Zurik: 'Payoffs for layoffs,' courtesy of Louisiana
NEW ORLEANS (WVUE) - A family of four living off a pay rate of less than $15 an hour would be right up against the U.S. poverty line. So why is Louisiana rewarding some businesses for paying that salary?
We wanted to take a closer look at the state board responsible for approving most of the incentives, two particular programs that raise some serious questions.
As we talked with Louisiana residents, it became clear that, for them, quality is tied to one thing - money.
"A quality job is something that would give you the means to support your family," says one man.
What would be the pay of a quality job?
"$80,000 a year," another resident told us. "It's the only way you can survive."
But in Louisiana, the Department of Economic Development says a quality job can pay you about $30,000 a year.
"We don't consider that a quality job," says Greg LeRoy, whose nonprofit group Good Jobs First watchdogs government subsidies across the country.
Here in Louisiana, the Quality Jobs program offers a cash rebate for businesses of up to 6 percent for creating new jobs. The low end of that eligibility threshold is about $30,000 a year, or $14.50 an hour. And under the current rules, if an approved business creates a new job and pays you that minimum pay rate, they get a rebate of $1,508 for creating that one low-paying job.
Is $14.50 an hour reasonable pay for a quality job?
"It certainly is, compared to minimum wage," says Stephen Moret, the state's secretary for economic development. "14-plus an hour, plus benefits."
While Louisiana has no state minimum wage, the federal minimum wage is $7.25 an hour.
Should our state give incentives to companies for paying $14.50 an hour?
"In Louisiana today, yes, I think we should, I do," Moret says. "And the reason why is we have a lot of people in our state that are in high poverty situations, a lot of people that would be thrilled to make $15 an hour."
Applications for the Quality Jobs program need approval from a little-known board, the Commerce and Industry Board. They approve many of the economic development incentives in Louisiana. The governor appoints all but three members of the board.
Right now, that board consists of a handful of elected officials and many campaign supporters for Gov. Bobby Jindal. In a four-year stretch, the appointees contributed almost $350,000 to Jindal's campaign.
We reviewed more than seven years of board minutes. And we never found an instance when the board voted down an application.
"So it's a rubber stamp," LeRoy remarks. "It's an automatic. It's a gimme."
We've found some cases in which board members' associated companies had projects up for consideration. Minutes show those members stepping aside and recusing themselves from such votes - and each time, the rest of the board passed along the projects.
"You've got a recipe for mischief," LeRoy warns. "It makes the whole thing look very chummy, frankly."
Moret says this board's main role is to determine who qualifies for an incentive, if there's any gray area. "It's certainly not the governing board of the agency," he insists. "It's more of a board that, from a functional perspective, is responsible for a small number of incentive programs."
But state law clearly says the Commerce & Industry Board has the authority to vote down projects. Since 2008, they've chosen not to do so.
"If they're saying yes to every single one with little debate, if any, that means that it's automatic," LeRoy says, "that it's practically what we'd say was an entitlement or an as-of-right tax break."
When the aluminum producer Ormet re-opened a facility in Ascension Parish, the Commerce and Industry Board approved a $14 million incentive package. In May 2011, Louisiana Economic Development issued a press release; Gov. Jindal called it "a tremendous economic boost."
But 16 months later, the company issued a WARN Act notice. Those notices announce plant closings or massive layoffs. Ormet told the state they would lay off up to 256 people at the plant, its full workforce.
The notice of those layoffs came on September 11, 2012. More than a year after announcing the layoffs, Ormet still received a rebate of $1,301,697 for hiring the very employees it laid off.
"What's that about?" LeRoy wonders "How do you get a tax rebate after you give a WARN Act notice?"
"If we started to say, you know, you can only use this program if you commit to keep the jobs in place forever or for decades or whatever, it's no longer useful," Moret contends.
"That sounds like a very profound structural flaw in your rules," LeRoy insists.
We found more. On May 4, 2012, the state announced International Paper would invest $44 million in their Bogalusa mill to retain 411 jobs. The state offered International Paper a $2.2 million tax credit and industrial tax exemptions. Remember, the state announced that deal on May 4.
