http://www.fallonforgovernor.net/welcome/index.aspState Representative and gubernatorial candidate Ed Fallon (D-Des Moines) today sent a letter to Mary Lawyer, director of the Iowa Department of Economic Development. The letter was his fourth request for accurate information concerning the successes and failures of the $50 million annual program. The full text of the letter follows this release.
“If we are going to spend hundreds of millions of dollars in public money, then it is absolutely critical that the money be accounted for in a way that is completely transparent to the public, state officials, and the media,” Fallon said in the letter. “The recent crisis surrounding CIETC exemplifies what can go wrong when there is a breakdown in accountability.”
On March 3, Fallon issued a request for job creation and retention achievements for Iowa Values Fund companies. IDED officials, including former director Mike Blouin, frequently claim that the Iowa Values Fund has already created over 25,000 jobs, despite the fact that IDED’s most recent report showed that only 1,282 jobs have actually been created. IDED’s response to the request indicated that finding and copying the requested information on yearly performance measures would take 142 hours, at a cost of $27.53 per hour.
“What I’m asking for isn’t exorbitant. In fact, I think it’s what every taxpayer should be asking for: accountability from their government,” Fallon said. “Instead, IDED has told me I’m more than welcome to crunch the numbers myself, as long as I’m willing to pay almost $4,000 to get the information. I think that’s pretty ridiculous.”
Responses to Fallon’s previous requests for the most recent information were met with a report from June of 2005, which does not match the numbers IDED and state officials have been using publicly. Fallon again requested the most recent available information.
“In your March 3 letter to me, you only released records up through 6/30/05,” Fallon said in the letter. “End of the year reports were due on December 31, 2005. Nearly 3.5 months have now passed.”
These requests, along with 18 others, are included in the letter Fallon sent to Lawyer.
“I think it’s critically important that we hold our government agencies accountable, especially agencies as well funded as IDED,” Fallon said. “If the recent scandal with CIETC has taught us anything, it’s that limited oversight can create terrible consequences.””
And a quick report from the Sioux City Journal:
“The department says more than 25,000 jobs have been created or retained because of the values fund. This number includes jobs that are scheduled to be added in the next few years.
Fallon argues that the number should be only a few thousand, because most of the jobs are still on the horizon, with little guarantee they will happen.
The people who oversee the values fund say the critics are the ones who are misleading. Lawyer said Thursday that companies benefiting from the values fund face strict scrutiny about the number of jobs they will create and the wages and benefits. Companies that fail to perform can be asked to return the state money.
Some members of the economic development board said unfair attacks should not go unchallenged. They suggested that business leaders or board members should write guest columns in local newspapers to explain how the values fund works.
But some board members said the attacks on the fund are not credible enough to deserve a response. “My personal philosophy is, you don’t reply to garbage,” said board member Craig Lang of Brooklyn.”
First off, it sounds like Mr. Lang has a bit of an attitude problem. I’m not sure where I stand on the Iowa Values Fund, but I do know that some reform is needed and it needs to be thoroughly reviewed. Fallon seems to be squarely against it — from his rhetoric in statements and on the stump — but I honestly just don’t know enough about it. Below the fold, you’ll find the full text of the letter he sent to Ms. Lawyer. I plan on studying it a bit later, after a nice nap later this evening after a long day’s worth of running around.
April 20, 2006
Mary Lawyer
Iowa Department of Economic Development
200 E Grand
Des Moines, IA 50309
Dear Mary,
As you know, one of my major concerns with the Iowa Values Fund (IVF) and other IDED programs is accountability. If we are going to spend hundreds of millions of dollars in public money, then it is absolutely critical that the money be accounted for in a way that is completely transparent to state officials, the media and the public. The recent crisis surrounding CIETC exemplifies what can go wrong when there is a breakdown in accountability.
I am writing you because I am concerned about the quality of the records you released to me on March 3. There are numerous instances, enumerated below, where the information is incomplete, inconsistent or too ambiguous to be able to fully assess how money has been disbursed, and how the companies that have received funds are performing. In addition, as outlined below, it is unclear to me why some companies are even included in the total number of jobs to be created/retained.
First, I want to raise a broad concern about reporting the progress of the IVF and other incentives. In your 4/03/06 letter, you correctly stated that “the Iowa Values Fund and other IDED business assistance programs will account for 25,015 jobs created and retained”
. Yet in a presentation to Marshalltown business people at the Statehouse on March 14, your Powerpoint presentation stated that the IVF and other IDED programs “have . . . created and retained 24,582 jobs at an average wage of $39,582 (incented jobs)” . In short, people are led to believe that these goals have been accomplished when in fact IDED’s own figures show that only 5,907 jobs have been created and retained by all IDED programs, 3,278 have been created and retained by the IVF, and of those, only 1,282 were actually created. This misrepresentation is common, and is included on Mike Blouin’s campaign web site, and was repeated in Gov. Tom Vilsack’s 3/25/06 Des Moines Register opinion piece. Whatever you can do to assure more accurate and consistent reporting of actual, verifiable job creation numbers would be helpful.
Beyond this general concern, I have several points of clarification and additional requests regarding your written responses to my open records requests.
