Archive for April, 2014

In Volkswagen Meddling, Did Tennessee Officials’ Actions Violate a Supreme Court Ruling?

April 10, 2014

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Update on 4/21/14: Hours before today’s scheduled NLRB hearing, the United Auto Workers withdrew their election appeal and urged Gov. Bill Haslam to reinstate his $300 million offer of expansion subsidies with no strings attached this time. Saying that Tennessee officials could again interfere with an election re-run, the UAW said it will ask a federal Congressional inquiry to look into the role of federal funds in the conditioned-subsidy dispute. “The UAW is ready to put February’s tainted election in the rearview mirror and instead focus on advocating for new jobs and economic investment in Chattanooga,” said UAW President Bob King in a statement.

Recent revelations by NewsChannel5 investigative reporter Phil Williams in Chattanooga explicitly raise an issue that I hinted at in my blog on public officials in Tennessee interfering with the vote among Volkswagen workers about joining the United Auto Workers. In that blog, I pointed out that Gov. Bill Haslam asserted that the past granting of subsidies to the plant gave him a right to weigh in on the vote and that a state legislator broadly hinted he would oppose new subsidies to expand the plant if the workers voted to unionize.

The Channel 5 revelations make these links much more vivid. The secret expansion negotiations were dubbed “Project Trinity,” and an August 23, 2013 “Project Trinity Final Summary of Incentives,” in which the state offers $299.8 million in subsidies, has as its first line of content: “The incentives described below are subject to works council discussions between the State of Tennessee and VW being concluded to the satisfaction of the State of Tennessee.”

I am not a lawyer, but that stipulation stands out to me because of the 1985 Supreme Court Case Golden State Transit Corp. v. Los Angeles. In this case, the Court ruled that state and local governments may not pre-empt the power of the National Labor Relations Board in enforcing those private-sector matters governed by the National Labor Relations Act. Specifically, the Court found that Los Angeles, by canceling a taxi franchise, interfered in “permissible economic tactics” being used by the company and its Teamster workforce during a strike.

The Channel 5 revelations suggest Tennessee officials were committing an equivalent act: they were using the conditioned offer of future subsidies to influence a representation election. It looks like impermissible interference in private-sector labor relations.

Indeed, the Haslam administration now admits that it withdrew the August expansion-aid offer in January as the UAW vote neared. While a state official told Channel 5 that the offer had a standard 90-day duration (which had already been extended two months), Channel 5 reports that the offer it obtained “contains no reference to any sort of 90-day deadline.”

The leaked emails also make it clear that Tennessee Department of Economic and Community Development officials were paying close attention to the vote. Indeed, Gov. Haslam even wrote Volkswagen a letter on February 4th protesting what he considered an unfair lack of access to the plant for anti-union organizers (Volkswagen allowed UAW organizers access).

The emails also show that high-level Tennessee officials, including the chief of staff to U.S. Senator Bob Corker, and chief of staff to Gov. Haslam’s commerce department, were interacting with anti-union consultants during the union election.

The United Auto Workers have seized upon the Channel 5 revelations to broaden the evidence for their Labor Board case seeking to invalidate the vote as tainted by the officials’ actions. The UAW for an April 21 NLRB hearing in Chattanooga has subpoenaed: Gov. Haslam, his economic development commissioner Bill Hagerty, and Hagerty’s chief of staff; Grover Norquist of Americans for Tax Reform; State Senator Bo Watson; Sen. Corker’s chief of staff; Peter List of LaborUnionReport.com; and Tennessee House Majority Leader Gerald McCormick, among others.

Among the materials requested of the witnesses are records of “Government Incentives” defined as “…aid or relief of any nature – whether proposed, contemplated, or effectuated…” by the state for the benefit of Volkswagen.

We await that hearing with interest.

 

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Supersizing New Jersey’s Subsidies

April 8, 2014

What a waste

Economic development incentives are making headlines again in New Jersey.   Following a massive legislative overhaul of the state’s business subsidy programs last year, Good Jobs First predicted that the state would quickly lose control of spending through the expanded programs.  It took less than a year for the state Economic Development Authority (EDA) to prove us right.

