Archive for the ‘Job Quality Standards’ Category

Report: States Spend Billions on Economic Development Subsidies that Don’t Require Job Creation or Decent Wages

December 14, 2011

States are spending billions per year on corporate tax credits, grants and other economic development subsidies that often require little if any job creation and lack wage and benefit standards covering workers at subsidized companies. These are the key findings of Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs, a study published today by Good Jobs First, a non-profit research center based in Washington, DC. It is available at www.goodjobsfirst.org.

“With unemployment still so high, taxpayers have a right to expect that economic development investments create significant numbers of quality jobs,” said Good Jobs First Executive Director Greg LeRoy. “If subsidies do not result in real public benefits, they are no better than corporate giveaways,” added Good Jobs First Research Director Philip Mattera, principal author of the report.

Money for Something rates the performance standards and job quality requirements of 238 key subsidy programs from the 50 states and the District of Columbia. Each is rated on a scale of 0-100.  Findings:

  • Only 135 programs have a performance standard relating to job creation, job retention or training of a certain number of workers.
  • Fewer than half (98) of the 238 programs impose a wage requirement, and only 53 of those are tied to labor market rates. Only 11 of the wage requirements raise pay levels by mandating rates somewhat above existing market averages. Wage requirements vary from just above the federal minimum to more than $40/hour in limited cases.
  • Only 51 programs require that a subsidized employer make available healthcare coverage, and only 31 require an employer contribution to premiums.
  • The states with the best average scores among their programs: Nevada (82), North Carolina (79) and Vermont (77). The worst: the District of Columbia (4), Alaska (5) and Wyoming (10).

Policy recommendations:

  • Every subsidy should contain job creation, job retention or training requirements strengthened by provisions barring employers from shifting existing jobs from other facilities and mandating that jobs be kept in place for a minimum period.
  • Every job in a subsidized facility should be covered by a wage standard that raises pay above market levels. They should also offer health coverage in which the employer contributes to premium costs.

NYC Living Wage Debate Boils Over, Into the Streets and before City Council

May 17, 2011

It’s budget season in New York City, when community groups and labor unions usually take to the streets to protest proposed budgets and this year proposals including teacher layoffs and social service cuts was a serious call to action. But marchers also had an added demand: a living wage at subsidized companies.  May 12 was planned as a day of action; it also was the day the New York City Council Committee on Contracts held a public hearing on the proposed “Fair Wages for New Yorkers Act”. The bill would require firms that receive certain economic development subsidies to pay a “Living Wage” of $10.00 an hour or $11.50 an hour if no benefits are provided.

Mayor Michael Bloomberg opposes the bill and the Speaker of the City Council Christine Quinn is undecided but the momentum is building with 30 co-sponsors (out of 51 members). The bill excludes many small businesses and only covers some subsidy programs. (more…)

Stung by Shutdowns, Massachusetts Debates Reforms

April 12, 2011

Recent job loss events in Massachusetts, though unfortunate for the state and its workers, may prompt passage of strong economic development accountability and clawback legislation that would apply to all economic development subsidies statewide.   Announcements by Evergreen Solar and Fidelity Investments – both major recipients of economic development subsidies – that the companies would be moving large numbers of jobs out of state have frustrated development officials, lawmakers and residents alike.

Evergreen Solar announced in January that it would shutter its Devens manufacturing facility and send over 800 jobs to China, despite the $58 million in job creation and development subsidies it received from the state.  Fidelity’s March announcement that it would be relocating approximately 1,100 jobs to two neighboring states from its Marlborough facility also came as an insult to the state; in the 1990s – at Fidelity’s urging and great cost to the state – Massachusetts altered its state tax code to apply single sales factor (SSF) corporate income tax calculation to mutual fund firms.  Weak accountability standards and a lack of safeguards in the state’s subsidy programs mean that Massachusetts will be able to recoup very little from Evergreen and nothing from Fidelity of the subsidies they received to create and maintain jobs in the state.

