JEFFERSON CITY — Missouri has authorized more than $120 million of tax credits through a program intended to entice wealthy investors to pour money into businesses in low-income areas, but the initiative has yet to produce even half the jobs that were anticipated, according to state figures provided to The Associated Press.
Supporters of the New Markets Tax Credit program assert that it nonetheless was tremendously successful at spurring business activity during an economic downtown and should be given an encore during an improving economy.
A bill expected to receive a Senate vote this week would renew the soon-to-expire program for an additional six years while allotting it $15 million of tax credits annually. The initiative rewards investors in private equity funds that help finance small businesses in areas with high poverty rates or lower-than-average family incomes. Missouri is one of about a dozen states with similar programs, all of which mirror a federal New Markets program that is to allocate about $3.5 billion of tax credits this year.
The goal of the Missouri program, launched in 2007, is to persuade investors to put more of their money into Missouri businesses as opposed to those in other states.
"It is a very, very successful tax credit program," Sen. Scott Rupp, R-Wentzville, told colleagues earlier this month while shepherding the bill to preliminary Senate approval.
He then added more superlatives — "It has been hugely successful" — and capped his sales pitch with an ever-important comparison to Missouri's western neighbor.
"We're kicking Kansas' butt in this program, and that's always something to be proud of," Rupp said.
Missouri had attracted $903 million of private capital investment qualifying for federal New Markets tax credits through 2010, more than any of its neighbors and far more than the $27 million of such investment in Kansas, according to U.S. Department of Treasury data distributed by supporters of the Missouri program. Part of the reason Missouri has fared so well is because it has a corresponding state tax credit that has drawn an additional $312 million in private capital investment, program supporters say.
Yet like other Missouri business incentives, the New Markets Tax Credit doesn't appear to have produced as many jobs as expected.
At the request of the AP, the state Department of Economic Development compiled a spreadsheet documenting every New Markets tax credit that has been authorized. The 9,679 "anticipated jobs" associated with the tax credits far exceeds the 823 "actual new jobs" and 3,141 "jobs retained" under the program, though those numbers could continue to rise.
State Rep. Jay Barnes, who has criticized the effectiveness of a separate Missouri job-creation tax credit, described the figures for the New Markets program as "deeply troubling."
During Senate debate, state Sen. John Lamping said the New Markets tax credits help "create a culture of dependency" in which private equity firms are reluctant to invest in businesses without getting government subsidies. Lamping referenced the scrutiny that former Republican presidential candidate Mitt Romney received because he previously ran the equity investment firm Bain Capital.
"The irony is that this actually goes to subsidize people like Gov. Romney, who was vilified in this last election cycle for being a rich guy who doesn't care about anybody else," said Lamping, R-St. Louis County.
Rupp said the job-creation figures provided by the state "seem awfully low."
St. Louis-based Advantage Capital Partners, which was allocated more than $80 million of Missouri's $120 million of New Markets tax credits, cites estimates that the state's program has created 5,985 jobs. Those figures come from a report prepared by Donald Phares, a professor emeritus of economics at the University of Missouri-St. Louis.
"The program has been extremely effective and a proven source of jobs for Missouri," said Rob Monsees, a vice president at Advantage Capital who previously served as deputy chief of staff to former Gov. Matt Blunt. The New Markets legislation was signed into law by Blunt in September 2007, though Monsees had left his staff by then.
St. Louis-based Indeeco, which makes electric heating and control systems, is listed on state records as one of the several dozen businesses that got money from Advantage Capital through Missouri's New Markets program. The company qualified because of a facility in a low-income area in Cuba, Mo.
John Eulich, the CEO of Aspeq Holdings Inc., said the money from Advantage Capital helped him purchase Indeeco in 2008. The overall company has since added about 100 jobs, he said, though that's not reflected on the state spreadsheet.
"It certainly was extraordinarily helpful. There was a fairly large gap in the financing that I needed to fill, and this one was available at the right price," Eulich said.