Corporate Welfare Fail in Indiana
Corporate welfare is a bipartisan problem, and it’s a problem at both the federal and state level. Yesterday, I discussed the recent demise of Obama-subsidized Abound Solar and the fact that Indiana Republicans were also involved in helping the company obtain taxpayer handouts. Adding insult to injury is another example of “crony capitalism” gone awry in Indiana.
The Indy Star recently reported on an attempt by the state’s Indiana Economic Development Corporation to pressure the city of Madison into subsidizing a manufacturing facility for a shady California businesswoman. The entire investigative report needs to be read in order to fully appreciate the incompetence displayed by the IEDC’s wannabe venture capitalists, but here are some excerpts:
Build us a 40,000-square-foot manufacturing facility, throw in some needed equipment -- all for around $5 million -- and we'll create up to 200 new jobs. That was the pitch by a California businesswoman and her renewable energy company, Global Energy Solutions, to officials at the Indiana Economic Development Corp. and, ultimately, the city of Madison.
The company was searching for a site in Indiana -- and the purpose of the IEDC, which reports to the Indiana secretary of commerce, is to lure jobs to Indiana and often provide incentives. IEDC officials did just that. They approved $1.5 million in tax credit and training incentives. They also began pressuring the city of Madison to act on the proposal -- and quickly.
“Secretary of Commerce Dan Hasler asked me to send the following message,” an IEDC official emailed City Council President Laura Hodges. “If Madison is not going to take advantage of the job creation and investment opportunity being presented by Global Energy Solutions (and that's OK), don't further frustrate the company with delays. We do not want to lose this project for Indiana.”
In their rush to generate a favorable press release for Gov. Mitch Daniels, which is the IEDC’s real mission, IEDC officials apparently didn’t bother to look into the background of the character they were anxious to fork over taxpayer money to:
An Indianapolis Star investigation has uncovered numerous red flags regarding Global Energy Solutions and its president, Mynette Boykin -- red flags that experts say raise questions about the IEDC's due diligence on a project that would have cost local and regional taxpayers several million dollars:
Boykin claimed that another company of hers, Secured Capital Investment Group, would eventually commit $500,000 to the Indiana project, emails show. That company, however, forfeited its California business license in 2011 because it didn't pay more than $40,000 in taxes.
Boykin noted in her business plan that DC Solar Solutions would be “working in collaboration” with her on the project. When The Star contacted the owners of DC Solar Solutions, they said they never agreed to work with Boykin.
Boykin filed for bankruptcy in 2005 with $1 million in debts. In April of this year, a company filed suit against her for an unpaid $100,000 loan.
The Star shared Boykin's business plan with an industry expert, who called it “extremely amateurish” and questioned the validity and viability of the proposal.
The Star also determined that other parts of Boykin's plan are identical to a sample business plan posted on the website bplans.com. The sample plan was for a company that makes auto tools.
The good news is that, unlike the IEDC, the locals in Madison did some probing. As they should have given that the cost to the city would have been $4 to $5 million. When a presentation given by Boykin failed to impress Madison’s city council, it became clear that the deal was dead. That didn’t sit well with the IEDC’s representing bureaucrat:
Regardless, IEDC official Wanda Heath was there, and she addressed the council for the first time. She sounded irritated. “You could tell she wasn't happy,” said Councilman Darrell Henderson, a Democrat.
She also made it clear that she felt that Madison council members weren't doing their job properly. “She said, ‘You guys are moving way too slow; you're making Madison look bad; this process should never take this long; no business is ever going to come to Madison being treated like this,’” said Councilman Rick Berry, a Republican.
“I really thought that was out of order,” another councilman, Republican Jim Lee, said. Lee told The Star that in his 12-plus years as a councilman, he had never before seen a representative from the state at an executive session. He felt like he and the other council members were being talked down to.
After leaving town, a defiant Boykin told the Star that “We will come to a different state. Probably right next to you guys.” Unfortunately, it’s not implausible that another state’s Department of Corporate Welfare will eventually come to her aid as this sort of scheming with taxpayer money is definitely not a problem that is unique to Indiana.
