What have Texans gotten for the millions spent by the enterprise fund? Nobody’s counting

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money

The Texas Enterprise Fund since 2003 has provided taxpayer money to companies in exchange for the promise of jobs. But in several cases, the grants have been paid and the companies left shortly after the deal was completed, often taking the jobs with them.

In January, the TEF announced that deals with 26 companies totaling $36.25 million had been terminated prior to completion. It did not say what stage the agreements were in at the time of termination or how many people had been hired as a result.

The public rarely hears of such failures of the program and the money isn’t often recouped. The TEF said in a recent report that a total of $76 million has been clawed back or recouped since the fund began; of that total, $48 million was reported as “other repayments,” a category that is not defined.

The historically secretive nature of the TEF, highlighted recently in a report by two University of Texas professors, has created a confusing scenario of economic grants that are funded through legislative action and managed by the governor’s office but with no clear record of the effects of that spending.

Requests for copies of contracts between the state and private companies are often contested by TEF or the recipients of the state grants, leaving even basic information obscured.

Despite those obstacles, documents obtained by The Texas Monitor, along with other news accounts, make it clear that some companies that received grants subsequently cut jobs after satisfying the requirements of the grant program.

Bank of America received $20 million in 2005 and 2006 for locating a financial services center in Richardson, expected to hire 3,876 people.  By 2013, the company announced it was laying off 324 workers in Richardson. In 2014, another 40 were gone. The state reports it got $8 million back, although it provides no further details.

Mortgage lender NationStar in September laid off 72 people in Lewisville several years after pocketing a $560,000 state grant.

Sematech, a nonprofit consortium of semiconductor manufacturers, was given $40 million in 2004 to build a facility in Austin. By 2010, Sematech had been lured north to Albany, N.Y., taking all of its jobs with it.

As part of their agreement with the nonprofit, the state was to come up with another $120 million but fell short. That’s when Sematech took a better deal in New York, which offered a reported $300 million package of incentives.

Even when Texas claws back some money in such situations, publicly available information can be contradictory.

Alloy Polymers bailed on a deal to create 52 jobs near Beaumont after it received $100,000 in TEF money in 2006. It paid back $53,000, state records show, although at the time a spokeswoman for then-Gov. Rick Perry insisted that the money had been fully paid back.

When tech giant Oracle was preparing to open an Austin office with 200 sales and marketing jobs in 2014, the state handed over a $1 million grant. In a report to the Texas Legislature, the TEF acknowledged that the Oracle contract was among the 26 that had been terminated prior to completion. It’s unclear how many people Oracle hired before the deal was terminated. The report made no mention of repayment nor had there been any announcement, prior to the report’s release, that the deal had failed.

Oracle did not respond to a request seeking the status of its deal with Texas.

State records show that the amount returned by companies with failed deals is rarely the full amount received.

“It is pennies on the dollar,” said Andrew Wheat, a researcher for Texans for Public Justice, which released a report on the TEF in 2010 probing the fund’s performance.

Gov. Greg Abbott has vowed to strengthen the ability of the state to get back money it spent on unfulfilled deals. However, John Wittman, a spokesman for the governor’s office, did not respond to an interview request.

When Wheat and his team produced the report in 2010, the agreements were reasonably easy to obtain through public information requests, he said. Those agreements often spelled out how long a company would have to maintain a presence in the state to keep its grant money.

“This was pre-Boeing, though,” he said, referring to the 2015 state Supreme Court decision that ruled contracts between government entities and private companies are not public.

Wheat found that then as now, numbers on job creation — along with capital spending, another of the key performance metrics for a TEF grant — did not add up.

“It’s self-reported and it gets very shady very fast,” he said.

The number of jobs created and money recouped were difficult to ascertain, he said. As in the recent report, Wheat found in 2010 that deals were often announced with a press release and a public pronouncement of new jobs, then amended to lower the job creation figures.

In their quest for records of TEF deals, the UT government professors received some materials from 63 of 164 recipients of TEF funds. Many of their requests for contracts were challenged through letters from the companies to the state attorney general’s office, alleging the records were not required to be made public.

The deals are too helpful politically to be carried out in full transparency, said Nathan Jensen, co-author of the recent study.

“No politician wants to back a big project and hand over incentive money and then announce that the deal isn’t going to work,” he said. “These are very discretionary programs, and each company has a different performance metric.”

Jensen added that, given the potential for politicians ending up with a public relations black eye, it’s not likely that the public will be able to find out how long such grant recipient companies stay in Texas.

“It’s not good PR to have a company that you were so proudly boasting of move their jobs elsewhere,” he said. “And there is a conflict of who is going to enforce a contract, even if it requires a company to stay for a certain amount of time. That generally falls to the same [entity] that is offering the incentive.”

“We do see this difficulty everywhere,” said Kasia Tarczynska, a research analyst with Good Jobs First, a Washington, D.C-based group that compiles corporate financial incentive data in the U.S.  “We don’t expect states to do a perfect job of providing this data, but they should do something to give access to the basic information on these packages. If they are secretive it is worse for them, as people become suspicious of the program.”

Steve Miller can be reached at [email protected].

See also: Bipartisan effort aims to make public-private deals more public

 

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