making development subsidies transparent, accountable ......priority shift to small businesses back...
TRANSCRIPT
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Greg LeRoy Executive Director Good Jobs First
LBJ School/UT ~ Opportunity Forum
February 6, 2015 ~ Austin
Making Development Subsidies Transparent, Accountable, Equitable & Sustainable
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What Would LBJ Say?
(About Economic Development Today)
Greg LeRoy, Executive Director, Good Jobs First
LBJ School/UT ~ Opportunity Forum February 6, 2015 ~ Austin
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~$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)
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Site Location 101 Business Basics:98%
All State and LocalTaxes Combined:2%
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Site Location 101, cont.
Public officials in “prisoners’ dilemma”
“Job blackmail,” “Economic war among the states” (and suburbs)
Unregulated site location consultants
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Deal Flow Still Depressed
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But Megadeals Are Surging
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And So Are Their Costs
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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
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1/3 of Forbes 400 (23 of top 25) Walmart (5 Waltons) Amazon (Bezos) Google (Brin & Page) Nike (Knight) Berkshire Hathaway (Buffett) Dell (Dell)
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Detroit MSA Shutdowns 2001-04
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MEGA Deals 2001-2004
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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
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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!
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2007
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2010
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2014
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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
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Show Us the Subsidized Jobs
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Cities & Counties, Too…
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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
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GASB Finally Proposes Disclosure!
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Property Tax Abatements & TIF
Schools are
biggest losers
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#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
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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
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#3: Location-Efficiency
Align (even subordinate) economic development with Transit and Land Use Planning
California, Maryland and Illinois Precedents (NOT New Jersey!)
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#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
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#5: Reverse Bias against small, local entrepreneurs
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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
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#6: Monitoring, Enforcement, Clawbacks
Annual reporting by companies
Online disclosure of outcomes
Independent verification by:
On-site audit; or
Unemployment Insurance records
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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!