Archive for February, 2014

Another Scandal at Florida’s Privatized Development Agency

February 28, 2014
Click to watch the CBS12 investigation

Click to watch the CBS12 investigation

For the followers of Enterprise Florida (EFI), another scandal at the organization should not come as a surprise. Television station CBS12 in Palm Beach discovered this week that EFI, the privatized “public-private partnership” responsible for recruiting companies to the state, has spent thousands of dollars on entertaining site selection consultants.

About $21,000 was spent at Yankee Stadium in New York, another $7,100 at the Cowboys Stadium in Arlington, Tex., and $4,400 at Turner Field in Atlanta, Ga. More than half a million more was billed to EFI credit cards for food, hotels and other entertainment. Enterprise Florida justified the lavish entertainment bills by saying it “must build and maintain strong relationships with site selection professionals across the country.” It is important to remember, however, that the majority of EFI’s funding comes from the public coffers, so, ultimately, the Florida taxpayers are the ones paying for those lavish expenses.

Just a few months ago, another scandal revealed that few of the jobs announced by EFI have yet materialized and several of the announced deals actually collapsed.

Integrity Florida, a nonpartisan watch-dog group, sent a letter to Governor Rick Scott calling on him to investigate the EFI spending. We join the Integrity Florida call!

New Jersey’s Big Money Clearing House

February 25, 2014

-money-houseLast week the Huffington Post revealed another chapter of the still evolving Christie-Gate saga (now including economic development subsidies!).  The New Jersey Governor’s mansion, used extensively by the Christie Administration for fundraisers and state business, is maintained by the Drumthwacket Foundation – a non-profit of modest means until the current administration.  That is no longer the case, as Christina Wilke exposed last week.  Donations to the Drumthwacket Foundation have skyrocketed in recent years, many of them made by businesses and individuals seeking economic development incentives, high profile appointments, and government contracts.

Chief among these donors are John Strangfeld, the chairman of insurance giant Prudential, and his wife, Mary Kay Strangfeld – now also chairman and vice chairman, respectively, of the Drumthwacket Foundation.  A year after the Strangfelds assumed leadership of the foundation, Prudential received a jaw-dropping $250 million tax subsidy deal from the state Economic Development Authority that didn’t even require the company to create any new jobs.  (Prudential is massively subsidized in other states as well – see our new Subsidy Tracker 2.0 database for more information on awards to the company’s subsidiaries across the nation.)

Head on over to the Huffington Post for more details on the Strangfeld/Prudential deal and the rest of the story – it deserves to be read in its entirety.

Subsidy Tracker Reveals Big-Business Dominance of Job Subsidies

February 25, 2014

With Parent-Subsidiary Ties Linked, Database Reveals Big-Business Dominance of Job Subsidies

Washington, DC, February 25, 2014—Three-quarters of all the economic development dollars awarded and disclosed by state and local governments throughout the United States have gone to just 965 large corporations.

Some of these big recipients, such as Boeing (at more than $13 billion) are well known for aggressively seeking tax breaks by pitting states against each other for jobs. However, 16 other companies, many less intuitive, have received awards totaling more than $1 billion, often to subsidiaries with names bearing no similarity to their corporate parents.

Warren Buffett’s Berkshire Hathaway, for example, has received 310 subsidy awards totaling $1.06 billion to subsidiaries with names such as Geico, NetJets, Nebraska Furniture Mart, General Re Corporation, Lubrizol Advanced Materials, and Webb Wheel Products.

These are the key findings in Subsidizing the Corporate One Percent, a report published today by Good Jobs First summarizing information brought to light by an extensive enhancement of GJF’s Subsidy Tracker database.

Good Jobs First is a non-profit, non-partisan research center in Washington, DC focusing on economic development accountability. The report and the database can be found at

“Subsidy Tracker can now demonstrate that a dominant share of the subsidies awarded by state and local governments in the name of job creation is ending up in the hands of a limited group of companies which can be regarded as the Corporate One Percent,” said Good Jobs First Research Director Philip Mattera, who created the original database and the newly released version 2.0.

