Companies that receive millions of dollars in incentives to locate to Texas frequently renegotiate their contacts, often in secret, to get better deals at taxpayers’ expense.
That’s the conclusion of a newly released study by two University of Texas government professors who started out to examine economic development in Texas, focused on the Texas Enterprise Fund. Lawmakers created the program in 2003 to give publicly funded grants to mostly larger companies. Before it was done, the professors had to fight many of the companies in court to get access to the contracts through public records requests.
The authors filed public records requests with the 164 recipients of the program, for the contracts and amendments. (See list of recipients here.)
The requests drew challenges from 45 companies, citing the 2015 Boeing public records decision by the state Supreme Court. The ruling allows contracts between private entities and public agencies to be kept secret.
More than a quarter of the recipients were granted changes to their contracts, often due to a failure to comply with the requirements of the initial agreement. It was those companies that were most likely to fight the records requests. Those renegotiations were not made public by the governor’s office, which is charged with administering the TEF.
The challenges, the authors said, were “partially successful.” They eventually obtained some materials from 63 of the 164 companies receiving TEF grants, though in many cases it was only part of what was sought. Some responses were substantially redacted.
In a piece written for the online research journal The Conversation, the researchers cite two deals as typical of the renegotiations.
Elon Musk’s SpaceX company received $2.3 million in 2013 to provide 300 jobs at a new facility near Brownsville. But in 2017, SpaceX covertly renegotiated the deal to reduce their job obligation to 150 for a grant of $1.15 million. So far, no jobs have been created nor has any of the grant money been disbursed.
Comerica took a $3.5 million TEF grant to leave Detroit for Dallas in 2007 and promised to hire 200 people.
“The people of Texas will see a stunning return on their $3.5 million investment,” Gov. Rick Perry said at the time.
The study found that five years later, Comerica renegotiated the deal to allow it to count 15 of its current executives, including the CEO, toward its obligation.
“Allowing companies to renegotiate contracts outside of the public eye violates the very spirit of adding performance requirements and performance provisions,” the study’s authors concluded. “We provide evidence consistent with firms using exceptions to public records requests to hide non-compliance with economic development agreements. In short, the firms that are hiding their contracts seem to be doing so for serious reasons.”
A 2014 state audit of the TEF found that the agency failed to follow up on job creation promises.
Steve Miller can be reached at [email protected].