Interview with Greg LeRoy – Executive Director, Good Jobs First

I became aware of Good Jobs First (founded in 1998) when doing research on the changing use of incentives in economic development.  The Organization’s focus on both transparency and return on taxpayer investment in incentive appealed to my P&G training.  To learn even more, I reached out to Greg LeRoy who is the founder and Executive Director.  Greg has an amazing depth of knowledge on the topic of subsidy accountability.  Greg has explored the subject as a consultant, researcher and author.  Based on my interaction with Greg, I knew he would have a perspective on the subject well worth sharing.  I hope you enjoy this interview, and that you take the time to check out the Good Jobs First website.

Q: Good Jobs First is a national policy resource center with a focus on promoting corporate and government accountability in economic development.  Would you provide a brief overview of the types of services your Organization offers that economic development professionals might find valuable to explore?

A: Our mission also includes what we call smart growth for working families. We often receive phone and email inquiries from state and local officials; recent queries have ranged from technical questions about anti-piracy agreements to designing a better transparency website. Since we started issuing our 50-state “report card” studies, we also get calls from state commerce agencies trying to get advance tips on the metrics we will use in our next update, i.e., trying to game our scoring, but we never show our hand. We also train a lot for public-sector groups: this year I spoke at IEDC’s spring meeting, the Center for Transportation Excellence’s bi-annual meeting and a Minnesota House committee, and will soon testify before the Washington legislature, and also train again for the National League of Cities convention and the New Partners for Smart Growth conference. These trainings span subjects as diverse as long-term trends in incentives, metro-regional cooperation systems, state tax credit transparency, and how best to organize riders and employers to advocate for transit service. Public officials are tied for the largest group of users of our Subsidy Tracker database (at 13 percent). Hundreds of our past public-sector trainees are on our email list. And developers (both public- and private-sector) make heavy use of our website. I can’t tell you how many times I’ve met officials who know us from our website, including younger folks who were assigned our materials while in grad school.

Q: Economic incentive packages are a tool often used by communities to encourage job attraction, retention and/or expansion.  But, the practice has come under increased public scrutiny.  Your Organization has an initiative called Accountable USA.  How does that initiative work to help ensure a positive return on taxpayer investment?

A: I backed into this role as subsidy critic accidentally 30 years ago when I started a dozen years of work as an activist against plant closings (I created a national non-profit consulting practice based in Chicago). We repeatedly discovered that factories slated to close had received incentives in the past, and we used that fact to drag public officials into the disputes. In a handful of cases, we found legal hooks and actually stopped one shutdown (in Duluth) and won a large settlement in another (in Elkhart). But usually it was legal to take the money and run, and those revelations prompted the first wave of clawbacks and other safeguards that I collected in No More Candy Store (1994; free on our website).

But Good Jobs First’s mission is not gotcha. We absolutely believe that government has a role to play in state and local economies, but that the system has strayed from good intentions. Accountable USA is a branch of our website that collects large amounts of material from many of our studies and disaggregates it onto one web page for each state. It is intended as an efficient starting place for officials, activists or journalists to get up to speed on their state’s major subsidy programs, how we have rated them, how well things are disclosed, what loopholes remain to be closed, what some of the major deals have been, and where the state’s policies have been heading. We intend it to be an “off the rack” accountability starter kit.

If you spend time there and on our publications page, our viewpoint and our strategy become easy to discern. We believe that much of the ~$70 billion spent annually by states and cities for economic development is wasted, and our studies articulate how the unintended consequences of that waste harm diverse specific constituencies.  We go to all these lengths because, as the Cuno Supreme Court case revealed, the subsidy-industrial complex is deeply entrenched; therefore we need a broadly informed consensus about the need for solutions. My second book, though dated in a few respects, lays out our case (The Great American Jobs Scam, 2005; also free and linked from our website).

We know we are having an impact. The number of states disclosing company-specific subsidy data has doubled since we started issuing our transparency report cards (from 23 to 45 plus D.C.). We have evidence that high officials in at least 35 states have reacted to the five sets of accountability “grades” we have issued. We just started the same disclosure grading + shaming process with cities and counties and expect to see the same dynamic play out with localities. The proliferation of online disclosure has enabled our Subsidy Tracker, which now captures a quarter-million deals from 490 programs in all 50 states plus D.C. And our subsidy-mapping studies have drawn enduring attention; GIS software giant Esri has featured them in conferences and its international newsletter. 

