Buddy did a great job with infrastructure, But the main focus will be trying to be a part of … economic development.
There’s a name for this arrangement. The Commerce Authority is a “quasi-public” entity, or a public-private partnership. About 10 other states have also given control over lucrative corporate tax incentives to similar organizations, which are often run by the states’ most influential businessmen, generally at the pleasure of the governor. Supporters say these partnerships are more nimble than government bureaucracies and are insulated from the vagaries of electoral politics. But both liberal and conservative watchdog groups say the practice takes a government function already prone to mismanagement and obfuscation and makes the situation worse by giving oversight of business incentives to businesses themselves.
“We receive a lot of questions about clawbacks,” said Grant Tennille, executive director of the Arkansas Economic Development Commission. “The process works, and in this case rather quickly. When it happens that we need to use clawbacks, we will negotiate keeping the unique circumstances of every project in mind.”
A friend notes a news article in the Arkansas Catholic and the coincidence of timing with discussions about a merger of clinical operations of the public University of Arkansas for Medical Sciences and St. Vincent Infirmary.
The Diocese of Little Rock is forming an Arkansas guild for the Catholic Medical Association.
Bishop Taylor said he believes the formation of the CMA guild in the state could also assist the diocese with promoting pro-life causes and strengthening the Catholic identity at Catholic hospitals.
Sounds like this turkey is cooked. Direct support by House Speaker Davy Carter and slightly qualified support by Senate President Michael Lamoureux would make it appear Gov. Mike Beebe is going to get his big state subsidy to help a startup steel mill operation in Mississippi County, despite stout opposition from an existing competitor that cranked up here without such millions in taxpayer help.
Sigh. I'm beginning to conclude that Brummett is right. That Davy Carter's unconscionable, unnecessary and unproductive capital gains tax giveaway is part of the grand bargain Beebe is working on to expand Medicaid, get his steel mill and perhaps some other lesser baubles.
If the steel mill works — and if it doesn't cost jobs at Nucor — and if 250,000 more people enjoy health insurance coverage, I know I need to relax and enjoy it. But I just can't help grumping at the notion that any benefit for the average Arkansan must be accompanied by a tribute to rich people, even though our regressive tax system, built on a punishing sales tax and organic favoritism to corporate taxpayers, already favors them.
The careful review of a major taxpayer investment in the proposed Big River steel mill is nothing but a good thing and there's no debate we can thank the new Republican legislative majority for the oversight.
As everyone here says, there are no guarantees that corporate welfare will produce a successful business. Nobody has ever said otherwise (indeed the Arkansas record is littered with failures of well-meaning efforts), but I think it's true that this fact was too often underplayed, if mentioned at all, before the money was handed out.
I have to wonder, too, whether Republicans will apply such strict scrutiny to their own economic development schemes and not just those of the Democratic governor. One example: The Republican article of faith that tax cuts for the wealthy are sure-fire economic engines. There's a pile of contrary evidence. Will Republicans commission reports from sources such as these when they run their own corporate giveaways through the legislature? Speaker Carter, who's lusting to cut the capital gains tax, primarily a windfall for the rich, you're up.
Roby Brock at Talk Business has a full report on the Nucor talking points, going out to legislators. It includes a warning that the state subsidies could contribute to market conditions that will force Nucor to pare its Arkansas jobs.
This has always been the core problem with corporate welfare. One player's gain is another player's loss, one way or the other. If the Big River Steel proposal is solid, why can't it make it on its own, in the free market, without taxpayer subsidy? (The standing state answer is that another state will get the jobs if Arkansas taxpayers don't pay tribute.) Still, is it fair for taxpayers to subsidize one business at the expense of another? Nucor's memo says, in part:
Help us understand how you can be backing a competitor when we have been in Arkansas for 25 years, have poured $2B of direct and indirect taxes in the state treasury, have brought many customers and corresponding manufacturing jobs to Mississippi County, and have been a good corporate citizen to the state and to northeast Arkansas.
Help us understand why the state believes this is such a good investment when the industry is operating at 70 to 75%, Nucor Steel Arkansas hasn’t run full since September, 2008, Nucor Steel Arkansas didn’t produce 600,000 tons last year due to lack of orders, and the BRS financial assumptions are more than questionable. If this is such a good deal, with their overstated rate of return, why aren’t steel mills popping up all over the place?
