Making Development Subsidies Transparent, Accountable ......Priority Shift to Small Businesses Back...
Transcript of Making Development Subsidies Transparent, Accountable ......Priority Shift to Small Businesses Back...
Greg LeRoy Executive Director Good Jobs First
LBJ School/UT ~ Opportunity Forum
February 6, 2015 ~ Austin
Making Development Subsidies Transparent, Accountable, Equitable & Sustainable
What Would LBJ Say?
(About Economic Development Today)
Greg LeRoy, Executive Director, Good Jobs First
LBJ School/UT ~ Opportunity Forum February 6, 2015 ~ Austin
~$70 Billion per Year! Property Tax Abatements (or PILOTs) Tax Increment Financing (TIF) Districts Corporate Income Tax Credits Sales Tax Exemptions or Rebates Tax-free Loans (“IRBs” or “IDBs”) Enterprise Zones Training Grants Land Write-downs Tax diversions (property, sales, income)
Site Location 101 Business Basics:98%
All State and LocalTaxes Combined:2%
Site Location 101, cont.
Public officials in “prisoners’ dilemma”
“Job blackmail,” “Economic war among the states” (and suburbs)
Unregulated site location consultants
Deal Flow Still Depressed
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But Megadeals Are Surging
And So Are Their Costs
2014 Megadeals Nevada $1.3B to Tesla
Oregon $2B to Intel
California $420M to Northrup Grumman
California $420M to Lockheed Martin
Tennessee $274M to Volkswagen
New Jersey $260M to Holtec
Ohio $112M to General Electric
Alabama $122M to Golden Dragon Copper
Washington $8.7B to Boeing
1/3 of Forbes 400 (23 of top 25) Walmart (5 Waltons) Amazon (Bezos) Google (Brin & Page) Nike (Knight) Berkshire Hathaway (Buffett) Dell (Dell)
Detroit MSA Shutdowns 2001-04
MEGA Deals 2001-2004
Recent News Michigan to cut services as discontinued
tax credits drive $325 revenue shortfall
Louisiana quintuples development subsidies, grows structural deficit
New Jersey sets record for 9-figure deals while suffering 8 credit rating downgrades
Remedy #1: Disclosure!
Annual, company-specific reporting of the deal (costs) and outcomes (benefits)
On the Web, accessible, searchable, downloadable
Time for a Report Card!
2007
2010
2014
Transparency = Cornerstone Job shortfalls > Clawbacks, Rescissions Poverty wages > Job quality standards Excessive costs > Elimination, caps Bias against urban poor > Targeting, Cuts Hogged by big business > Cuts, reforms $ to predatory retail > Site-fight tool Big $ to political donors > Reforms
Show Us the Subsidized Jobs
Cities & Counties, Too…
Show Us the Local Subsidies 2/3rds of big cities & counties fail to even
disclose deals by name
Deadbeats include Charlotte, Cook County (Illinois), Dallas, Harris County (Texas), Los Angeles (city and county), Miami-Dade County, Philadelphia, and San Francisco
Austin, Chicago, Memphis, New York get top grades
GASB Finally Proposes Disclosure!
Property Tax Abatements & TIF
Schools are
biggest losers
#2: Job Creation & Job Quality Job creation with cap of $35k/job
Job maintenance for duration of subsidy
Pirated jobs ineligible
Market-based wages
Health insurance
Full-time hours
Paid leave
Job Quality Standards Market-based wage rates are best
Money for Something (2011)
Rationale: avoid hidden taxpayer costs
Example: Austin’s 2013 prevailing construction wages for TIF
#3: Location-Efficiency
Align (even subordinate) economic development with Transit and Land Use Planning
California, Maryland and Illinois Precedents (NOT New Jersey!)
#4: Process Reforms Only elected officials may grant tax breaks
30-60 days advance notice with full docket + application files online
Website e-mail sign-up for hearing notices
Hearing at accessible time and place
Guaranteed public comment, both oral time at hearings and written file
#5: Reverse Bias against small, local entrepreneurs
Priority Shift to Small Businesses
Back to basics, “market imperfections”
E.g., reduce or deny subsidies to sectors/companies w/ best access to credit
Increase aid to small businesses most hurt by credit squeeze
#6: Monitoring, Enforcement, Clawbacks
Annual reporting by companies
Online disclosure of outcomes
Independent verification by:
On-site audit; or
Unemployment Insurance records
Austerity Mantra
“At a time when governments must make difficult budget decisions, spending to create jobs should be transparent, fair and effective.”
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Let’s do LBJ Proud!