Legislators Seek Payback For Bad Investments
Recent news that Marlborough-based Evergreen Solar would close its Devens manufacturing plant and lay off 800 workers sparked a new debate about state economic development incentives and how they are recollected, or clawed back, if companies don’t live up to their end of the bargain.
Some say more stringent clawback provisions are necessary, including more frequent auditing of not only the businesses receiving the money, but also the organizations doling out the deals.
Others say an entirely new strategy is needed that would focus on making investments in infrastructure and utility systems rather than picking and choosing specific companies to receive the money.
Defenders of these deals say they are important economic development incentives that are needed in a globally competitive environment to help the state’s top industries and companies prosper.
Either way, state officials have made it clear they intend to go after companies where applicable. The only question is how much of the money they will actually be able to get back.
Money To Lend
Evergreen Solar received more than $40 million in tax incentives, grants and lease agreement deals when the company opened its Devens manufacturing plant, according to Kimberly Haberlin, a spokesperson for the state Executive Office of Housing and Economic Development,
For example, the company received more than $20 million in direct grants: $10 million from MassDevelopment, and another $10 million from the Massachusetts Clean Energy Center, which, at the time was under the direction of MassDevelopment. Evergreen received another $570,000 workforce training grant from the state’s Executive Office of Labor and Workforce Development.
The state is “actively pursuing” the recovery of as much of the taxpayer funds invested in Evergreen Solar as possible, according Haberlin.
In addition to the grants, Evergreen Solar also received more than $10 million in tax and lease incentives, including a deal from MassDevelopment in which the company leased land valued at $2.76 million a year for only $1.
In addition to the incentives given specifically for the company, the state also made more than $13-million worth of infrastructure improvements in Devens before Evergreen Solar opened the plant there.
Some state legislators are regretting the incentives, including state Rep. Harold Naughton, D-Clinton.
“What Evergreen did to us was a body blow,” he said.
Naughton said a lot of questions linger after the Evergreen Solar debacle. At a recent legislative breakfast organized by the Corridor Nine Area Chamber of Commerce, Naughton called for stronger clawback provisions for all state agencies that hand out money and said perhaps the state should be investing in general infrastructure projects as opposed to specific companies.
State Sen. Karen Spilka, D-Ashland, and the chair of joint committee on economic development, said she’s had discussions with the Massachusetts auditor about investigating all state incentives programs and said she may file legislation soon to that effect.
Tools Of Development
But these quasi-public state agencies defend their programs and say there are already clawback provisions in place. For example, each year through a competitive application process, the 10-year, $1-billion Massachusetts Life Sciences Center awards tax incentives to companies that propose to create a certain number of jobs in Massachusetts.
In 2009, the first year of the program, the center authorized 26 companies to receive tax incentives worth $24.5 million. A year after receiving the incentive, each company had to submit a report showing proof that the promised number of jobs had been created.
If the company does not create at least 70 percent of the jobs it agreed to, then the center launches an investigation and can have the state Department of Revenue strip the tax incentive from the company.
Five companies voluntarily gave up their tax incentives last year, including Cambridge-based Genzyme Corp., which had received $6 million, and Framingham-based GTC Biotherapeutics, which received $300,000.
Another eight companies failed to meet the 70-percent threshold and are being investigated by the center. These include Hopkinton’s Facet Solutions Inc., which received $300,000 in incentives, and Interlace Medical in Framingham, which got $300,000 but was recently acquired by Bedford-based Hologic.
It’s important to keep the companies honest, explained Susan Windham-Bannister, president of the life sciences center, but she said the incentives are critically important to the future of the commonwealth.
“Companies have lots of choices about where to go and where to grow jobs,” she said.
“We need to compete for those jobs, and these incentives play a very important role in creating an atmosphere here where businesses want to invest.”
There are some success stories.
The center’s first year’s worth of incentives totaled $17 million and led to 458 jobs being created. Marlborough-based Sunovion (formerly Sepracor), which agreed to create 25 new jobs with its incentive, has added more than 86 in total since getting the money from the state.
Other quasi-public agencies say they too have clawback provisions.
MassDevelopment, which was responsible for many of the incentives Evergreen Solar received, has “strict guidelines” for giving out incentives and collecting money from businesses where applicable, said Janet Hookailo, MassDevelopment spokesperson.
“These are contracts and we will seek to exercise the remedies that are available to us,” she said.
Still, some legislators are calling for sharper claws to recollect money.
State Sen. Jamie Eldridge, D-Acton, who represents the Devens area, has filed a bill that would install stringent clawback provisions in all state incentive programs.
The bill would give all awarding agencies the ability to collect incentives in proportion to the number of jobs the company creates. Eldridge first proposed the bill last year but it was never considered; he has refiled it this year.
“Certainly a lot of people are upset about the Evergreen Solar incident, so we’re hoping to use this as a bad poster child,” he said. “I’m hoping we can use this as a realization that if we’re going to offer tax breaks and other incentives, we, at the very least, need the strongest possible clawbacks.”
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