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Supported By a Megadeal, Volvo Choses South Carolina

May 18, 2015

Swedish automaker Volvo has chosen South Carolina over Georgia and North Carolina for its first car-making facility in the Volvo_logo-LUnited States. A hefty subsidy package of more than $200 million helped the state close the deal.

Volvo, owned by a Chinese investment company but still managed from Sweden, will locate in Berkeley County, about 30 miles north of Charleston. The company is planning to invest $500 million and to hire 4,000 workers by 2030 (the first hiring benchmark will be 2,000 workers in about a decade).

The $208 million package will include $120 million that the state will borrow to pay for infrastructure and road improvements around the plant. The economic development bonds still need to be approved by the legislature. The South Carolina Commerce Department will provide about $30 million in grants, most likely via Job Development Credits. State-owned energy company, Santee Cooper, will spend $29 million to buy the land for the plant and will provide an additional $24 million in loans and grants to the company. Berkeley County will chip in $5 million toward the purchase of the land as well. The reported value of the subsidy package is about 41 percent of Volvo’s investment.

The final cost of the subsidy package, however, might be much larger than what has been reported. The package amount includes neither funds for workforce training nor the value of local property tax breaks.

By locating in South Carolina, Volvo has chosen a state that not only has a “right-to-work” law but also a governor who is openly anti-union. It remains to be seen whether Volvo, which has strong ties to unions in Sweden, will join the long line of European and Japanese companies that gladly operate non-union in the U.S. or will follow the exception to the rule, Volkswagen, in being receptive to some sort of worker representation.

Based on what has been announced, the Volvo subsidy package would rank as the third largest megadeal ever awarded in South Carolina (behind the $900 million to Boeing in 2009 and the $250 million to Continental Tire in 2011), according to data compiled by Good Jobs First for our Subsidy Tracker. Another automaker, BMW, has been located in South Carolina since 1992; it received $150 million in 1992 and another $103 million in 2002.

Learning the full value of the Volvo package will be difficult, given the state’s poor disclosure practices. Now would be a good time for South Carolina to improve its transparency.

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Astonishing Failure Rate Found in Major North Carolina Subsidy Program

February 19, 2015

Every time a company is approved by the North Carolina Commerce Department for a Job Development Investment GrantPICKING LOSERS Cover (JDIG), there is 60 percent of chance that the company will fail short on its jobs, investment or wage promises. This astonishing statistic is contained in a new report by the North Carolina Justice Center that evaluates performance of this key subsidy program in the Tarheel State.  The study comes at a time when the North Carolina legislature is about to debate Gov. Pat McCrory’s request to expand the faulty program.

JDIG provides performance-based grants to companies that create certain number of jobs in the state.  If a company fails to deliver on the promised jobs within five to seven years, the subsidy is cancelled and in some situations money is recouped through clawback provisions (for example, the 2004 failed Dell deal). The Justice Center found that 62 out of 102 projects approved for JDIG grants between 2002 (the year the program was created) and 2013 did not deliver on their jobs, investment or wage obligations and thus were canceled. This 60 percent rate would give you an F in school!

The report also found that out of only nine percent of JDIG grants that went to rural counties, 77 percent were canceled (90 percent of JDIG projects went to urban counties). However, “the most troubling trend in the state’s targeting mismatch,” as Allan Freyer, the author of the study, puts it, is the fact that 60 percent of all approved grants went to three counties with the fastest job growth: Durham, Wake and Mecklenburg. Freyer adds: “the state is investing the majority of its incentives resources in the counties that need it least.”

In recent months Gov. McCrory has been arguing that money in the JDIG program has dried up and is asking the legislature to allocate more resources.  The report, however, shows that JDIG money did not suddenly run out. Rather, more than a half of the money earmarked for the program was granted to one “megadeal” for MetLife. In 2013, the insurance company was awarded $110 million over ten years, or $11 million a year. The yearly payments to MetLife constitute half of the money in the program, leaving only $11.5 million for all other projects.

Instead of expanding the JDIG program as requested by the Governor, the report urges lawmakers to strengthen performance measures and evaluation processes. It also recommends focusing on companies in growing industries and taking steps to bring about a more equal distribution of grants between urban and rural counties.

