Thursday, June 02, 2011

Vought's $35 Million Agreement Complied with HB 2457

The Houston Chronicle reported:

State lawmakers moved to make two economic-development funds — the Texas Emerging Technology Fund and the Texas Enterprise Fund - more transparent in the wake of a recent audit that was critical of the tech fund's oversight.

The bill says any grant agreements must contain provisions requiring the creation of a minimum number of jobs and deadline for the job creation. Recipients who fail to meet the job creation performance targets will have to repay all or a pro-rated portion of the grant.

The bill awaits the governor's signature. Separately, both programs received all of their unexpected balances and interest earnings for 2012 and 2013. For the Texas Enterprise Fund, about $148.5 million was appropriated for 2012 and $1.5 million for 2013. For the Texas Emerging Technology Fund, about $139.5 million was appropriated for 2012 and $1 million for 2013.

House Bill 2457 purports to fix longstanding holes in Governor Perry's Texas Enterprise Fund.  Only it doesn't address one of Rick Perry's most egregious cases.

The Carlyle Group's Vought Aircraft Industries promised Texans 3,000 new jobs in 2004 in return for $35 million from the Texas Enterprise Fund.  Vought shelved plans to move operations from Nashville and Florida to Dallas.  Then they located Boeing 787 Dreamliner production in South Carolina.  They failed to meet their promises by December 31, 2009.  Over the five year period Vought cut 35 Dallas jobs, a $1 million incentive per job lost. The agreement had a clawback or repayment plus interest provision

Vought refunded Texas $900,000 per their SEC filing, while the Governor's report credited Vought with a $970,000 repayment.  That's far short of $3.5 million plus interest owed to Texas taxpayers.

What happened?  Governor Perry renegotiated the agreement in secret as Carlyle put Vought up for sale.  Perry fabricated results by claiming Vought's 3,000 existing jobs were new jobs and adding an economic impact column using a job multiplier. Vought's CEO admitted an internal liquidity crisis  in ramping up 787 production, so Texas' $35 million in financing came in handy.  TEF is pubic money incentivizing jobs.  It's not intended to carry an employer through tight cash flow periods.  That's what Rick Perry did for at least one Carlyle affiliate.

HB 2457 is silent on the Governor's ability to renegotiate TEF contracts in secret and contains no punishment for fictional results.  Problems with Perry's pet funds remain.

(click on the image above to make it larger)

No comments: