Subsidies not creating jobs as hoped

 

By Don Michak
Journal Inquirer

Published: Tuesday, April 12, 2011

 

Nearly half of 63 companies that got state Department of Economic and Community Development grants and loans in exchange for promises to create or retain jobs failed to meet those contractual obligations last year, the agency’s latest annual report reveals.

The report shows that 29 companies, or 46 percent of those in the DECD’s “business assistance portfolio,” together were expected to retain 12,204 jobs and create an additional 1,779 by the end of last June, for a total of 14,183.

But the employers actually retained or created 12,845 jobs — 1,338 less than pledged.

Those companies collected a total of $86.1 million in DECD subsidies, according to the report, which puts the cost to the agency of each missing job at $6,707, or a total of $8.9 million.

Among the companies that essentially flunked the DECD’s “job audits” were two firms with operations in north-central Connecticut: Cuno Inc., with facilities in Stafford and Enfield now owned by 3M Corp., and Ahlstrom Windsor Locks LLC, owner of the paper plant formerly operated by Dexter Nonwovens.

The DECD’s contract with Cuno, which had 728 jobs at the time of its application and which received two loans totaling $537,500, called for 728 jobs to be retained and 22 to be created, according to the agency’s survey results on full-time employees. As of June 30, 2010, Cuno had retained 698 jobs and created none.

Ahlstrom, meanwhile, had 495 jobs when it applied for state assistance and contracted to retain 495 and create 15. Last June the company, which received a $550,000 loan, had retained 434 jobs and created none.

Agency officials, however, emphasize in the report that 34 of the 63 companies — which together collected a total of $145.3 million in subsidies — not only satisfied their obligations to keep or create 17,769 jobs, but actually retained or created an additional 2,879 positions, at a cost per job to the DECD of $7,041.

They say that means that in the aggregate, their business assistance portfolio has produced “5 percent more jobs than the assistance recipients were contracted to produce.”

The DECD in previous years issued similar reports documenting how dozens of companies it assisted had missed their employment objectives, repeatedly renewing controversies over the efficacy of such subsidies.

Some lawmakers, including a few who privately have referred to the agency as a “candy store for corporations,” even asked their respective political caucuses to stop subsidizing companies so they could retain or create jobs. They argued the costly incentives didn’t work, that the process was likely corrupt, and that the money could be put to better use.

But DECD officials have defended the subsidies, saying that not every investment in its assistance portfolio carries a job retention and creation requirement.

They also repeatedly have explained that the portfolio accounts for a small share of the agency’s investments — 13 percent in 2010 — which also include community and housing development projects.

Similarly, the officials emphasize in their latest report that 54 percent of the companies that have undergone contractually obligated job audits either met or exceeded their respective job goals, and 84 percent met 70 percent or more of their contractual jobs commitment.