Posted in Jobs, North Carolina, Subsidies | Leave a Comment »

North Carolina Conflict of Interest Controversies

September 16, 2014

As odd as it sounds, North Carolina’s ethics law allows high-level state appointees to serve on the boards of for-profit

Secretary Sharon Decker

Secretary Sharon Decker

corporations. Such officials are prohibited, however, from taking actions that might create a conflict of interest with their official duties. Sharon Decker, the state’s secretary of commerce, is taking advantage of that law but is ignoring what many observers see as an obvious conflict.

Decker has been serving on the board of Family Dollar Stores, one of the country’s largest chains of deep-discount retailers. That part-time post pays her more (nearly $150,000 last year) than her official salary ($136,000). Being a Family Dollar director these days is more challenging than usual. The company, responding to concerns about its financial performance, agreed a few months ago to be acquired by its rival Dollar Tree. But then the biggest dollar-store chain of all, Dollar General, made its own offer.

The situation remains unresolved, but it is likely that any change in ownership of Family Dollar will jeopardize jobs at the company’s headquarters in Matthews, North Carolina. In other words, Decker, whose duties include promoting job creation, might very well be taking steps in her private position that reduces employment in the state.

Decker’s situation creates serious questions about the policy of allowing high-level economic development officials to sit on corporate boards. On one hand, those officials are responsible for protecting North Carolina jobs and for representing the state’s interest in negotiations with companies. On the other hand, as directors they are responsible for maximizing profits of corporations.

Decker is not the first high-level official whose close relationship with a private company has caused public concern. For 14 years when Gov. McCrory was Charlotte’s mayor, he was also a manager at Duke Energy. The recent coal ash spill caused by the company raised questions about whether the Governor was still advancing the interests of the company.

There is another troubling aspect of this story. The Economic Development Partnership of North Carolina, a newly created private arm of the Commerce Department, is about to start its operation. Its employees will follow the same ethics rules as legislators and executive branch officials, meaning that they could end up in similar positions to McCrory and Decker.

The next time they meet, North Carolina legislators might want to consider whether it’s time to overhaul the state’s conflict of interest rules.

Posted in North Carolina, Privatized Economic Development Agency | Leave a Comment »

North Carolina Puts the Brakes on Subsidy Spending but Moves Ahead on Privatization

August 25, 2014
North Carolina State Capitol. Image by Abbylabar (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

North Carolina State Capitol. Image by Abbylabar (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons

For the past decade, North Carolina has spent heavily on subsidies, abandoning its previous economic stinginess. In an encouraging new reversal, the Tar Heel State is returning to its old ways. In a just completed short session, the state legislature took two important steps to limit giveaways: it ended one of the country’s biggest film tax credit programs and it defeated a proposal by Gov. Pat McCrory and Secretary of Commerce Sharon Decker to create a deal-closing slush fund. The defeat of the fund also meant the rejection of an expansion of several existing subsidy programs and a special deal for a paper mill.

Not everything coming out of the session was positive. Lawmakers moved ahead with an ill-conceived plan to privatize job recruitment functions of the state’s Commerce Department. The plan was approved despite warnings of problems with similar quasi-public agencies across the country and despite revelations by the N.C. Policy Watch that the Partnership’s CEO lacks experience in economic development and led his company into bankruptcy.

It was the second attempt by the Governor and Commerce Secretary to pass this bill. During the previous legislative session, a similar proposal failed when an amendment that would lift the state moratorium on hydraulic fracturing was added to the bill (the North Carolina chapter in our Creating Scandals Instead of Jobs study has more details on that plan).

(more…)

Posted in Film Industry, North Carolina, Privatized Economic Development Agency, Subsidies | 1 Comment »

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!

Posted in Florida, Site Location Consultants | 1 Comment »

Florida’s Disappointing Job Creation Record

December 10, 2013
PHOTO BY ALAN DIAZ / ASSOCIATED PRESS

PHOTO BY ALAN DIAZ / ASSOCIATED PRESS

Florida Gov. Rick Scott received negative press in the last few days for his job creation record. The Tampa Bay Times and Miami Herald  published a three-part series called “Jobs in Florida: The Rick Scott Record,” in which the newspapers document that only a small fraction of positions that subsidy recipients promised to create have actually materialized, and a significant portion of the deals have collapsed entirely. Accompanying the series is an interactive database showing the performance of 340 subsidy deals.

The series shows that the state pledged $266 million in public money for 45,258 jobs, often subsidizing low-wage industries like call centers and retail (Wal-Mart and its Sam’s Club unit are among the recipients). Ninety-six percent of those jobs have yet to materialize, with 46 deals creating none.

