Economic Development
Corporations
Corruption: |
All the ways they have NOT
worked properly
Return to
Main page
on the Econ Dev Corporation
THE PROGRAM WAS DROPPED IN MICHIGAN
BECAUSE
:
“Taking money from some people and giving it others through a
political process in the name of job creation has been a losing
policy.”
( see more about
the
Michigan
program below )
WHY
GOVERNMENTS FAIL
at economic development
"In short, so-called development programs run by governments are
ineffective and expensive. They don’t work, they’re unfair to
those who pay full freight, cost billions of dollars that could
be better used elsewhere and are potentially corrupting.” ( see
Why Gov’ts Fail )
MONTGOMERY
COUNTY, MARYLAND-
Economic Development Corruption
“A
government official stole $6.7 million from Montgomery County,
Maryland, over a six-year period reports
the Washington Post.
The IRS discovered the crimes,
not Montgomery County. Six years without noticing a bureaucrat
stuffing his pockets with $6.7 million?”…. the chief operating
officer of the county’s Department of Economic Development ….
complex financial structures permitted for “economic
development” activities to hide his long-running thievery.https://www.washingtonpost.com/local/md-politics/ex-montgomery-official-gets-4-years-in-federal-prison-for-67m-embezzling-scheme/2019/02/22/125096bc-3552-11e9-854a-7a14d7fec96a_story.html
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
DUQUESNE, PA
More than $1 million dollars
was taken out of a local city's coffers, just before a change in
leadership, 11 Investigates has learned.Now the city of Duquesne
is working to recover that money, starting with suing its own
redevelopment authority for transferring the money to a private
nonprofit organization……https://www.wpxi.com/news/top-stories/city-suing-its-own-redevelopment-authority-to-regain-control-of-money-leaving-city/714877630
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
NEW JERSEY
FBI, Philly prosecutors investigating N.J.
corporate tax breaks, sources say“FBI
agents have interviewed potential witnesses over the last month,
sources said. Among their areas of interest has been the
development boom in Camden, which has been fueled by $1.6
billion in tax breaks that the state’s Economic Development
Authority awarded to companies there since 2013, according to
one person briefed on the matter.” https://www.inquirer.com/news/new-jersey-tax-credits-fbi-investigation-philadelphia-federal-20190926.html
50+ Organizations Call for Resignation of NJ
Economic Development Board in Response to Whistleblower
Allegations, Audit
“The call comes in the face of growing scandal over the $11
billion in corporate welfare it has pledged to profitable and
politically connected companies"
https://www.insidernj.com/press-release/50-organizations-call-resignation-nj-economic-development-board-response-whistleblower-allegations-audit/
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
CAMDEN, NEW JERSY BEING HURT BY THE TAX BREAKS
the businesses won’t have to pay property taxes on their new
buildings for a decade. And for now, Camden is facing the “most
severe” challenge of raising money of any municipality in New
Jersey
Camden New Jersey has a revenue problem and Tax Break problemas
aren’t helping
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
WESLACO,
TEXAS
Another
charged in association with city of Weslaco scam (McAllen,
Texas)
“Beginning in at least April 2013, Wadhwani allegedly
conspired with others to obtain a development agreement with
favorable terms containing $300,000 in incentive agreements from
the City of Weslaco Economic Development Corporation.”
https://www.justice.gov/usao-sdtx/pr/another-charged-association-city-weslaco-scam
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
WARREN COUNTY
, VIRGINIA
The Entire Warren County Board
of Supervisors indicted 9-24-19
A widening corruption investigation involving current and former
public officials resulted in 14 indictments Tuesday from a
special grand jury in Warren County, Virginia — including all
members of the Warren
County Board of Supervisors. They are up
to 21 million or more .
https://wtop.com/virginia/2019/09/public-officials-charged-in-corruption-probe/
FBI confirms raid of Warren County Economic Development
Authority office (Virginia)
“Last month, the EDA filed a civil lawsuit after
their former director, Jennifer McDonald, and several others,
allegedly misplaced $17 million of the authority’s money. Thomas
Sayre of the Warren County board of supervisors gives his
personal opinion on the matter.”
https://www.localdvm.com/news/virginia/fbi-confirms-raid-of-warren-county-economic-development-authority-office/
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
WISCONSIN
Wisconsin Economic Development Corp. gave taxpayer funds to
businesses that created jobs
in other states, audit finds“MADISON - The state's economic development agency
gave nearly half a million dollars to a company that cut
more jobs than it created and handed out taxpayer funds to
others for jobs in other states, according to a bruising audit
released Friday. In
addition, the Wisconsin Economic Development Corp. didn't
recover more than $400,000 in tax credits and more than $4
million in loans it could have when employers didn't meet the
terms of their taxpayer-funded deals, auditors concluded.”
https://www.jsonline.com/story/news/politics/2019/05/10/wedc-gave-funds-businesses-created-jobs-other-states/1163670001/
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
ST LOUIS
Sheila Sweeney gets probation, fine in Stenger
scandal
“Sheila Sweeney,
the former CEO of the St. Louis Economic Development
Partnership, was sentenced Friday to three years of probation
and was ordered to pay a fine of $20,000 for her role in Steve
Stenger's pay-to-play scandal.”https://www.bizjournals.com/stlouis/news/2019/08/16/sheila-sweeney-gets-probation-fine-in-stenger.html
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
MICHIGAN
“All told, there
is likely more than half a billion that can be saved and spent
elsewhere if the MEDC closes and the state stops its business
subsidies”.
