalkah’s scathing op-ed about it!

by Kasia Tarczynska and Greg LeRoy

Good news just in from Kansas and Missouri—Governors of the two states are reportedly moving towards an agreement to stop the notorious Kansas City interstate jobs war. If a truce is declared, credit should go to a group of outspoken and tenacious Kansas City-area business executives who have acted on longstanding public outrage.

For years, the two states have poached companies from each other, wasting hundreds of millions of dollars on subsides to companies moving short distances within the same labor market. On June 13,  however, Kansas Gov. Sam Brownback said he was ready to talk to Missouri Gov. Jay Nixon, but under a condition that Missouri will agree to revise the “as-of-right” structure of its Quality Jobs program (Brownback claims that Kansas’ “discretionary” PEAK program is less problematic).

That might be a tough sale in Missouri legislature. However, according to a Kansas City Star editorial, there is an alternative on the table. Two states could simply prohibit subsidies for companies that move from certain counties in one state to certain counties in another state within the Kansas City region. Apparently “conversations have occurred” and 2 of the 17 local business leaders, who in 2011 urged  the two governors in a public letter to stop the war, now are performing “shuttle diplomacy.”

Good Jobs First has blogged on the Kansas City border war for years and detailed it in our January 2013 study The Job-Creation Shell Game.  Indeed, Bill Hall, assistant to the chairman of Hallmark Cards, spoke at our tele-press conference, detailing the absurdity and ruinous costs of the war.

We welcome the news of ongoing negotiations and hope to blog soon about an effective cease-fire. And we repeat: the initiative in Kansas City was NOT taken by an elected official, by a Chamber of Commerce, or by a Business Roundtable—all of whom should take note and be inspired!

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Giant Job Subsidy Packages Grow More Common and Costly

June 19, 2013

moneybagsWashington, DC, June 19, 2013 — In recent years, state and local governments have been awarding giant economic development subsidy packages to corporations more frequently than ever before. The packages frequently reach nine and even ten figures, and the cost per job averages $456,000 and often exceeds $1 million.

These are the findings of Megadeals, a report released today by Good Jobs First, a non-profit resource center based in Washington, DC.

“These subsidy awards are getting out of control,” said Philip Mattera, research director of Good Jobs First and principal author of the report. “Huge packages that used to be reserved for ‘trophy’ projects creating large numbers of jobs are now being given away more routinely.”

In a painstaking review using hundreds of sources, Good Jobs First identifies 240 “megadeals,” or subsidy awards with a total state and local cost of $75 million or more each. The cumulative cost of these deals is more than $64 billion.

The number of such deals and their costs are rising: since 2008, the average frequency of megadeals per year has doubled (compared to the previous decade) and their aggregate annual cost has roughly doubled as well, averaging around $5 billion. For those deals where job projections were available, the average cost per job is $456,000.

Michigan has the most megadeals, with 29, followed by New York with 23; Ohio and Texas with a dozen each; Louisiana and Tennessee with 11 each; and Alabama, Kentucky and New Jersey with 10 each. Forty states plus the District of Columbia have done at least one megadeal.

In dollar terms, New York is spending the most, with megadeals totaling $11.4 billion. Next is Michigan with $7.1 billion, followed by five states in the $3 billion range: Oregon, New Mexico, Washington, Louisiana, and Texas.

“Despite their high costs, some of the deals involve little if any new-job creation,” said Good Jobs First executive director Greg LeRoy. “Some are instances of job blackmail, in which a company threatens to move and gets paid to stay put. Others involve interstate job piracy, in which a company gets subsidies to move existing jobs across a state border, sometimes within the same metropolitan area.”

Megadeals have been awarded to many of the largest and best known companies based in the United States as well as foreign ones doing business here, including: every large domestic automaker and all of the foreign auto producers with appreciable U.S. sales; oil giants such as Exxon Mobil and Royal Dutch Shell; aerospace leaders Boeing and Airbus; banks such as Citigroup and Goldman Sachs; media companies such as Walt Disney and its subsidiary ESPN; retailers such as Sears and Cabela’s; old-line industrials such as General Electric and Dow Chemical; and tech leaders such as Amazon.com, Apple, Intel and Samsung.

The most expensive single listing is a 30-year discounted-electricity deal worth an estimated $5.6 billion given to aluminum producer Alcoa by the New York Power Authority. Taking all of a company’s megadeals into account, Alcoa is at the top with its single $5.6 billion deal, followed by Boeing (four deals worth a total of $4.4 billion), Intel (six deals worth $3.6 billion), General Motors (11 deals worth $2.7 billion), Ford Motor (9 deals worth $2.1 billion), Nike (1 deal worth $2 billion) and Nissan (four deals worth $1.8 billion).