Executives from both companies were questioned by lawmakers last week about their acceptance of job subsidies and subsequent decisions to move jobs out of Massachusetts.  Evergreen Solar CEO, Michael El-Hillow, stated during the hearing that the company would not be repaying the $21 million it received as direct cash grants and tax credits from the state.  Fidelity’s major economic development subsidy, provided in the form of reduced corporate income tax responsibility through the SSF calculation, is impossible to recapture.  However, even some lawmakers who voted for the passage of SSF are now questioning its value to the state’s economic development efforts.  During the hearing Senator Mark Montigny, chairman of the Senate Post Audit and Oversight Committee, stated that he expected SSF “not to continue in perpetuity with no oversight” or accountability.

Prompted by these revelations,  the Massachusetts State Auditor issued a preliminary review of business tax expenditures this week.  She found that of 91 business tax expenditures, only 8 include a sunset clause, just 10 contain clawback provisions, and only 19 have public disclosure or accountability reporting requirements.  (Program sunsets, clawback provisions, and public disclosure are among the most basic and most critical aspects of key subsidy reforms supported by Good Jobs First.)   Massachusetts passed its first public disclosure law last year, which covers only the recipients of refundable or transferable tax credits.

This law, though a good first step towards strong public disclosure, is narrow and incomplete compared to other states’ disclosure practices.  It would be leapfrogged by S153/H2565: An Act to Promote Efficiency and Transparency in Economic Development, legislation currently being examined by the Joint Committee on Revenue.  Over 50 legislators, including primary sponsor Sen. Jamie Eldridge, are co-sponsoring the omnibus economic development reform bill.  Among its many provisions are the following major subsidy reforms:

  • Transparency, including spending transparency via a Unified Development Budget
  • Enhanced online disclosure of job creation and performance monitoring
  • Mandatory clawback provisions; and
  • Job quality standards

If enacted, the bill would protect Massachusetts’ future investments in economic development and ensure that companies can no longer take taxpayers’ money and run.

Report Documents Proof of Low-wage Employment at NYC Subsidized Projects

March 11, 2011

This week, Good Jobs New York, along with the Fiscal Policy Institute and the National Employment Law Project, released a report highlighting how New York City economic development policies often support low-wage jobs. The policy brief An Overview of Job Quality and Discretionary Economic Development Subsidies in New York City, describes the variety of subsidies and jobs at three well-known projects: Yankee Stadium, Gateway Mall in the Bronx and the Queens warehouse of Fresh Direct, an on-line grocery store.

Yesterday, the findings of the report were discussed at a forum at the City University of New York’s Graduate Center for Worker Education.

Data to estimate the wages at firms came from various sources including public records, government wage data and field interviews.

Together, the projects analyzed in the brief won tens of millions of dollars in benefits from the City, but because there are no job quality standards attached to employment at the projects, many jobs pay remarkably low wages.  Of the 4,909 jobs studied (concession food and beverage workers, warehouse workers, retail salespersons, security guards, and cashiers) the estimated annual median pay ranged from $17,534 to $26,395 for a full-time worker. Ironically this is only 58 percent to 87 percent, respectively, of the Bloomberg administration’s own 2008 poverty threshold for a four-person family in New York City. Security guards, representing about 563 of the jobs nearly 5,000 jobs studied, earned the highest wages at $12.69 an hour.

Cashiers working full-time in the retail industry (a rarity as a business that depends on part-timers) earn approximately $17,500 a year. The prevalence of low wage employment continues at the controversial, heavily subsidized new Yankee Stadium where seasonal jobs are the norm; starting wages there are estimated to be $9.19 an hour. Of the over 1,200 employees working in a Queens warehouse for Fresh Direct, the starting wage was typically the legal minimum.

Obtaining the data for the report (originally released last May and updated with new data) was a daunting task. Transparency about how discretionary subsidies are allocated has improved greatly over the years. But as the report states, the city falls flat on providing data enabling New Yorkers to determine the quality of jobs at subsidized projects.

Evergreen Solar Turns Out the Lights

January 24, 2011

Massachusetts Governor Deval Patrick and Evergreen Solar's CEO, Richard M. Feldt (Boston Globe 2008)

Evergreen Solar announced this month that it would shutter its solar wafer and cell production plant in Devens, Massachusetts despite the generous $58 million it received in subsidies from the state.  Eight hundred workers will lose their jobs by the end of March this year.  The company is moving its manufacturing operations to China, where it will enjoy higher levels of government subsidies in the form of low-interest loans and factory wages averaging less than $300 a month.

When you compare a $300 monthly salary with an average Massachusetts factory worker salary of $5,400 a month, it’s little wonder that the subsidy awarded by Massachusetts makes little difference in the company’s long term business strategy – especially given the fact that Evergreen will be able to take most of the money and run.  Of the $58 million award, $13 million was provided through an infrastructure subsidy, $21 million in the form of direct grants, and the remainder was provided in tax credits.  Massachusetts officials stated that the state stands to recoup only $3 million of its $21 million grant, even though Evergreen constructed its factory just two years ago.

In its rush to bag a green trophy business, Massachusetts neglected to attach job creation requirements to the majority of the subsidy.  Only $20 million of the total award contractually required that jobs be created at all.  (For more on green job quality and job creation, including the Evergreen Solar deal, see Good Jobs First’s 2009 publication “High Road or Low Road:  Job Quality in the New Green Economy.”)

It’s never fun to say “I told you so” when the subject is economic development subsidies because it is so often the case that workers will be losing their jobs, so we’ll focus instead on the takeaways:

  1. Job creation subsidies provided to companies that have a history of outsourcing manufacturing jobs are a dangerous bet.
  2. When a company can retain nearly 90 percent of its development subsidy after operating for just two years, it’s time for stricter clawback requirements.
  3. Attempts to combat global market forces and federal trade policy with state tax subsidies are ineffective and wasteful.

After Massachusetts’s experiences with Raytheon and General Electric, one might think they would have learned these lessons by now.

NYC Considers Big Subsidy Packages for Thriving Firms While Cutting Vital Services for Poorest Residents

July 16, 2010

Later this month, the New York City Industrial Development Agency will consider lucrative subsidy packages for two of the world’s largest corporations: “big four” accounting firm Deloitte, LLP, and Thomson Reuters, a multimedia news and information provider. Meanwhile, despite recent reports of an improving unemployment rate, 385,000 New Yorkers are still jobless—twice as many as there were two years ago—and in the name of budget crisis, the city is slashing critical services for its poorest residents, from seniors and children to those with HIV/AIDS.

Why are these profitable firms up for tax breaks when everyone else is forced to sacrifice and there’s no guarantee these subsidies will create jobs for those who need them most?

Even in good times, there would be ample reason to question the wisdom of these deals. Let’s begin with Deloitte: The firm wants taxpayers to finance what amounts to a reshuffling of space in Lower Manhattan—a move from 2 World Financial Center, where it currently subleases space from Merrill Lynch, to 4 World Financial Center. (Bank of America acquired Merrill in 2008, and both firms have received hefty subsidies from the city and state.) Deloitte has allegedly been considering leaving the Financial Center in favor of other locations within the city. The company already received a $14 million cash grant under a program the state created to retain large businesses in Lower Manhattan after 9/11, not to mention millions in BEIP subsidies in 2008 from neighboring New Jersey. It is also likely that Deloitte received—or will receive as a result of its impending move—generous benefits from the Lower Manhattan Relocation and Employment Assistance Program, though the city withholds the names of participating businesses under a “tax secrecy” provision.

