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Exhortation or Extortion

These are the tax incentives and other baits that States offer businesses to locate their headquarters or other base industries there to generate jobs.

John Oliver did an excellent job explaining the bull in the shit of these programs that do little to create jobs, are rarely audited to see if the incentives are meeting the standards specified or done so in such a manner that makes much of the data obfuscated or secret that few actually know the deal behind the deal.  Or the actual cost per job is egregious and again taxpayer funded.

Tennessee has found themselves recently behind a failure to launch as this article shows:

State's TNInvestco gamble failing, FastTrack reporting flawed, audit finds

Jamie McGee,The Tennessean  Published October 2017

Although the state paid for a $200 million TNInvestco program, that's not the amount that's actually invested.

Tennessee has recovered just $5.3 million, or 2.6 percent, of the TNInvestco program's $200 million investment, according to a performance audit from the Tennessee Comptroller’s Office.

The program, approved by the state legislature in 2009 and 2010, allows select private venture funds to invest state dollars into Tennessee startup companies. The program, managed by the Tennessee Department of Economic and Community Development, was passed to create jobs and generate a return for Tennessee taxpayers.

"We're dealing with taxpayer money, and it doesn't appear that the TNInvestco program has been successful," Comptroller Justin P. Wilson said. "In the future, the administration and the General Assembly should consider the effect on taxpayers before even considering similar programs."

The audit follows a Tennessean investigation published earlier this year that found returns through 2014 did not put the state on track to recoup the $200 million invested.

In addition to TNInvestco, the comptroller’s report examined the Tennessee FastTrack program. It found examples of companies misreporting jobs created, of lower average wages for new hires than forecast in applications and fewer jobs created than expected. The program, used to attract new businesses to Tennessee, provides business grants for job training and infrastructure. More than $400 million has been dedicated to the program since 2011.

The Tennessean reported in October that the state's database of the program failed to include the number of jobs created.

“We respect and appreciate the process of working with the comptroller’s office on TNECD’s performance review and look forward to the opportunity to present our response to the report at next week’s government operations sunset hearing," Jennifer McEachern, spokeswoman for the economic department, said.
TNInvestco audit

While the state is likely to increase its TNInvestco returns in the coming years, it is unlikely that the returns will near $200 million, the report said. Additionally, jobs retained and created and those held by women and minority employees were reported inaccurately in some years.

The comptroller recommended that the economic department provide regular updates on returns to the public and the legislature. It should also track the number of minority-owned and women-owned businesses that receive capital.

Based on TNInvestco annual reports, 181 companies had received funds as of last year. Through 2015, 85 companies receiving TNInvestco funds had either closed or sold. Those companies yielded nearly $11 million in profit, to be split between the private capital groups that made the investments and the state. That leaves the state with $5.38 million in profit, according to the report. It is unclear how much principal went into those 85 companies.

Jim Phillips, a manager of TNInvestco fund XMi Holdings, said most of the money that will be generated is still outstanding and he emphasized the overall value of the program beyond returns for the state. He credited TNInvestco as being a significant contributor to Nashville's economic growth.

"It brought a whole series of entrepreneurialism and excitement to the economy that we hadn’t seen prior to that program," Phillips said. "I don’t know how you measure that in economic terms, but I do think that is an important consideration."

Because more mature companies tend to produce greater returns, the profits are likely to climb higher as some of the remaining 96 companies are sold. Others might simply shut down.

The audit found discrepancies in the number of created jobs reported in the economic department's annual report and the individual reports provided by the TNInvestco investment groups. In 2014, there were 1,307 new jobs reported by the investment funds. But the auditors said only 595 new jobs were created based on the annual report. The economic department's 2014 annual report, meanwhile, shows 1,056 new jobs.

Nearly 1,380 women and minorities were employed by companies receiving TNInvestco funds, based on individual funds' reports, but 981 were reported in the annual report.

