House Committee on Government Oversight and Accountability Archives

House Committee looks for ways to improve Quality Jobs program

January 28, 2013 By Mike Lear

A House Committee has held its first hearing digging into the Quality Jobs Program.

Representative Jay Barnes (speaking) says the committee on Government Oversight and Accountability will meet Friday, February 8 in Kansas City to talk about the Quality Jobs program and “What to do about Kansas.” (Photo courtesy; Tim Bommel, Missouri House Communications.)

The House Committee on Government Oversight and Accountability was originally formed to study the failure of a project to bring a sucralose refinery and more than 600 jobs to Moberly. Its chairman, Representative Jay Barnes (R-Jefferson City), acknowledges the Quality Jobs discussion began with the Mamtek investigation.

“It was just a catalyst to allow myself a platform to get people asking the first real questions about the Quality Jobs Act.”

Jones says Quality Jobs is has suffered from a low success rate. He says up until two years ago for projects of $1 million annually or more, about the jobs created matched the number of jobs promised about 35 percent of the time. More than 46 percent of those projects yielded no jobs at all. He says smaller projects met their job promises only about 20 percent of the time while creating no jobs nearly 76 percent of the time.

Barnes notes there have been some success stories, however, and says his goal is to find how to have more of those and fewer failures.

He says one way to achieve that might be to give the Department of Economic Development more discretion in what projects are approved for Quality Jobs incentives.

“Right now, as we heard the testimony, there is no discretion. You come in, you make certain promises, you get the tax credit automatically. What we know happened in Mamtek is the executives from Mamtek used that and some other things as leverage to put pressure on local communities for the offering of local government bonds which ended up in a tremendous failure.”

Proponents of Quality Jobs argue that in failures such as Mamtek, the project received no incentives because certain thresholds in job creation and other factors were not met. Barnes says there’s more to it than that.

“There’s two responses to that. The first is that the Quality Jobs Act authorizations are used in some scenarios to leverage local government resources or other resources in which taxpayer money is expended up front. We know from Mamtek that is what happened. The second issue is that these programs have caps … and every dollar authorized for a business that has no business receiving the authorization is a dollar that can’t be spent on a business that might actually create jobs.”

He also says the time spent by Department employees on failed projects is also wasted.

The committee also heard from the Director of the Institute for the Study of Economics and the Environment at Lindenwood University, Professor Howard Wall. He told the committee that academic economists view tax credit programs as “completely ineffective.”

He says the Department’s claim that Quality Jobs has created more than 11,000 new jobs over its life is hard to back up.

“There’s a credit authorized and a factory is set up then people are employed. That’s usually what’s called ‘jobs created.’ Maybe those were created by the credit, maybe they would have existed anyway. Also, that’s not taking into account the negative effects on employment everywhere else because those workers typically came from other jobs, other employers who might now shut down because they can’t get workers.”

Wall recommends that Quality Jobs be scrapped, but Barnes says realistically, that won’t happen.

“Politically speaking I believe it would be impossible. I have much sympathy for the professor’s position that it ought to be scrapped in total. However, I know that it has bipartisan defenders in [the Capitol] and I know that’s not going to happen.”

Barnes says the next step for the Committee will be a hearing at Union Station in Kansas City to discuss, “What to do about Kansas.”

He says the two topics are, “absolutely related, because the Quality Jobs Act is used as a measure of competition with the State of Kansas.”

Barnes says discussion of improving the quality jobs act will be one of the subjects at that hearing, as well as reducing taxes, which he says would do more to create jobs than all jobs tax credits combined.

House Oversight committee sets sights on Quality Jobs incentives

September 11, 2012 By Mike Lear

The House Committee that last year dug into the failed Mamtek deal at Moberly will now turn its attention to one of the incentive programs administered by the Department of Economic Development.

Representative Jay Barnes

Representative Jay Barnes (R-Jefferson City) says work by the Committee on Government Oversight and Accountability last year, and a report by the State Auditor’s Office, say the Quality Jobs Program could be oversold and under-performing. Barnes chairs that committee.

