Megadeals Don't Add Up
When it comes to economic development, spending more often results in a smaller return.
Looking at more than 170 economic development "megadeals" made in recent decades, a new report finds that states and localities spend more than
A megadeal is a subsidy award with a total state and local cost of at least
According to the report, the most expensive jobs have been in the oil and gas industry, with an average price tag of more than
By contrast, 31 of 33 workforce development programs with available data from state audits cost less than
The Takeaway: If you're only looking at job creation, this report contains some pretty damning evidence against offering huge tax breaks to lure employers. But to be fair, luring an employer or convincing one to stay also comes with other goodies for states, such as a bump in sales tax revenue from money spent on new construction costs. Another effect to consider is that having one major employer in an industry can often attract others serving that industry -- governments could reap the tax benefit of that increased economic activity.
Still, the precise impact of the indirect benefits is much harder to quantify. And sales tax bumps from new construction are temporary benefits. The real bread and butter in this economic growth recipe is job creation -- as each new job introduces new, stickier money into the local and state economy. So while it's not an apples-to-apples comparison between tax breaks spending and workforce development programs, it's not an unreasonable one if you want to look at the cost of growing a local economy.
The report recommends curbing such costs with capping the dollars spent per job. Nineteen states have at least one program with a cap of, in most cases,
Retirement Security for All
The program will be phased in over three years and will require all companies with five or more workers that don't offer a retirement program to auto-enroll employees in the Secure Choice Retirement Savings Program. The plan will ultimately impact about six million
Money is expected to start flowing into Secure Choice accounts next year and will make
The Takeaway: More states are now expected to follow
But the real boost for retirement programs like
A Comeback for
Bond insurers -- companies that provide a money back guarantee to investors on bonds sold by municipalities -- were one of the biggest casualties of the 2008 financial crisis. Governments liked to insure their bonds because it typically allowed them to sell the bond with the insurer's higher credit rating. That let governments get a lower interest rate cost on the bonds, making it worth the insurance expense. But the insurers' effectiveness was essentially obliterated when their own credit ratings were downgraded amid the 2008 crisis. A little over a decade ago, half of new bonds issued in the municipal market were insured. Today, just 6 percent are.
While they're down, bond insurers are far from out.
In their monthly outlook, analysts
Meanwhile, insurers have been decreasing their exposure to outstanding bonds as governments have not re-upped their insurance when refinancing old debt.
The Takeaway: Low-interest rates have driven down the need for bond insurance because even low-grade governments are getting historically low rates on their bonds. But Schankel and Kazatsky say that has also provided a window for insurers to regain their financial health after losing a lot of money in municipal bankruptcies. When rates rise, more governments will turn back to insurance.
"Bond insurance plays an important role for many municipal investors," the authors wrote. "We expect that role to expand, along with market share, if not immediately, then in coming months and years."
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