It’s also worth noting that Deloitte benefits from contracts worth tens of millions of dollars with New York City and state (not an unusual arrangement), and even has an office on the 6th floor of the city’s Municipal Building. The issue of double dipping aside, the potential for corruption should be of concern. Last fall, Pennsylvania’s Auditor General found that Deloitte was being awarded subsidies from the very entities it was auditing. While there’s no evidence that this is the case in NYC, Deloitte’s business practices in other contexts should be taken into account.

IDA is also considering a proposal to allow media giant Thomson Reuters to steer unused subsidies from a 1998 agreement toward seven new locations in Manhattan. This might not sound so bad, except that the only information the public has to evaluate this proposal, an IDA Annual Report from 2005, shows that Reuters failed to meet job targets. It also shows that the company only used $2.4 million out of $26 million in subsidies. The public deserves the latest data on the true value of the remaining subsidy, Reuters’ employment record in the city since 2005, and the impact of its 2009 merger with Thomson Media on its job figures. IDA will release project details a week prior to the July 29th public hearing, but whether these and other critical questions will be answered remains to be seen.

Adding to the issues with the Thomson Reuters deal, the Newspaper Guild of New York has filed a complaint with the National Labor Relations Board charging that the company plans to cut wages of reporters and other employees by an average of 10 percent this year without the union’s consent. Reuters denies this claim, but at the very least no subsidies should be considered until this dispute is resolved.

Both the Deloitte and Thomson Reuters deals are rife with transparency and accountability issues—not to mention Deloitte’s deep connection to the Wall Street crowd that got us into the economic crisis in the first place. This would be unacceptable even in good times. But with our most vulnerable residents set to suffer even more as the city and state retrench, New Yorkers should be especially outraged.

Led by Community Groups, Newly Elected Officials Put Accountable Development in NYC on Front Burner

February 22, 2010

The rotten political culture in New York has forced ordinary New Yorkers to become increasingly savvy at making their voices heard, particularly when it comes to big development projects. And it’s making a difference. Advocates in the Northwest Bronx, for example, led by the Kingsbridge Armory Redevelopment Alliance (KARA), spent years organizing for a plan for the Armory that would bring good, permanent jobs to neighborhood residents. In a dramatic climax at the end of 2009 to their dogged efforts, they managed to defeat a proposal that fell short of these basic standards.

Blocking the city’s determination to take the low road represents remarkable progress, but what New York desperately needs is development policies that guarantee concrete benefits for local residents. Could a brand new crop of elected officials who are talking tough on accountable development provide a critical moment for advocates to finally accomplish just that?

Early signs are promising. Take the city’s new Comptroller John Liu, who spiced up February’s board meeting of the New York City Industrial Development Agency by voting ‘no’ on tax breaks for several projects, including a Western Beef grocery store proposed for the Bronx that, according to its application for benefits, would pay employees an average wage of about $19,000 a year with no benefits. Stating his concern that the current system lacks “clear processes and standards for project development and approval,” Liu pledged to “examine how scarce public resources are used to advance our City’s economic development.”

The proposed Western Beef would fulfill an urgent need for grocery retailers in this part of New York City, but Liu’s call to examine IDA’s way of doing things more closely could lead to more analysis of the consequences of subsidizing companies that pay poverty wages in order to address other legitimate problems such as food deserts.

Just over a week after his debut at the board meeting, Liu was at it again, suggesting in a bold op-ed in the Daily News that New York is behind other cities like Los Angeles and Milwaukee in embracing equitable economic development policies, a point neighborhood advocates have also fought hard to convey. He called for city developers to stop “stifling” neighborhood voices, and for remarkably high standards of transparency, accountability, and inclusiveness in Community Benefits Agreements, a promising tool that has thus far proven little more than a sham in New York City.

Other public officials appear to be hopping on the accountable development train, too. In another recent Daily News op-ed, the city’s newly-elected Public Advocate Bill de Blasio toughly proposed a citywide code of conduct for businesses that receive public subsidies, and called for requiring firms to pay a prevailing wage, and to stay neutral when workers try to form a union. These are all positive signs that some of the city’s newly elected officials may have gotten the message that voters have long been pushing. Now is a critical time for advocates to stay on alert and keep these officials on the right track.

