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!