Fifty-six megadeals went to corporations with parents based outside the United States and seven more went to joint ventures of domestic and foreign companies.

The megadeals list is a new enhancement of Good Jobs First’s Subsidy Tracker database, the first online compilation of company-specific data on economic development deals from around the country.

Until now, the content of Subsidy Tracker has consisted exclusively of official disclosure data provided by state and local governments. However, many large deals pre-dated disclosure and many recent ones are missing from the official lists because of gaps in state and local transparency practices. To overcome those constraints, Good Jobs First went back and assembled information on large deals using a wider variety of sources. The resulting list of megadeals has been incorporated into Subsidy Tracker.

In a policy sidebar, the study points out that the Governmental Accounting Standards Board (GASB) has been long-negligent in failing to promulgate regulations for how state and local governments should account for tax-based economic development expenditures.  If GASB were to finally promulgate such regulations—covering both programs and deals—taxpayers would have standardized, comparable statistics about megadeals and could better weigh their costs and benefits.

Posted in Disclosure, Subsidies, Subsidy Tracker | Leave a Comment »

Economic Development Among Consenting Adults

June 14, 2013

Lalo Alcaraz (c) 2013

California has unwittingly joined New York and Pennsylvania in the distinction of subsidizing strip clubs. Is there a bi-coastal consensus for, ahem, full disclosure?

Late last month, as a part of California Governor Jerry Brown’s campaign to end the wasteful and ineffective Enterprise Zone (EZ) program, the Sacramento area EZ businesses list was made public.  This disclosure of companies benefiting from EZ hiring tax credits was the first time that taxpayers in California have ever had access to information about which companies receive economic development subsidies through the program and how much those tax breaks are worth.

In addition to showing that the state provides subsidies to highly profitable corporations and a casino, the list revealed that two strip clubs in the town of Rancho Cordova have been claiming EZ tax credits since at least 2010.  Gold Club Centerfolds is receiving tax breaks worth up to $37,440 apiece for nine employees, and Déjà Vu Showgirls is receiving the same deal for 13 employees.

It is unknown how many other “adult” businesses in the state are getting such tax breaks because the identities of EZ businesses are usually hidden from public scrutiny based on (clearly misplaced) taxpayer confidentiality policies.

As we blogged last week, the California EZ program is also extremely expensive, with an annual loss of state revenue now more than $700 million headed towards $1 billion.

California is not the first state to embarrass itself by subsidizing sexually-oriented businesses.  New York City provides substantial tax breaks to thousands of businesses through its Industrial and Commercial Incentive Program (ICIP).  In 2010, the New York Daily News revealed that at least three strip clubs were receiving subsidies through ICIP.  The scandal led many organizations, including Good Jobs New York, to call for an overhaul of the misguided program (NYC’s costliest).

Similarly, Pennsylvania’s Keystone Opportunity Zone program (KOZ is the state’s name for Enterprise Zones) became embroiled in considerable controversy when an “adult entertainment business” in LycomingCounty landed in a KOZ in 2005.  The business was later forced to relocate after an utterly predictable land use conflict with the nearby Little League World Series Complex, and the KOZ rules were modified to prevent strip clubs from receiving tax breaks.  Unfortunately, this eligibility rule is literally one of the only restrictions on uses of KOZ subsidies and the identities of participating businesses remain hidden from the public.

The common element these three costly programs share is secrecy: none publicly discloses recipients of the tax breaks.  Hiding government expenditures is a guaranteed recipe for waste and abuse.   Public outrage is justified when the veil of taxpayer confidentiality is lifted to reveal a subsidized strip club or other controversial enterprise.  Whether or not such uses of economic development funds are appropriate should be decided in broad daylight; without subsidy transparency, continuing scandals are inevitable.

(Comic compliments of Lalo Alcaraz, (C) 2013)

Posted in Disclosure, Enterprise Zones, New York, Subsidies | 1 Comment »

$2.6 Billion Spent on Cleaning Up DC Rivers Must Address Local Job Creation

June 7, 2013

SinkorSwim_WebBoxOver the next decade, DC Water will use a regressive Impervious Area Charge (IAC) to fund $2.6 billion in needed water infrastructure investments. Middle- and low-income residents and neighborhoods will carry the highest burden of the DC Water fee increase that will pay for these improvements.

Despite the fact that the funding burden of these projects falls heavily on the most vulnerable residents, DC Water has not implemented a local hiring agreement, even though putting residents to work on the project may be the best way to reduce the harm of a regressive fee. These are among the findings of Sink or Swim? Who will pay and who will benefit from DC Water’s $2.6 billion Clean Rivers Project?, a study published this week by Good Jobs First.

More coverage of the report can be found over at the Washington Post and the Washington City Paper’s Housing Complex Blog.

