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A modest IDA reform

Clawback is a dirty word in much of the economic development community.

It involves retrieving a subsidy granted to a business when it fails to deliver as promised. Typically, clawbacks are used when companies fail to create jobs as promised.

No local economic development agencies use clawbacks, but the Amherst IDA wants its brethren to embrace a limited use. Its board voted unanimously last week to recommend that IDAs throughout Erie County establish a uniform clawback policy when companies use fraud to obtain benefits.

Reported my colleague David Robinson:

The measure, proposed by board member Ayesha F. Nariman, is a scaled-back version of a claw-back proposal that the Amherst IDA rejected in April. That defeated proposal also would have imposed the claw-back on companies that failed to meet their job creation targets.

The Nariman proposal excludes companies that don’t meet their job creation promises due to economic circumstances. The only trigger for the claw-back provision in her proposal is if the tax breaks were sought in “an intent to defraud.”

The county's six IDAs agreed in 2001 to adopt uniform policies, so this proposal would have to gain the approval of the the IDA Leadership Council, which includes the agencies, the county executive and some other economic development types. The council meets again the middle of October.

"Any policy change would be all or none," explains Jim Allen, head of the Amherst IDA. "That way, no one is putting themselves at a competitive advantage or disadvantage.

"My sense it is will be passed. It's something whose time has come. The public is clamoring for a clawback in the event someone isn't playing by the rules."

This seems like an easy lift for the IDAs, as it's limited to fraud. Who can be against punishing a company under those circumstances?

Of course, the provision would have very limited application and would do little to satisfy those pushing for more comprehensive IDA reform.

Local IDAs don't want clawbacks extended to include a company's failure to meet job projections "because the numbers fluctuate," Allen said.

That's true, but the resistance goes beyond that, from what I've seen and heard from a wide range of local economic development officials.

They're concerned clawbacks would make it that much tougher to put deals together. OK, I can appreciate that.

But expanded clawbacks, enacted in numerous states, would also introduce a level of accountability that many economic development types would just as soon not interject into the process. If you had clawbacks, you'd have to go after under-performing companies and that would bring attention to the fact the public wasn't get a full return on its investment.

Darth_vader_2That's not a shot at Alllen, who, despite his Darth Vader reputation among some in the city, strikes me as a progressive guy when it comes to the larger economic development issues confronting this community. He doesn't dispute the notion that the region needs to rethink its approach. In fact, he's put more thought into how to fix things than anyone I've come across. Read this and you'll know what I mean.

Anyways, subsidies are failing to deliver as promised not just here, but around the country. Check out this new new report in Clawback, a blog published by the folks at Good Jobs First.


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