EDGE Credits and Mitch Roob and Indiana Economic Development Corp. and Tax Abatements and Legislature and Economic Development Incentives and State Government and Tax Credits and Job Creation and Government & Economic Development and Economic Development

IEDC responds to House speaker's public records request

June 22, 2010

Indiana Secretary of Commerce Mitch Roob on Tuesday defended the state's economic development efforts in a response to House Speaker Pat Bauer’s request for public records related to the state’s job-creation figures, which the South Bend Democrat has said he suspects are inflated.

On June 8, Bauer sent Roob a letter formally requesting that the Indiana Economic Development Corp. disclose records about promises companies gave the state in exchange for job-creation incentives. He also asked for records to show whether firms kept their pledges. IBJ.com reported on the public records dustup June 14.

Roob replied with a three-page letter of his own on Tuesday, saying that many local firms and companies headquartered elsewhere have invested in Indiana expansions over the last five years due to the state’s business climate, not incentives. He credits Gov. Mitch Daniels for the pro-business environment, with bi-partisan support of the General Assembly.

Roob wrote that IEDC only uses incentives when other states compete for projects that are also under consideration here. In those scenarios, Roob wrote, Indiana offers incentives worth an average $8,502 per job, which he called the lowest amount possible. Roob wrote that competing states often offer five times that much.

According to Roob’s letter, Indiana sets a ceiling for the amount of tax credits companies are eligible to receive. He then pointed out that Bauer, in 1994, was the primary sponsor of legislation that created the Economic Development for a Growing Economy, or EDGE, tax credit, which is the state’s most powerful and most frequently used economic development incentive.

“The program you helped design protects taxpayers by providing incentives specifically tied to the creation of net new jobs only after new incremental payroll taxes have been generated and paid,” Roob wrote. “Taxpayers are protected because the companies do not receive incentives until they perform. If a project fails in its entirety, the company is not entitled to any of the tax credits it was offered. Conversely, if a company exceeds its job creation projections, no additional incentives are awarded.”

Roob wrote that IEDC determines a company is not in compliance with its incentives deal when it ceases operations, relocates its project outside the state, reduces employment levels after receiving state incentives, or otherwise defaults under a material term of the agreement.

According to Roob, 42 projects originated since 1994 ended up in non-compliance status. As a result, Roob wrote, IEDC has pursued $10.5 million in collections. Attached to the letter was a list of projects and the status of the state’s clawback efforts.

“From 2005 to 2008, the IEDC secured 637 decisions by companies to locate projects in the state, which could have located elsewhere,” Roob wrote. “The companies collectively projected that these decisions would result in 78,688 new jobs. Shortly after we closed the books on 2009, we concluded that 66 of the 637 projects announced from 2005 to 2008 were not moving forward, which accounts for 13 percent of the previously anticipated new jobs. We promptly reflected our revised job projections in our 2009 annual report. While some of these projects commenced operations and partially performed before failing, only $13,032 in tax credits and $123,924.67 in training dollars were expended and are deemed unrecoverable.”

As for the 160 projects IEDC announced in 2009, Roob wrote that the companies have collectively indicated they added 5,280 new jobs, or 102 percent of their projections. In 2010 so far, he wrote, IEDC has secured 89 job-creation commitments from companies who promised to locate 13,141 new jobs in Indiana.

“Our state’s success in economic development is a direct result of bipartisan frugality,” Roob wrote, before inviting Bauer to meet for further discussion in person. “In our service to the citizens of Indiana, however, it is important that we work together to clear up any misconception that the longstanding EDGE tax credit program puts tax dollars at risk.”

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