Archive for the ‘Subsidies’ Category

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Good Jobs First: Open for Business!

April 1, 2015

cash-flowIn our quest for revenue diversification, Good Jobs First is pleased to announce that we are Open for Business! Advertisers: don’t be misled by our wonky, ethical façade: we’re ready to go head-to-head with associations and public media bulking up on pay to play!

Naming Rights: Subsidy Tracker 3.0, the hottest spot on our website, is available for the right price! Reach tens of thousands of unique visitors a year: non-profit, for-profit, public sector, tons of journalists. A super nameplate for a technology company in the government IT space. Our Smart Growth for Working Families page is just waiting for the right transit-vehicle or construction/engineering sponsor—even a law firm. And our email list, with its incredible open rates: great visibility—no monkeying around!

YourLogo

Individual States/Megadeals: Is your company one of those pulling down nine or ten figures and hobbling a state’s budget for decades?  Show your pride and sponsor that state’s page at Accountable USA! We’re thinking of a certain aerospace company in a rainy place… A microchip company next door… A metals company near a famous hydro-power source… A medical lab close to orange groves… A failing retailer that left a very tall building… C’mon folks, you know who you are! We’ll also accept clever historical references (Con Agra: Nebraska is still available! Fidelity Investments: we have Massachusetts for you! Sorry, Rhode Island: 38 Studios struck out.) Who’s in your wallet?

State and Local Agencies: Your economic development agency can sponsor an Accountable USA page—featuring your “report card” accountability grades. Or perhaps you’d prefer to sponsor a pop-up that covers up that grade—let’s talk! We can’t promise anything of course, but who knows what our next report will find? Hey, maybe we’ll divide the country up so there can be six winners! Just think about it.

War Among States Special: Planning to relocate closer to the boss’s exurban home or his favorite golf course? Realize you can get paid for creating “new” jobs by just jumping a state line and merely changing people’s commuting patterns? Why not sponsor the losing state’s page in a show of tough love, to show you really do care about its future without you—even link to a prospectus about your abandoned facility to help the state market it! Show me America’s bread basket!

Association Specials: The American Legislative Exchange Council (ALEC) issued a paper on “The Unseen Costs of Tax Cronyism” even though some of its corporate leaders are with big subsidy recipients. Of course, we have no favorites in this association space: we’d love to hear from the governors (hey, it’s only been 22 years since they last debated the economic war among the states), state legislatures, counties, cities, development officials, development financeers, and their sponsors! Ah, the power of ideas!

Invisible Sponsorships: For site location consultants wishing to remain in the shadows, we’re offering fingerprint-free sponsorships of [recruitment records exempt from FOIA]. You can’t bash whatcha can’t see.

Happy April Fools’ Day!

Posted in Jobs, Site Location Consultants, Subsidies, Subsidy Tracker | Leave a Comment »

DC Subsidy Transparency Leads to Campaign Finance Reform

March 27, 2015

On the heels of a terrific NPR-station exposé, the District of Columbia has become the first large U.S. jurisdiction to enact campaign finance reform thanks to job subsidies becoming transparent.

moneybags

In 2011, the D.C Fiscal Policy Institute convinced the DC Council to require an annual Unified Economic Development Budget (UEDB, a key Good Jobs First reform). Better than most UEDB’s that report only program costs, DC’s UEDB was how DC began online recipient disclosure for all subsidy transactions worth more than $75,000 in any fiscal year. It was a landmark moment in economic development transparency: District subsidies are now posted online in a single place for all to see.

When the data came online in 2012, WAMU reporters Julie Patel and Patrick Madden began investigating rumors that big campaign contributors were also getting big subsidies. Their 2013 series, “Deals for Developers, Cash for Campaigns,” mashed up campaign finance reports with subsidy deals. The results shocked many: over a decade, 10 big developers had given more than $2.5 million in campaign contributions to political candidates and then received nearly a third of the District’s $1.7 billion in subsidies examined. Despite strict campaign finance laws capping such donations, developers skirted the law by forming multiple LLCs and donating to candidates from each of them—the “LLC loophole.” Madden and Patel built a timeline that found such campaign donations were also timed noticeably close to subsidy award, suggesting an influence connection.