He says the Auditor reported two things. “They first is that they had lax oversight and the second was that the program did not deliver as advertised on the front end … that there were a lot of ballyhooed press announcements and press releases on the front end but then when you came back a year or two years or three years later, there weren’t any jobs created. I think when you look at the record of massive announcements like in Mamtek what you find is a string of epic failures.”

The Committee in January announced it had reviewed a list of 91 projects that received more than $1 million in state incentives in the past six years. Those projects reported creating only about a fourth of the more than 20,000 jobs they projected. Among them, Mamtek had been awarded $7.6 million in Missouri Quality Jobs Program tax credits and produced no lasting jobs. Barnes said at the time that raised questions about the performance of Quality Jobs.

Barnes says as Governor Jay Nixon calls back together his Bi-Partisan Tax Credit Review Commission, and as some state senators push again for tax credit reform, the Quality Jobs Act has not been brought up.

“If it’s worth looking at tax credits, it’s worth looking at all of the tax credits, even those favored by politicians and the powerful.”

Barnes is critical of the Governor’s tax credit review commission, saying it failed to look into Quality Jobs in its initial review and lacks any active state legislators. He says the group was not interested in asking difficult questions about the program.

Barnes expects the Committee to begin where it left off. “I simply asked for that list to be updated, and then we start hearing testimony on whether an employer being able to keep the withholding taxes from new hires for a short window of time is actually a sufficient incentive to have employers create new jobs, or whether its, ‘Hey, we’re going to create new jobs. How much money can we get from taxpayers on top of what we’re already going to do?'”

Barnes issued this statement:

“More than a year after the Mamtek disaster, the Department of Economic Development chugs along with Quality Jobs Act authorizations accompanied by other public benefits and often high-profile press conferences. Unfortunately, recent reviews of the Act have shown that it may be oversold and under-performed.

“Last year, an investigation by the House Committee on Government Oversight and Accountability revealed that five out of every six Quality Jobs Act authorizations failed to deliver as promised and only about one in four jobs promised under the Act have actually been realized. Following our investigation, Missouri Auditor Tom Schweich released a blistering audit of the program, concluding, as our committee did, that (1) the number of jobs created has been vastly overstated; and (2) the Department of Economic Development conducted inadequate oversight of the program.

“In the past few weeks, both Missouri Senate leaders and Governor Nixon have announced intentions to consider thorough tax credit reform in the next legislative session. Governor Nixon recently announced the re-formation of his Tax Credit Review Commission, a group of 27 people hand-picked by the governor that does not include a single active legislator. Unfortunately, the Governor’s Tax Credit Review Commission failed to make any investigation into whether the Quality Jobs Act was delivering as promised. From the Committee’s 2010 report, it is apparent they were not interesting in asking difficult questions about the program’s efficacy.

“Missouri taxpayers deserve better. They deserve elected leaders willing to look at all tax credits for potential reform – even those favored by the powerful and politicians who like using them to claim false credit for “creating jobs.” The House Committee on Government Oversight and Accountability will go where the Governor’s Tax Credit Review Commission didn’t and won’t.”

Proposals would slow down Mamtek-like bond arrangements

January 17, 2012 By Mike Lear

Two measures have been proposed in the House by a member of the committee that has looked at the Mamtek situation that would take some grease off the wheels in future, similar deals.

Representative Chris Kelly (D-Columbia)

Representative Chris Kelly (D-Columbia) says right now when communities want to issue bonds for industrial development, bond advisors & lawyers might advise the city’s credit be used, such as what happened in Moberly with Mamtek. His proposals target such arrangements.

“That is a, I think, kind of a sneaky method to avoid the Missouri Constitution, because what it does is it requires that one city council effectively bind the appropriations of further city councils without a vote of the people, and the Constitution prohibits that.”

The plan regarding communities would require a change to state statute, found in House Bill 1304, while the prevention of such state-backed bond deals requires a constitutional amendment found in House Joint Resolution 58.