The state’s broader job picture has also been discouraging. The series points out that between January 2011 and November 2013 Florida lost 49,163 jobs at companies bigger than 100 employees, a fact never mentioned by the Scott administration.

We applaud the Tampa Bay Times and Miami Herald reporters for their impressive work (See our previous blog on similar investigations in North Carolina and Washington, DC).

Posted in Florida, Jobs | 4 Comments »

Missouri Gives Rick Perry a Taste of His Own Medicine

August 30, 2013

Texas Gov. Rick Perry has been spending much of his time lately traveling to other states with the overt aim of luring their companies and thus poaching their jobs. In the run-up to his recent trip to Missouri, Gov. Jay Nixon and other state officials have been seeking to turn the tables on Perry.

Click on the image to listen to Gov. Perry ad

Click on the image to listen to Gov. Perry’s ad

In Missouri television and radio ads paid for by a public-private group called TexasOne, Perry criticizes Nixon for vetoing a tax cut bill while enticing Missouri businesses with talk of Texas’s lack of a state income tax and limited regulation of business. In a response, Missouri Secretary of State Jason Kander wrote to Perry advising him that “instead of launching a wholesale public relations effort,” he should “spend time asking Texas business owners if there’s anything [he] can do to help their companies move forward.”

Nixon also responded to Perry with his own radio spot arguing that the Texas ads are misleading and that, in fact, Missouri has a better tax system and business climate than the Lone Star State. Nixon criticized the Missouri Chamber of Commerce for hosting Perry.

Missouri media also reacted to the Texas campaign. St. Louis radio station KTRS refused to play the Texas ads, and the St. Louis Post-Dispatch produced its own version saying “Come to Texas… four million people who work [here], live in poverty….We have the lowest percentage of high-school graduates in America but we still manage to produce more toxic waste than any other state. So come to Texas and get a career in fast food….”

Good Jobs First has extensively covered the economic war among the states in several of our blog posts (for example, see Greg LeRoy’s primer for journalists) and in our  Job-Creation Shell Game report, in which one of the case studies is dedicated to Texas. In the report, we found that “interstate job moves have microscopic effect on state economies.” Specifically, under Perry’s first seven years in the office only 0.03 percent of Texas jobs base annually came from corporate relocations. We recommended that state governments should spend time and money to encourage start-ups and to support expansions in their states, not to waste money poaching jobs from each other.

Posted in Job Piracy, Missouri | Leave a Comment »

Arkansas Will Claw Back Hewlett-Packard Subsidies

July 11, 2013

DSC_1979 2

Photo and the caption by Arkansas.gov: “Governor Beebe today [Mar 3, 2010] helped dedicate the HP Conway facility. HP expects to employ 1,200 Arkansans at the new facility.”

After laying off 500 workers from its publicly subsidized facility in Conway, Hewlett-Packard will have to repay some of the money it has received from the state, Arkansas economic development officials announced.

When HP opened its customer support facility in 2010 (the deal was announced in 2008), it was supposed to be a game changer for the economic development reputation of Arkansas. The state was willing to pay the price and offered HP state and local subsidies.

Arkansas never disclosed the full value of the subsidy package, but it was reported that the company received at least $17 million upfront: $10 million from the state’s Quick-Action Closing Fund and $7.2 million from city of Conway, including $5 million the city spent to upgrade the industrial park where the facility was later located.

HP was also eligible for various performance-based tax refunds, rebates and credits. Although Arkansas does not publish data on its subsidies, the state made some of that information available to Good Jobs First. The data, now available through Subsidy Tracker, includes: three awards from the Existing Workforce Training Program for a total of $62,882; an income tax credit from the Advantage Arkansas program worth $53,418; and a refund of $21,801 from the Tax Back Sales and Use Tax Refunds program.

After the layoff, the state officials announced that HP no longer met the minimum requirement of 1,000 jobs at the Conway faculty and that the state would work with the company to determine how much money needs to be returned. It is unclear, however, whether the clawback will include only upfront grants or also already claimed tax and workforce training subsidies, and whether HP will have to return any local funds.

Although HP’s layoffs are not good news, it is encouraging that Arkansas is willing to implement the clawback provisions it wisely included in its deal with the company.

Posted in Arkansas, Clawbacks, Subsidies, Subsidy Tracker | 1 Comment »

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 »

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.

Posted in Disclosure, Georgia, Subsidies | Leave a Comment »

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