Timing of Campaign Contributions & Awarding of Subsidies (credit: WAMU)

 

So thanks to economic development transparency, the District learned it had a massive campaign finance loophole. Council members were outraged and eventually passed a bill in 2013 to close the LLC loophole. The new law went into effect in January 2015 and LLC bundling is no longer legal. Before the loophole took effect, numerous developers rushed to make significant contributions. Unfortunately, political consultants are already suggesting the law be defeated by trusted campaign staffers to run Political Action Committees (or PACs) which can take unlimited campaign contributions after the Citizens United decision.

While subsidy transparency can reveal influence and loopholes and spur officials to act, ethics in government need more than local campaign finance reforms. Mashing up subsidy disclosure data and campaign finance records can change the public discourse and allow citizens to demand greater ethics from their elected representatives.

Posted in Campaign contributions, Disclosure, Subsidies, Subsidy Tracker, Tax Credits | Leave a Comment »

Chicago Mayor’s Proposed Tax-Free Zones No Policy Panacea

March 26, 2015

As early voting begins in the Chicago mayoral runoff election, incumbent Rahm Emanuel has proposed tax-free zones allowing businesses exemptions on property, income, and sales taxes in impoverished neighborhoods. The idea is neither new nor promising. In fact, Illinois already has six Enterprise Zones in Chicago and they have very mixed track records.

For example, Pepsi Cola General Bottlers, Inc. received Enterprise Zone subsidies, but automated its business processes and shed 14 positions after applying for the subsidies. The Sherwin Williams Company’s Chicago facility had 12 fewer jobs than when it applied for Enterprise Zone subsidies. And although the Solo Cup Operating Corporation has gained 24 jobs since applying, according to public documents, the company did not make use of Enterprise Zone State Utility Tax Exemptions for which it was eligible. In other words, they hired without needing subsidies.

Research on the effectiveness of enterprise zones makes it clear these anecdotes are not atypical. As the Minnesota State Legislature found in a review, “the economic effects of enterprise zones remain unclear. Most studies find no significant increase in employment, while a few do.” Moreover, it concluded that enterprise zones are most likely to be successful in already thriving areas, not blighted ones. Most importantly, the review suggested that subsidies should never let the quality of public services drop as it would easily wipe any positive effects of the policy. However, many of Chicago’s poorest neighborhoods have been made less desirable by Emanuel’s closure of 50 public schools. Emanuel has proposed shifting dollars from other subsidies, including the heavily criticized TIF program, to pay for his rendition of enterprise zones.

For the average company, state and local taxes amount to less than two percent of their overall cost structure. The business basics—the 98 percent of corporate cost structures that are not state and local taxes—almost always dictate why companies expand or relocate where they do, factors such as access to a qualified workforce, proximity to suppliers and customers, energy costs, availability of high-quality infrastructure and logistics.

Tax Breaks Don't Move the Needle

Tax Breaks Don’t Move the Needle

But while tax breaks can do little to move the needle on corporate location decisions, the opportunity costs can be enormous. Indeed, as we documented last year, subsidies in Chicago appear to have significantly harmed public budgets. Since 1985, some $5.5 billion in property tax revenues have been diverted into TIF accounts and one out of every ten property tax dollars now ends up in TIF districts instead of funding schools and other public goods that benefit all of Chicago’s employers by investing in the labor force and infrastructure as well as keeping up with the city’s bills.

It’s also important to consider that enterprise zones may do little to target job creation to communities of need. Without adequate community benefits like local hiring policies included in enterprise zone policies, companies may not hire from within a neighborhood hungry for jobs enabling inclusive revitalization and a pathway to the middle class.

