Category Archives: Economic.Development

Taking the P3 Route to Reinvent Downtown

Source: Charles Renner, Public Management, July 27, 2017

… The past decade has seen a steady increase in the use of P3 structures, and 2016 was something of a watershed year with multiple high-profile projects coming online that address a variety of public needs, including a $1 billion water infrastructure project servicing San Antonio, Texas, the site of ICMA’s 2017 Annual Conference. In each case, the public sector identified a future need aimed at supporting the attraction of mobile talent, evaluated the limits of going it alone, engaged a P3 partner, and found leadership to achieve results. …

A Sioux Falls Renaissance … A key part of the updated Downtown 2025 Plan is increasing the CBD’s available commercial and residential real estate. To help accomplish this, Sioux Falls opted for a P3 solution to design, build, operate, and maintain a mixed-use facility with retail, office, and residential uses that will ultimately increase the density of downtown. …

Nebraska Innovation Campus and P3 … Located adjacent to the University of Nebraska-Lincoln, NIC is a research campus designed to facilitate new partnerships between the university community and private businesses. …

San Antonio’s Vista Ridge … As a result, the San Antonio Water System (SAWS) crafted the vision of a 142-mile water pipeline project called Vista Ridge that will deliver enough water for some 162,000 new families by 2020, providing a 20 percent increase in water supply. … SAWS opted for a P3 undertaking in order to engage private equity and much needed development expertise in securing and constructing a resource delivery project that requires roughly $1 billion in investment, thousands of private water commitments, along with the 142 miles of built-to-last water pipeline. …

With New P3, Delaware Partially Privatizes Economic Development

Source: Governing, August 16, 2017
 
Delaware’s economic development efforts are about to undergo a major transformation.  Gov. John Carney signed a bill Monday that replaces the Delaware Economic Development Office with a public-private partnership partially run by some of the state’s largest companies.  “This is a starting point,” Carney said. “The hard work starts now and that’s working together in partnership … to market our state more aggressively and think out of the box about how to develop our entrepreneurial economy.”  Tentatively called the Delaware Prosperity Partnership, the new nonprofit will be responsible for recruiting new employers to the state, supporting the state’s nascent startup community and investing in workforce development programs. …

A unanimous House votes for oversight bill vetoed last year

Source: Mark Pazniokas, CT Mirror, May 17, 2017
 
Connecticut’s legislators acted Wednesday for the second time in two years to require independent oversight of the millions of dollars in grants, loans, tax credits and other economic incentives extended to business, often a political flashpoint as states compete to attract and keep jobs.  With support ranging from organized labor to a conservative think tank, the House of Representatives voted unanimously to approve and send to the Senate an updated version of a measure Gov. Dannel P. Malloy vetoed last year as “unnecessary and unwarranted.” … Rep. Jason Rojas, D-East Hartford, the co-chair of the Finance, Revenue and Bonding Committee, said the bill requires the legislature’s Auditors of Public Accounts to examine the Department of Economic and Community Development’s entire portfolio of aid programs and report to the legislature. Their findings will be the subject of a public hearing every year. … The legislation addresses policy and political concerns of legislators. Questions over economic aid, especially when some of the recipients made headlines by subsequently laying off employees, had posed a political liability for some and, perhaps, an opportunity for others. …

Some States Spend Billions on Economic Tax Incentives for Little or No Return

Source: Eric Pianin, Fiscal Times, May 7, 2017
 
By one estimate, state and local governments spend at least $45 billion a year on tax breaks and other incentives to lure or keep job-producing businesses and plants in their jurisdictions. … But while these tax credits, exemptions, and property tax abatements are popular tools to create jobs, attract new businesses and strengthen the local economy, they also constitute high-risk investments that can squander billions in tax dollars without always paying off.  A new study by the Pew Charitable Trusts offers provides a wide-ranging look at the way many state officials handle these costly programs in recent years.  While the ultimate success of these incentives often hinges on good planning by state officials and follow-up measurements of the impact and efficacy of the programs, Pew researchers found that many states have fallen well short of what was needed.  Indeed, the study found that 23 states either lack a smart evaluation policy or have had a policy in place for five or more years that has not proven effective in measuring impact or adequately informing state lawmakers and other policy makers of what needed to be done. …

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State to get $1.5 million in EB-5 settlements

