(Have the tax dollars raised by the creation of the 4A sales tax been spent as voters were told they would be? You be the judge. The following is re-posted from April, 2010.)

The ED Wayback Machine, Part I: If we don't pass this tax, then the Terrorists will have won!

Microfiche is a wonderful thing. Okay, I take that back. Microfiche is a total pain now that we have all gotten used to internet based archives.

Nevertheless, we have taken the time to go through some of the microfiched copies of issues of the Midland Reporter-Telegram around the time the Economic Development Sales Tax was passed on November 6, 2001......on it's third try I should mention...the voters obviously having gotten it wrong the first two times it was brought forth. Enlightened (and almost certainly outside-the-box) thinking finally won out and the voters decided the issue...(some say for all time)...with a vote in the affirmative. Midland would have its Economic Development Sales tax and thereby guarantee its future.

We found campaign ads, Letters to the Editor, a couple of "Speaking Out" columns, and some Editorial Opinions. Over the next few days (or until we run out) we will be posting some of the better ones.

The Economic Development Sales Tax has been with us for nearly a decade. In that time, the pseudo-governmental agency known as the Midland Development Corporation has pulled over $25 million out of the local economy. It has banked most of that both denying the taxpayers of Midland the use of their own money and also precluding the much vaunted "multiplication factor" used by the High Priests of the Church of ED when artificially inflating the impact of every dollar they re-direct from the free market.

Of the money that has been spent, no real success can be shown in regard to Midland's economic development nor its diversification. Companies are lining up to "renegotiate" the terms of their "forgivable loans" from the MDC. Indeed, the Mother of All Economic Development Success Stories, the original Cingular arrangement, has essentially collapsed as far as any promise to alter or diversify the local economy.

Now, almost ten years later, in light of all that we now know regarding the performance of our local economic development initiatives, have a look at these archived items and see how well the promises have matched up with the performance.

(Originally posted by Walsingham on March 25, 2010)

Link to original post.

From MyWestTexas.com:

Nearly 10 years after the 4A tax was passed, city council members discussed on Friday how successful the economic development initiative has been and if its uses need to be tweaked to better benefit residents.

Well, let's see. In the past 10 years we have:

1. Taken over $30 million out of the local economy,


2. Larded up an administrative staff to the point that we have paid out as much in salaries as we have in the "economic incentives" that were to rescue Midland from oblivion,


3. Can show zero, zilch, nada results in the way of local economic diversification,


4. Built a $2,000,000 building in an industrial park that has stood empty since the day it became available back in August of 2006,


5. Redefined what constitutes "economic development" every 18 months or so due to the lack of any measurable results under the previous definition,


6. Had to modify pretty much every agreement that was entered into with these rent-seeking corporate welfare queens "incentee" companies,


7. Reached a point of such desperation on the PR front that we have taken to handing free money over to companies like Apache Corporation so we can include jobs that the ED Sales Tax had absolutely nothing to do with in the MDC's Annual Report,


8. Banked over $20,000,000 in tax money that we have no idea what to do with other than to not return it to its rightful owners.
   

There is only way to describe Midland's Economic Sales Tax experiment: A bust of epic proportions that illustrates every malady and hazard of political appointees attempting to correct a presumed-to-be-wayward free market, being given millions of dollars of other people's money to do it with, and operating under a system for which there is no penalty for failure. Or, as the MDC would describe it in fewer words, a "Win, Win!"

"I think the reason the citizens passed this was to diversify our economy," Mayor Wes Perry said. "If they voted for diversification of our economy and we're not doing it, then we've got a problem."

They did. You haven't. You do. Although, it would be more accurate to say that there is a problem. A big one. The problem, simply stated, is that the ED Sales Tax experiment is an expensive failure and it has not done nor will it ever do what it was purported to. A additional problem is that it is a problem with no ownership. If these decision makers, smart and successful business people all, were ponying up their own money and getting these results they would have killed this thing years ago. But they aren't and so we have been witness to years now of accountability ping-pong. New consultants, new philosophies, Plan B, then Plans C and D. Oh, and improved communications. Can't get enough of that, can we?

"I truly think the days of going out and looking to bring businesses to Midland are completely over," Dufford said.

Without a doubt, the days of the MDC going out and bringing businesses to Midland are indeed over. I just have one question: When did those days ever even begin? We have ten full years of empirical evidence that show that the days of the MDC bringing businesses into Midland were over the second the polls closed the night Midlanders voted in this monstrosity back in 2002.

