Archive for the ‘war among the states’ Category

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!

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.

Tesla: New Technology, Same Old Subsidy Charade

September 9, 2014

Tesla Motor’s shameful subsidy competition for its battery factory is wrapping up to a close in a state known for big gambling.  The Nevada Governor’s Office of Economic Development (GOED) announced last week it had assembled a breathtaking package for the proposed “Gigafactory” totaling as much as $1.3 billion in tax breaks.  Governor Brian Sandoval has called the legislature into a special session starting this week to approve the deal, which is unprecedented in size in Nevada.  Included are new transferable tax credits based on the electric vehicle manufacturer’s hiring and investment, plus extensions of existing business, sales, and property tax abatement programs that would allow Tesla to operate completely tax-free in the state for ten years.  (The majority of the subsidy package lasts for twenty years.)  If approved in its current iteration, the megadeal will be among the 15 most expensive state subsidy packages in U.S. history.

powered by subsidies

 

Two weeks prior to this announcement and in anticipation of a subsidy shakedown by Tesla, Good Jobs First coordinated with groups in the five states named by Tesla to compete for the battery factory. Along with Arizona PIRG, the California Budget ProjectProgressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, and Texans for Public Justice, we issued an open letter calling for transparency and cooperation between states forced into a subsidy bidding war for the battery manufacturing jobs.  Media response to this effort was strong, but state lawmakers bound by non-disclosure agreements common to secret site selection negotiations did not comply with our requests.

Aside from the subsidy terms, the only information made public about the pending Nevada deal consists of overly optimistic job-creation talking points.  During last week’s press conference Gov. Sandoval told attendees that 22,000 new jobs would be created by the project and that the total economic impact would be $100 billion over the 20-year subsidy term.  6,500 new direct permanent positions will purportedly enjoy an average wage in excess of $25 per hour, according to the Governor’s office.  A day before the special session is rumored to begin, the economic impact study informing these extravagant economic figures has not been presented for public review and the economic projections are being challenged.  Economist Richard Florida believes 3,000 permanent positions are more likely, and estimates the total job creation impact at 9,750 – less than half of the 22,000 claimed by GOED.

For anyone paying attention to the super-hyped “Gigafactory” site selection competition, the announcement that the company had selected Reno, Nevada came as no surprise.  Although Tesla has maintained over recent months that it was also negotiating terms with Arizona, California, New Mexico and Texas, it broke ground outside Reno early this summer.  The location is proximate to lithium mining operations, boasts freeway and class 1 rail access, and is less than a day’s drive from the Tesla assembly plant in Fremont.  Storey County, Nevada – Tesla’s future home – is famous in the state for approving industrial permits in less than a month.  In hindsight, Tesla’s unusual announcement that it intended to break ground in several sites is starting to appear disingenuous.

What exactly the company has been seeking over the past few months is more of a mystery.  Tesla has announced, at various points during this period, that it wanted laws changed to allow direct sales of its cars to consumers, as is the case in California.  It emphasized that the most important factor for launching the Gigafactory was expedited permitting, so Tuscon, Arizona issued Tesla an unsolicited blank building permit in July.  Initially mum on the topic of economic development subsidies, (and well after reports surfaced of a $800 million subsidy offered by San Antonio, Texas) CEO Elon Musk announced last month during a conference call that he expected the “winning “ state to ante up a $500 million investment for the battery factory.

In the context of all of this messaging on the company’s priorities, the size of the subsidy offered by Nevada is all the more confounding.  During last week’s press event in Carson City, Musk repeatedly stressed that incentives were not among Tesla’s most important considerations in its location decision.  What remains unanswered is why Nevada was compelled to offer more than double the $500 million subsidy originally sought by Tesla.  Until the veil is lifted from secretive corporate incentive negotiations, the public will be left out of the critical conversations that determine the who, where, and why of business subsidy decisions it is forced to fund.  In the meantime, many questions remain as the state’s lawmakers move toward a vote on the largest subsidy package in Nevada history.