Not to deny the handful of veteran public officials who have been pressing for policy reform, like Manhattan Borough President Scott Stringer, who has been advocating for stronger accountability at the New York City Industrial Development Agency for some time now. Stringer’s appointee to the IDA board, Kevin Doyle, stands out as one of the few board members willing to ask challenging questions about IDA’s decision-making processes.

In addition to ensuring that large development projects are a boon to local residents, creating more equitable development policies will also help exorcise the larger culture of corruption that bedevils the city and state. This was most recently played out in the indictment of Bronx City Councilman Larry B. Seabrook on charges that he stole cash from the city through a series of money laundering schemes, including one connected with the new Yankee Stadium. It’s all too easy to view such scandals as the bad behavior of stray individuals, and stop there. But by condoning a process that excludes community input and encourages wheeling and dealing behind closed doors over transparent, democratic means, our current approach to development reinforces the very culture that incubates such tainted public officials.

Ordinary New Yorkers are clearly prepared to keep fighting for a different way. Hopefully Liu and de Blasio will do them justice by continuing to show real leadership on these issues, creating momentum for other elected officials to fall in line.



In the Bronx, could a loss lead to a win?

October 22, 2009

blogphotokara2No, it’s not baseball, it’s NYC’s land use process. This week, the New York City Department of City Planning voted 8 to 4 in favor of a plan to develop the Kingsbridge Armory in the Bronx into a mall, even though the deal lacks a Community Benefits Agreement (CBA). So why are supporters of creating a CBA optimistic?

In New York City, where heads of commissions and board leaders are predominantly mayoral appointees, rarely is there dissent or even serious questions raised about proposed projects. But years of organizing and learning the ins and outs of development policy by members of the Kingsbridge Armory Redevelopment Alliance (KARA) have put officials on a bumpy ride. “No” votes from Planning Commission members representing Manhattan, Brooklyn, the Bronx and the city’s Public Advocate (there was one recusal from a Mayoral appointee) opens up significant leverage for organizers as the project needs final approval from City Council members in those boroughs.

With the strong backing of the relatively new Bronx Borough President Ruben Diaz and a unique showing of labor support – including the retail workers, building trades, Central Labor Council, teachers and SEIU 32BJ – KARA is in a strong position to push for CBA negotiations with Related Companies even though the developer is not required to participate in such talks.

“We are not asking for anything radical or extreme. We are simply asking that, in a borough that has the highest poverty rate in the nation and has consistently seen the highest unemployment numbers in New York State, Related and their future tenants provide living wage jobs with benefits that allow Bronxites a chance to provide for their families and to build a better life,” said Diaz.

As the project winds its way through the City Council for the final phase of approvals, KARA and the Bronx Borough President hope that the developer who wants to develop “Shops at the Armory” (with tens of millions of dollars of subsidies, a rock-bottom purchase price of $5 million for the landmarked building and the benefit of a $30 million new roof thanks to New York City taxpayers) will come to the negotiating table.

Considering that massive development projects in New York City, and the Bronx in particular (think Yankee Stadium, Gateway Mall, Croton Water Filtration Plant), have been easily approved without real community benefits, KARA is ahead of the curve and could shepherd in the first real CBA in the Big Apple.

Runaround on Job Numbers for Stimulus-Financed City Point Project

September 18, 2009

Is the New York City Economic Development Corporation (EDC) cooking up different sets of job numbers for the City Point project depending on its audience?

Conflicting figures in hearings, meetings, official documents, and the press over the past week are cause for some raised eyebrows at the very least.

City Point is a large mixed-use project planned for Downtown Brooklyn that was just approved for $20 million in tax-free financing in the form of Recovery Zone Facility Bonds (RZFBs), a new program created by the federal stimulus bill (ARRA). The bonds are intended to finance the project’s first phase, consisting of 184,000 square feet of retail space.