Posted in Community Benefits Agreements, Enterprise Zones, Illinois, Jobs, Property Taxes, Subsidies, Tax Increment Financing, Taxes | 1 Comment »

Uncle Sam’s Favorite Corporations

March 17, 2015

UncleSam_WebTeaserFederal “Corporate Welfare” Database Now Online
Study: Large Corporations Dominate Federal Subsidy Awards; Banks, Foreign-Owned Energy Firms and Federal Contractors Among the Biggest Recipients

Washington, DC, March 17, 2015 — Two-thirds of the $68 billion in business grants and special tax credits awarded by the federal government over the past 15 years have gone to large corporations. During the same period, federal agencies have given the private sector hundreds of billions of dollars in loans, loan guarantees and bailout assistance, with the largest share going to major U.S. and foreign banks.

These are key findings of Uncle Sam’s Favorite Corporations, a study with accompanying database released today by Good Jobs First, a non-profit and non-partisan research center on economic development accountability based in Washington, DC. They derive from the first comprehensive compilation of company-specific federal subsidy data. The study and database are available at www.goodjobsfirst.org.

The database, which collects more than 160,000 awards from 137 programs, expands Good Jobs First’s Subsidy Tracker, which since 2010 has posted economic development data from states and localities. The federal data was enhanced with Good Jobs First’s proprietary subsidiary-parent matching system, enabling users to see individual entries linked to more than 1,800 corporate parents, along with each parent’s total subsidies.

“For more than 20 years, so-called corporate welfare has been debated widely with little awareness of which companies were receiving most of the federal assistance,” said Good Jobs First Executive Director Greg LeRoy.

“We now see that big business dominates federal subsidy spending the way it does state and local programs,” said Philip Mattera, principal author of the study and creator of Subsidy Tracker. “Our hope is that the new Subsidy Tracker will serve as a resource in the ongoing debates over federal assistance to business,” Mattera added.

Other key findings:

  • Six parent companies have received $1 billion or more in federal grants and allocated tax credits (those awarded to specific companies) since 2000; 21 have received $500 million or more; and 98 have received $100 million or more. Just 582 large companies account for 67 percent of the $68 billion total.
  • The largest recipient of grants and allocated tax credits is the Spanish energy company Iberdrola, which acquired them by investing heavily in U.S. power generation facilities, including wind farms that have made use of a renewable energy provision of the 2009 Recovery Act. Iberdrola’s subsidy total is $2.2 billion. Other top grant/allocated tax credit recipients include NextEra Energy (parent of Florida Power & Light), NRG Energy, Southern Company, Summit Power and SCS Energy, each with more than $1 billion. The results exclude the numerous corporate tax breaks that cannot be attributed to individual companies.
  • Mainly driven by the massive programs launched by the Federal Reserve in 2008 to buy up toxic securities and provide liquidity in the wake of the financial meltdown, the total face value of loans, loan guarantees and bailout assistance run into the trillions of dollars. These include numerous short-term rollover loans, so the actual amounts outstanding at any given time, which are not reported, were lower but likely amounted to hundreds of billions of dollars. Since most of these loans were repaid, and in some cases the government made a profit on the lending, we tally the loan and bailout amounts separately from grants and allocated tax credits.
  • The biggest aggregate bailout recipient is Bank of America, whose gross borrowing (excluding repayments) is just under $3.5 trillion (including the amounts for its Merrill Lynch and Countrywide Financial acquisitions). Three other banks are in the trillion-dollar club: Citigroup ($2.6 trillion), Morgan Stanley ($2.1 trillion) and JPMorgan Chase ($1.3 trillion, including Bear Stearns and Washington Mutual). A dozen U.S. and foreign banks account for 78 percent of total face value of loans, loan guarantees and bailout assistance.
  • A small number of companies have obtained large subsidies at all levels of government. Eleven parent companies among the 50 largest recipients of federal grants and allocated tax credits are also among the top 50 recipients of state and local subsidies. Six of the 50 largest recipients of federal loans, loan guarantees and bailout assistance are also on that state/local list. Five companies appear on both federal lists and the state/local list: Boeing, Ford Motor, General Electric, General Motors and JPMorgan Chase.
  • Foreign direct investment accounts for a substantial portion of subsidies. Ten of the 50 parent companies receiving the most in federal grants and allocated tax credits are foreign-based; most of their subsidies were linked to their energy facilities in the United States.
  • The Federal Reserve aided a large number of foreign companies in its efforts to stabilize banks that had acquired toxic securities originating mainly in the United States. Thanks largely to those programs, 27 of the 50 biggest recipients of federal loans, loan guarantees and bailout assistance were foreign banks and other financial companies, including Barclays with $943 billion, Royal Bank of Scotland with $652 billion and Credit Suisse with $532 billion. In all cases these amounts involve rollover loans and exclude repayments.
  • A significant share of companies that sell goods and services to the U.S. government also get subsidized by it. Of the 100 largest for-profit federal contractors in FY2014 (excluding joint ventures), 49 have received federal grants or allocated tax credits and 30 have received loans, loan guarantees or bailout assistance. Two dozen have received both forms of assistance. The federal contractor with the most grants and allocated tax credits is General Electric, with $836 million, mostly from the Energy and Defense Departments; the one with the most loans and loan guarantees is Boeing, with $64 billion in assistance from the Export-Import Bank.
  • There is also a link to the current debate over so-called tax “inversions.” Federal subsidies have gone to several companies that have reincorporated abroad to avoid U.S. taxes. For example, power equipment producer Eaton (reincorporated in Ireland but actually based in Ohio) has received $32 million in grants and allocated tax credits as well as $7 million in loans and loan guarantees from the Export-Import Bank and other agencies. Oilfield services company Ensco (reincorporated in Britain but really based in Texas) has received $1 billion in support from the Export-Import Bank.
  • Finally, some highly subsidized banks have been involved in cases of misconduct. In the years since receiving their bailouts, several at the top of the recipient list for loans, loan guarantees and bailout assistance have paid hundreds of millions, or billions of dollars to U.S. and European regulators to settle allegations such as investor deception, interest rate manipulation, foreign exchange market manipulation, facilitation of tax evasion by clients, and sanctions violations.