The economic department said in the report that it does not agree with the audit's assessment that these numbers are inaccurate. Because multiple funds at times invest in the same companies, the department adjusts the data to avoid duplication.

"We must report both sets of numbers to provide accurate information from both the perspective of each TNInvestco and the perspective of the overall program," the economic department said in the report.

The economic department, led by Commissioner Randy Boyd, also said that it was in compliance with statutes related to women and minority participation. Those statutes do not require tracking or reporting the number of women- and minority-owned companies, but the auditor said doing so would help the department know if TNinvestco funds are striving to "maximize participation," as the law prescribes.

Even when a deal looks profitable, it may not be for the state.

State Rep. Charles Sargent, a co-sponsor of the TNInvestco program, said he had not read the audit and did not want to comment on it until he had. He emphasized that the number of jobs created is an important component of the program.

The comptroller reviewed 42 of 329 FastTrack contracts that were issued in 2014 and 2015 to assess the program's compliance with its requirements. Several companies were behind schedule in the number of jobs they would need to create to meet targets and reported varying numbers to different divisions within the economic department. Many companies also failed to submit annual reports as required, the auditor found.

In a sample of six companies whose contracts end in 2018, one company, Teledyne, has exceeded its job targets as of June 2016, and two companies had created more than 50 percent of the new jobs expected. But three were substantially below the targets, according to job tallies sent to the legal division.

For example, Prologue Corp., near Whitwell, Tenn., forecast 100 jobs would be created and three have been added as of June 16. Conduit Global, which has a Memphis location, said it would add 1,000 jobs and 152 jobs were created. However, the company reported to the FastTrack program that it created 778 jobs. The Commercial Appeal in Memphis reported in 2015 that about 590 workers would be laid off after the company received $2 million in state incentives.

These companies "will have to create jobs at a much greater rate than they have thus far in order to meet contracted job creation goals," the report said.

Several other examples in the report showed a large disparity in jobs promised versus those delivered. Pacific Industries was supposed to create 190 jobs but created 40, according to its final report. Del Conca should have created 160 jobs but only 71 were added.

The FastTrack program includes clawback provisions that require a company to repay grant money if certain thresholds are not met.

In a different sample of six other companies, five companies reported average wages that were less than wages in the application. HP Pelzer said it would pay $29.02 an hour as an average wage for new hires, but the average was $12.25 at the time of its final grant report. Conduit Global targeted $14.93 an hour, but average wages fell below $9.

The comptroller's office recommended that the economic department ensure companies understand reporting requirements and issue reports on time to improve the department's calculation of return on investment. Those calculations could help the department evaluate whether to provide additional incentives to those same companies, the report said.

"The department has established reporting requirements designed to show whether important benchmarks are met," the auditor said. "Monitoring those reports would assist the department in determining whether grantees are on progress to meet goals and whether results are being achieved with the state funds expended to incentivize companies."

But the economic department disagreed that actual company performance should be calculated as part of return on investment. Instead, the department considers location, capital investment and the number of promised jobs, among other factors, as part of its decision to award more incentives. It said it would consider the comptroller's suggestion.

The economic department agreed reporting from companies was not always timely and said its staff spends "many hours" requesting data from companies and follows up with many phone calls and letters.

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Further investigation has found that the secrecy does prohibit many inquiries and in turn few jobs are actually created as promised with little recourse to clawback the money. Again another program that ostensibly is corporate welfare. Funny the same individuals who bemoan public welfare for individuals have no problem kissing the wealthy white ass of Jeff Bezos to get the secondary HQ of Amazon. Meanwhile infrastructure collapses, schools are underfunded and the poor get short shrifted.

Today in Nashville more good money over bad to fund a new Soccer stadium for a team not yet bestowed upon Nashville by the second most corrupt organization (next to Trump's)FIFA. This too is another way to extort money and tax deferments. Can't wait for the World Cup to be held in Russia next year. Bet Trump has front row seats next to Putin.