Cities rarely spend so much — $2.6 billion — on infrastructure projects. A strong Community Benefits Agreement could make this public infrastructure investment provide a jobs stimulus benefit to District residents without spending an additional dollar. A proposed Community Benefits Agreement (CBA), like the District’s amended First Source Law, would establish a minimum percentage of work hours that must be performed by District residents, increasing to 50% over the next decade.

The report was commissioned by the Washington Interfaith Network (WIN) and The Laborers’ International Union of North America (LIUNA).

Among the major findings:

  • The impact of the IAC – measured as a share of 2013 property taxes – will be four- to five times greater for homeowners in poor neighborhoods than for those in affluent neighborhoods.
  • Small businesses, especially those east of the river, will feel a heavy burden from IAC fees. Office buildings on K Street will feel little impact.
  • There is no indication that District residents will benefit in proportion to their burden. Contractors on major DC Water projects currently employ more North Carolinians than residents from Wards 7 & 8 combined. Over half the contractor workforce lives outside Washington, D.C. and its immediate surroundings.
  • Continued failure to hire local residents will result in a massive transfer of wealth out of the District. We estimate that over the next thirty years, D.C. ratepayers will be billed $4.2 billion in IACs, including $1.1 billion from Wards 7 and 8 alone.

District residents will pay for these infrastructure investments through a regressive fee for the next thirty years. Low- and middle-income residents will be hit the hardest. These are neighborhoods that have historically been excluded from opportunities in construction careers; to not leverage $2.6 billion in public spending for District construction careers would represent a tremendous missed opportunity.

Posted in Community Benefits Agreements, Economic Recovery, Green Jobs, Jobs, Property Taxes, Smart Growth, Taxes, Washington DC | Leave a Comment »

Subsidizing Union Avoidance at Wal-Mart and Nissan

June 7, 2013

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

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

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

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

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

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

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

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

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

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

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

Reposted from the Dirt Diggers Digest

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Posted in Hidden Taxpayer Costs, Subsidies, Unions | 1 Comment »

California Enterprise Zones On the Chopping Block (Again)

June 7, 2013

CA EZsGovernor Jerry Brown has again proposed elimination of California’s much-maligned Enterprise Zone (EZ) program in order to help balance the state’s precarious budget and redirect the foregone business tax revenues to better uses.   (Gov. Brown’s previous attempt to cut the program in 2011 during a severe revenue shortfall was thwarted by business groups and localities seeking to retain the business tax breaks; the state instead eliminated municipal redevelopment agencies.)

In the past, the state has hidden the names of companies getting the EZ tax breaks of up to $37,000 per employee.  Multiple disclosure requests by Good Jobs First and other accountability-minded organizations have been denied by California’s Franchise Tax Board, which claimed tax confidentiality.   For the first time, however, recipient data has just been released by the Sacramento area Enterprise Zone administrator.

The Sacramento Bee revealed that over 6,000 employment vouchers—essentially the bounty documents for EZ tax credits—have been claimed by county businesses since 2010.  FedEx alone benefited from nearly 1,400 vouchers.  Other notable recipients include Verizon, Wells Fargo, and Walmart.  However, the most notorious enterprise zone claimants are a casino and two strip clubs in Rancho Cordova.

The EZ program is no stranger to controversy.  Policy makers have been reluctant to cut or even reform the program, even in the face of evidence that it has had zero net effect on job creation in the state.  The lost revenue currently costs the state approximately $750 million a year and is projected to grow to over $1 billion annually in coming years.  Seventy percent of those tax dollars go to companies with assets valued over $1 billion.  Even more troubling, companies can retroactively claim EZ credits for employees hired up to five years in the past—even if the person is no longer working at the company—meaning that there is literally no incentive for new job creation in order to receive the subsidy.

The state also allows companies to claim EZ credits for new hires, rather than on net new positions created.  Companies don’t need to be creative to abuse the poorly designed system.  VWR, formerly located in Brisbane, laid off 75 unionized workers and moved across the state to Visalia, where it located its new facility in an Enterprise Zone and receives tax credits for the (non-union) replacement hires.  In Anaheim, stadium concessions contractor Anaheim Arena Management recently announced it would lay off 500 workers, the replacements for which would be eligible for EZ vouchers under current program rules.

Clearly it is time for California to rethink its costly EZ program.  A program that fails to create jobs, subsidizes wealthy and abusive businesses, and incentivizes job churn cannot be called economic development.  Whether California elects to reform the program to actually create jobs or eliminates it altogether, it is past time the state made this use of economic development dollars deliver for taxpayers.

Posted in Corporate relocations, Disclosure, Enterprise Zones, Jobs, Subsidies | 1 Comment »