So it now appears that there is a split opening up on the City Council on how best to use the 4A tax money. It looks to be a contest between building city infrastructure off the books and....well....unicorns and fairy dust:

James said he'd rather see funds go toward innovation funding. Through that initiative, James said the city could offer incentives to companies coming up with the next dynamic technology.

Innovation funding? Really? That's your plan?

A group of political appointees who need show no more qualifications to become an MDC Board member than to be well thought of by a political office holder somehow will have the vision to divine the next great innovation and the company most likely to be responsible for it and do so with a confidence level high enough to back it with possibly millions in tax money? The same bureaucratic apparatus that couldn't even judge the market well enough to fill the one building they had built in the Entrada Industrial Park?

Seriously? I mean, for them to do that.....for them to take on these near super-human skills and be able to apply them in such a way would require some sort of game-changing paradigm shift. Something that would have to be almost completely outside what is considered the total body of knowledge in the area of economic development. Something that would enable a six member board with near zero experience in any of the industries that would likely be in the forefront of innovation to be able to correctly select just the right company that will not only succeed in their respective industry, but will do so from Midland.

I am talking about...dare I say it? No, I cannot. It's too much!

But I must! For Midland's sake!

I am talking about....a New Dynamic! That would change everything! But let's be real. The chances of that happening would be so infinitesimally small as to.....Oh, hey, look!

Michael Trost, councilman for District 4 and recently added MDC board member, said innovation funding already is a possibility.

He said the MDC is taking on a "new dynamic," and he thinks the council will see successful planning coming from the board in the months ahead.

Wow. I didn't see that coming.

A New Dynamic. And one that will be a catalyst. For successful planning. In the months ahead. He thinks.

I'm sorry, what was the "old" dynamic then?

Does there not exist someone, somewhere in official Midland's leadership structure willing to stand up and say, "Whatever it was we planned to accomplish with this money we have not managed to and, further, we have not earned the right to continue taking it from the taxpayer."

Council members Trost, James, and Morales are all former or current MDC Board members so they are probably true believers. From the quotes in the article it looks like Councilmen Dufford and Sparks are unimpressed with the results of the MDC but are finding the loot handy for other things. This is how larger and larger governmental entities are created. Whatever you do, don't stop the taxing, just re-purpose the money. You know, to be more effective or something.

My money is on Mayor Perry and/or Councilman Hailey to finally acknowledge that the experiment has failed as originally set out and at least call for having the voters revisit the issue.

After finally being promised by the Economic Development authorities the after hours parking in and around the 500 block of West Illinois that has been long demanded by an impatient citizenry, it looks like our hopes will be dashed once again.

In all likelihood, the MDC will end its agreement with Basic Energy to subsidize the Permian Place venture to the tune of $2,000,000 of the taxpayer's money.

Apparently, Basic will be selling the facility to another company which is looking for additional space:

Alan Krenek, senior vice president and chief financial officer at Basic Energy Services, said the complex, which consists of two office buildings and a parking garage, is being sold because Basic found another local company that can "fully maximize the facility." City officials and MDC board members said Concho Resources is in the process of signing a contract to purchase Permian Plaza.

To translate: Basic Energy Services didn't need for themselves all of the space that would be available at the new Permian Place. And I am guessing that they were not optimistic about finding tenants for the rest of the space. Luckily, at the same time, Concho had expanded to the point where they needed more space and was willing to take the project off of Basic's hands. How Concho was able to expand to such a degree without MDC involvement is left unexplained.

Which tells me that the MDC essentially threw $2,000,000 to a company to build a parking garage for an office space project for which there was little demand. (Update: I may be wrong about the demand, see Bob's remarks in the comments.)

But in the land of Fairies, Unicorns, and Economic Development everything is a "Win-Win." No economic development agreement ever fails to deliver a positive return on investment. Ever. Even when it is universally known that a relocation or expansion would have happened with or without involvement from the MDC the handing over of tax dollars to them anyway just makes it all the more betterer.

From the article:

[MDC Board Member Robert] Rendall said while the original intent of the agreement was to incentivize development and provide parking downtown, this proposed resolution to the agreement also is beneficial to the city.

Followed by the "Dog Bites Man" statement of the year:

City Council members who've been involved with the MDC board previously, agreed.

No kidding. As I am sure that former Chamber Board members who have been previously involved with the City Council and/or the MDC agreed. And MDC Board Members who have previously been involved or plan to be involved in the future with the City Council agreed.

Which is why when the votes are taken on ED projects you can actually hear the theme song from Deliverance.