Subsidy Tracker now contains parent-subsidiary linkages for more than 25,000 entries with aggregate values of $110 billion, or 75 percent of the total dollar value of all the entries in the Tracker universe. Those entries have been connected to 965 parent companies drawn from the Fortune 500, the Forbes list of the largest private companies and similar lists. The total of about 1,300 corporations checked for Tracker matches represent a good proxy for big business.

The Fortune 500 alone account for more than 16,000 subsidy awards worth $63 billion, or about 43 percent of total Tracker dollars.

“In our Megadeals study last year, we found that since 2008, there has been a spike in the number and cost of gold-plated deals, even though overall deal flow remains depressed,” said Good Jobs First Executive Director Greg LeRoy. “It looks like the corporate rich are getting richer at the expense of public goods that benefit all employers.”

Subsidy Tracker 2.0 shows for the first time which companies have received the most cumulative awards, both in dollar terms and numbers of awards. After Boeing, whose $13 billion total reflects the giant deals it has gotten in Washington and South Carolina as well as more than 130 smaller deals around the country, the others at the top of the cumulative subsidy dollar list are: Alcoa ($5.6 billion), Intel ($3.9 billion), General Motors ($3.5 billion) and Ford Motor ($2.5 billion). A total of 17 companies have received cumulative subsidy awards worth more than $1 billion; 182 have received awards of $100 million or more. 

The company with the largest number of awards is Dow Chemical, with 416. Following it are Berkshire Hathaway (310), General Motors (307), Wal-Mart Stores (261), General Electric (255), Walgreen (225) and FedEx (222). Forty-eight companies have received more than 100 individual awards. The award numbers include some for which no dollar amount has been disclosed (reflecting the inconsistent quality of state and local disclosure).

Among the 965 parents identified as subsidy recipients, the average number of awards is 26 and the average total dollar amount (from awards for which this information is disclosed) is $102 million.

Given the decline of manufacturing in the United States, it is interesting that the list of top parent companies is dominated by industrial firms. Of the ten biggest recipients, only one – Cerner – is primarily a service provider. As for specific industries, auto is well represented, with GM, Ford, Fiat (which now owns Chrysler) and Nissan in the top ten. Toyota is no. 16 and Volkswagen is no. 22. Other heavy industries represented include aerospace (Boeing, no.1), semiconductors (Intel, no.3), petroleum (Royal Dutch Shell, no.7), chemicals (Dow, no.12) and steel (ArcelorMittal, no.13).

Also significant is the presence of foreign-based corporations. There are three in the top ten (Fiat, Royal Dutch Shell and Nissan) and another five in the next 15.  Since private equity firms are treated as big-business parents, the list includes several of those firms. The most-subsidized is Silver Lake Partners, which now controls the computer company Dell and thus has Dell’s megadeals in North Carolina and Tennessee attributed to it.

The list of most-subsidized parent companies overlaps considerably with the companies in the Megadeals report Good Jobs First issued last June. Of the 100 most-subsidized parent companies, 89 received at least one megadeal (worth $75 million or more).

“Both our new findings and our Megadeals study clearly suggest a ‘corporate rich getting richer’ trend,” LeRoy added.


MSNBC Hears Us Out on Recent Studies

February 17, 2014

Yours truly recently had a chance to thumbnail three of our recent studies on daytime TV (and preview a fourth). For really busy people, here’s a brisk summary of our key findings on state revenue lost to subsidies and loopholes, state disclosure practices, and interstate job piracy.

Small Business Owners Say: Cut Taxpayer Subsidies to Big Business (And Taxes Matter Least to Top-Growth Entrepreneurs)

February 17, 2014

A large national poll of independent business owners finds that cutting taxpayer subsidies to big business is their top-rated public policy priority. And a smaller survey of high-growth entrepreneurs finds that the last things they are concerned about are low taxes or business-friendly regulations.

The large poll, conducted by the Institute for Local Self-Reliance and Advocates for Independent Business, surveyed 2,602 small business owners nationwide. It asked them which two public policy changes would most help their business. Their single most common reply (36 percent) was “eliminate public subsidies for big companies.”