Tesla, We Have Questions

September 4, 2014

For Immediate Release September 4, 2014

Contacts: Bob Fulkerson bfulkerson@planevada.org 775-348-7557

Greg LeRoy goodjobs@goodjobsfirst.org 202-232-1616 x 211

Bob Fulkerson of the Progressive Leadership Alliance of Nevada and Greg LeRoy of Good Jobs First issued the following statement regarding reports that Tesla plans to announce it has chosen Nevada for its “gigafactory,” or massive electric-car battery factory.

This is a huge event in Nevada history. If the taxpayer subsidy package for the facility is $500 million or more, as Tesla has demanded, it would be the biggest subsidy package in Nevada history by a factor of more than five. (There is only one recorded eight-figure deal in Nevada history and none over $89 million.)

The announcement only raises more questions:

  1. Was the five-state auction all just a charade to extract bigger subsidies from the state Tesla had already chosen? (Tesla broke ground in an industrial park in Reno, Nevada in July.)
  2. If it was a charade, does that mean Tesla doesn’t need any Nevada subsidies because the business basics drove the project to Reno (which has good access to key material inputs and is also close to Tesla’s assembly facility in Fremont, California)?
  3. When will the full details of the proposed Nevada subsidy package be released to the public? How many days will Nevada taxpayers have to weigh the costs versus the benefits before the legislature votes on the deal?
  4. Will Tesla agree to the Good Jobs First/MoveOn petition demand and allow all five states’ commerce agencies to immediately release their Tesla project files so that taxpayers can see how seriously Tesla considered the other states and how much in subsidies each state offered?
  5. Exactly how does Tesla’s claim of 6,500 new jobs break down? How many would be temporary construction jobs? How many would be permanently directly employed by Tesla? How many would be associated with unnamed suppliers? (Tesla and Panasonic’s joint July 31 press release says half the space will be occupied by suppliers.) Are any of the 6,500 projected jobs indirect or so-called “ripple effect” jobs?
  6. How good will the Tesla jobs be? What will be the median wage for non-managerial production workers? What will the benefit package consist of?
  7. Will Nevada taxpayers be protected by “clawback” language that would require Tesla to refund some or all of the subsidies (and/or lose future subsidies) if the deal fails to deliver all of the promised jobs?
  8. How many of the engineering and other highly-paid jobs at the plant will be filled by people who will move to the Reno area from out of state?

Until these questions are answered, Nevada taxpayers will remain in the dark. Without answers, no one will be able to judge if Nevada elected officials are overspending for a trophy deal.

Ask Tesla’s Elon Musk to Open-Source His Subsidy Demands

September 3, 2014

Good Jobs First has launched a petition through MoveOn asking Tesla CEO Elon Musk to open-source his ≥$500 million subsidy demands.

Sign the petition here.

Embed from Getty Images

Tesla Motors is demanding at least $500 million in taxpayer subsidies, whipsawing AZ, CA, NV, NM and TX siting a huge battery factory.

If it’s really confident that such massive subsidies are justified, Tesla should release the five states from non-disclosure agreements and allow taxpayers to see the files.

Elon Musk: open-source your subsidy-application files and let taxpayers weigh costs and benefits!

 

Sign the petition here.

 

(more…)

Tesla Open Letter Electrifies Gigafactory Debate

August 29, 2014

Early this week Good Jobs First joined its voice with those of progressive organizations in Arizona, California, New Mexico, Nevada and Texas to express concerns about the pending subsidy bidding war over Tesla’s proposed Gigafactory.  In case you missed it, an open letter signed by Arizona PIRG, the California Budget Project, Progressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, Texans for Public Justice  and Good Jobs First regarding the multi-state competition has been generating growing media attention.  The letter calls for state leaders to seize the opportunity presented by Tesla’s subsidy demands, communicate with each other, and reject the harmful Race to the Bottom.