It seems like I have heard something recently involving Chrysler and taxpayer assistance...although I am sure I don't what it was.

Now, while the author of this letter apparently has no problem with even serial government bailouts, the fact of the matter is that most Midland voters probably do. And anyway, these are not bailouts, right? Or even subsidies. They are forgivable loans. Forgivable loans with hard-wired, iron-clad, taxpayer-protecting, "Clawback Provisions" that sometimes make the more traditional loan agreements with professional private lenders look tame by comparison. In fact, in many of these agreements the Shilocks at the MDC/City are even harder on the "Lendee" than would be any private sector lender. I know this because I read it in the paper:

Ten years later, reality has asserted itself. Currently, several of the MDC's "clients" are attempting to renegotiate their agreements; presumably to make them less stringent, not more. We shall soon see what the actual level of enforcement on these agreements is going to be. It is a tough one. On the one hand, these companies are probably hurting. On the other, we certainly don't want to be written down as patsies to future "incentees". Well, as much as one can have an economic development fund at all and not be seen as a patsy, anyway.

We have asked these questions (and others) before, but the opportunity presents itself again:

• Philosophically, what is the difference between the MDC taking money from the taxpayers and giving it to [Insert MDC Client Name Here] and the Obama administration taking money from the taxpayers and giving it to Chrysler or GM?
• Should the MDC/City Council decide not to actually enforce these contracts (or should they renegotiate them down) isn't that the exact same thing as a taxpayer bailout?

An interesting paragraph from above:

"The economic development agreement is sometimes more stringent than normal business agreements because public funds are involved, and the city has an interest in seeing that these dollars are protected and not wasted."

Really? Then given an actual choice, why would any company choose the more stringent agreement? They wouldn't ever.....unless they were betting that the provisions in the agreement, however stringently written, won't be enforced.

The dice are rolling on that as we speak.

And, yes, everything that is happening nationally applies here. Directly. Every reason there is on why the Obama Administration and the U.S. Congress shouldn't try to direct an economy at the national level applies in every way to the Midland Development Corporation and the City Council at the local level.

• Part I: If we don't pass this tax, then the Terrorists will have won!


• Part II: This economic development stuff is easy!


• Part III: We will use this money to diversify the economy. Except when we don't.


• Part IV: Government bailouts? No problem!


• Part V: Naysayers! They have no vision!"


• Part VI: That Free Market thing? That's like sooooo Reagan. We're smarter than that now.

In the archives are many, many letters just like this one. Too many to count. All with the same drumbeat: Midland is too tied to an oil-based economy and we need this money from the taxpayer so that we can go out and recruit businesses for Midland who are not part of the oil-based economy. That way we are protected from the downside of business cycles that inevitably come and go.

Actually, it goes a much further than that. The business cycles are usually a result of the market demand (and therefore price) of oil. When the price of oil is high, Midland thrives. When the price of oil is low, Midland suffers a bit. But these cycles are just that. Cycles.

There were also many letters like this one:

One of the biggest arguments offered by the campaign for an Economic Development Sales Tax and its supporters was not simply that we needed to protect ourselves from these business cycles but that the oil reserves on which our economy was based were simply going away. The author of one letter compared Midland to a mining town and stated that he was not aware of a town based solely on mining that survived.

But over the life of the MDC, it has given a lot of money away to companies that 1) are already here, 2) are already coming here without any MDC-driven public subsidies, 3) operate in the oil-based economy, 4) are currently in default (or about to be) on the terms of their agreement with the MDC, or 5) are all of the above. (In fact, here is a challenge: List the companies that the MDC has "incented" that don't fit into one of the above categories.)

Every dollar that the Midland Development Corporation extracts from the economy and turns over to these companies in the oil business like Basic Energy and now the global multi-billion dollar Apache Corporation reveals fully half of the reasoning behind the need for an ED sales tax to be an outright falsehood. I'd call it an outright lie but for the fact that it is a Sunday morning so I feel the need to be more civil. And also because, at the time, the authors of these letters probably really believed what they wrote about what the purpose of this tax money was and how it was to be used.

We have said before that the local economic development establishment behaves and operates as though economic development is whatever the hell they say it is on any given day. Ten years ago the oil patch was going away. Apache Corporation quite apparently disagrees and has decided (with zero artificial incentives needed) to set up a regional office here to handle the acquisitions they have made in the area over the past several years. Still, the local development corporation finds it necessary to hand over a quarter of a million dollars of public money to Apache Corporation to....to do what, exactly? Just spend it locally somewhere?

That kind of sounds like...um..."Stimulus Money"...if you know what I mean.