Tennessee's stories mirror many states who stand over backwards to get these type of "deals" but the winners and losers are on very different ends of the economic spectrum.


Are Tennessee job subsidies a success? Secrecy makes it nearly impossible to know.
Mike Reicher, USA TODAY NETWORK – Tennessee Sept. 16, 2017

Each year state and local governments award Tennessee companies $2.5 billion in taxpayer subsidies to create long-lasting jobs. Are they good investments?



Clarksville, a military hub north of Nashville with 150,000 residents, has awarded multimillion-dollar property tax breaks to large corporations, including Google, without publicly disclosing the value of the subsidies or tracking hiring at those companies.

"It's a verbal check,” said Mike Evans, executive director of the Clarksville-Montgomery County Industrial Development Board. "Do we have a piece of paper or a form filled out? We don't. But it's a system."

More than $2.5 billion in subsidies such as grants, tax breaks and tax credits are given to businesses in the state each year, according to an analysis by the W.E. Upjohn Institute for Employment Research.

An investigation by the largest four media organizations in Tennessee — The Tennessean, The Commercial Appeal, Knoxville News Sentinel and (Chattanooga) Times Free Press — found statewide that many officials and agencies do not track or disclose the number of jobs created by subsidy deals.

That lack of accountability means taxpayers and leaders can’t effectively decide whether individual subsidy deals are a good investment or if the money would be better spent on education, infrastructure or another jobs program.

After reviewing hundreds of pages of records, the findings show:

It is impossible to gauge whether some of the deals were a good value because local agencies awarded businesses multimillion-dollar property tax breaks without calculating the actual loss of tax income to government coffers.

There is no accountability for some companies that received incentives but don’t report their hiring progress to local economic development boards or the state Department of Economic and Community Development. 

A group of companies getting subsidies from Tennessee's main grant program, FastTrack, fulfilled about 80 percent of all jobs committed. Some exceeded their hiring expectations, but nearly 40 percent said in 2016 they had fewer than half of the jobs promised.

"It is our job and responsibility to make sure these businesses succeed," said Ted Townsend, chief operating officer of the Department of Economic and Community Development, "that they uphold to the commitments that they're making to the state, that they adhere to the contracts that we put in place, and that if they are struggling to meet job fulfillment, there's a reason why."

Gov. Bill Haslam made economic development one of his key priorities, increasing spending by 80 percent from 2011 to 2017. He also moved the department from a lower-level floor in the William R. Snodgrass Tennessee Tower to the 27th floor, providing company executives being courted sweeping views of Nashville.

Tennessee's economy has added 390,000 new jobs since January 2011. Employment grew by nearly 15 percent, fourth among states in the Southeast and 12th nationwide, according to state figures.
'How do you expect the cheerleaders to be the cops?'

Local officials celebrate when businesses announce they’re coming to town but often fail to hold the companies accountable for their promises.

“How do you expect the cheerleaders to be the cops?” said Greg LeRoy, executive director of Good Jobs First, a Washington-based liberal watchdog group that advocates for more economic development accountability. “Political value is right here, right now. Why would I spend time on tracking outcomes?”

In the deals known as PILOTs, or payments in lieu of taxes, companies agree to create a certain number of jobs or invest capital in a building in exchange for a waiver of most or all property taxes. The businesses pay governments a nominal fee instead of taxes. PILOTs can last up to 20 years after construction concludes, or longer with a special state waiver.

Google's parent company, Alphabet, the nation’s second most valuable business, will not pay taxes for 20 years on the land at its new data center in Clarksville, or on its equipment and buildings for four years.

While the county's announcement of the deal said Google would create 70 jobs, the contract states that is only a "target." Google committed to hiring 34 direct employees, plus an additional 15 contract or temporary hires. It plans to invest $600 million at the site, which formerly housed Hemlock Semiconductor, a solar materials manufacturer.