The smaller survey, by Endeavor (a global network for accelerating entrepreneurship), surveyed 150 founders of some of the fastest-growing companies in the United States. It asked them why they chose the locations in which they built their businesses. Their typical answer: before starting their company, they moved to a city of one million or more because of personal connections and quality of life. Their most critical business reason for staying was a pool of talented labor, followed by access to customers and suppliers.

Only five percent cited low taxes and only two percent cited business-friendly regulations as a reason for choosing their successful location.

Watch this blog for big news soon from Good Jobs First on the issue of subsidies to big business.

In Volkswagen Union Vote, Conservatives Declare Open Season on Free Markets

February 16, 2014

Update: Citing “what appears to have been a coordinated and widely-publicized coercive campaign” by at least six named Tennessee elected officials, the UAW filed a complaint to the National Labor Relations Board on February 21 claiming interference and seeking that the vote be set aside and held again.

A common platitude among conservatives is that government should not interfere with free markets. Yet in last week’s vote among Volkswagen workers in Chattanooga on whether they wanted to join the United Auto Workers (UAW), Tennessee politicians and outside ideologues went to extraordinary lengths to meddle in the business of one of the world’s most successful corporations. Their meddling prevailed when the workers voted not to unionize, 712 to 626.

A governor asserted that past subsidies give him the right to interfere. A United States Senator claimed to know more than Volkswagen Chattanooga’s CEO and chairman. And a state senator called the company’s behavior “un-American” and threatened to oppose future subsidies to expand the plant if the workers unionized.

This was not some runaway clutch plant from Ohio; it is Volkswagen’s only U.S. assembly plant, producing the Passat. VW is neck-and neck with General Motors to become the #2 car producer in the world. The workers in virtually all of its other 105 plants worldwide are union members, and also have works councils, a cooperative structure that Volkswagen credits for high quality, morale and productivity.

VW clearly signaled openness to the Chattanooga workers voting to unionize, allowing UAW organizers into break rooms and publicly stating that the outcome of the vote will not affect its future decisions about where to locate new product lines. “Our strong desire is to have a works council present in Chattanooga,” said a VW executive in November.

Despite the company’s global success and clear signals that outsiders should butt out, elected officials in Tennessee couldn’t restrain themselves.

Tennessee Gov. Bill Haslam was consistently opposed to the workers unionizing. “I’ve been fairly vocal in a way that some people have said, ‘Why is it your business?’” Haslam told newspaper editors and publishers. “I think it is our business in the state of Tennessee. We have a considerable investment in that plant. The state of Tennessee put a whole lot of money in that plant,” the Chattanooga Times Free Press reported.

Just before and during the three-day vote, U.S. Senator Bob Corker made a string of remarkable statements, even dissing VW’s U.S. management. Corker was mayor of Chattanooga when the city landed the plant, has often spoken of his friendship with VW executives, and recounts that two key meetings to land the deal were held in his home. State and local subsidies to the plant totaled $554 million, the second-costliest package for a foreign-owned auto plant in U.S. history.

On Wednesday, the first day of voting, in what Reuters called a bombshell, Corker said “I’ve had conversations today and based on those am assured that should the workers vote against the UAW, Volkswagen will announce in the coming weeks that it will manufacture its new mid-size SUV here in Chattanooga.” Corker refused to name his source and his spokesman refused to say if Corker was also saying the SUV line would go to Mexico if the workers voted to unionize. (That is, Corker’s statement left open the possibility that he was told the new line is coming no matter which way the vote went.)

The same day, Corker called a Washington Post reporter. He discussed legal opinions about U.S. labor law and works councils, and claimed he doesn’t oppose work councils. Yet although the National Labor Relations Act prohibits company unions (which were rampant in the 1920s and early 1930s, as a device to subvert independent workers’ organizations), Corker said: “We’ve even told Volkswagen that, ‘why don’t you guys create your own union within the plant, if you feel like that is something that is necessary to fully implement this in a way you see fit.’”

On the second day of voting, Corker told Reuters he was “‘very certain that if the UAW is voted down,’ the automaker will announce new investment in the plant in the next couple weeks,’” and again refused to identify his source.

