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Good Jobs First

Doing more to get tax breaks

We’ll see about this.

BagOfMoney

Companies seeking city tax breaks soon could get a boost if they commit to providing additional community benefits – such as workforce housing, paid internships for low-income students or jobs for those who previously were incarcerated – as part of a retooling of Houston’s tax abatement program before City Council on Wednesday.

The new guidelines harken back to Mayor Sylvester Turner’s campaign proposal to ensure that recipients of city tax incentives pay their employees “decent wages with decent benefits.”

However, the recommended changes suggest rather than require that companies offer those additional benefits, prompting concern among advocates that they could have little impact.

“When you start talking about workforce affordable housing and livable wages, all of those things are critical components as we look to rebuild not only streets, but neighborhoods and communities,” Turner said Tuesday. “I think this is one way of moving the ball further down the field and completing some of the things that I’ve talked about earlier, over the last year and a half.”

Houston’s tax abatement rules already favor companies that commit to offering health benefits, purchasing locally, providing jobs within a designated area or providing opportunities to minority- and women-owned businesses. The city is looking to add to those categories as part of a biennial renewal of its tax break protocol, as required by state law.

[…]

Government accountability advocate Greg LeRoy was more skeptical, saying such preferences need an enforcement mechanism to be effective.

“In this era of economic development, where there’s so much money getting spent and so many recurring accountability problems, soft language doesn’t cut it,” said LeRoy, executive director of the Washington, D.C.-based policy group Good Jobs First. “Absent black-and-white requirements, which are carefully monitored and enforced, any kind of community benefits – wage and hour standards, geographic targeting, local hiring, set-asides of any kind – just don’t happen.”

Even Houston’s explicit prerequisites for tax breaks have been set aside in recent deals. Council waived a requirement in at least two of the six tax abatements approved in the last two years.

In backing a $6.5 million tax break last month for Fairway Energy Partners to store oil in underground caverns, council agreed to forgo its typical requirement that a business create at least 25 on-site jobs. Two months prior, council signed off on a $1.5 million tax abatement for oil field services giant Halliburton even though city rules block companies from receiving such deals if they already have announced or begun construction on their expansion plans.

Count me in agreement with Greg LeRoy that enforcement is key, and with Ginny Goldman of the Texas Organizing Project that it shouldn’t be so easy to waive these requirements. I get the argument for offering incentives, but it always feels like the “they’ll locate outside the city” reasoning is granted far more weight than any consideration of whether we’re getting sufficient value in the deal. How about an annual review of each deal, with a public accounting of what was promised, what’s been done, what’s still left to do, and what the timeline is for doing them? I don’t think that’s too much to ask, and if it winds up embarrassing any of the recipients of these incentives, then I submit they needed to be embarrassed. Surely at a time when budgets are squeezed and money is tight, the city needs to do all it reasonably can to ensure it is getting the best return on its investments. Give me a public review of these rebate/incentive deals, or give me a good reason why we shouldn’t just do away with them altogether and let the free-market chips fall where they may.

Questions asked about Perry’s job-stealing trips

Good.

As Gov. Rick Perry visits Maryland in his latest effort to recruit businesses to relocate to Texas, a Washington, D.C.-based group is taking aim at what it calls the governor’s “piracy trips,” raising questions over how they are funded.

A report by Good Jobs First says that despite the governor’s office’s statements that state funds are not used for the trips, local sales tax funding is indeed used to cover travel expenses and advertising related to the trips.

“Texas taxpayers have a right to know about the public funds that partially support TexasOne,” said Greg LeRoy, executive director of Good Jobs First.

The press release is here and the full report is here. Let me quote from the press release, as it gives a fuller picture of what the study is about:

The job-piracy trips represent an enormous surge in spending for television and radio advertisements that feature Gov. Perry himself. In eight months, TexasOne has spent about $1.8 million in advertising buys to publicize Gov. Perry’s job-piracy trips. That sum exceeds TexasOne’s entire FY2012 budget by more than half a million dollars, and is about nine times what TexasOne spent on advertising and promotion in FY2012.

The study finds that scores of local Economic Development Corporations (EDCs), funded by local sales tax dollars, as well as some city and town governments, and other local government agencies in Texas, form the most numerous group of dues-paying members to TexasOne and accounted for about one fourth of its revenue in FY2012. However, the federal tax returns of the non-profit 501(c)(3) corporation that sponsors TexasOne refer only to “private contributions.”

The study also points out that Gov. Perry’s press releases announcing his trips include a funding disclaimer that prompts more questions. They say state funds aren’t used to pay for the advertising air time or Gov. Perry’s travel or accommodations, but they are silent on local taxpayer dollars, and the trips involve many other expenses.

The study also finds 40 corporations funding TexasOne, including two dozen that are publicly traded companies or subsidiaries of such companies. Some serve national markets; some even have headquarters or large facilities in states that Perry is trying to lure jobs from.

These are all good points, and I’m glad to see them get an airing. One point that I’ve brought up before only gets mentioned in passing in a footnote, however:

This study does not explore the effectiveness of Texas’ job-piracy efforts. For that topic, we refer readers to a study we released in January 2013 entitled The Job-Creation Shell Game. There, we chronicle the history of interstate competition for capital, and detail several arguments why interstate job piracy is wasteful and ineffective. We refer readers to that study for those arguments. One key point we demonstrated is that Texas, like every other state, gains or loses microscopic shares of firms and jobs due to interstate in-migration (net of out-migration). All or very nearly all of the job-creation action is attributable to the expansion of existing firms (net of contractions) and to start-ups (net of firm deaths). Therefore, state resources are most effectively spent helping firms start up and grow (and helping them avoid layoffs and shutdowns). At http://www.goodjobsfirst.org/sites/default/files/docs/pdf/shellgame.pdf (regarding Texas specifically, see pages 4-5 and 16-20)

So the bottom line remains that Perry’s gallivanting around is a failure on every level except for one – the promotion of Rick Perry.