JEFFERSON CITY — Republican businessman Dave Spence has been touting his job-creating abilities while campaigning to become Missouri governor. Yet Spence's plastic bottle business had to repay $75,000 of incentives to New York after failing to meet job targets, according to records obtained by The Associated Press.
The failed business venture in Brooklyn in the mid-2000s could undercut Spence's proclamation that he can help turn around a Missouri economy that has been slow to recover from the recession. Spence's campaign puts a different twist on the deal, asserting that New York was a poor place to do business and warning that Missouri is experiencing a similar exodus of employers under Democratic Gov. Jay Nixon.
The debate over whose policies can best spur job creation figures to be pivotal in the November elections. But before Spence can directly challenge Nixon, he must win an Aug. 7 Republican primary that includes several other candidates with fewer financial resources.
Spence stepped down last year as president and CEO of Alpha Packaging and has invested at least $2 million into his gubernatorial campaign. He touts the fact that he transformed the St. Louis-based company from a payroll of 15 people and sales of $350,000 in 1985 to firm that now employs more than 800 people with almost $200 million in annual revenue.
"I've spent my career growing Missouri jobs. That's why I'm running for governor," Spence says in his latest ad.
But Spence was not able to create jobs in New York.
In 2001, Spence's firm bought Gutmann Plastics, a Brooklyn-based manufacturer of plastic pharmaceutical bottles that was on the verge of closing. Alpha Plastics of New York Inc. received a $125,000 grant from the Empire State Development Corp. — New York's chief economic development agency — to help finance a $2.25 million renovation of the facility.
Under the terms of the grant, Alpha Plastics agreed to keep the facility's 55 full-time employees and add 45 more by January 2006. But in March 2005, the New York agency sent a letter to Alpha Plastics in Brooklyn saying it had failed to show that it met the job requirements and thus must repay 60 percent of the grant.
No immediate payment was made. So in December 2005, the Empire State Development Corp. sued Alpha Plastics asserting it "did not achieve the employment goals" and demanding a $75,000 repayment. The next month, Alpha Plastics wrote a $75,000 check to the New York agency, according to the records, which the AP requested from various New York agencies.
"It was a business deal that didn't really last," said Jason Conwall, a spokesman for the Empire State Development Corp.
Spence's campaign declined to make him available for an interview about the New York deal. Campaign manager Jared Craighead said Alpha closed the New York facility in 2006 and relocated its equipment to a plant in Bethlehem, Pa.
"It was not a business-friendly state," said Craighead, citing New York's taxes and utility costs. "They made the business decision that they were going to be able to be more successful in a different state. That's what companies all across Missouri are doing today."
Nixon's campaign referred questions about Spence's business deal in New York to the Missouri Democratic Party. A party spokesman pointed to various speeches in which Spence has said he doesn't like "corporate welfare" and believes businesses should have to repay government incentives if they don't follow through on their job-creation agreements.
"Spence says incentives should only go to businesses that create jobs, yet Spence took taxpayer money and then refused to create the jobs that he promised," said Democratic Party spokesman Isaac Wright.
In recent months, Spence and Nixon each have cited rival examples of particular businesses that have closed or expanded in Missouri. The state's business environment has received mixed reviews. Missouri ranked 43rd among states last year with an inflation-adjusted economic growth rate of less than 0.04 percent. Yet its unemployment rate of 7.3 percent last month remained below the national average. Unemployment rates take into account only those who are looking for work, not those who have quit trying to find a job.
In January, Spence outlined a "Back to Work" economic platform that included a moratorium on Missouri's tax credits until their effectiveness can be vetted by independent private-sector experts. Craighead said there was no inconsistency between the proposed moratorium and Spence's incentives in New York. Not only are the states different, but the New York incentive was a grant, not a tax credit, Craighead said.
The $125,000 grant to Alpha Plastics was not particularly large compared with other grants disbursed by the New York development agency. Most businesses do not end up having to repay grants for failing to meet job-creation goals in New York, Conwall said.
Missouri's main business incentive program also requires companies to create a certain number of jobs to receive tax breaks. Last year, Missouri authorized a record amount of job-creation breaks. Yet the AP reported in January that businesses approved for the Quality Jobs program between 2005 and 2010 had so far created just 38 percent of the jobs they had anticipated when applying for the program. Most notably, Mamtek U.S. Inc., halted construction work on its artificial sweetener factory in Moberly last year after winning approval for state and local incentives that Nixon had said could create more than 600 jobs.
Craighead said Spence's experience operating Alpha facilities and subsidiaries in eight states and the Netherlands gives him a good perspective about which type of government policies help businesses and which ones don't.
To criticize Spence for business deal in New York that occurred several years ago "is a sad attempt by Jay Nixon to district from his abysmal record of economic growth in Missouri," Craighead said.