Posted in Subsidies, Subsidy Tracker | 1 Comment »

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 »

Report: District of Columbia Job Subsidy Practices In Need of Improvement; Lag Behind Nearby Jurisdictions

February 11, 2015

 

Washington, DC—Despite the District of Columbia embracing four leading best practices, other basic economic development standards and safeguards remain absent.

WebBox_ABetterDealfortheDistrict_FINAL_Feb6Broadly, the District has four major shortfalls:

  • failure to set job creation and job quality standards,
  • lax reporting on project outcomes,
  • failure to enforce existing standards, and
  • the need for an online transparency database.

The report is available at:

http://www.goodjobsfirst.org/ABetterDealForTheDistrict

Despite such shortcomings, experience shows that the District can rapidly change course. For example, recent enhancements raised D.C.’s ranking on job subsidy transparency from dead last to 26th among the states in a 2014 Good Jobs First national report card study.

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Posted in Clawbacks, Disclosure, Hidden Taxpayer Costs, Job Quality Standards, Jobs, Subsidies, Tax Credits | Leave a Comment »

2014: A Landmark Year for Subsidy Accountability

January 14, 2015

Two-thousand fourteen was a banner year for our movement, hands down. The first move to require standardized subsidy-cost reporting! The first half of a legally-binding two-state cease fire deal! The first state ban on tax-break commissions! A big surge found in state disclosure of subsidies! Big improvements to our Subsidy Tracker, enabling first-ever mash-ups! And a governor apparently shamed to stop his partisan job piracy forays!

GASB Finally Weighs In: After a decades-long conspicuous absence, the Governmental Accounting Standards Board (GASB) announced in October that it would soon issue a draft standard to require states and localities to account for the revenue they lose to economic development tax breaks.

This is a truly tectonic event in the decades-long struggle to rein in corporate tax breaks. When states and localities start issuing the new data in 2017, we predict it will enable massive new bodies of analysis and policymaking: in state and local finance, tax policy, government transparency, economic development, regionalism and sprawl, public education finance, and campaign finance.

