Shoulda, coulda, woulda
“… the Pine Tree Development Zone (PTDZ) program demonstrates the importance of competitive tax policy for new and growing companies leading to the creation and/or retention of nearly 10,000 jobs that could have landed in other states …”
WHO SAID IT
The state Department of Economic and Community Development (DECD) in a press release, Feb. 2, 2014.
The statement from DECD refers to a section of the just-released “Comprehensive Evaluation of Maine’s Economic Development Incentive Programs.” Such programs have been in the news in recent years because critics say they cost the state millions of dollars each year while there is scant evidence of their cost-effectiveness. The study was designed to look for that evidence. One of the programs it looked into deeply was the Pine Tree Development Zones, established in 2003 by then-Gov. John Baldacci. The program gives tax breaks and other advantages to businesses located in Pine Tree Zones across the state in return for promising to create jobs.
The key phrase in the press release is “could have.” A closer reading of the report tells a lot more than the press release.
The 10,000 job reference on the press release is based on the report stating that “In 2012, 285 certified companies created 5,010 new jobs and 4,878 jobs were retained.”
The DECD release states these jobs “could have” landed in other states. Does the report back that up?
Not exactly. It says based on the information provided by the state, estimating how many jobs could be attributed to the PTDZ program is “arbitrary” and could be anywhere from none to all of them.
But the DECD release also leaves out a fact in the study that is based on data, not speculation. The authors’ cost-benefit analysis calculated whether the state got a return from the tax breaks given to PTDZ businesses.
A zero Incentive Rate of Return (IRR) means the state got back in taxes and jobs what it granted to the business in incentives – a “wash.” A positive rating meant the incentive programs were cost-effective; a negative rating meant the state gave away more in business benefits than it got back in taxes and jobs.
The rating for PTDZ was minus 22.4 because the costs of the incentives were $350 million greater than the benefits to the state.
Under the headline “Important consideration,” the report states: “The negative IRR implies that the PTDZ is an expensive program …” That strong comment was not part of the press release.
The press release is an example of selective truth-telling. Yes, the program “could have” led to those jobs or could have led to half of them or none of them – according the department’s own report. And the strongest statement about PTDZ – that the program is expensive and produces a negative return – is bad news and government agencies do not like to trumpet bad news about their own programs. “One of our programs is too expensive and it’s anyone’s guess if it produces jobs” is a sentence you are not likely to find anytime soon in a government press release.