Kelly acknowledges his proposal would put communities in Missouri at a disadvantage when competing with those in other states to bring in new industries, because those deals sometimes develop very quickly. Having to put certain elements before a vote of the people will significantly slow the process down. “That’s one of the things that the cities won’t like about this, but if the only thing that my bill does is it makes cities more aware of this problem, I will think that that in-and-of-itself is a good thing.”

On that line of thought, Kelly says his bill would not have to pass to sound an alarm. “I want to raise the consciousness about the danger here.”

Kelly says if his bill had been law when Mamtek was developing, the deal would have been aired better and might not have reached the stage it has. He notes, he is not critical of the people with the City of Moberly. “I am morally convinced that they did not realize that they were binding the credit of the City. The people I find fault with are the bond advisors and the bond lawyers.”

While discussing who was at fault in the Mamtek deal, Kelly says he thinks the state handled it “probably, actually about right. There’s a lot of political motivation to blame (The Department of) Economic Development because the governor’s a Democrat. But I think the Department of Economic Development handled this under (Governor Jay) Nixon the same way that they handled these under (Governor Matt) Blunt and it’s just handy now that this one went south, to try to find a political way to blame Nixon.

Kelly is not saying that DED could not have done better in certain areas involving communication or contributions to due diligence. “At any given time in any operation … you can find ways to make improvements.” He adds, “if there were sins here, they were pretty venial sins.”

Key figure in Mamtek deal expected in front of House Committee

January 13, 2012 By Mike Lear

His is testimony that has been sought for months, and at last legislators expect to hear it.

Patent attorney Michael Wise is scheduled to testify before the House Committee on Government Oversight and Accountability at its hearing on Thursday. In December, Department of Economic Development representatives told the Committee that it was Wise who in a phone conversation told Moberly officials he had been to a Mamtek production facility in China. Wise was said to have claimed he visited the facility in-person more than once and to have obtained product made there.

The House Committee on Governmental Oversight and Accountability will continue meeting through the 2012 regular session.

Wise’s claims were part of the basis for Moberly officials proceeding with the Mamtek project that has since collapsed and become the subject of multiple investigations.

Chairman, Representative Jay Barnes (R-Jefferson City) said in December he had already been trying to get Wise before the Committee for over a month. Now, he’s anxious to hear what the man has to say. “‘What did Michael Wise see in China?’ is the big question for next week.”

That could also be one of the last questions the Committee asks before moving on to another phase. “We’ve had a lot of hearings. We’ve heard a lot of testimony. I think we have a pretty good picture of what happened. Next week’s testimony I think completes our picture.

Barnes says after the Thursday hearing, the body might shift focus from investigating the facts of Mamtek to dealing with legislation stemming from those facts. It is for that task that it went from being an “interim” basis to a standing special committee. “We’re going to be assigned bills relating to this topic and so we’re gonna be in existence until the end of session.”

Some such legislation has been filed, while the chairman says he and others are developing more. “Stay tuned,” Barnes suggests.

Read about one bill filed in relation to the Mamtek investigation.

He says he will talk to other Committee members about whether there is anyone else they believe it would be worthwhile to talk to.

Others are expected at the hearing but at least one name has been pulled from that list. On Monday Barnes said he was working to get Moberly attorney Tom Cunningham to testify, but he now says that will not be happening. “(The Committee is) going to have a conversation about what to do about that.”

Another notable absence will be Bruce Cole, who was Mamtek’s Chairman and CEO and announced the deal at Moberly in July of 2010. Barnes says his attempts to contact Cole have been met with no response.

Testimony is expected from financial services company Standard & Poor’s, who gave Moberly’s bonds in the Mamtek deal a high quality rating. Barnes plans to ask them how they arrived at that rating and why the viability of the company did not play into it.

Also expected is Tom Smith who was a site consultant and project manager at the Moberly Mamtek site. Moberly officials testified in December that Smith e-mailed them with pictures of the alleged China plant.

Thursday’s hearing is at 12:30 in the Capital.

See our earlier Mamtek stories.