Go back and read the campaign literature...or wait for it to show up here. It doesn't take much reading to realize that the Midland Development Corporation, along with the City Council, has essentially re-purposed the money that they asked the public for back on November 6, 2001. Yes, I know that "The Law" allows the MDC to spend the money on these things, just as the law allows a panhandler on the street to buy a bottle of vodka with the money he asked you for just so he could get a hot meal.

I would like to think that there is at least one member of the City Council...or even more than one member who would take an honest look at the money that has been taken out of the economy in the last ten years and, taking into consideration the original claims of what the money was for and to whom it would go, and then compare that to what is obviously now a manifest change in philosophy (not to mention the spectacular lack of any success) and then wonder if, just perhaps, the voters should be consulted again.

But then, that's just crazy talk. Because what has happened to this money is what happens to almost all government-run "Investment in our Future!" programs. At the beginning, it was money that was to be used for a specific purpose from which specific results would be achieved.

Ten years on, the money has been re-purposed; there are no discernable results, and what was once asked for from the public is now seen as an entitlement by local public officials both elected and unelected. Among the incenteratti, immediately upon the failure of Plan A there will always be a Plan B (or C or D...), or the need for "improved communications", or the hiring of more consultants to point out Airpark on a map and call it an "Opportunity Zone" or some damned thing to justify the money they take and to help explain away their lack of (positive) impact.

The idea that this money is better left in the hands of the taxpayers never survives. Because, you see, in the eyes of Official Midland, it's their money now. Not yours.

• Part I: If we don't pass this tax, then the Terrorists will have won!
• Part II: This economic development stuff is easy!
• Part III: We will use this money to diversify the economy. Except when we don't.
• Part IV: Government bailouts? No problem!
• Part V: Naysayers! They have no vision!"
• Part VI: That Free Market thing? That's like sooooo Reagan. We're smarter than that now.

See? All it takes to make a multi-billion dollar global corporation do something it had previously thought was not in its interest is to throw just around $300,000 per year at them. And Cingular is big! They will always be here!

What a deal, indeed!

This economic development stuff is easy! We should do more of it!

(Note: In keeping with standard Well practice of not using anyone's names unless we just have to we will be blanking out the names of the authors of these letters. We do this for several reasons. One, Google is forever and while the issues at hand will always resurface from time to time there is no need to have anyone's actual name bubbling up through search engine results from now until forever. Two, we have a "No Hounding" rule here at The Well which states that once someone is out of the news for a period of time they are to be left alone. These letters were written almost ten years ago and none of the authors envisioned them re-surfacing stamped with their names. Further, we don't want this to be a personal gotcha to the authors. The content of the letters is what is important and this is why: 50% of all of these kinds of Letters to the Editors are written by the campaign itself and then a signatory is found for them. 40% are actually written by the signatory but depend heavily on direct information from the campaign. So reading these letters is the best way to get a feel for what the "official" proponents believed (or at least told others) the economic development sales tax would achieve.)

• Part I: If we don't pass this tax, then the Terrorists will have won!
• Part II: This economic development stuff is easy!
• Part III: We will use this money to diversify the economy. Except when we don't.
• Part IV: Government bailouts? No problem!
• Part V: Naysayers! They have no vision!"
• Part VI: That Free Market thing? That's like sooooo Reagan. We're smarter than that now.

Microfiche is a wonderful thing. Okay, I take that back. Microfiche is a total pain now that we have all gotten used to internet based archives.

Nevertheless, we have taken the time to go through some of the microfiched copies of issues of the Midland Reporter-Telegram around the time the Economic Development Sales Tax was passed on November 6, 2001......on it's third try I should mention...the voters obviously having gotten it wrong the first two times it was brought forth. Enlightened (and almost certainly outside-the-box) thinking finally won out and the voters decided the issue...(some say for all time)...with a vote in the affirmative. Midland would have its Economic Development Sales tax and thereby guarantee its future.

We found campaign ads, Letters to the Editor, a couple of "Speaking Out" columns, and some Editorial Opinions. Over the next few days (or until we run out) we will be posting some of the better ones.

The Economic Development Sales Tax has been with us for nearly a decade. In that time, the pseudo-governmental agency known as the Midland Development Corporation has pulled over $25 million out of the local economy. It has banked most of that both denying the taxpayers of Midland the use of their own money and also precluding the much vaunted "multiplication factor" used by the High Priests of the Church of ED when artificially inflating the impact of every dollar they re-direct from the free market.

