Missouri firms missing job targets cited for state aid
Monday, January 9, 2012
JEFFERSON CITY, Mo. (AP) — Over the past six years, businesses seeking state tax breaks have optimistically told Missouri officials that they plan to create thousands upon thousands of jobs. Most of those jobs have yet to materialize, and some never will.
Figures from the Missouri Department of Economic Development show a wide gap between the number of jobs anticipated and actually created by businesses participating in the Missouri Quality Jobs program, which is the state's foremost job-creation incentive. The department offers at least a couple explanations — it can take years for businesses to reach their job goals; and the figures are only upper-end projections, not firm commitments.
But the disparity between plans and reality has added to concerns among some lawmakers about whether Missouri's business incentives are missing the mark. Members of a special House committee plan to question Department of Economic Development officials about the figures during a hearing Monday.
"The impact of the Quality Jobs act appears vastly overstated. Five out of six promised jobs for mega projects have ended in epic fails, and a record like that cries out for closer scrutiny," said Rep. Jay Barnes, R-Jefferson City, who is chairman of the House Interim Committee on Government Oversight and Accountability.
The special committee was created this fall after the financial collapse of a proposed artificial sweetener factory in Moberly, which had been touted by Gov. Jay Nixon to create 612 jobs. The failure of Mamtek U.S. Inc. led Moberly to default on $39 million of bonds issued for the project. The state never paid the $17 million of incentives it offered, because the company folded before it hired enough employees or met other criteria to trigger the state aid.
As part of the House committee's investigation, Barnes asked the Department of Economic Development to provide data comparing anticipated to actual jobs and comparing the total authorized tax breaks to the amount actually issued for all projects approved to receive at least $1 million of incentives since 2006. The Associated Press obtained the information through a request to the committee chairman.
In their applications for state tax breaks, those businesses told the department they anticipated creating 23,145 jobs through a total of 91 projects in the Quality Jobs program. So far, those businesses have created 5,873 jobs — one-fourth the amount they projected. About five out of every six of the projects has not reached their anticipated jobs. Of the $311 million of state aid authorized for those companies, a little over $36 million actually has been paid.
The Missouri Quality Jobs program requires companies to create a minimum number of jobs — ranging from 10 to 100, depending on the type of business — within two or three years of being approved for the program. Once they hit that job threshold and also meet wage and health-insurance requirements, businesses then have three to five years to claim their tax breaks, which are awarded on a per-job basis. The program was created in 2005 under Republican Gov. Matt Blunt and has remained one of the most frequently used incentives under Democratic Gov. Jay Nixon.
The Department of Economic Development said the anticipated jobs reported by businesses are used as a budgeting tool to help calculate the state's potential financial exposure under a law that caps Quality Jobs tax credits at $80 million annually. There is no penalty if businesses fall short of their jobs mark nor is there any cost to the state, because the tax breaks are issued based on the actual number of new jobs.
"These and other safeguards ensure that no benefits are provided until the jobs are actually created, while allowing companies to pursue their growth and expansion plans in accordance with law," department spokesman John Fougere said in an emailed statement.
Yet governors often cite the projected job figures while announcing the deals, and they don't typically hold news conferences years later when the job targets aren't reached.
Barnes, who was an aide to Blunt from June 2007 through May 2008, acknowledges that he likely wrote speeches for the governor touting some of the dozen-plus Quality Jobs projects approved during that time. Barnes said he doesn't begrudge Nixon for similarly touting the largest possible projected jobs figures, but he now questions whether the program actually spurs businesses to hire more employees.
"They can't claim when the application comes in that there are going to be jobs created and then when it fails that it's (the job projection) just a budgeting gimmick," Barnes said.
More than half the businesses authorized to receive more than $1 million in Quality Jobs incentives during the past six years are listed by the department as not currently having any new jobs. Many of those businesses still could make good on their intentions, because they have not hit the deadline to meet the program's minimum job threshold. But like Mamtek, some of those businesses have already failed.
Wings Enterprises Inc., for example, was approved for nearly $1.3 million of tax breaks in 2006 while projecting that it would hire 200 employees to re-open an iron ore mine near Sullivan. State records show it created eight jobs and received $2,519 in tax breaks before it encountered financial and legal troubles and lost its eligibility for state aid. This past week, MFC Industrial Ltd. — based in Vancouver, Canada — announced that it had teamed with St. Louis-based Alberici Group Inc. to acquire the troubled mining project.
Officials in Moberly are still searching for someone to take over the partially built artificial sweetener factory once intended for Mamtek.
Prompted largely by the Mamtek failure, a Missouri Senate committee also has been investigating the Department of Economic Development's oversight of business incentives. The committee chairman, Sen. Jim Lembke, plans to hold a hearing this coming week on a recent report from legislative staff that faulted the department for poor documentation of its oversight activities. That report said some case files appeared to lack verification that companies actually hired employees or provided health insurance. The department objected to parts of the report and now is providing more information, Lembke said.
"I want to make sure we have the mechanisms in place to say you have to create so many jobs and sustain those jobs, if we're investing the people's money," said Lembke, R-St. Louis.