By voting to subsidize BRS ($400,000+/job), you ARE voting against jobs. You are voting against high paying jobs that have been in the area for 25 years. As stated earlier, having 3 mills so close together will drive up the costs for all mills. At some point, orders, tons and people will flow to where they can most profitably be produced. In Nucor’s case, that will be one of our 3 sheet mills in Indiana, Alabama or South Carolina.
We don’t believe it makes political sense for the state to attempt to pick winners and losers and putting existing successful industries in jeopardy by giving unique advantages to their competitors. Do other established businesses need to worry about the state subsidizing their competitors?
The state, however, picks winners and losers all the time. The Republican legislature is poised to designate the wealthy as the big winner in the tax cut derby. Those sorry takers who are the working poor will be losers, both through minimal tax cuts and the certain decline in public services (particularly in vital higher education) that will have to follow.
UPDATE: Roby Brock of Talk Business is reporting additionally on the new report by legislative consultants on the deal. They say the market can absorb additional steel capacity, though the state perhaps has overestimated the long-term economic benefits of Big River Steel. More here from Arkansas Business.
Sour grapes or important cautionary words?
Judge for yourself. The Mississippi Business Journal reports on the Big River Steel proposal for Arkansas, which Mississippi had also sought. It raises questions about developer John Correnti's track record and, maybe more important, about the steel market generally. It includes strong defense from the Arkansas economic development corner.
It is, to me at least, undeniably healthy to have a full debate on state investment of $125 million-plus in a private enterprise that will compete with existing, less-subsidized businesses.
A taxpayers' lawsuit has been filed challenging expenditure of tax money by the cities of Little Rock and North Little Rock — cumulative millions over the last 20 years — to support local chambers of commerce.
The lawsuit contends that the Arkansas Constitution prohibits payments to private corporations by municipal governments. It also says both Little Rock and North LIttle Rock have violated state law on bidding procedures in the course of funneling money to Little Rock and North Little Rock organizations in the name of economic development.
Little Rock, particularly, has defended the practice over the years as a service contract with the Little Rock Regional Chamber of Commerce. It says it can't afford to operate its own economic development office, as it once did. But the arrangement has functioned as a financial subsidy to existing chamber operations and the contract has been unaffected by changes in the city allotment based on budgetary restraints. It currently is $200,000 a year. The Chamber only provides general information on the spending, not specific accounting how and on whom the money is spent. It says the state Freedom of Information Act does not require it to disclose specific spending on travel, entertainment and other costs. North Little Rock has similar arrangements with the North Little Rock Chamber of Commerce. It of course doesn't disclose what political representations it might make in the course of recruiting businesses. The money to the chamber helps pay the salaries of employees who lobby the legislature on political issues important to the business lobby, though not necessarily to working people.
A news release follows. As I've disclosed before, I'm a member of the board of the Arkansas Public Law Center, which is backing the legal action. The Center earlier brought a successful lawsuit over the Arkansas legislature's practice of enhancing members' pay with undocumented "expense" reimbursements. The nonprofit group has also intervened in support of open court records and has attorneys working on several other potential public interest matters, including the city's threat to take private property by eminent domain for a development to be used by private businesses in the proposed Little Rock Tech Park.
TThe Arkansas Public Law Center today filed a lawsuit in Pulaski County Circuit Court to stop the annual city appropriations to the chambers of commerce in Little Rock and North Little Rock.
Some years ago, chambers of commerce were encouraged to seek annual appropriations from their local governments with the justification that they were helping attract industry and commerce to the cities and counties. Many cities did so although Article 12, Section 5 of the Arkansas Constitution prohibits cities, counties and municipal corporations from appropriating money to private corporations.
The city of Little Rock appropriates $200,000 a year to the Little Rock Chamber of Commerce for performing economic development, and the budget for 2013 appropriates another $100,000 to the Metro Little Rock Alliance, which is run by the Chamber of Commerce. North Little Rock appropriates $250,000 a year to the North Little Rock Economic Development Corporation, which is housed with the North Little Rock Chamber of Commerce, and the city appropriates a smaller sum directly to the Chamber of Commerce.
The suit alleges that the cities are illegally donating tax revenues to and subsidizing private organizations. It contends that the payments are an illegal exaction because people are taxed and their money illegally spent.
The cities also violate their own codes and contracting procedures in making the annual appropriations, the complaint says.
The plaintiffs are Jim Lynch and Tony Orr of Little Rock and Glen M. Miller of North Little Rock. The McMath Woods law firm and Sonia Eileen Fonticiella Rios are the attorneys.
The Arkansas Public Law Center is a non-profit corporation established in 2009. It engages in litigation for the public interest.
Here's a link to the full lawsuit. The link is corrected.
Mentioned this earlier, a new report on the billions spent by states to move jobs from one state to another, rather than spending the public's money to create truly new jobs.
What was long ago dubbed a Second War Between the States is, unfortunately, raging again in many parts of the country," said Greg LeRoy, executive director of Good Jobs First and principal author of the report. "The result is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs rather than new business activity. By pretending that these jobs are new, public officials and the recipient companies engage in what amounts to interstate job fraud."
Interstate job piracy is not a fruitful strategy for economic growth, LeRoy noted: "The costs are high and the benefits are low, since a tiny number of companies get huge subsidies for moving what amounts to an insignificant number of jobs." LeRoy added: "The flip side is job blackmail: the availability of relocation subsidies makes it possible for companies that have no intention of moving to extract payoffs from their home states to stay put."
Arkansas is prone to be lured into this. The state has been blackmailed for benefits in the past to hang onto operations of existing companies and state incentives have been used to move business within the state, once to benefit a company run by a member of the Arkansas Economic Development Commission. So keep your eyes peeled.
Full releease follows.
Jennifer Pierce reports that the Conway City Council voted 7-0 tonight in favor of a resolution that says corporations are not people. This is part of a national movement to amend the Constitution if necessary to overturn the Citizens United ruling in favor of corporate personhood.
Conway joins Eureka Springs, Fayetteville, North Little Rock and Pine Bluff in adopting this resolution.
Little Rock loves corporations, particularly the corporate personage of the Little Rock Regional Chamber of Commerce which gets direct financial subsidies from the city and holds critical power in shaping city decisions that grimy little citizen people can only dream of. Oppose corporate personhood? Not this bunch. Check the campaign contributions of the at-large directors who cast the swing votes on major issues. Corporate Arkansas is their middle name.
Arkansas still waits for how much money Gov. Mike Beebe wants from taxpayers to land a super project with many new jobs, said to be almost a certainty.
At a minimum, super projects always raise questions about cost and benefit; about whether the state payouts were critical to the corporation or merely lagniappe the companies were happy to slurp. But there's another issue bubbling that will be the subject of discussion this week, which may or may not be relevant to Arkansas's coming news:
Good Jobs First will hold a tele-press conference on January 24 to issue a major study exploring the states' use of eight- and nine-figure economic development subsidy packages to poach jobs from each other, or pay "job blackmail" to prevent jobs from being pirated..
The study will include an especially outrageous aspect of the problem, dubbed "interstate job fraud."
In addition to the primary author of the report, the press conference will feature Bill Hall, Assistant to the Chairman, Hallmark Cards. He and other Kansas City-area business leaders have been outspoken on the issue.
The study will include case studies featuring metro areas Kansas City, Charlotte and Memphis and the states of Georgia, New Jersey, Rhode Island, Tennessee, and Texas. It has additional content regarding California, Connecticut, Illinois, Massachusetts, New Hampshire, New York, Ohio and Pennsylvania. It includes a historical chapter on interstate competition for jobs, data on interstate job relocations, and policy recommendations
I'm particularly interested if the coming Arkansas project might be one of those "job blackmail" deals — where a company already in Arkansas holds the state up for money to prevent it from moving jobs elsewhere. Seems like we went down this road once years ago on a forest products company's threat to locate a big mill elsewhere — many miles from the trees it was cutting in Arkansas to feed existing operations.
Thanks to Republican Rep. Duncan Baird for calling my attention on Twitter to a new Pew study on the perils of corporate welfare — state tax incentive programs to lure business that can grow to crippling revenue drains.
Reliable cost estimates and annual cost controls for tax incentives have helped states promote job creation and economic growth while avoiding unexpected budget challenges. But Pew’s analysis shows that policy makers often create tax credits, deductions, and exemptions without these tools, raising the risk of budget shortfalls and unplanned spending cuts or tax increases to close them.
I erupted last night when I discovered the proposed Little Rock city budget for 2013 included a new appropriation directed toward the Little Rock Regional Chamber of Commerce. I've written much about this topic before. I think the existing city subsidy of a private corporation is unconstitutional, even with the sham services contract the city has devised as a fig leaf. I think it's outrageous that taxpayers are paying the salaries of people who opposed the Obama health care law, fight unions, hate progressive taxation, fought for an unfair workers comp system and have hurt the Little Rock public schools.
City officials haven't been much swayed by my criticism. The Chamber ran their successful sales tax campaign on which the city is now getting fat. The Chamber also ran this campaign in an ethics law-defying way, refusing to disclose specific expenditures, in a procedure that the Ethics Commission now intends to correct. The Chamber is getting its payback, not only by running city government but getting paid to do it, both in the $22 million handout for a chamber tech park pipe dream and annual operating subsidies. The Chamber, or the business establishment it represents, effectively controls city government through the three at-large city board seats that generally combine with directors from wealthier wards for the City Board's working majority.l
The city is holding its annual chamber subsidy to $200,000 a year in the 2013 budget. But, surprise! There's a new item, $100,000 for the Metro Little Rock Alliance. This amounts to an additional subsidy for the chamber's economic development work, based on what limited information I've been able to gather.
The regional organization is based at the Little Rock chamber offices. It's administered by a Little Rock chamber employee, Joey Dean. The chamber supplies its website with info. The organization, established in 2003, spent $173,000 in 2011 and is headed to spending about that amount again in 2012. In other words, Little Rock is about to give the alliance the means for a 60 percent budget increase.
The money comes from a variety of public sources, generally tied to cities and counties in Central Arkansas, including Conway. There's the odd private contributor, including Democrat-Gazette publisher Walter Hussman's foundation.
How is the money spent? I have a pro forma statement, but not a detailed accounting. Dean is out of the office today. He said he'd respond to my request for more detailed information next week.
So far this year, the Alliance has spent $56,000 on "general marketing," more than $10,000 on "direct marketing/travel/professional development," $4,300 on "event sponsorship," and $35,000 on an "administrative agreement." That last sounds like it might be a payment to the chamber for running the operation, but I don't know that. I'd like to know specifically how this money is spent and what portion of public tax money goes to pay chamber salaries. I've asked Little Rock officials, too, how they arrived at a $100,000 outlay for an organization that has spent only $145,000 this year. I can't help but wonder whether this a makeup for reductions in the past allotments from the city to the chamber that dropped the payments from $250,000 to $200,000 (one of many indications that this wasn't a true contract pegged to specific services but just a subsidy to a private lobby group).
I'll update as I hear further.
There's an Arkansas angle here in a tale of corporate welfare that appears to be playing out poorly.
The Wall Street Journal reports that ThyssenKrupp is pulling the plug on an $11.8 billion steel mill in Alabama. High production and transport costs, a weakening market and competition were listed in the article as factors.
Remember when Arkansas and Louisiana came down to the final round in the competition for this plant about five years ago? Alabama won with a whopping $1 billion worth of incentives and credits. Seems like the Arkansas site near an earthquake fault line was mentioned as a negative, but money did most of the talking, the kind of money that has encouraged the legislature to create a super fund to give away megabucks to corporate titans like Thyssen Krupp.
Please note that the steelmaker feels it met its obligation in getting the plant running and need pay none of that billion back.
OK then. Thanks for the memories.
We are getting some freezing drizzle in my area this morning and also in Conway…
Gracious, strange. Who peed in your cheerios? "fat"? From the looks of the picture, Max…
that should have been "compiled by Stephen S..." using sweetie's strange, awkward lap top...it's too…
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