The day the Exposure Draft was published on October 31, we swung into action, issuing a critique of it, speaking on two webinars and answering many queries. We are posting exemplary comments here.  If you haven’t filed a comment with GASB yet, the deadline is January 30. Contact us ASAP if you need help.

FASB Enters the Debate, Too! In late December, GASB’s sister group, the Financial Accounting Standards Board (FASB), which effectively regulates private-sector bookkeeping, revealed that it too is debating whether and how to require disclosure of state and local tax breaks by the recipient corporations. The FASB process is well behind that of GASB, but this is equally tectonic.  See “Disclosures by Business Entities about Government Assistance.”

Missouri Enacts Half of a Bi-State Cease-Fire: In July, Missouri’s “red” legislature and “blue” governor agreed on legislation that is the first time a state has enacted a legally binding half of a two-state “cease fire” in the economic war among the states. Kansas has until July 2016 to reciprocate: the ball is in your court, Gov. Sam Brownback!  Credit for this victory belongs to a group of 17 Kansas City-area businesses, led by Hallmark, who went public in 2011.

Disclosure Found in 47 States plus DC: In January, we issued our latest 50-state “report card” study on state transparency of company-specific subsidy data. We found that only three states—get with it, Delaware, Idaho and Kansas!—are still failing to disclose online (more than double the 23 states we found disclosing in 2007). But we also found that reporting of actual jobs created and actual wages paid is still lagging: only one in four major state subsidy programs discloses actual job-creation outcomes and only one in eleven reports wages.

First-Ever Ban on Tax-Break Consultant Commissions: In September, California became the first state to ever ban consultant commissions on an economic development tax break. It’s a reform we have long called for and would become commonplace if states registered and regulated tax-break consultants as lobbyists.

Subsidy Tracker “2.0” Upgrade: In February, we unveiled a massive upgrade to Subsidy Tracker, linking more than 30,000 subsidy awards to their ultimate corporate parents and issuing “Subsidizing the Corporate One Percent,” showing that just 965 companies have received three-fourths of recorded subsidy dollars. Later in the year, we mashed up Tracker data with the Forbes 400 and with low-wage employers to reveal more than $21 billion in subsidies fueling economic inequality.

Perry Quits Partisan Job Piracy: 2014 was also notable for what didn’t happen. After our September 2013 study chastising Texas Gov. Rick Perry for making interstate job piracy a partisan sport and for issuing deceptive disclaimers about who funded his highly publicized trips to six states with Democratic governors (Texas taxpayers are footing part of the bill)—and a follow-up blog basically daring him to do it again—he never did, and will leave office January 20th.

Truth in TIF Taxation: In July, Cook County, Illinois started showing property taxpayers how much (in both dollars and percent) of their taxes are going to tax increment financing (TIF) districts, the largest jurisdiction known to be doing that in the U.S.

Property Tax Losses Revealed: In studies covering Chicago and Memphis, we revealed that property tax losses—either to TIF in Chicago or PILOTs in Memphis—are costing enormous sums that could be meeting other needs: 1/10th and 1/7th, respectively, of their entire property tax bases. The studies helped block a tax hike in Chicago and changed the debate in Memphis.

Privatization Slowed: Only one more state privatized its economic development agency: North Carolina. After our October 2013 study, Creating Scandals Instead of Jobs, documenting scandals nationwide, provoked editorials in three of the Tarheel State’s leading newspapers, Gov. Robert McCrory’s plans to fast-track a new privatized entity were slowed. It was later created, but with many of the safeguards we recommend if a state chooses such a structure.

Transit Investments as Economic Development Done Right: In case studies in St. Paul and Normal, Illinois, we documented the broad job-creation benefits for more than a dozen Building Trades crafts when transportation investments build transit hubs that spur massive new transit-oriented development. We even gave cautious approval to Normal’s use of a related TIF district.

It was also the year Tesla ran a five-state public auction for a battery plant. Kudos to the Progressive Leadership Alliance of Nevada, California Budget Project, Southwest Organizing project in New Mexico, Arizona PIRG and Texans for Public Justice who staged a high-profile outcry with us, calling out Tesla for its Old Economy whipsawing behavior. Ultimately, Nevada overspent for the trophy deal at $1.3 billion and will go down in history as the birthplace of what we dubbed the “tax credit capture zone,” a new benchmark for tax-break greed.

