Report: Tennessee Lacks Transparency and Accountability in State Incentive Programs

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Tennessee has too many confidential incentive deals, and taxpayers don’t know how much of their money goes to private companies or what return on investment they’re getting, according to a report released Thursday.

The Beacon Center of Tennessee, a Nashville-based free market think tank, published the report.

“To make matters worse, even when companies are required to disclose the number of jobs created as part of their agreement, some haven’t submitted reports in years,” said Beacon Policy Coordinator Ron Shultis, who authored the report, in a press release.

“This report actually leaves us with a lot more questions than answers. No matter where you stand on economic incentives, everyone should be for transparency when it comes to how our tax dollars are being spent, and our economic development programs fail that basic test.”

Among some of the report’s findings:

• State officials do not require that many companies that receive taxpayer money hire the number of workers promised. All 25 FastTrack agreements that Beacon employees reviewed only required companies to hire 80 percent of the promised jobs.

• Companies that received FastTrack Economic and Community Development Grants often did not submit the required documentation on time. In fact, only 51 percent of the mandated reports detailing the number of new jobs were filed on time.

• More than $218 millionof tax credits were claimed in 2017 alone, and an even bigger issue is that the state is on the hook for nearly $900 million of tax money for unclaimed credits that will likely be collected at some point.

• The city of Memphis and Shelby County are losing out on hundreds of millions of dollars that officials could have used to improve the city. Beacon researched the Economic Development Growth Engine agency’s Payments in Lieu of Tax agreements. Beacon found that using only new jobs and investment, EDGE PILOTS overestimated projected tax receipts by a staggering $451 million for Memphis and Shelby County.

In the report, Beacon suggested the General Assembly should make all FastTrack agreements subject to accountability agreements with mandatory clawback provisions. This, if companies fail to meet their commitments or fail to comply with simple reporting requirements.

“The General Assembly should assess if there are other agencies more suited to enforce these various programs than ECD,” according to the report.

“This would remove the perverse incentive where the ‘cheerleader’ is also the ‘referee,’ which can lead to inflated expectations and loss of taxpayer money as showcased with EDGE’s PILOT programs.”

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Chris Butler is an investigative journalist at The Tennessee Star. Follow Chris on Facebook. Email tips to chrisbutlerjournalist@gmail.com.
Photo “Tennessee National Guard” by National Guard. CC BY 2.0. 

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