Of the money that has been spent, no real success can be shown in regard to Midland's economic development nor its diversification. Companies are lining up to "renegotiate" the terms of their "forgivable loans" from the MDC. Indeed, the Mother of All Economic Development Success Stories, the original Cingular arrangement, has essentially collapsed as far as any promise to alter or diversify the local economy.

Now, almost ten years later, in light of all that we now know regarding the performance of our local economic development initiatives, have a look at these archived items and see how well the promises have matched up with the performance.

More tomorrow.

• Part I: If we don't pass this tax, then the Terrorists will have won!
• Part II: This economic development stuff is easy!
• Part III: We will use this money to diversify the economy. Except when we don't.
• Part IV: Government bailouts? No problem!
• Part V: Naysayers! They have no vision!"
• Part VI: That Free Market thing? That's like sooooo Reagan. We're smarter than that now.

Actually, they were against it before they were for it before they were against it again.

A quote from today's MyWestTexas.com article reporting on the City Council's discussion about "sunsetting" various boards and organizations...including the non-performing Midland Development Corporation:

Referring to the elections since 1999 in which the 4A and 4B boards were established, Councilman John James said, "The citizens have already made that decision."

There are two things that Councilman James knows for certain that make this statement really stand out. The first is that the ED Sales tax was voted down at least once (twice?) before it passed in 1999. I guess in those elections the voters didn't decide anything. They just got it wrong. Only when the voters agreed with Mr. James was the issue considered decided.

The second, in all fairness, Mr. James doesn't know for sure...but most everyone else does: If an election were held today to renew the ED Sales Tax it would go down. Big.

That is why all of the talk you will hear about trying to discern the will of the people is just that. Talk. The City Council will never in a million years unilaterally place a "sunset" proposal for the ED Sales Tax/MDC on the ballot. They know what would happen.

Them darn voters would get it wrong again.

From the comments here, a good question regarding those "publicly available" parking spaces at Permian Place that were paid for with taxpayer money (paraphrasing):

When the City Council members voted to approve the $2,000,000 public subsidy towards the development of Permian Place did they know that those 75 parking spaces that were to be "made available to the public" would actually only be available to the public after 5PM and on weekends?

(Yeah, I know it is a reach, but I just felt like typing out "Third Party Non-Tenantgate" just to see how clumsy it actually was.)

From Newsroom Stew:

The point here is to say that at some point the MDC needs to tell us in their words why those who write for Jessica's Well are wrong (if they are wrong). For a while now, Jessica's Well has been the most prominent voice talking about economic development, specifically the MDC. And while the development corporation has spent hundreds of thousands of dollars on marketing, it is hard to hear their responses. They might say why do we need to respond to these people?

One reason that they could respond is because while we may be bloggers we are also actual taxpayers.

A point of clarification: Walsingham actually does live in his Mom's basement.

Question: What is an "incentive" for a company other than an opportunity to reduce its risk in any given venture?

And if there is any sort of meaningful "clawback" provision contained in an agreement with the MDC, how can there then be reduced risk for the "incentee" company?

And doesn't it then follow that the only way a company can look at any agreement with the MDC that contains a "clawback" clause as an actual reduction of their risk is if that company believes that the clawback provision won't actually be enforced if push comes to shove?

I guess we are about to see how seriously the MDC and the City Council take these Clawback provisions that have been trumpeted as having been set in place to protect the taxpayer's interest.

Or if these companies have guessed correctly on how willing the MDC and the City Council are to actually enforce the contracts.

If we are to believe MDC Board member Robert Rendall (and we very much should, I fear), the Midland Development Corporation has provided a low cost (zero interest, actually) loan to a company (several companies maybe) who either wouldn't warrant traditional bank lending (or at least didn't pursue it) and now said company would probably fail should it be required to make good on the terms of it's "loan" leaving the taxpayers to foot the loss.

Gee, that's sound kind of familiar.......

Save in terms of size and scope, is there a whit of difference between the operational philosophy of the MDC in this case and that of Fannie Mae?

Earlier/Related: "So...those so-called "Clawback" provisions are really pretty worthless then, huh?".

From MyWesttexas.com's article on yesterday's Council meeting:

[Midland Development Corporation Board member Robert] Rendall came to the podium and said the company might fail if the council required it to pay back the money. "We are really encouraging them to try to make it," he said.

So the money that Trace was to pay back to the taxpayers of Midland should this venture not work out as was planned can't be paid back because...well..um...this venture hasn't worked out as was planned.