Volkswagen Chattanooga CEO and Chairman Frank Fischer disputed Corker’s claim: “There is no connection between our Chattanooga employees’ decision about whether to be represented by a union and the decision about where to build a new product for the U.S. market,” reported. Corker then dissed Fisher by claiming higher knowledge: “Believe me, the decisions regarding the Volkswagen expansion are not being made by anyone in management at the Chattanooga plant …Frank Fischer is having to use old talking points when he responds to press inquiries.”

Corker’s intrusive statements were a flip-flop; the previous week he had pledged silence: “During the next week and a half, while the decision is in the hands of the employees, I do not think it is appropriate for me to make additional public comment,” the Chattanooga Times Free Press quoted him saying. Corker’s animus towards the UAW is well-established; during the federal bailout of GM and Chrysler (which helped save the GM plant in Spring Hill, Tennessee that not only reopened but is now expanding), Corker demanded that UAW members take pay cuts to equal the non-union transplants.

Finally, State Senator Bo Watson, from a Chattanooga suburb, called Volkswagen’s actions “un-American” and made a thinly veiled threat to block subsidies for an SUV line expansion. “…Volkswagen has promoted a campaign that has been unfair, unbalanced and, quite frankly, un-American in the traditions of American labor campaigns,” Watson said. “Should the workers choose to be represented by the United Auto Workers, then I believe additional incentives for expansion will have a very tough time passing the Tennessee Senate.”

In calling a German corporation “un-American” without irony, Sen. Watson also overlooked the fact that the Marshall Plan installed members of Germany’s metalworkers union, IG Metall, on Volkswagen’s board of directors (10 of its 21 members are union members). Restoring works councils and union representation, which the Nazis had abolished, was meant to help prevent the return of fascism.

Collusion between employers and Southern politicians against unions is a many decades-old story. But usually it all happens behind closed doors—even in cases like this where the employer is not anti-union. At a time when states mortgage their futures to land high-impact trophy deals like an auto assembly plant, it is stunning to see elected officials publicly denounce a company’s business model just because it includes unions.

It’s also a teachable moment on how development subsidies get perverted, akin to Boeing using 22 states’ subsidies bids as a bludgeon for wage and benefit concessions against Machinists in Puget Sound several weeks ago.

As for the UAW and Volkswagen, they are clearly not giving up. In the wake of the vote, the union lauded “Volkswagen for its commitment to global human rights, to worker rights and trying to provide an atmosphere of freedom to make a decision.” Volkswagen sang harmony: “Our employees have not made a decision that they are against a works council. Throughout this process, we found great enthusiasm for the idea of an American-style works council both inside and outside our plant,” the Washington Post reported. “Our goal continues to be to determine the best method for establishing a works council in accordance with the requirements of U.S. labor law to meet VW America’s production needs and serve our employees’ interests.”

Postscript: Washington Post business columnist Steven Pearlstein wrote eloquently on a similar theme as I was finishing this blog.

Footnote: contrary to some press accounts, there have been at least three foreign-owned U.S. automotive assembly plants whose workers have enjoyed UAW membership: Mazda’s plant in Flat Rock, Michigan; the Diamond-Star (Mitsubishi) plant in Bloomington, Illinois; and the New United Motors Manufacturing, Inc. (Toyota/GM then Toyota) in Fremont, California. As well, workers voted to join the UAW at two small Freightliner (then DaimlerChrysler) inspection facilities in North Carolina.

Stunning TV Exposé: Indiana’s Fishy (Privatized) Jobs Numbers

February 16, 2014

For reasons that will hopefully become clear as more evidence comes out, Indiana’s privatized Economic Development Corporation (IEDC) continues to play games with its jobs numbers.

And in Indianapolis, WTHR-TV’s tenacious 13 Investigates unit continues to document the IEDC’s record with outstanding coverage, looking into failed deals, shuttered workplaces, and the IEDC’s misleading transparency website.

Take a few minutes and watch these two remarkable TV segments by reporter Bob Segall.  Has your local TV station ever done job-subsidy reporting so robust?

The Indiana Job Numbers Still Don’t Add Up (1/31/14)

Indiana lawmakers to state job agency: “Tell the truth” (2/13/14)