The Google deal did not include a cost analysis, according to records obtained only after news organizations threatened to sue. The Clarksville-Montgomery County Industrial Development Board did not have a calculation of the projected forgone property taxes, according to the records.

The county also stands out for its secrecy. In its PILOT contract, Google negotiated an unusually strict confidentiality agreement.

“We’re not going to spend our time and money answering your questions,” said Dick Batson, the lawyer for the Clarksville-Montgomery Industrial Development Board, when asked about the Google deal. Google did not respond to a request for comment.

A lack of analysis can be found at agencies across the state, particularly in smaller governments. A review of state-mandated “cost-benefit” forms showed that most included no information about costs. In a review of projects by nearly 20 local economic development boards, about half did not require companies to regularly report job creation.

Sometimes the risks are high. In the most egregious example in recent history, Hemlock was awarded more than $400 million in state, local and other incentives to open a manufacturing plant for polysilicon in Montgomery County. But the facility never opened and the state lost more than $100 million. That collapse prompted the state to institute "clawbacks" to recover funds for failed projects. But the clawbacks apply only to a small portion of the projects.

Some agencies — especially those in major metropolitan areas — track and publish the number of jobs created from subsidy deals. The Economic Development Growth Engine for Memphis and Shelby County (EDGE), for instance, makes progress reports for hiring, capital investment and projected amount of forgone property tax amounts available to the public online.
FastTrack program criticized for not enforcing reporting requirements

For three generations, Scott Troglen's family worked at the same Nashville windshield manufacturing plant. But the streak nearly ended.

Troglen credits state subsidies for keeping the glass furnaces burning.

The plant sat neglected and for sale in 2011, its three brick smokestacks signaling a bygone era. But Japanese-owned Carlex saw potential in the dusty building and friendly state and local governments.

Tennessee and Nashville offered more than $3.6 million in subsidies to save 400 jobs and add 50 more.

“It’s a really good income for people who work here, and for their families too,” Troglen said. The average pay for factory workers is about $18 an hour. “If this place were to go away … the general public doesn’t realize what kind of impact that would have.”

The company is one of many economic development successes along Tennessee’s road to a record-low unemployment rate, but the public has no way to tell how many jobs were created at Carlex or if the deal was a good investment. The state and county do not publish the figures.

Both at the local and state level, officials rely on companies' self-reported job figures, which aren't always accurate. The Tennessee Comptroller of the Treasury criticized the state grant program's record keeping and evaluation in a 2016 audit.

“The FastTrack program has not enforced reporting requirements from grantees regarding annual employment data," the comptroller report said. “We found no evidence that FastTrack staff verify self-reported data or compare it with prior reporting to track trends.”

Turnover within companies sometimes makes it difficult to get responses to annual employment surveys, said Townsend from the state Department of Economic and Community Development. "It's not through lack of effort or inquiry."

The state Department of Economic and Community Development this year began requiring more companies to submit jobs data as part of their grant contract.

Other states, such as Virginia, use federal employment and wage information to verify whether companies meet their commitments.

What's the difference between a grant, a subsidy and a tax credit?

Tracking hiring can help officials decide if they should expand a subsidy program or provide incentives to the same company in the future.

Video Gaming Technologies received more than $500,000 in state grants in 2012 to train employees and retrofit its offices. It consolidated its Virginia and Nashville sites in Franklin and has since grown from 48 workers in Tennessee to about 200. About 100 moved from Virginia.

“There’s a loss to a community when jobs are moved. There’s no question about it,” VGT President Jay Sevigny said. “But it’s been a boon to this area.” Company salaries range from the $40,000s to the high six figures, according to Sevigny.

In 2014 an Australian company purchased VGT, which by then had cemented its headquarters in Franklin, thanks in part to the subsidies. The new company probably would have closed the Franklin office if it was not so established, Sevigny said: "All of these jobs would be gone."

But some companies have lost jobs after receiving state grants. The news organizations' database analysis showed 39 percent of projects reported fewer than half of their promised jobs.