Yes, I know that in some cases that money has in fact been "clawed back" from some companies who did not make good on their employment numbers. But judging from the published council agenda regarding several ongoing MDC agreements the only clawing back of anything is being done by these rent-seeking companies trying to reduce their commitment to "create" jobs.

But the question still remains of these "claw-back" provisions: If these companies have the wherewithal to return these taxpayer funded subsidies after the projects that were funded turn out to be non-performing then why do they need the subsidy in the first place? In short, if they have the money to be "clawed-back" on the back end of a failure, why don't they use that money to self-finance up front? Answer: Because it isn't about financing, it is about free money for the favored.

And although we have asked these questions many times before, back when economic mistakes in one area can be papered over by economic growth in others, I shall ask them again in the hope that our finding ourselves in the midst of a real recession and ham-fisted Obamaian attempts at "re-forming" this country's economy will provide a bit more focus and clarity.

1. Does the Federal, State, or local government have any business provding these kinds of subsidies to privately held firms?
2. Philosophically, what is the difference between the MDC taking money from the taxpayers and giving it to Trace Engines and the Obama administration taking money from the taxpayers and giving it to General Motors?
3. Should the MDC/City Council decide not to actually enforce these contracts (or should they renegotiate them down) isn't that the exact same thing as a taxpayer bailout?
4. Can six political appointees actually ever at once:
   • Be knowledgeable enough about each specfic company's operations and product line as to ascertain the viability of it's business model, and
   • Possess adequate knowledge of the sometimes world-wide industries that these subsidy-seeking companies compete in in order to make any sort of educated guess as to their long-term viability in the marketplace?
   • At least use Google every now and again?
5. Given that the whole philosophy of development corporations is to force the flow of capital into areas that the free market has already decided against funding, how is the Midland Development Corporation's/City Council's arbitrary decisions on which companies are to be subsized and which companies are not anything but a corruption of the marketplace? Even if they get one right?
6. How soon will it be before the MDC moves from referring to "jobs created" to "jobs saved"?

The article mentions that one of the members of the City Council is an investor in one of the companies in the MDC troughdom. He will probably recuse himself from any vote on the proposed renegotiations.

Although, he could always vote against a renegotiation and to actually enforce the current agreement. Such a move would have the twin virtues of being a blow struck on behalf of true free enterprise and one that would also match up with his campaign literature.

But serial claims of fiscal conservativism and a faith in the free market notwithstanding, the "dead hand" of government intervention in the marketplace always seems to mean other people in some other governmental body somewhere else.

They spend. We invest!

(Hat tip to Ospurt for doing yeoman's work on this stuff.)

According to the MRT, the Midland City Council decided to table three of the four economic development agreement amendments at their most recent meeting. From the reporting, I can't really tell if there were serious concerns, or if the council was just running out of time after the Culver Drive issue.

We don't know what the amendments to Sentry Pumping or Natural Gas Services Group entail, but we do know that the amendment with Trace Engines was to lower their employment target to 25 jobs and, I assume, reduce their letter of credit by only $75,000, leaving $325,000 for Trace to borrow against, while keeping their $400,000 forgivable loan intact (the reporting isn't too clear on this and neither the City nor the MDC posted the complete proposed amendments for the public to examine).

Councilman Scott Dufford has the money quote, too bad he's not even half way to the full story with Trace Engines:

"So we paid $400,000 for 25 jobs?"

Actually, the State of Texas Paid $456,000 for 114 jobs, then the MDC/City paid $400,000 plus provided $400,000 in credit facilities for the same 114 jobs.

I'm not sure what lowering the employment target to 25 from 114 acomplishes, except taking that liability off the books, since other reports say Trace has until 2013 to meet that target.

If it was reported I didn't see it, but on the agenda for the February 19th, meeting of the MDC were four amendments to four different economic development contracts:

10. Consider a resolution authorizing the execution of an amendment to the economic development agreement between the Midland Development Corporation and Trace Engines, L.P.
11. Consider a resolution authorizing the execution of an amendment to the economic development agreement between the Midland Development Corporation and Natural Gas Services Group, Inc.
12. Consider a resolution authorizing the execution of an amendment to the economic development agreement between the Midland Development Corporation and Sentry Pumping Units International, Inc.
13. Consider a resolution authorizing the execution of an amendment to the economic development agreement between the Midland Development Corporation and Midland College.

