"Creating More Job Announcements Than Real Jobs": I couldn't have said it better myself. Oops, I did. And well before the conservative-leaning folks at the Mackinaw Center, and editors at the Lansing State Journal decided to jump on the bandwagon and actually wonder out loud how in the names of Charles Ponzi and Bernie Madoff it's possible to spend hundreds of millions of tax dollars on "job creation" programs and have a net loss of 750,000 jobs in our state.
Here at A2Politico, I've been questioning the claims of out-sized "job creation" and "job retention" "successes" made by the good old boys (and girls) at the local "job creation" front, Ann Arbor SPARK, for the past year. In response to this A2P post, a SPARK representative suggested in an email that I learn more about the good work SPARK does. I'd love to, so long as it includes recent 990 forms filed with the IRS, because I suspect folks at SPARK have been fibbing to Uncle Sam concerning the actual number of jobs created and retained.
On its 2008 990 form, SPARK spinmeisters told the IRS that the entity had created 2,033 new jobs and helped retain 1,561 jobs. Yeah. Right. SPARK's CEO Mike Finney signed the 990 form. I'm hoping the IRS gets nosy and asks for documentation. I suspect what we'll see is something very similar to what Katherine Yung uncovered.
In a May 2010 exposé the Detroit Free Press revealed the fact that the Michigan Economic Development Corporation's (MEDC) 21st Century Jobs Fund program, the first of two major initiatives under the 10-year, billion-dollar program, created only about a third of the actual jobs promised by recipients of Jobs Fund money. The Freep reporter writes, "only 1,147 direct jobs had been created, about 33 percent of the jobs promised, according to a report from the MEDC." Reporter Katherine Yung goes on to pen the knock-out punch, "Excluding jobs created by the research projects, most of which are temporary, only 935 direct jobs have been added." The 21st Century Jobs Fund was created in 2006.
Three months after the Freep piece was published, the brave editors at the Lansing State Journal decided it was finally safe enough to editorialize on the boondoggle. Since 2006, editors and reporters at the Gannett-owned newspaper have worked tirelessly to look the other way. Fortunately for the 40,000 subscribers who pay to read AnnArbor.com, the Three Musketeers who run AnnArbor.com (Matt Kraner, Tony Dearing and Laurel Champion—Treasurer of SPARK's Executive Committee, and a board member since 2006) are not caving into journalistic peer pressure to actually investigate or report on the clearly outlandish "job creation" claims, or ask nosy questions about the spending of the local MEDC love-child, Ann Ann SPARK.
In a February 2010 post AnnArbor.com's business reporter, Nathan Bomey, did little more than re-post a press release from SPARK touting the number of jobs the outfit had "created."
When asked by readers to substantiate up SPARK's claims, Bomey replied thusly, "This story was not meant to take a deep dive into SPARK's claims. That may be good idea for the future project, however."
Ann Arbor SPARK is diverting money from our local public schools through a local LDFA financing arrangement set up in 2006. While the money diverted from schools should, in theory, be refunded to the District by the State of Michigan, the fact is that the State is not keeping up its end of the bargain. So, while Ann Arbor Public Schools spends less on instruction, students and their parents are asked to put up with crowded classrooms, expected to pay for supplies, field trips, and bus rides to outings, and while dedicated teachers buy their own classroom materials, between 2006 and 2008, the handful of employees at Ann Arbor SPARK spent over $210,000 on a web site and IT services, $953,000 for office space (2007 and 2008), and $109,616 on travel, meals and entertainment.
And "created" zero jobs that wouldn't have otherwise been created, according to what the LDFA's Richard King told Ann Arbor City Council members in March 2009. As I wrote in November 2009:
Who could want less for more? It’s a Bernie Madoff Special—no actual job creation in return for millions in public money. How long will it take the public to realize that they’re being robbed?
There's a possible explanation as to why Nathan Bomey hasn't "dived" into SPARK's business practices or its job creation/retention claims. Detroit Freep reporter Katherine Yung writes in her May 2010 piece:
Four years after Michigan launched the 21st Century Jobs Fund to diversify its economy and create jobs, the first two major initiatives under the 10-year, billion-dollar program have generated mixed results so far. A handful of small companies that received loans look promising, a handful have failed and only a small number of direct jobs have been created. Venture capital firms outside the state that were awarded millions have been slow to invest in Michigan businesses. And the majority of the grants, loans and investment dollars went to recipients in one city: Ann Arbor.