The (Bergen) Record revealed this weekend that under the new subsidy structure the EDA has awarded twice the amount of business incentives as it did during the first quarter of last year:

“The grants so far, awarded in the form of tax credits, totaled $355 million. That’s about $89 million a month, compared with about $36 million a month awarded under the state’s main incentive programs in the first nine months of 2013, authority data show. The state made about six awards a month under the revamped programs, nearly double the number in the first nine months of 2013.” (source)

Prior to the state’s business subsidies undergoing scrutiny as a result of the ongoing David Samson/Christie-Gate scandal, and even before the structural overhaul that has allowed the current subsidy surge, New Jersey was already facing criticism for its excessive spending on business incentives.  During its first two and a half years, the Christie Administration awarded nearly $2 billion in tax incentives and grants.

All this spending has done little to help the state’s economy.   New Jersey’s employment recovery rate lags behind the rest of the nation and reports that small business owners are still having trouble accessing Hurricane Sandy recovery funds are persistent.  Unfortunately for residents, the Christie Administration has already demonstrated that doubling the state’s already ineffective business incentive spending isn’t likely to have much of an impact.  Supersizing subsidy spending is no recipe for prosperity in the Garden State.

Posted in Economic Recovery, Hurricane Sandy, New Jersey, Subsidies | Leave a Comment »

New Report: Putting Municipal Pension Costs in Context: Chicago

April 4, 2014

Have secretive TIF accounts played a significant role in the underfunding of Chicago pension funds?

A new report out today, Putting Municipal Pension Costs in Context: Chicago, focuses on how Tax Increment Financing or TIF seems to be undermining the city’s budget and has been for the last decade. At a moment when politicians are talking about cutting retirement benefits for civil servants like Teachers, Firefighters, and Policemen, we think it’s useful to remind the public about what’s been dubbed Chicago’s Shadow Budget, none other than TIF.

There’s been no shortage of troubling issues surrounding TIF. We’ve blogged about them a number of times on this blog.

Nearly one out of every ten property tax dollars collected in Chicago doesn’t end up in the city’s general fund or with other taxing jurisdictions that provide public services. Instead, those revenues are siphoned off into what were once secret TIF accounts controlled almost exclusively by the Mayor.

While this report does not specifically call for the abolition of TIF in Chicago or oppose taking other measures to raise the needed revenues to pay for critical public services, we believe that as a matter of honest accounting and fair budgeting, TIF requires careful consideration.

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TIF costs have grown significantly in recent years. They have for years exceeded the City’s annual pension liability. Our analysis shows that property tax diversions into TIF have exceeded pension costs in every year since 2007. For example, the city’s pension costs were about $386 million in 2012, while TIF diverted $457 million in property tax revenues in that same year.

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When newly elected Mayor Rahm Emanuel took office, he convened a TIF review process in order to fix this so-called Shadow Budget. Although the City made TIF far more transparent as a result, the review did not make TIF any less corrosive towards Chicago’s budget. Recent new rounds of proposed subsidies for things like basketball stadiums and hotels raise serious doubts about whether TIF reform has actually materialized.

Aides to Mayor Emanuel have acknowledged that about $1.7 billion sits in TIF accounts, though $1.5 billion is obligated to various projects through 2017. But if the city is willing to consider breaking pension commitments, why should TIF spending not receive similar scrutiny?

Indeed, in California, Governor Jerry Brown didn’t rule out TIF spending to shore up budgets. Much like in Chicago, TIF in California was siphoning off an enormous amount of property tax revenue: 12 percent overall. When efforts to reform California TIFs failed, the state dissolved the authority of localities to have TIF districts and began the process of unwinding the existing debt obligations.

In the long run, local jurisdictions in California will see a 10 to 15 percent increase in property tax revenues over what they would have had with TIF still in effect.