Brooklyn activists testified against the deal at a September 10 public hearing on grounds that EDC is failing to leverage the subsidies to ensure jobs will pay a living wage, provide benefits, and go to local residents. Activists also want to see 10 percent of space in the new facility set aside and made affordable for small businesses that were displaced to make way for City Point.

But it’s hard to stay focused on issues of job quality when you have to spend time sorting through the different claims on job numbers.

Here’s a breakdown:

Those who testified on the project did so based on a formal cost/benefit analysis posted on EDC’s website shortly before the hearing. In these documents, EDC projected that City Point will create 68 new permanent jobs and 108 construction jobs during the first phase of construction. (This round of bonds is only intended to finance the first phase, not the entire development.)

Less than a week later, on September 15, EDC staff told New York City Capital Resource Corporation (CRC) board members who were to vote on the allocation that the project would generate 208 permanent jobs and 328 construction jobs. (CRC is part of EDC.) According to EDC, these higher numbers incorporate jobs projected for a later phase of the project that has nothing to do with the current bond allocation, but which they believe will be indirectly catalyzed by completion of the first phase.

A majority of CRC board members voted to approve the financing.

EDC also touted the bigger numbers to the media, though a typo in their September 15 press release on the project explains why Amanda Fung reported in Crain’s New York Business that City Point would create 108 (rather than 208) permanent jobs, and 328 construction jobs.

These inconsistencies look especially bad in light of passionate participation at the three and a half hour hearing on September 10. Turnout was impressive. There was real debate. It was democracy in action.

But the EDC’s handling of these numbers undermines that process.

It’s misleading for EDC to promote figures that were not included in its official analysis, and that the public wasn’t given. Shouldn’t board members vote on the project based on the same numbers furnished to the public?

Standing Strong at the Kingsbridge Armory

September 8, 2009

esnuestroIn a move rarely seen in The Bronx lately, an elected official is standing up for the creation of good jobs and accountable development. Newly elected Bronx Borough President Ruben Diaz Jr. has voted no on a land use proposal to build a subsidized mall inside the Kingsbridge Armory because the developer refused to sign a community benefits agreement.

This must come as a shock to Related Companies, which plans to develop the mall and has gotten subsidies and sweetheart real estate deals from the city in the past. Related was awarded the contract to purchase the armory from the mayoral-controlled Economic Development Corporation for the bargain basement price of $5 million. The armory is a landmarked building that spans an entire city block, has a new roof, and is directly across the street from a subway and bus lines. 

The city seemed to move in the right direction in 2006 by involving community leaders in developing a Request for Proposal and including language that applicants supporting a living wage provision for the permanent jobs associated with the project will be viewed favorably. But after that the community hasn’t been involved.

Diaz’s vote doesn’t mean the proposal can’t happen; the project now moves through the city’s 60-day labyrinthine land-use approval process that includes hearings and votes by the City Planning Commission and the City Council. If other elected officials follow Diaz’s lead, the city could leverage the subsidies to bring Related back to table with the community and still hammer out an agreement.

For nearly a decade the Northwest Bronx Community and Clergy Coalition advocated for community use of the armory. In 2005 the group joined with the Retail, Wholesale, Department Store Union to create the Kingsbridge Armory Redevelopment Alliance (KARA), which called for a project that creates living wage jobs,  promotes retail that doesn’t compete with long-time businesses and builds much-needed community, educational and recreational space for neighborhood youth.

The Borough President’s stance comes not a moment too soon. Unfettered, subsidized development has grown rampant in The Bronx: Gateway Mall (developed by Related) near Yankee Stadium and the Water Filtration Plant have not brought promised jobs, have run far over budget and/or have moved forward in the land use process under the guise of fake Community Benefit Agreements.

Kudos to Diaz for standing up for his constituents and hopefully setting a new standard that won’t allow subsidizing mega developments to come at the expense of locally owned stores and diminished wages, taxes and jobs.