“Taking money from some people and giving it
others through a political process in the name of job creation
has been a losing policy.”
https://www.mackinac.org/what-happens-when-the-michigan-economic-development-corporation-ends
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
NEW YORK
Edc's Recent Challenges Extend Well Beyond Amazon Debacle
The EDC, however,
has missed chances to undercut criticism from the left. It has
been slow to re- examine decades-old incentive programs that
some watchdogs say are tailored to a bygone era when the city
strained to attract private investment.
https://www.crainsnewyork.com/features/edcs-recent-challenges-extend-well-beyond-amazon-debacle
))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
WHY GOVERNMENT FAILS AT
ECONOMIC DEVELOPMENT
“There are few areas of research where I find such widespread
agreement in academic and other studies than those involving
targeted “economic development” programs. In short, so-called
development programs run by governments are ineffective and
expensive. They don’t work, they’re unfair to those who pay full
freight, cost billions of dollars that could be better used
elsewhere and are potentially corrupting.”
https://www.mackinac.org/why-government-fails-at-economic-development
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
THE REALITIES
OF ECONOMIC DEVELOPMENT SUBSIDIES
“The
announcement of a deal between a government and a company
typically includes the promise of jobs retained or created and
millions of dollars in new investment. These benefits are a
politician’s dream because they create immediate positive
headlines. In fact, one public finance expert calls it the
“ribbon-cutting syndrome.”2 Meanwhile,
any negatives, such as companies failing to deliver on their
promises, come to light much later and often receive less
attention. And in some cases, companies even started
construction on a new facility while still pursuing incentives
to locate there”
https://www.americanprogress.org/issues/economy/reports/2018/11/01/457771/realities-economic-development-subsidies/
)))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))))
THE IRS'S POSITION ON EDCS
Relief of the poor and
distressed or of the underprivileged; advancement of religion;
advancement of education or science; erection or maintenance of
public buildings, monuments, or works; lessening of the burdens
of Government; and promotion of social welfare by organizations
designed to accomplish any of the above purposes, or (i) to
lessen neighborhood tensions; (ii) to eliminate prejudice and
discrimination; (iii) to defend human and civil rights secured
by law; or (iv) to combat community deterioration and juvenile
delinquency.
While the phrase "economic
development" does not appear in the regulation, it is through
this language that EDCs are exempt from taxation.
“the IRS's position is
that EDCs must generally exist to help disenfranchised taxpayers
in blighted communities. EDCs are well-advised to be aware of
both the regulatory foundation for an exemption and the various
IRS authorities on EDCs”
The IRS stated in an informal memorandum:
The theory behind recognizing economic development corporations
as exempt under IRC 501(c)(3) is that although services are
provided directly to for-profit businesses, the ultimate good
received by the general public outweighs the private benefit
accorded to the direct beneficiaries. In light of this, the
most important factual determination for the specialist to make
is whether the activities of the incubator serve a public rather
than a private interest consistent with Regs.
1.501(c)(3)-1(d)(1)(ii). . . .
Merely targeting assistance to an economically depressed area is
not sufficient to overcome the private benefit derived by
non-charitable business beneficiaries
intended to serve as instruments to accomplish charitable
purposes.
In developing economic development corporation cases under IRC
501(c)(3), the emphasis should be in having the organization
provide information that shows the targeted area in which it
will operate as one which is economically depressed. Federal,
state or local designations of an area as depressed, or studies
(including maps) are helpful. The organization also should be
able to show its specific criteria used in determining whether
businesses are eligible for its assistance and how such criteria
relate to furthering public rather than private interests. [IRS
Exempt Organization CPE Text, "Economic Development
Corporations: Charity Through the Back Door" (1990), available
at tinyurl.com/y967zwrg]
The IRS's informal
memorandum also listed three factors for evaluating whether an
EDC primarily accomplishes charitable purposes despite the
element of private benefit: (1) whether the activity aids
economically blighted or depressed areas; (2) whether the
benefit is conveyed upon a disadvantaged group, e.g., unemployed
or minority groups; and (3) whether the activity is necessary to
ensure that a business remains in or locates to the economically
blighted area.
https://www.thetaxadviser.com/issues/2018/oct/economic-development-corporations.html
Return to
Main page
on the Econ Dev Corporation
tHE NEWSLOOP
Sign up here to receive our
periodic Newsloop updates
on issues that matter to us all
Send your name &
address to
lel@abingtoncitizens.com
please ask your Commissioner to
video and air this meeting
We
welcome your comments
to share either anonymously or with your name attached with
your fellow Abington residents. Send any
updated
information, comments or questions to:
lel@abingtoncitizens.com
|