Source: Jonathan Ellis, Argus Leader, March 15, 2017

The state of South Dakota on Tuesday announced the settlements of two civil lawsuits against a company that managed the federal EB-5 Immigrant Investor Program on behalf of the state. The settlements with the South Dakota Regional Center will result in the company repaying approximately $1.5 million to the state. … The lawsuits stem from the scandal over management of the EB-5 program in South Dakota. The federal EB-5 program allows wealthy foreign investors to acquire green cards to the United States for investing $500,000 in qualifying projects that increase economic development in rural or impoverished areas of the United States. … Under former Gov. Mike Rounds, the EB-5 program was run through the Department of Tourism and State Development by a state employee named Joop Bollen. In 2009, Bollen quit his job with the state and signed a contract with the state to manage EB-5 projects through his company, SDRC. In 2011, the former head of Tourism and State Development, Richard Benda, went to work for Bollen and SDRC. In the spring of 2013, state officials learned that the U.S. Department of Justice was investigating the administration of the EB-5 program in South Dakota. Benda committed suicide that October as state authorities moved to indict him for directing $550,000 in state funds to SDRC. … Last month, Bollen pleaded guilty to one felony count for diverting money from an account to protect the state from potential liability claims. … Tuesday’s settlements don’t end litigation surrounding the EB-5 program. …

Labor agreements impede shared services, cities say

Source: Rob Ryser, News Times, March 23, 2017
 
… The inability of willing neighbors to share services when it makes sense for both sides is part of what keeps local governments from finding more efficiencies, Boughton said, and one reason he was in the state capital this week. Boughton spoke in favor of legislation that would waive certain restrictions in municipal labor contracts when towns and cities make agreements to share services. … The bill, which was extracted from a larger report containing recommendations by the statewide Connecticut Conference of Municipalities, was the subject of public hearings this week in the state legislature’s Planning and Development Committee. … In Danbury, Boughton and the City Council have been exploring partnerships with neighboring Putnam County – a six-town region of 100,000 people across the border in New York, and with Waterbury, the state’s fifth-largest city. Neither partnership needs the legislation pending in Hartford to proceed. The agreement with Putnam County involves a potential deal to provide city sewer service to a Brewster-area commercial zone, and the potential to capitalize on mutual economic interests such as infrastructure projects, recreation initiatives and cultural events. The proposed partnership with Waterbury aims to build an economic development zone along the Interstate 84 corridor, anchored by the two cities. …

House votes to abolish one of Gov. Rick Scott’s prized agencies, Enterprise Florida

Source: Jeremy Wallace, Miami Herald, March 10, 2017

The Florida House shrugged off political threats from Gov. Rick Scott and stuck a dagger into the heart of his political legacy on Friday. By an 87-28 vote, the House voted to kill Enterprise Florida, the agency Scott has relied on to hand out tax breaks to businesses in exchange for them creating jobs — a central promise in his two campaigns for governor. … With 87 votes backing the Enterprise bill, the House would be in a position to override a Scott veto because the bill passed by more than a two-thirds majority. … But the Senate still needs to pass its own bill. So far, it hasn’t. … It’s a remarkably bad week for Enterprise Florida. On Monday, the agency’s CEO, Chris Hart IV, quit abruptly without much explanation. He was only on the job since January. It’s the second time in nine months that its CEO has left. … Eliminating Enterprise Florida — a quasi-private government agency created in the 1990s to serve as a commerce department — has a long way to go. Both chambers have to pass identical bills for it to pass the Legislature and end up on the governor’s desk. Even then Scott would seemingly have the last say in vetoing the idea. … Jenne said even if the Senate doesn’t take up the bill, Enterprise Florida is vulnerable. He said in a few weeks the House and Senate will start working on a 2017 budget and the House is almost certain to put no money in the budget for Enterprise Florida, regardless of whether Renner’s bill moves forward. That will set up a budget showdown that could still put a spending plan on Scott’s desk that would de-fund what Jenne called Scott’s “policy baby.” …

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Another Scandal at Florida’s Privatized Development Agency
Source: Kasia Tarczynska, Clawback blog, February 28, 2014

For the followers of Enterprise Florida (EFI), another scandal at the organization should not come as a surprise. Television station CBS12 in Palm Beach discovered this week that EFI, the privatized “public-private partnership” responsible for recruiting companies to the state, has spent thousands of dollars on entertaining site selection consultants.

