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Unknown and unbridled by law: Economic developers set to make millions off tax incentives

Bill Britt

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A new law establishing a class of individuals known as economic development professionals opens the door for profit-driven incentives paid with taxpayer funds to vaguely described, unknown agents not registered or held accountable to state law.

There are many reasons to suspect that House Bill 317 is filled with loopholes not yet fully understood by the Legislature that passed it, those responsible for policing it or the public who will supposedly benefit from it and pay for it.

One point that never seemed to enter the discussion was the fact that unlike lobbyists, this new class of economic development professionals can be paid based on a contingent fee.

As enrolled, The Alabama Jobs Enhancement Act carves out a class of economic development professionals that are no longer subject to the Alabama Ethics Act as enacted by the Republican super-majority in 2010, under the leadership of then-Gov. Bob Riley and future felon Mike Hubbard.

Under ALa. Code 36-25-23 (d) and § 36-25-18 (6) working for or being paid on contingency is strictly prohibited.

§ 36-25-23 (d) No principal or lobbyist shall accept compensation for, or enter into a contract to provide lobbying services which is contingent upon the passage or defeat of any legislative action.

§ 36-25-18 (6) A statement signed by each principal that he or she has read the registration, knows its contents and has authorized the registrant to be a lobbyist on his or her behalf as specified therein, and that no compensation will be paid to the registrant contingent upon passage or defeat of any legislative measure.

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“there is an even darker motive afoot here: some site location consultants work on commission; that is, they get paid largely or in part by a percentage of the subsidies they negotiate for the company.”

With its new class distinction, economic development professionals may be hired on a contingency contract, eliminating any risk to a principal or a lobbyist who might hire them.

HB317 allows economic and site developers to be paid based on contingent fee contracts. In other words, the more incentives an economic development professional can obtain from the state, the more money those individuals can make off the state.

According to Greg LeRoy, executive director of Good Jobs First, besides the windfall for companies who receive state taxpayer incentives to relocate a business, “there is an even darker motive afoot here: some site location consultants work on commission; that is, they get paid largely or in part by a percentage of the subsidies they negotiate for the company.” LeRoy’s research shows that a consultant, or what now passes as an economic development professional, can earn as much as 30 percent of a subsidy package.

Also under HB317, the public is denied a right to know who these economic development professionals are or what they are paid for at least two years. However, according to the new stature, this period may be extended at the whim of the secretary of commerce or others.

Not allowing the public to know who is benefiting from the incentives and permitting contingent fee contracts are the two issues that were never at the forefront of discussions on HB317.

Beyond all the secrecy and profit-driven deal making is the ambiguity on precisely who is an economic development professional.

After the bill passage, State Sen. Cam Ward, R-Alabaster, took to social media to discuss that very issue, writing, “Well I think you hit the nail on the head when you asked what an economic developer is. That definition is not entirely clear if you ask me.”

“While the lobbyists and special interests were rewarded with a loophole in the ethics law, the super-majorities failed to do their jobs for the people of Alabama.”

Ward, who works in economic development and is head of the Senate Judiciary Committee, should know but freely admits the legislation as passed is unclear.

Republican-dominated state government is being pummeled in the press and on social media. Some State lawmakers who voted for the act are being called out by name, such as Senate President Pro Tem Del Marsh, R-Anniston, but most of the anger, distrust and disappointment is aimed at Gov. Kay Ivey, Attorney General Steve Marshall and Commerce Secretary Greg Canfield. Ivey and Marshall face reelection bids, and their rivals see the passage of HB317 as an opportunity to paint them as weakening the state ethics laws.

Democrat gubernatorial hopeful Tuscaloosa Mayor Walt Maddox was first to call out Ivey, and his pointed accusation is continuing with reported media by underscoring the deceptive passage of HB317.

Democrat Mayor Walt Maddox sees what lawmakers and governor can’t

The day after HB317 was sent to Gov. Ivey, Maddox wrote, “Yesterday, the majority of Alabamians went to work with the full expectation of doing their jobs. The same cannot be said about the super-majorities in the legislature which again ended another session failing to address critical needs in education, mental health, health care, corrections, and infrastructure.” In what is becoming an internet meme, Maddox said, “While the lobbyists and special interests were rewarded with a loophole in the ethics law, the super-majorities failed to do their jobs for the people of Alabama.”

In branding HB317 as weakening the state’s ethics laws to favor lobbyists and special interests, Maddox is turning Republican messaging on its head by pointing out the hypocrisy of conservatives who claimed they came to Montgomery to root out Democrat corruption. Ivey, in a recent TV ad, said she had cleaned up the messiness in Montgomery. For now, the passage of  The Alabama Jobs Enhancement Act is a dumpster fire, but it may grow as the state heads into election season which, like HB317, is unknown and unbridled.

 

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