Lost in the Washington noise about job creation is the reality of how the system really works at the local level. We stumbled upon a story that sheds light on the whole job creation process at the grassroots level; and it isn’t pretty.
The Cincinnati Enquirer recently published a story in which it examined the relationship between the job creating corporations and the state, local and city governments that curry them favor. One of the responsibilities of state, local and city governments is to attract large corporations to their area. They do this by offering millions of dollars in tax credits and grants. They also commit millions in public funds to build roads sewers and other infrastructure to support offices and factories. In exchange corporations promise to bring their facilities and create jobs in the local community. These government tax credits are often based on the specific number of jobs promised.
The Enquirer discovered that out of 420 local projects that had reached the end of their incentive period in 2010; only 220 had actually created the number of jobs they had promised. Of the 40 largest tax incentive deals over the past decade only 20 had created the number of jobs they had promised; yet the companies received millions in tax credits and grants.
Tata Consultancy Services, a software development firm based in Mumbai, India reported profits of $2 billion last year. They promised Ohio officials that their new North American headquarters would bring 1,000 new technology jobs. Ohio officials offered Tata $15 million in tax incentives over eight years, gave them $2.5 million to help purchase the local facility and another $1.7 million worth of training to help Tata hire people with the necessary technical skills. Local county officials agreed to provide $1.8 million in infrastructure improvements to handle the expected influx of new workers. Tata has created only 269 of the promised jobs and raked in over $600,000 in tax credits.
The Enquirer sited several other examples: Batavia Transmission Plant promised 75 jobs, created 0 and received $1,327,111 in tax incentives. SUMCO promised 260 jobs, created 0 and collected $484,031 in tax incentives. Cincinnati Financial Corp. promised 505 jobs, created 78 and received $1,255,730 in tax credits. Convergys promised 195 jobs, created 0 and received $330,613 in tax credits. Ohio Casualty promised 201 jobs, created 0 and received $652,837 in tax credits. The list goes on and on.
In Ohio and several other states, corporations have little financial risk in failing to meet the incentives. Economic development officials say they are often reluctant to go after companies that haven’t met their targets for fear of alienating the company and fostering an anti business reputation. The bar for compliance is low. In Ohio, the state can only reclaim tax dollars in cases where the company has shut down their operations. In Kentucky, a company is considered to be in compliance if it maintains 10 employees at the site.
The economic impact of these decisions ultimately works its way down to the tax payer. While local officials funnel tens of millions to corporations they are forced to cut investment on education, social programs and other services.
This is a story that is occurring all across the country. To be fair, many companies do fulfill their promises, create jobs and become an asset to the community. But the number of corporations in non-compliance is shocking and the financial repercussions devastating.
So when Mitt Romney says; “corporations are people too” we have to wonder in what alternate universe he exits. Because in our world when a person makes a promise and accepts millions of dollars as consideration for that promise; he faces serious consequences if he doesn’t keep his end of the bargain.
So if corporations are people too…
Kudos to the Cincinnati Enquirer for their work on this under reported story.