Almost a Record Year for “Megadeals.” As we found in an update of our “Megadeals” study and entries in our Subsidy Tracker database: we now have 298 such deals documented over $60 million and some over $1 billion. Only 2013, with its record Boeing megadeal of $8.7 billion, cost more than 2014.

Finally, 2014 was the year we said goodbye to Bettina Damiani after her stunning 13-year streak of achievements at Good Jobs New York: the best local disclosure law in the country (won in 2005 and later improved); an online database of >41,000 deals; a radical overhaul of the process by which the NYC IDA relates to the public (enabling project interventions from diverse grassroots groups); $11 million in improper rent deductions disgorged by the New York Yankees; a racetrack defeated on Staten Island wetlands; and assistance to hundreds of community groups, unions, environmentalists and journalists challenging the status quo. One of Bettina’s tangible legacies: the space for new mayor Bill de Blasio to do things like saying no to JP Morgan Chase’s demand for $1 billion to move across Manhattan (with our database documenting its huge past subsidies and job shortfalls).

If you like what we do, please support Good Jobs First: we have a lot in the works for 2015, too!

Posted in California, Corporate relocations, GASB, Job Piracy, Kansas, Missouri, New York, Privatized Economic Development Agency, Property Taxes, Smart Growth, Subsidies, Subsidy Tracker, Tax Credits, Texas, Transit, war among the states, Yankee Stadium | Leave a Comment »

Tax Breaks and Inequality

December 16, 2014

inequality_graphicReport: Development Subsidies Fuel Economic Inequality by Enriching Billionaires and Low-Wage Employers

Washington, DC, December 16, 2014—Taxpayer subsidies awarded to corporations by state and local governments, supposedly to create good jobs and growth, are instead fueling economic inequality by going to companies that are owned in whole or part by billionaires, and to low-wage employers.

Indeed, about one-third of the individuals in the Forbes 400 are linked to 99 taxpayer- subsidized companies, including every one of the 11 wealthiest individuals and all but two of the richest 25. Subsidies have also gone to 87 companies that pay low wages. More than $21 billion in taxpayer dollars have been awarded to these two sets of firms. Seven retailers appear on both lists.

Those are the major findings of Tax Breaks and Inequality, a report published today by Good Jobs First, a non-profit resource center on economic development based in Washington, DC. The report is available at  www.goodjobsfirst.org/taxbreaksandinequality and was funded by the Nathan Cummings Foundation.

“Inequality has many causes, and now we can say development subsidies are among them,” said Good Jobs First Executive Director Greg LeRoy. “Subsidies are being awarded to large, profitable companies controlled by billionaires such as Warren Buffet’s Berkshire Hathaway while we have too many communities that really need the help.”

Tax Breaks and Inequality is a “mash-up” of Good Jobs First’s Subsidy Tracker database with two lists of companies: firms linked to members of the Forbes 400 list (the wealthiest Americans) and major low-wage employers.

“This year, Forbes highlights those said to have built fortunes entirely on their own rather than through inheritance, yet our research shows that many of the billionaires got assistance from taxpayers,” said Philip Mattera, Good Jobs First Research Director and lead author of the report.

The members of the Forbes 400 control or are otherwise closely linked to 99 large corporations that have been awarded more than $19 billion in cumulative subsidies, as documented in Subsidy Tracker. Five of the 99 firms have been awarded more than $1 billion in subsidies, including Intel ($5.9 billion), Nike ($2 billion), Cerner ($1.7 billion), Tesla Motors ($1.3 billion) and Berkshire Hathaway ($1.2 billion). The average subsidy total for the group, which is limited to those firms receiving $1 million or more, is $196 million.