Sentry is interesting. The MDC pledged $250,000 for 50 total jobs over some non-reported time period. They got $150,000 for sealing the deal and then they got $50,000 for meeting the 25 job plateau. The March 2009 MDC Newsletter had this to say upon meeting the 25 employee goal:

"Not only did Sentry meet the expectations of full-time-employees, they hit the ball out of the park," said Mike Hatley, vice president of the MDC. "They certified 42 full-time-employees by year end. We're impressed with their internal performance as it relates to their contract, to say the least."

So, we had to move the fence in to keep "the ball out of the park" for a company that was 8 jobs shy of meeting their goal last year?

Then there is Midland College, They are teaching wind courses, per the requirements of their grant, maybe we're giving them more money?

Personally, four development contract amendments on one meeting agenda is a big deal in my book. It is obvious that these companies aren't meeting their original development commitments (as I've speculated about repeatedly using publicly available sources) and their promises to invest in property tax generating capital improvements and jobs is the only thing that masks the illusion that these economic development payments aren't anything more than a lump sum to the bottom line.

I'd just like to see the MDC spin all these amendments after they made it a point to say that the Accutel/Semperian deal was "successful" a couple of weeks ago in the wake of the Cingular "Clawback."

I'm not sure riding out the development contract terms and then immediately starting to wind down operations, is a success. Add to that, Semperian Closed their Knoxville Office last week and didn't list Midland as one of the core centers where they were going to transfer employees. Given Semperian's investment in a huge facility in Lewisville in mid-2008 and their recent pattern of closing call centers I wouldn't be surprised to see the Midland office fold by the end of summer.

If that happens, just how much of a success was that fulfilled MDC contract? I think it is embarrassing to have your "First Big Win" closed down within a decade.

UPDATETexans for Public Justice recently posted an update to their "Watch Your Assets" series which looks at the status of the Texas Enterprise Fund grants in this recession. Check out their synopsis of Trace Engines and Huntsman in Odessa.

As most Midlanders know Jal Draw Improvements, (the Ditch north of Wadley) have been necessary for well over a decade. To see the City moving on rehabilitating this channel is comforting to the residents and businesses who are located along the channel and the thousands of residents along a line from Whitney to Fannin to Scharbauer who rely on that channel to protect them from flood waters.

I think the story lead and the quote from former Councilor Morgan sum up the situation pretty well.

The rehabilitation of Jal Draw, perhaps one of the city's most urgent needs, could be under way by spring......

Former District 1 Councilwoman LuAnn Morgan said the deteriorating, dirt-walled draw has worried her for nine years and now is a priority of her successor, Jeff Sparks

However, the quote from our Mayor a couple of paragraphs down is a little troubling:

Perry said the task has been budgeted for two years but was delayed while the council bolstered the downtown tax base. "When those investments paid off with values going up by double digits every year, we went back to the basics and Jal Draw quickly came to the top of the list," he said.

"Repairing this kind of infrastructure is like putting in new air conditioning or plumbing. It's expensive and you don't see it, but if you don't have it you don't have a house."

Huh? Increasing the tax base in downtown over the last two years has been more important than a budgeted, vital infrastructure rehabilitation? It's not like those increased downtown property values are actually going to help pay the cost of this rehabilitation, or any rehabilitation that doesn't occur within the downtown Tax Increment Reinvestment Zone.

Since 2001, every single property tax dollar from the City of Midland, Midland County, Midland College and the Hospital District generated from downtown taxable values greater than $98,933,311 dollars, go straight to the TIRZ account, only to be used within the TIRZ boundary per the requirements of Chapter 311 of the Tax Code.

Since 2004, the year the property values rose back above $98,933,311, the Midland TIRZ has banked about $1.4 million dollars. I don't know about 2009, but according to City of Midland CAFRs for 2005-2008, the TIRZ spent a grand total of $17,167.

Personally, I think Downtown should be left to the TIRZ, the Downtown Midland Management District the MDC and their bankrolls. Ostensibly thats why those entities and their tax funded accounts were created? So why is something that was these entities direct concern (downtown tax values) siphoning off budgeted dollars from needed infrastructure for thousands of citizens while they make bank?

I hope the Mayor was taken out of context or misquoted, because I think the Council can safely take their eyes off the development of downtown and concentrate on the infrastructure of our City as a whole.

Because, the fruits of the City's labor to increase the downtown property values aren't putting money in the City Budget to pay for needed infrastructure improvements, nor are they decreasing the overall property tax bill for the citizens. It is benefitting the TIRZ and the DMMD. Maybe it is time to make them let loose their bounty in their own self interest.

In March of 2008, the MDC doled out $275,000 to Natural Gas Services Group to lease a corporate headquarters in Downtown, employ some people for that office, buy a building in the County, employ some people there, and do a whole bunch of improvements to both locations. Their time limit for doing these things expires in 2011.

So, with a year to go how are they doing? Well, they have leased office space in Downtown Midland, but that may be all they are on track to comply with.

Employment:

- employ at least 10 new full-time employees for its corporate office before 2011 at $380,000 in annual salary and wages.

- employ at least 39 new full-time employees for its operational facility before 2011 at $1.5 million in annual salary and wages.

According to NGSG Investor Presentations there were 259 Employees as of September 30, 2006, 296 employees of NGSG as of December 31, 2008 and 217 employees as of June 30, 2009.

From their high in December 2008, they have cut 79 jobs. This doesn't look to good for a total employment increase of 49 over their March 2008 employment (which I suppose was somewhere between 259 and 296).

Improvements:

- invest at least $500,000 in purchases and improvements for the office and $4 million for the operational facility.

The only way I know to evaluate this metric is to look at the taxable values of these facilities and see if they have risen by the amounts required, because the increase in property values is always sold to the voters as a part of the return on the public investment.

According to the Midland Central Appraisal District, For the downtown office (ID P000205785), in 2009 it had a taxable value of $123,000. For the operational facility (ID R000008595), prior to purchase in 2008, it had a value of $520,560 and in 2009 it had a value of $1,129,370. Not exactly $500,000 and $4 Million.

So with a year to go to comply, employment at NGSG is down by about 40 employees company wide, they need to invest about $377,000 in their downtown office and about $3.5 million in their operational facility.

Any bets on them meeting the terms?

As the City of Midland starts to investigate clawbacks for the Cingular/AT&T deal that has been out of compliance with their abatement and loan contracts for approximately 5 years, maybe it is time the MDC takes a look at their deals with Accutel, now called Semperian Administrative Services.

The deals with Accutel (a subsidiary of GMAC) for a call center in Midland were the first for the newly created MDC. Per the newspaper reports, in the first agreement, Accutel was to have 120 Employees by 2003, later add-ons to the original agreement provided more incentives for an additional 60 employees by 2004 and then an additional 240 employees by 2006 for 440 TOTAL.

So where is Accutel (now called Semperian)? According to the Community Profile on the MDC website, Semperian is shown to have 200 employees.

When I was researching the Cingular economic development deal in June of 2009, I did look at Semperian and at that time, their employment numbers were around 375.

A little more than a half a year later, 175 jobs have been trimmed and they are now employing less than half of the numbers reported in their development contracts.

So, again I ask, where's the due diligence from the MDC on their grantees meeting their jobs requirements of the contracts? Is the MDC not even looking at their own data posted on their website to check compliance?

As I watched the employment numbers for AT&T/Cingular fall in the Economic Development "Largest Employer Listings" over the last couple of years, I did a little research on the AT&T/Cingular deal and blogged about it on June 1, 2009. I even took the occasion to update the blog posting on January 3, 2010 after this deal was positively cited as one of the top 10 stories of the decade, all while AT&T had been dropping down, and then finally fell off the list of largest employers in Midland.

Well, now it is official.

The deal required the call center to have 750 employees by October 2003 and keep that level, but its failure to do so since 2005 has started negotiations that will apparently make AT&T return part of the loan and pay some of the taxes from which it has been excused.

Noting the center only had 303 people working two months ago, City Manager Courtney Sharp said Thursday that it "had a hard time when unemployment was so low and we're working with them to see what we can do to get them back into compliance.

"The contract has some clawback provisions we have to visit about. They may owe the city some money, but they had put in a $7 million tangible property investment and when you factor in all the employees they've had, it has been a win-win for AT&T and the city."

I'm still trying to figure out how this turned out to be a win-win for the City and AT&T.

The Council got an update:

An architect representing Basic Energy Services told the Midland City Council on Tuesday the company will have its downtown 440 space parking garage, including 75 public spaces, open by late December or the first quarter of next year.

Though this quote from a "Chamber Official" was telling:

Basic's contract with MDC also requires the company to retain at least 50 jobs, although a Chamber of Commerce official said the provision of permanent infrastructure was the more important aspect.

This story did tell me one thing I suspected, Basic really didn't start doing detailed plans and specifications until they had the MDC check in the bank. If they had design professionals working on the project from the moment the project was announced in February 2008, and the $2 million in May 2009 was truly to bridge the difference between a "smaller [parking garage that] would not have included public parking" they would have had a contractor and broken ground before the end of 2009.

My money is still on MMH to have their much larger parking garage open before Basic.