Perdue Farms, at its chicken packing plant in Monterey, received $3.7 million in training grant funds for a 2010 expansion. It also received a 20-year property tax break from the county initially valued at $3.2 million.

At the time the subsidies were awarded, the company added a state-of-the-art production line and improved efficiency. One local official said his agency was compelled to offer incentives because it determined that Perdue might close the factory. Perdue was expected to save about 1,150 jobs, but it laid off 142 workers in 2012 and today has 972 workers.

“The good news is they’re good-paying jobs, the company is still here, and they’re doing well,” said George Halford, president of the Cookeville-Putnam County Chamber of Commerce.

That sentiment is echoed around the town of Monterey. Perdue is the largest employer, and nearly everyone in the town of 2,800 either used to work at the plant or knows someone who does. Perdue also helps the community through civic involvement. The company donated more than $120,000 to local causes, a spokeswoman said, including the Cookeville Rescue Mission and Relay for Life.
Perdue Farms, at its chicken packing plant in Monterey,Buy Photo

Perdue Farms, at its chicken packing plant in Monterey, Tenn., received $3.7 million in training grant funds for a 2010 expansion. It also received a 20-year property tax break from the county initially valued at $3.2 million. It was expected to save about 1,150 jobs, but it laid off 142 workers in 2012 and today has 972 workers. (Photo: Lacy Atkins / The Tennessean)

The waitresses at the Cup & Saucer, a Monterey diner open since the late 1940s, notice when Perdue cuts back. Fewer managers take their associates out to lunch. Co-owner Clarice Weist, in an interview before she died in August, said the town depends on the business.

“If they pulled out it would be devastating,” said Weist, who was surprised to learn that Perdue had cut jobs after receiving millions of dollars in subsidies.

New Perdue factory workers also buy steel-toed boots at Phillips Shoe Store, just across Commercial Avenue from the diner. Some buy secondhand boots; others spend up to $159 for Western-styled work boots. Owner Jeannie Templeton, 58, who once worked at the chicken plant, says her business relies on local shoppers like the factory workers.

"It's not right," she said after learning about the subsidies and layoffs. "We pay taxes all over. Don't get me started on taxes."

Overall, companies fulfilled 80 percent of their job promises, according to the news organizations' database analysis from the state’s internal spreadsheets and handwritten records.

The analysis focused on FastTrack grants with contracts ending December 2016 or those that already had five years to create the promised jobs.

Take, for example, Bank of New York Mellon’s data center in northeast Nashville. It was awarded more than $850,000 in grants for power infrastructure and job training in 2011, but according to state records the company has lost 21 jobs since then. A spokeswoman for the Fortune 500 company declined to comment.

The Tennessee Department of Economic and Community Development touts a “job fulfillment” rate of 113 percent for incentives from 2011 — the first awarded under the Haslam administration.

The data behind this online "dashboard" tells a more nuanced story. Out of 79 projects from 2011, 28 reported fewer than half of their targeted jobs. Also, some of the listed companies didn't receive state grants but were still listed. The website refers to job “commitments” made by individual companies but does not list the number of jobs actually created.

"You can demonstrate the job fulfillment, creation a lot of different ways," said Townsend from the Department of Economic and Community Development, "but the fact of the matter is that no dollars go out of this office ... unless those costs have been incurred or those jobs have been fulfilled."

The 327 grants that completed their contracts or their five-year job creation window by the end of 2016 generated 33,843 jobs. The state gave those companies $52 million in subsidies as of March, for a cost per job of about $1,500.

Programs that average a cost per job of $30,000 are considered effective for economic development, said Tim Bartik, a senior economist at the Upjohn Institute. But the cost per job isn’t the only measure. Incentives, he said, can be structured so companies hold onto jobs for years.

"Are these programs being evaluated?" Bartik said. “People should be demanding accountability and transparency.”




This post first appeared on Green Goddess VV, please read the originial post: here

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