State-run agency accused of abusing tax payer dollars
Source: Michael Buczyner, CBS 12 NEWS, February 25 2014

CBS 12 News spent hours reviewing 20 months worth of spending at Enterprise Florida and uncovered thousands of dollars spent on sky boxes, steakhouses and at fancy hotels. Tens of thousands of dollars were spent on credit cards. We weren’t provided the detail on what was purchased. Our investigation found leaders at Enterprise Florida, the state’s public-private economic development machine, spent more than $21,000 at Yankee Stadium in New York. They also paid a visit to Cowboys Stadium in Arlington, TX where they dropped more than $7,100. The stadium tour also stopped off in Atlanta, GA for a cost of $4,400.

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When It Comes to Tax Incentives, How Transparent Is Your City?

Source: Mike Maciag, Governing, March 13, 2017
 
When it comes to tax breaks for economic development, following the money has never been easy.  Thanks to new accounting rules, states and localities have to disclose how much revenue they lose to such deals. But a new report finds that most of the nation’s largest local governments fail to reveal other basic information online, like what companies are benefiting, how much money they receive or whether they deliver on promises to create jobs. … Just 35 of the 85 economic development programs identified the companies receiving incentives, while only 19 listed dollar amounts paid to or claimed by businesses. … Researchers also assessed programs’ disclosure of jobs and wage data — a crucial component in evaluating the return on investment. Only 21 of the 85 programs reported numbers of pledged jobs, while 18 disclosed actual jobs created. Even fewer local governments reported wage data for recipient companies. Meanwhile, 27 jurisdictions — just over half of those reviewed — failed to disclose basic information about any of their incentive programs. … Compared to state governments, large localities have made significantly less progress in promoting online transparency. … The release of the report comes at a time when governments are preparing to begin disclosing long-sought-after data around incentive programs in their annual financial reports. The Governmental Accounting Standards Board recently adopted a rule mandating reporting of aggregate economic development program costs. However, the rule doesn’t require disclosure of totals specific to individual deals or more detailed information. …

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Effort to privatize economic development questioned

Source: Judith Crown, State Journal-Register, February 18, 2017

The Rauner administration’s year-old move to privatize state economic development has been rocked by the sudden resignation of its CEO, a departure underscoring swirling questions about its effectiveness, transparency and efficiency.  Even before the departure announcement in late January by Jim Schultz, a veteran venture capital investor who said he was returning to the private sector, Intersect Illinois had come under fire for disclosing little about how it operates, its goals and how it planned to measure success. Watchdog groups also raised concerns about whether Intersect was adding to bureaucracy rather than reducing it. … Intersect, launched by Gov. Bruce Rauner in early 2016, followed similar privatized initiatives in Wisconsin, Indiana, Michigan and Ohio. Many of those efforts quickly came under attack for a lack of transparency as well as controversies ranging from exaggerated job creation claims to cronyism. With the state’s economic development efforts now at a crossroads, a looming question is whether Rauner remains committed to privatization and if Intersect will continue as it has been or change course. Intersect’s structure and dependence on private capital presented the potential for conflict of interest. It raised capital from 41 private and public organizations in the state, but didn’t publish the amounts raised or disclose what, if any, benefits are conferred on its contributors. Schultz told Crain’s the group raised or had commitments for $7 million, which would last it for a couple of years, and already had spent $1.6 million on establishing a Chicago office, hiring a staff of six and launching a marketing campaign.

… Illinois, where Republican Rauner assumed power in 2015, is somewhat late to the game when it comes to public-private partnerships for economic development. A wave of such initiatives took hold in states after elections in 2010, ushering in new Republican governors pledging to make their governments run more like businesses. Scandals were quick to mount. Some states exaggerated job-creation claims, misused taxpayer funds, paid questionable subsidy awards, or created appearances of insider dealing and conflicts of interest, according to a 2013 study by the Washington, D.C.-nonprofit Good Jobs First, which promotes corporate and government accountability in economic development. … But Rauner, a wealthy private equity investor before turning to politics, was undeterred. He made privatization a centerpiece of his campaign, arguing that the state suffered from the lack of a pro-business mindset. … But with the governor’s backing, Intersect is in a position to set the economic development agenda and recommend which businesses should receive incentives. Disclosure of incentives has been spotty. … Critics of privatization, largely Democrats, are skeptical of Intersect. They point to a lack of transparency about the donors, the initiatives underway and the decision making process. They note that Intersect is adding another layer of bureaucracy since decisions to use public dollars as incentives still must ultimately return to DCEO for review and approval. …