Much of our daily work at Good Jobs First consists of monitoring massive subsidy packages that often don’t receive much attention in the media.  But events like the Gigafactory bidding war provide an opportunity to break down these complicated issues into smaller pieces that allow a practical public dialogue about job creation, competition, and fairness.

(more…)

Report: Sprawling Job Piracy among Cities and Suburbs Can Be Ended

July 10, 2014

Denver Illustration191px

Washington, DC – The most common form of job piracy-among neighboring localities in the same metro area-can be ended, as agreements in the Denver and Dayton metro areas have proved for decades. The agreements prohibit active recruitment within the metro area, and they require communication and transparency between affected development officials if a company signals it might move.

Those are the main conclusions of a new study released today by Good Jobs First. “Ending Job Piracy, Building Regional Prosperity,” is online at www.goodjobsfirst.org.

The study finds that even regions like the Twin Cities, with revenue-sharing systems intended to deter job piracy, have rampant job piracy because they lack the procedural safeguards Denver and Dayton have. Multi-state metro areas like Kansas City suffer the problem on steroids because state subsidies fuel the problem.

Career economic development professional staff-not elected officials-are best suited to institute anti-piracy systems, although politicians and the public generally should be educated about the value of such agreements. Information-sharing about companies considering relocation is also key. And states need to amend incentive codes to stop requiring local subsidies to match state awards, to deny state monies for intra-state relocations, and to deny eligibility for such relocations to locally administered tax increment financing (TIF) districts. These changes will deter job piracy and promote regionalism, the study concludes.

“The anti-piracy agreements we describe focus on economic development professionals communicating openly with each other in a transparent system,” said Leigh McIlvaine, GJF research analyst and lead author of the study. “When local officials cooperate for the benefit of the metro area, they can better focus on attracting investment and jobs that are truly new.”

“We know from previous studies that intra-regional job piracy fuels job sprawl, harming older areas, communities of color and transit-dependent workers,” said GJF executive director Greg LeRoy. “By favoring retention, anti-piracy agreements help stabilize employment in areas that need help the most, and areas that provide more commuters the choice of transit.”

Good Jobs First is a non-partisan, non-profit group promoting accountable development and smart growth for working families. Founded in 1998, it is based in Washington, DC.

-30-

Missouri Seeks Cease-Fire in Kansas City Border War

July 2, 2014

borderwar01-1200xx900-506-0-85A bill signed this week by Missouri Governor Jay Nixon has the potential to solve one aspect of the wasteful jobs border war currently ravaging the Kansas City metropolitan economy: the use of state subsidies to fuel intra-regional business relocations.  Senate Bill 635 would prohibit the state’s business subsidies from being awarded to businesses relocating within the two-state metro area from Kansas to Missouri.  However, the law will only go into effect if Kansas enacts a companion law limiting its own use of state business incentives in the Kansas City metro within the next two years.

The legislation was sponsored by state Sen. Ryan Silvey (R-Kansas City), who called the practice of subsidizing companies to hop the border “senseless.”  The bill also had the support of the Kansas City Chamber of Commerce, which stated that it was one of its “highest legislative priorities.”  One of the most vocal supporters of the effort to end the border war is a coalition of metropolitan business leaders, who in 2011 submitted an open letter to governors in both states demanding a cease-fire on the use of subsidies for intra-regional relocations.  And in June, while awaiting Gov. Nixon’s signature on SB635, the business coalition again appealed to both leaders in an open letter:

“For the last several years, both states have followed a destructive practice of encouraging a cross border job shuffle. This has cost taxpayers hundreds of millions of dollars and it has generated little or no new economic activity. Neither state is a winner in this game as one state loses tax revenue while the other state forgives it.”

For its part, Kansas has signaled little interest in supporting a companion bill, citing the need of local suburban jurisdictions to pursue their own economic development agendas.  This is an ironic position to take, given the extent to which state subsidies have interfered in metropolitan economic dynamics in the region.  The best way to allow localities to pursue their own economic development agendas would be for both states to stop providing ammunition for the border war.