is No. 3 in the nation for “megadeals” — massive government subsidies to
corporations that are meant to encourage in-state job creation — but a
new report found many of the deals rarely produce the kind of jobs initially
touted by public officials.
In the Good Jobs First report
released on June 19, Ohio tied with Texas as No. 3 for megadeals,
which Good Jobs First defines as subsidies worth $75 million
or more. Michigan topped the list with 29 deals, followed by New York
no secret the deal with Convergys went sour for Cincinnati. In December 2011,
the company, which provides outsourced call center services, agreed to pay a $14 million reimbursement to the city because the company’s
downtown employment fell below 1,450 — the number of jobs required under
the initial deal.
Good Jobs First report finds this kind of failure is not exclusive to
the Convergys megadeal or Cincinnati; instead, the report argues that
megadeals are expensive and often fail to live up to
their high costs, some of the deals involve little if any new job
creation,” said Good Jobs First executive director Greg LeRoy in a
statement. “Some are instances of job blackmail, in which a company
threatens to move and gets paid to stay put. Others involve interstate
job piracy, in which a company gets subsidies to move existing jobs
across a state border, sometimes within the same metropolitan area.”
For the jobs that are kept and created, states and cities end up paying $456,000 on average, with the cheapest deals costing less than $25,000 per job and the most expensive costing more than $7 million per job.
report finds the number of megadeals per year has doubled since 2008,
on top of getting more expensive in the past three decades. Each
megadeal averaged at about $157 million in the 1980s, eventually rising
to $325 million in the 2000s. The average cost dropped to $260 million
in the 2010s, reflecting the price of deals made in the aftermath of the
Great Recession, which strapped city and state budgets.
subsidy awards are getting out of control,” said Philip Mattera,
research director of Good Jobs First and principal author of the report,
in a statement. “Huge packages that used to be reserved for ‘trophy’
projects creating large numbers of jobs are now being given away more
Ultimately, the report aims to increase transparency for such subsidies, reflecting an ongoing goal for Good Jobs First. To do this, the organization has set up a database (www.subsidytracker.org) that anyone can visit to track past, present and future subsidy deals.
But the report claims much of this work should already be done by the Governmental Accounting Standards Board (GASB), which “has been long-negligent in failing to promulgate regulations for how state and local governments should account for tax-based economic development expenditures,” according to a policy sidebar from LeRoy. “If GASB were to finally promulgate such regulations — covering both programs and deals — taxpayers would have standardized, comparable statistics about megadeals and could better weigh their costs and benefits.”