Among the individuals on the Forbes 400 linked to one or more of the 99 highly subsidized companies are every one of the 11 wealthiest individuals and all but two of the top 25. These include Bill Gates, whose $81 billion fortune comes mainly from his holdings in Microsoft, which has been awarded $203 million in subsidies; Warren Buffett, whose $67 billion net worth derives from Berkshire Hathaway, which has been awarded $1.2 billion in subsidies; Larry Ellison, whose $50 billion net worth comes from Oracle, which has been awarded $18 million in subsidies; the Koch Brothers, each worth $42 billion from Koch Industries, whose subsidies total $154 million; and four members of the Walton Family, each worth more than $35 billion from Wal-Mart Stores, which has been awarded more than $161 million in subsidies.

Inequality is also caused by the long-term stagnation and even the decline of wages in real terms for many low- and middle-income workers. Here, one would hope that the billions spent on economic development would help raise living standards for typical families. But instead Tax Breaks and Inequality finds dozens of large low-wage companies being subsidized.

Eighty-seven such companies have each been awarded more than $1 million in state and local subsidies, for a total of $3.3 billion. Retailers dominate the list, with 60 firms awarded more than $2.6 billion in subsidies. Twelve firms in the hospitality sector (restaurants, hotels and foodservice companies) account for more than $245 million in subsidies. The low-wage companies with the most in subsidies are: Sears ($536 million), Amazon.com ($419 million), Cabela’s ($247 million), Convergys ($202 million), Starwood Hotels & Resorts ($166 million) and Wal-Mart Stores ($161 million).

Eight companies, seven of them retailers, are both linked to members of the Forbes 400 and pay low wages: Sears, Amazon.com, Wal-Mart, Best Buy, Bass Pro, Meijer, Menard, and Allegis Group.

“Subsidies are certainly not the main cause of growing inequality,” LeRoy points out in a policy chapter. “But subsidizing billionaires and low-wage companies is a strong facial connection that our Subsidy Tracker now enables us to make.”

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Posted in Subsidies, Subsidy Tracker | 1 Comment »

Audit of Texas Subsidies Reveals Lax Oversight, Enters Gubernatorial Debate

October 8, 2014

A new audit of the controversial Texas Enterprise Fund is casting deep doubts on economic development practices in Texas and has become a key issue the current gubernatorial race.

Over the course of Governor Rick Perry’s term in office, over a half-billion dollars in subsidies have been awarded to over 100 companies. New revelations from the recent audit raise questions as to whether recipients were adequately vetted and monitored.

moneybagsAmong the major findings:

  • Nearly half of the money awarded, some $223 million, went to 11 recipients that failed to file an application or make specific job creation promises.
  • Texas Attorney General Greg Abbott, a candidate for Governor, denied public access to application records on TEF subsidy recipients. Oddly, the audit revealed that some applications which the Attorney General’s office claimed were exempt from freedom of information laws never actually existed.
  • Because of the failure to adequately document the process of awarding subsidies, the Auditor concluded that, “It was not always possible to determine how the [Governor’s] Office made awarding decisions.”
  • The Auditor specifically criticized the practice of “self-reported information that recipients submitted” to determine compliance.
  • A January 2013 report to the legislature gave a misleading impression about subsidies by reporting promised job creation from TEF recipients. The actual rate of job creation, 73 percent, was omitted. Such oversights led the Auditor to conclude that “The Office also did not consistently provide decision makers with complete and accurate information.” Worse, the report ignored requirements to inform the legislature about the median wages of subsidized jobs and the number of jobs providing health care benefits to employees.
  • TEF subsidy agreements frequently failed to adequately define full-time job creation, despite requiring it from subsidy recipients. And some subsidy recipients weren’t required to meet job-creation benchmarks before receiving grants.
  • The Governor’s Office fell short on recapturing some $3.8 million in subsidies from 23 recipients whose contracts were terminated and could have collected some $14.5 million through clawbacks from firms failing to meet job creation goals.
  • State law requires that both the Texas Speaker of the House and the Lieutenant Governor be notified about changes in subsidy contracts. But the audit reveals lapses in notifying these parties about changes in subsidy contracts.

Posted in Subsidies, Texas | Leave a Comment »

GASB Finally Prepares to Step Up! And Who is GASB, You Ask?

