Friday, March 25, 2011

The Devil Is Always In The Details

The spark for today's blog entry must be credited to Zach Adamson, one of the candidates for City-County Council At-Large. Zach posted a link to a WRTV investigative report by Kara Kenney on Facebook.

Kenney piece, "Indianapolis' Job Figures May Not Always Add Up", aired last night.

Kenney begins:

Indianapolis' job commitment claims may be more wishful thinking than reality after a six-week investigation of claims made in January by Mayor Greg Ballard and Develop Indy, the city’s economic development arm.

In January, the city announced that it had secured 8,737 new job commitments from 73 companies in 2010, touting the number as the highest number of new job commitments in a decade.

6News' Kara Kenney found that less than a quarter of the commitments are enforceable.

Twenty-two percent of the now 72 companies have a written agreement with Indianapolis to receive tax breaks, meaning that the city can hold the company accountable if the jobs don't come to fruition.

That means that 1,634 of the more than 8,700 job commitments have a written agreement with Indianapolis. Twenty-two of the 72 companies have no written agreement at all with the city or state.
Kenney interviews Mayor Greg Ballard and Develop Indy's President, Scott Miller. Develop Indy is the new name for the old Indianapolis Economic Development, Inc. Just last year, this group was the beneficiary of $3.5 million of tax money given to them by Mayor Ballard. This was part of the $5 million "clawed" back when Navistar did not live up to its job creation targets agreed to as part of its property tax abatement agreements (see "Abatements - Scary Loopholes Need Closing"). Also, Develop Indy pays for Mayor Ballard's numerous trip abroad.

The written agreements that Kenney refers to, are property tax abatement agreements. An abatement is a deal where the City forgives a fraction of the property taxes a company owes for a fixed period of time (usually between 5 and 10 years). These agreements anticipate that the company will be investing new money in new real estate or buildings and/or creating new jobs. The increase in value of the property due to the company's new investment, is the target of the abated taxes. For example, if Company XYZ intends on adding a building to its corporate campus, then they can ask the City for an abatement on the taxes that will be due on that one new building. The City and Company XYZ would agree to specific targets for the amount of money to be invested and the number of new jobs to be created.

The City's standard abatement agreement contains what is called a 'clawback clause'. This clawback clause says that if Company XYZ does not invest the agreed to amount of money on the new building and/or it does not create the targeted number of new jobs, then the City can get the owed taxes back as a penalty.

Unfortunately, as far as I am concerned, sometimes the City does not insist that new jobs be added, and instead clings to the number of old jobs to be retained.

From time to time, Develop Indy will send a representative to a City Council committee meeting, to tell the Councillors just how rosy the future looks for Indianapolis. They cite the number of jobs created in the recent past and the prospects for job creation in the future. They almost never report on the number of jobs lost, so the Council does not get a good look at where the City really stands and what its true prospects are. This is more than unfortunate, given that Council actions need to be grounded in reality and supported with accurate and fulsome data.

Kenney has waded into the obtuse world of jobs numbers. Sometimes the Mayor refers to new jobs promised, which seems legitimate. Sometimes its new jobs promised plus jobs promised to be retained. Then, you add Develop Indy's numbers of jobs discussed - not promised, and you have the very fuzzy math that adds up to fictional forecasts of Indy's job prospects.

Kenney also interviews Morton Marcus who has the most intelligent things to say:
"Public officials want to make themselves look good. They want to make their administration look good, and they're going to use every device they can, short of outright lying," Marcus said. “The numbers tend to be, I wouldn’t say imaginary, but hopeful. Sort of like a Christmas wish list.”
“I think the public should be careful about believing every press release that comes out of the mayor’s office or governor’s office, no matter who the mayor is or governor is,” said Marcus.

When it comes to jobs numbers, especially in this current economic recession, it sure would be nice to have an accurate picture of where we actually stand presented once in a while; and, not fictitious numbers all the time.

[edited to add: while I was writing this up, Paul Ogden posted on the same Kara Kenney report over at OgdenOnPolitics]

1 comment:

Anonymous said...

Morton Marcus was being nice. I just call it lying. Ballard's use of the word paradigm to me just referred to the fact that the numbers are bogus, made-up B.S. - are now and always have been and always will be. The people struggling to find jobs know that the numbers are bogus. The numbers are intended to fool the people who are working and barely paying attention - except to the headlines.

Well, that short video exposed a lot that many of us have known about Ballard for a long time. Now quite a few more people know.

Tax abatement is nothing more than a game that is played by site selection firms and the various agencies, with supposedly top secret information - blah, blah, blah. Some of the stuff these people propose is so off-the-charts and stunning, it is beyond laughable.