Q: If the public and private leadership finds a community’s value proposition to be non-competitive, would you recommend using incentives to compete or investing in making the community more competitive?  Which strategy will help create the most good jobs in your opinion?

A: To be up front: we are not opposed to incentives per se. We support incentives when they are accurately targeted to address worthy market imperfections (e.g., food deserts, small business credit gaps, brownfields, or ex-offender re-employment).

That said, if a community determines it is not competitive, it needs to make a cold hard analysis about why, with special attention to its public goods. Are its schools graduating skilled new workers? Is its community college closely attuned to the labor market? Is its infrastructure efficient? Has it nurtured business linkages? Can it afford to give away a large stream of future tax revenues and still sustain fairly-priced services for all remaining employers? There are some communities that have managed shrinkage for a long time, like Flint and Youngstown. In which census did the populations of 66 of Iowa’s counties peak? Eighteen-ninety.

One size can’t fit all, but in general we make these points: 1) if you give up so much tax revenue as to harm your public goods, then you are perversely undermining economic development; 2) use cluster strategies to be strategic, spread your eggs among many baskets, and strengthen your pro-cluster public institutions; 3) spending priorities should be shifted to small business generally, accepting the fact that more deals will fail but knowing that overall costs will be smaller and benefits greater; 4) fix what’s broken, don’t just throw money at a deal; and 5) you can have incentive reform until the cows come home, but if you are one locality in a metro area without growth management, you will always be swimming upstream, because left to their own devices, incentives are very pro-sprawl.

Q: If you look forward 10-years, with an on-going increase in competition for FDI and global capital investment, how do you see the practice of offering economic development incentives evolving?

A: In my IEDC talk (which is now an article under consideration for the IEDC Journal), I argued that incentives will be: 1) more transparent (as already stated); 2) more risk-averse (per cluster strategies and other egg-spreading devices); and 3) more location-efficient (i.e., more intentionally aligned with transportation and land use planning, especially public transit investments.

I wish I could credibly forecast that the Europeans will bring with their FDI the stingy, rational incentives rules of the EU, but for now we’ll have to settle for the books of Kenneth Thomas, Competing for Capital (2000) and Investment Incentives and the Global Competition for Capital (2010)

Q: The United States is on a path to energy independence. However, the road is anything but smooth.  Can you compare/contrast the impact of renewable energy, shale energy, and coal energy industry verticals on the creation or destruction of good jobs?

A: Many other people know far more than I on energy, so I’ll answer your question briefly and then plug my own subsidy-monomania solution. Most coal-related jobs are well-paid (mining, freight rail, power plants) because of substantial unionization, but they are also highly automated. Renewables have been a disappointment in terms of job creation, but we were pleased to find in a 2009 study that 80 percent of then-operating plants making solar and wind equipment were covered by job quality standards attached to state incentives. I love my natural gas heating bills but am unnerved by fracking’s threat to water purity.

So here is my solution: economic development subsidies to the rescue! The built environment accounts for 40 percent of U.S. greenhouse gas emissions. Let’s attach “green strings” to bread-and-butter incentives like IRBs and property tax abatements. Let’s say: no subsidies unless the facility is built or retrofitted to LEED (or equivalent) standards. Such a system was put in place in the late 1980s in Louisiana’s unusually state-centralized industrial property tax exemption program: half of a plant’s exemption was conditioned on environmental compliance and upgrades. Overnight, the system created 3,500 construction jobs as companies scrambled to reduce emissions and upgrade systems; it also reduce solid toxic emissions eight percent in one year (a worthy act in “Cancer Alley”).

Q: In what areas should an economic development organization engage with Good Jobs First, and what is the best way to do so?

A: Email or call! We answer every query, and no question is off limits! They should engage with us if they are rewriting program laws or rules. They should ask us about our research methodologies (we love getting copied!). They can ask if we have peer connections by issue or geography, or if we are able to train or testify.