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Missouri hopes high job incentives pay off

Saturday, January 28, 2012 | 5:09 p.m. CST

JEFFERSON CITY — Missouri economic development officials authorized a record amount of job-creation tax breaks for businesses in 2011, ratcheting up state incentives even as new data shows that past business enticements are falling short of their anticipated jobs.

The Missouri Quality Jobs program offered nearly $80 million of tax breaks to 57 projects last year, according to figures obtained under an open-records request by The Associated Press. Both figures are records for the state's main job incentive program, which began in 2005.

Gov. Jay Nixon's administration says the figures are evidence that Missouri's economy is "turning the corner" from a recession that pushed the state's unemployment rate over 9 percent for nearly two years. The state's estimated unemployment rate fell to 8 percent in December, even though Missouri had the second-largest job loss in the nation that month.

"With prospects improving, more companies are considering expansion and the creation of new jobs, and it is fortunate that the state has a program like Quality Jobs to assist in their growth," said John Fougere, a spokesman at the Missouri Department of Economic Development.

Businesses approved for the Quality Jobs program in 2011 told the state that they anticipate creating 6,451 jobs in the coming years. The state pays out tax breaks only after those jobs actually are created.

The Quality Jobs program requires companies to create a minimum number of jobs — ranging from 10 to 100, depending on the type of business — within two or three years of being approved for the program. Once they hit that job threshold and also meet wage and health-insurance requirements, businesses then have three to five years to claim their tax breaks, which are awarded on a per-job basis.

Data from the Department of Economic Development show that many companies have yet to make good on their past promises to hire scores of employees.

For the 167 projects authorized from 2005 through 2010, businesses have reported creating just 38 percent of the jobs they had anticipated when applying for the program. They have been issued less than $83 million of the $315 million of tax credits they were originally authorized to receive.

Those figures are likely to increase in coming years, because many businesses still have time left before their program deadlines. But it appears unlikely that the actual jobs will come anywhere close to the original projections. Businesses approved for tax breaks in the first four years of the Quality Jobs program have reported hiring only a little over half of the 12,529 employees they had projected.

That kind of success rate has caused even some business groups to question whether the job-based tax breaks are the best way to try to spur economic growth.

"It does kind of make you wonder: How many jobs would be created if you took that $80 million and you applied that to a cut in the corporate or the individual income tax for businesses?" said Brad Jones, the state director for the National Federation of Independent Business.

The federation is one of several business groups backing legislation this year that would gradually reduce the state tax rate on business incomes. But they are proposing it as an addition — not an alternative — to the existing Quality Jobs program.

Although the federation supported the Quality Jobs program in 2005, Jones said it has done little for small businesses. According to 2010 figures from the Missouri Department of Labor and Industrial Relations’ Division of Employment Security, three-fourths of businesses in Missouri have 10 or fewer employees. To qualify for Quality Jobs, they would have to double or triple their workforce within a two-year period — an unlikely occurrence, especially in the current economy, Jones said.

Yet the Missouri Chamber of Commerce and Industry remains a firm supporter of the Quality Jobs program. Even if the incentives have resulted in barely half the jobs that were originally projected, that's still a net benefit to Missouri's workforce and its economy, said Tracy King, vice president of government affairs for the chamber.

"Each situation probably is different in why an employer didn't create the number of jobs they said they would — it could be as simple as the economy, market changes or the ability to get capital," King said.

State Rep. Jay Barnes, R-Jefferson City, leads a special committee that has been investigating Missouri's most high-profile failure in job incentives— an artificial sweetener factory that had been touted by Nixon to bring 612 jobs to Moberly but instead halted construction and laid off its workforce after missing a payment toward $39 million of bonds issued by the city. Mamtek U.S. Inc. never received any money under the Quality Jobs program because it collapsed before meeting the state thresholds.

Barnes said his committee's inquiry has determined that state officials and Moberly's private-sector financial advisers all failed to do enough research on whether Mamtek actually could carry out its plans. The Department of Economic Development continued its record-setting pace of authorizing new participants in the Quality Jobs program, even as lawmakers were conducting their hearings.

"The concern is that the faster they push on the gas, the more chances there are that they make mistakes like Mamtek," said Barnes. "That said, if we're going to have programs like the Quality Jobs Act, the department ought to be pushing it as hard as they can to attract employers, within the context of doing actual due diligence."


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