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Rauner: No plans for mass privatization of state jobs
Source: Doug Finke, Journal Star, February 3, 2017
 
In yet another email to state workers in the process of voting on whether to authorize a first-ever strike, the Rauner administration said it has no plans for mass privatization of state jobs. … Terranova went on to say that the administration’s proposal “has offered protections against subcontracting that borrow from AFSCME’s contracts with other public employers. These protections give state workers a more meaningful role in subcontracting discussions, potentially leading to better outcomes for employees.”  Terranova said those protections were not part of AFSCME’s last contract with the state. Details of the administration’s offer can be found at the TeamIllinois website.  AFSCME said Terranova is spreading “misinformation.” Spokesman Anders Lindall said there were standards in the old contract that had to be met to outsource jobs. The last, best and final offer from the administration does away with those standards. … And in late January the PSC, whose members are appointed by Governor Andrew Cuomo, decided to allow Suez to ‘recover’ more than $50 million for something it did not build. Because of the Rockland Water Coalition’s efforts, the state required the company to implement stronger conservation measures. …

Donald Cohen: Privatization not the answer to budget woes
Source: Donald Cohen, State Journal-Register, June 5, 2016

When Gov. Bruce Rauner said during February’s budget address that Illinois taxpayers need “more value” from government, no one was surprised. As a private equity executive prior to taking office, he measured value in terms of cash flow and layoffs. … He’s pushing to sell off assets, like the Thompson Center. Despite the massive failure of the Illinois Lottery privatization, he continues to search for another private vendor. He recently all but privatized the Department of Commerce and Economic Opportunity by forcing it to work with a not-for-profit corporation he formed to recruit businesses. And he’s even trying to remove the modest protections against bad privatization deals from the state’s contract with its largest employee union. This flies in the face of all the evidence against privatization, let alone against outsourcing without transparency and oversight. … With a long history of insider political deals, Illinois taxpayers should be skeptical of more privatization. As the budget impasse continues, they deserve to know the terms of any deal that will put millions in the pockets of private corporations by cutting and outsourcing middle class, public jobs. Illinois should take steps now to ensure greater oversight of any privatization of assets and services, and the Governor should reverse course and lead that effort. …

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St. Paul City Council questions return on investment in Greater MSP

Source: Jessie Van Berkel, Star Tribune, January 12, 2017

The city of St. Paul gives Greater MSP $125,000 each year to work on regional economic development. But when the City Council heard Wednesday what that has paid for, some members questioned whether the city had been getting its money’s worth. Greater MSP, a public- private partnership, says it has been involved in the creation of 70 new jobs in the city over the past five years, and has helped retain 1,030 jobs. Council Member Rebecca Noecker called the new job numbers “shockingly low,” noting it equates to $9,000 contributed for each job added. … The city’s investment helps pays for the work of 21 employees at Greater MSP, CEO Michael Langley said, and they are going to redouble their efforts to make sure St. Paul gets what it needs. The public-private partnership headquartered in St. Paul is mostly funded by private companies, but Greater MSP draws about a fifth of its $6 million budget from local governments. Its 40-member board of directors includes St. Paul Mayor Chris Coleman, Minneapolis Mayor Betsy Hodges and the CEOs of many companies in the Twin Cities area. St. Paul’s meeting with Greater MSP comes a month after Minneapolis dropped its 2017 funding for Greater MSP from $125,000 to $10,000. The city opted to instead use the money for a new employee who would work on business retention and expansion. Tolbert and Noecker said St. Paul also could do that if Greater MSP is not helping them get the jobs they want. … Greater MSP staff notes on Wednesday’s presentation, obtained by the Star Tribune, encouraged representatives to “be impressive, but not slick. The council has concerns about how we spend our $$.” The notes said some council members think the group spends lavishly, and advised Greater MSP representatives not to talk about the Ryder Cup or Minnesota Orchestra’s European Tour, which Greater MSP staff attended. The note was attributed to St. Paul’s Planning and Economic Development Director Jonathan Sage-Martinson. After Wednesday’s meeting, Sage-Martinson said he advised Greater MSP to talk about projects that were a St. Paul priority. He added that the Ryder Cup generated a lot of visitors to St. Paul. …