Friday, March 13, 2015

Hirschfeld Goes on Lawsuit Offense

The Standard Times ran Hirschfeld's stance in the economic development agreement dispute with the City of San Angelo: 

“Our partnership with Martifer to build wind towers failed due to factors outside of Hirschfeld’s control.”

If the partnership truly failed the joint venture would've declared bankruptcy and the city would've joined the line of creditors seeking funds.  That didn't happen.  Hirschfeld bought out Martifer, likely for pennies on the dollar. 

This decision had the approval of Hirschfeld's private equity owner, Insight Equity.  Private equity firms love buying distressed assets.  It doesn't get more distressed than a wind tower market with no customers.  That happened in 2010.  Hirschfeld took over Martifer's stake in 2012.

Hirschfeld and the City couldn't agree on the company's performance under the contract for the last two years.  Without agreement on performance measures Hirschfeld hasn't had to live up to their end of the contract.  That ended two days ago when the Development Corporation board and City Council approved suing Hirschfeld to compel performance under the contract. 

Hirschfeld's owners refunded $473,242 of a $500,000 Texas Enterprise Fund grant from 2008.  This 95% refund shows the project has not come close to fulfilling its promise.  Local taxpayers are just as important as state taxpayers.  Refunds or contract performance are in order for a firm providing 93 jobs (TEF report) instead of 225.

Companies are happy to take public money but considerable effort seems necessary to get them to repay.  Take Vought Aircraft Industries, a Carlyle Group subsidiary when the state awarded the company $35 million in Texas Enterprise Funds in 2004. 

Carlyle promised 3,000 new jobs, but instead cut 35 by 2010.  The state gave Vought $1 million per job lost.  Carlyle sold Vought to Triumph Group.  Vought has repaid $10.1 million of Texas taxpayer money, a mere 29% for contract nonperformance.     

I hope Hirschfeld does better by San Angelo taxpayers.

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