October 7, 2014

For many years, we at Good Jobs First have criticized GASB—the Governmental Accounting Standards Board, or “GAZ-bee”— for failing to require state and local governments to disclose economic development subsidy spending in a uniform way.

It appears that’s finally about to change, and if it does, it will be hard to overstate the significance of the news.

As the group that has been successfully shaming states and cities to disclose on subsidies all these years, with our 50-state and 50-locality “report card” studies, and as the group that has been collecting all the public data—and also lots of previously unpublished data—in our Subsidy Tracker database, we are intimately familiar with the irregularities and gaps that exist in these vital public records. And we have long shown how to fix them in our model legislation.

First, a quick primer on GASB: it is the public-sector counterpart to the Financial Accounting Standards Board, or FASB, which issues private-sector accounting rules. Each body oversees its respective set of rules, which are constantly under review and improvement, known as Generally Accepted Accounting Principles, or GAAP.

Adhering to GASB, cities, counties, states (and other government bodies such as school boards and sewer districts) must account for their finances in conformity to GAAP if they want to receive ratings from the major credit ratings agencies (Moody’s, Standard & Poors, Fitch), which they must earn if they wish to sell bonds.

The same is true for corporations of all kinds if they wish to satisfy shareholders, sell debt, or even get foundation grants. Indeed, Good Jobs First’s auditors have to certify us as GAAP compliant in our annual financial statement. All of which is to say: the influence of GASB and FASB is enormous and ubiquitous; they are the arbiters of sound United States bookkeeping standards that protect investors, taxpayers, and consumers every day. (Both are part of the non-profit Financial Accounting Foundation.)

Now, GASB is preparing rules that say: to meet GAAP, governments will have to publish an annual accounting of the revenue lost to economic development subsidies. The proposed wording of these rules has not been issued; all we have are board-meeting minutes of a low-profile process spanning more than two years, as GASB gathers information and debates how best to achieve this new standard.

GASB is using the term “tax abatement” as an umbrella term (not just specific to local property tax exemptions) but “a reduction in taxes… in which (a) one or more governmental entities forgo tax revenues that [an individual] taxpayer otherwise would have been obligated to pay and (b) the taxpayer promises to take a specific action that contributes to economic development or otherwise benefits the government(s) or its citizens.” This would appear to also cover state corporate income tax credits and state or local sales tax exemptions, but apparently not tax increment financing.

As part of that process, GASB even commissioned a survey that included citizens groups, county board members and bond analysts. Tellingly, the bond analysts said they are most keen to see both current and future-year costs. For cities like Memphis, where we recently found that Payments in Lieu of Taxes (or PILOTs) cost the city almost one-seventh of its property tax revenue, such losses are apparently becoming bigger concerns for bond investors.

GASB will have a three-month comment period on its proposed rules starting next month (November).

For all the cost-benefit debates featuring inflated ripple-effect claims that beg the more fundamental issue of cause and effect, we have always said: the only thing that can be said for sure is that development subsidies are very expensive, so costly that they undermine funding for public goods that benefit all employers. Therefore, at the very least, taxpayers have the right to know the exact price of every deal and every program (and the outcome of every company-specific deal). GASB now appears to be moving to make some form of standardized disclosure of tax-break costs a reality for reporting periods after December 15, 2015 (and sooner on a voluntary basis).

Some important details remain to be clarified. Based on the board minutes, it appears that GASB will propose giving governments the option of disclosing individual deals or only programs costs in the aggregate (the latter option would be far inferior). We’ll know for sure when the draft standards are published sometime this month. Good Jobs First will publish a detailed analysis of the draft when it comes out.

But for now, the big picture is simply huge: the body that effectively controls how taxpayer dollars are accounted for is finally catching up to the Wild West of record-keeping known as economic development incentives.

Posted in Corporate Income Taxes, Disclosure, GASB, Jobs, Property Taxes, Sales Tax, Subsidies, Subsidy Tracker, Tax Credits, Tax Expenditure Budgets, Taxes, war among the states | 2 Comments »

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