Over the past decade or so, observers have noted that the City of Chicago had a revenue problem, but rarely have they noted the corrosive nature of TIF spending. According to a 2010 report on pensions issued under the previous Mayor of Chicago, pension funds began running into issues after the year 2000. It was during this period that the city began making what the report dubbed “inadequate contributions” to pensions. Is it a coincidence that property tax revenues lost to TIF more than doubled between 2000 and 2003 and quadrupled by 2007 to exceed half a billion dollars a year?

It’s hard to ignore the evidence that TIF impacted pensions: TIF costs grew, general fund revenues declined, and the city addressed its budget gap in part by making inadequate contributions to public pensions.

Cutting back on TIF in Chicago can and should play a role in shoring up the city’s financial situation.

Coverage of the report can be found at The Chicago Sun-Times & at PandoDaily.

Good Jobs First is a non-profit, non-partisan research center focusing on economic development accountability. It is based in Washington, DC.

Posted in Illinois, Subsidies, Tax Increment Financing, Taxes | Leave a Comment »

Connecticut’s Open Data Website Leads Nation in Adopting Economic Development Transparency Best Practices

April 1, 2014
Screenshot taken from Connecticut's new Open Data website

Screenshot taken from Connecticut’s new Open Data website

Those looking for a model on how to disclose economic development deals should start their search in Connecticut. No joke: Connecticut is cutting edge when it comes to taxpayer transparency on economic development.

Yesterday, Governor Dannel Malloy launched a new website called Data.CT.gov which aggregates numerous datasets that were previously unavailable or difficult to find. Included in this portal are many economic development programs we have doggedly watched and evaluated for transparency and accountability. Our January 2014 study ranked Connecticut 14th on job subsidy transparency: the states’ new website is a clear improvement that would have boosted their ranking into the top ten nationally had it been in use when we ranked all 50 states.

The Governor’s new transparency efforts came to fruition through two executive orders: one creating the website and the other instructing the state’s economic development agency to compile a searchable electronic database of subsidy information.

What makes the Connecticut website such a great model?

  • Clean Data: Often state agencies put up data in a haphazard fashion. Misspellings, data irregularities, and so forth make the data less useable. Worse, sometimes agencies put up data in static, unsearchable PDFs, not databases which contain the same information. When Good Jobs First imports data into our 50-state Subsidy Tracker database, this sort of messy data requires a great deal of clean-up. It’s clear that Connecticut has taken the time to ensure the data isn’t messy.
  • Relevant Data: The Connecticut portal also includes extremely important data that other states frequently forget to include. These fields include things such as clawback amounts, contract date timelines, job benchmarks, the result of a jobs audit, the amount of a subsidy awarded, the amount of a subsidy disbursed in each year, and the facility address. Including these data fields meets many of Good Jobs First’s best practices recommendations. In fact, the only data that really seems to have been omitted from the database is information about the wages and benefits of subsidized jobs (see here).
  • Data Tools: Another open data best practice is to allow users to easily search through the data. The database includes built-in mapping tools, filters, and charts. As the screenshot above illustrates, taxpayers can now easily see on a map all film tax credit recipients that were issued tax credit amounts greater than $1 million.
  • Downloadable Data: Connecticut doesn’t hamstring users like it used to with a single big PDF. Now the data is available in a variety of easy to download formats including XML, CSV, and, of course, Excel spreadsheets.
  • More Data: Frequently states spend a great deal of time disclosing data about a few major programs, but forget to disclose information about other economic development programs. This database includes tax credits, grants, loans, and other economic development tools. For more discussion about tax credit disclosure, see our previous blog on the topic. Connecticut’s data also includes previously undisclosed data about programs. For instance, it includes street addresses for film tax credit recipients.
  • Potential taxpayer savings: In the long run, the database will also save Connecticut taxpayers money. Frequently, Freedom of Information Act (FOIA) requests cost the government great resources in responding. But the new website will include frequently requested FOIA data. In addition to staff time saved, the enhanced ability for more citizens to know how their tax dollars are being spent will prevent waste, fraud, and abuse and enhance accountability.

We encourage you to go on the website and give it whirl: https://data.ct.gov/Business/Tax-Credit-Portfolio-Point-Map/megq-7hbv

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