In a comment in response to his February 2010 post, an AnnArbor.com reader cuts up Bomey's food for him and gives us an idea of what a little concerted digging could reveal:
I read the full [SPARK] press release, and did a little digging. My admittedly shallow research (plugged a couple of business names into the site's search mechanism) pulled up a story showing that Atwell-Hicks was evicted from one Ann Arbor site, moved its headquarters to Southfield, reorganized, and opened a smaller Ann Arbor office than previously existed. SPARK puts Atwell-Hicks on the list of companies that "located and expanded" in Ann Arbor during the last year. Does using SPARK money to move its headquarters out of Ann Arbor but retain a smaller Ann Arbor office count as a SPARK success story? http://www.annarbor.com/...
Also, I looked up Edwards Brothers, and a recent article indicates that revenues were down in 2009, and that Edwards Brothers lost employees during 2009. So how did Edwards Brothers make the list? http://www.annarbor.com/...
Just wondering why we would be giving taxpayer money to long-time Ann Arbor companies who end up on a SPARK report as a "success story" despite the evidence to the contrary on this website. Is there any other way to get additional information about SPARK's "success stories?
In a September 3, 2010 piece, the news hounds at the Lansing State Journal wrote in an editorial, "An April report from the Michigan Auditor General's Office indicated that many recipients of the tax credits were not providing sufficient documentation of their efforts to create jobs, retain jobs or build new capital projects in the state."
The first time I questioned the claims of the MEDC-love child Ann Arbor SPARK was in 2008. I pointed out that the job creation fantasies—fairytales repeated by SPARK Board member and Ann Arbor Mayor John Hieftje during the past election—had never been verified by an independent agency. At the time, in it's 2008 annual report, Ann Arbor SPARK officials, including gubernatorial candidate Republican Rick Snyder among others, were taking credit for having "created" and "retained" thousands of jobs.
In response to the growing scrutiny, the executive committee of the Michigan Economic Development Corporation publicly cried foul over "unwarranted criticism" of the agency and warned that "political in-fighting" could hurt the state's business investment climate. But the criticism of the state's chief "jobs" department is not only warranted, it's overdue.
The Mackinaw Center recently had this to say about the MEDC's claims that criticisms of its efforts were unwarranted.
The MEDC's letter specifically references the MEDC's Michigan Economic Growth Authority tax credit program as evidence of effectiveness, claiming the program is "enabling us to compete successfully against other states and countries. ..." The officials cite no supporting evidence. The claim, however, is at odds with the four scholarly analyses of MEGA that have been produced since its inception - two by the Mackinac Center, one by the Anderson Economic Group and one by the Upjohn Institute.
A 2005 study by the Mackinac Center showed that MEGA had no impact on per-capita personal income or job creation. We did find that for every $123,000 in tax credits offered, one construction job was created, but 100 percent of those jobs disappeared within two years.
Last year, we used a different modeling technique to isolate MEGA's effects from the larger economy and found that for every $1 million in tax credits earned in a county there was an associated loss of 95 manufacturing jobs.
The Anderson Economic Group study, published in March and funded by the Michigan Education Association, found that MEGA and two similar state programs cost the state 25,000 jobs and $85 million in tax revenue annually.
The Upjohn study, published in April, was by far the most favorable study done. Even so, the authors' claim that MEGA has created 18,000 jobs since 1996 totals just 1,600 a year on average. If this is the MEDC's idea of success, we would hate to see their definition of failure.
In March 2010, the MEDC offered a refundable tax credit deal to a convicted felon out on parole. While the state would not allow embezzler Richard A. Short to possess a credit card, the MEDC placed him on stage with Gov. Jennifer Granholm to celebrate his $9.1 million subsidy deal.
In April 2010, the state Auditor General chastised the job agency for handing out MEGA tax credits to companies that had not earned them. During later testimony before a House committee, MEDC CEO Greg Main acknowledged that for its first 10 years, the MEDC did not audit the businesses that were collecting tax credits.
To date and to our knowledge, MEDC officials have not refuted a single fact in these critiques. Since its creation, the MEDC has spent hundreds of millions of dollars in appropriations and tax expenditures while Michigan has lost 708,500 jobs and led the nation in unemployment. Yet they have the temerity to describe public discussion of these failings as "unwarranted."
The MEDC is a highly secretive organization that in recent years has become even less transparent. The Mackinac Center has documented many of its efforts to delay, deflect and obfuscate. Why hide? Because the MEDC is creating more job announcements than real jobs.
The MEDC model needs to be closely evaluated and, obviously, either discontinued or seriously re-tooled with an emphasis on absolute accountability. Each of the ten Smart Zone entities created under the auspices of the MEDC, including Ann Arbor's and SPARK, need to have their claims substantiated and their finances scrutinized. Michigan's taxpayers deserve no less. It's time to stop robbing the public schools to pay for meals, entertainment and lush office space for a handful of people who spend their time and millions of our tax dollars churning out fiction disguised as press releases and annual reports to justify their own employment, salaries and benefits, not to mention providing "job creation" bullet points for local and state politicos to use on their résumés.