Two weeks later, on May 18, International Paper told the state it would lay off 64 workers at another plant in Louisiana.
"That's a terrible juxtaposition of events," LeRoy says. "It suggests that they were holding back, perhaps, on the layoffs until after they got the award."
International Paper sent this brief statement in response to our inquiries:
We received the state incentive only after committing to invest $30 million dollars in capital improvements at our Bogalusa mill. We appreciate the cooperation from the state and are proud to employ 2000 workers across Louisiana.
In 2008, the Commerce and Industry Board approved a tax break of $1,985,260 for Libbey Glass in Shreveport. State records show the company promised to create 46 new jobs. But they actually reduced their workforce by 147. Nonetheless, the board approved their tax break renewal and let Libbey continue to receive its incentive.
"I think, in this time and day when unemployment has been so high for so long, we shouldn't be paying companies to lay people off," LeRoy says. "We call this 'payoffs for layoffs.'"
When FOX 8 wrote Libbey Glass to ask about the layoffs, a company representative replied simply, "Updates and changes in business operations are made in order to remain competitive and to provide products based on customer and market demands."
From 2010 to 2013, Omega Protein - a producer of fish oil and related products - received $791,195 in incentives from the state for its Cameron Parish plant. Two weeks before Christmas, the company sent the state a letter, announcing the closure of its facility. They said all 45 employees would be fired.
We asked for Omega Protein for comment on the layoffs, and they sent this statement Monday:
Omega Protein's Cameron plant was built in the 1950s and suffered significant structural damage from hurricanes in 2005 and again in 2008. The plant needed costly capital investment to remain efficient and effective. Additionally, the proximity of the facility to the coast made it the most susceptible to poor weather of any of Omega Protein's plants. The decision to streamline our operations by consolidating the Company's two Louisiana plants into a single facility based in Abbeville, Louisiana has improved long-term operating and capital efficiencies.
It is important to remember that the property tax abatements are annual incentives, and Omega Protein provided hundreds of local jobs and millions of dollars in economic impacts in Cameron parish during the years that abatements were received. Once the Cameron facility was closed, the abatements ended.
Although the Cameron facility permanently closed in 2013, job losses were minimized as much as possible. Of the approximately 105 seasonal vessel employees, 60 were retained on boats operating at other Gulf facilities. Also, more than 20 of the 60 shore-side employees were retained at the Cameron facility in 2014 while the plant is being decommissioned and since have found employment at other Omega Protein facilities.
In 2012, the Commerce and Industry Board approved an incentive for Air Products and Chemicals in Luling. Air promised a single new job and received a $1.2 million tax credit.
Perryville Gas Storage promised five jobs for a project; their Enterprise Zone incentives essentially came out to $1,165,300 per job.
From 2008 through 2013, Louisiana gained a little over 82,000 new jobs. In that same period, the state has approved $11 billion in business incentives.
"If Louisiana is paying almost $110,000 per new job created since the bottom of the recession, you can't break even on that," LeRoy says. "You're not taxing people at tens of thousands of dollars per year."
Many businesses also qualify for another incentive program, an Enterprise Zone tax credit. The state's website defines an Enterprise Zone as one with "economically distressed areas within the state that have high unemployment rates, low per capita income and/or a high number of residents receiving public assistance."
We mapped out the companies that received them and found many in higher income areas – including a Walmart in Covington and a Walgreens in old Metairie. The state says "businesses participating in the program are not required to locate in an Enterprise Zone."
State officials estimate this program costs the state $50 million every year.
Greg LeRoy thinks Louisiana is giving too much to big business. Stephen Moret defends the incentives.
We put the question to some Louisiana citizens: Should a company receive a tax rebate for paying a worker $30,000 a year?
"I don't think so," says one woman.
"It's a governmental scam," another resident tells us.
While we haven't found the Commerce & Industry Board vote down any applications, they have voted to terminate many deals for not meeting certain terms.
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