1) In response to my request that you supply job creation and retention goals broken down by each year of each company’s plan, your March 3 letter stated that this has “not been calculated for the Iowa Values Fund as a group”. You then estimated that it would take 142 hours to pull the folders of the 283 companies and copy that information, at a cost of 27.53/hr. It seems incredible to me that it would take 30 minutes per company to pull a folder and photocopy the relevant pages. I ask that you recalculate the estimated time and cost involved and for this reason I reiterate my request.
2) I also asked you for information on any case where IVF monies were dispensed, but required to be returned due to inability to meet job creation goals. Your letter stated that there were no companies that met this criteria. (Note that your letter misstated our request as “inability to meet job creation goals because the project completion dates have not been reached??, while our request simply stated “inability to meet job creation goals.”) Yet, your records listed four IVF projects that were not proceeding. One of them, Phytodyne Inc. received $300,000. In total, 18 companies that are part of IDED business assistance programs from 7/1/03-6/30/05 are not proceeding. A total of $673,000 was disbursed (although not all companies received a disbursement). Please explain why this does not constitute a situation where disbursed funds are required to be returned.
3) My second open records request of 3/24/06 asked that you verify that the documents you sent me are the most recent and accurate figures that IDED has available. Your response stated that “. . . since July 2003 through March 2006, the Iowa Values Fund and other IDED business assistance programs will account for 25,015 jobs created and retained.” This, along with your presentation to Marshalltown business people on 3/14/06, suggests that more recent data is indeed available. In your March 3 letter to me, you only released records up through 6/30/05. End of the year reports were due on December 31, 2005. Nearly 3.5 months have now passed. I request that you release to me a list of all the companies now participating in IDED programs, the amount of assistance pledged, whether contracts have been signed, the number of jobs they have promised to create and retain, and the promised hourly wage of these jobs. In order to evaluate progress, I would also like to know the companies’ information on actual job creation and retention figures, actual amount of funds disbursed, and the actual hourly wage of the jobs. This list should, of course, include companies where projects are not proceeding as anticipated, and the names of companies that did not submit a report.
4) Two years ago, I requested similar records from then-IDED director Michael Blouin. In his response on 4/7/04 Mr. Blouin stated that the Iowa Public Impact Model was “intended to assist with evaluation of the performance of the Iowa Values Fund and other state financial assistance programs.” “The model”, Mr. Blouin stated, “relies upon the cooperation of the participating companies to provide the Department with business tax, wage and job creation estimates and projections.” What is the status of this model, that is, has it been validated by actual data? If it is no longer in use, by what means will IDED calculate return on investment? Why was the Iowa Public Impact Model discarded, if indeed it is no longer being used?
5) In files I have in my office, I have a copy of a contract issued to Data Builder on 4/28/04 as part of the Iowa Values Fund. I have noted two important discrepancies between the contract and the performance spreadsheet.
* The contract specifies that all pledged jobs be created and retained by the end of the third year. Because the contract was dated 2004 and the spreadsheet lists 2004 as the award date, the completion date should be 2007. However, the spreadsheet lists the completion date as 2009.
* The contract says that 36 jobs should be created, yet the spreadsheet lists just 16 to be created. It clearly would be easier to create 16 jobs in five years than to create 36 jobs in three years. Please explain these discrepancies. Because of this, I am concerned about possible discrepancies in other IVF contracts, and so I request copies of contracts for all IVF companies (92 companies listed on the IVF spreadsheet you released to me in March).
6) The spreadsheet lists 99 companies (35 % of the 283 projects) where no contract has been signed. These companies account for 3,878 of the 11,562 jobs promised to be created (34%). If no contract has been signed, how can these companies be officially listed as part of an IDED program, and the jobs included among those that have been promised? As of 12/31/05, how many of these companies had still not signed contracts?
7) Why are some completion dates left blank?
8) Why are some completion dates filled in with NA? Does NA mean “not available” or “not applicable”? In either case, what is the reason for lack of a completion date?
9) What does “royalty” mean, and how does that affect the completion date?
10) On this spreadsheet there are 36 companies that are listed as “on schedule” to meet their contractual obligation, yet the completion date is either left blank, or marked with ‘NA” or “Royalty?” How can a company be assessed as on schedule when there is not a completion date to evaluate the company’s progress?
11) Similarly there are six companies that are listed as “behind schedule”, where the completion date is also blank or marked with “NA” or “Royalty.” Again, how can progress be measured without a completion date?
12) The spreadsheet lists 18 companies where projects are “not proceeding”. These companies account for 475 of the 11,562 jobs promised to be created. Six hundred and seventy-three thousand dollars has been dispersed to these companies. If the projects are not proceeding, why are the jobs still being counted as among those to be created?
13) What effort is IDED making to recover the money dispersed to these companies?
14) Similarly, there are three companies that declined an IDED award, accounting for 65 jobs. Why are these jobs still being counted?
15) Thirty-two companies are listed as participating in multiple IDED programs, where contracts have been signed for only some of the incentive programs. What is the current status of these contracts? If all the contracts have not been signed, how does this affect the number of jobs the companies have promised to create or retain?
16) Eighty of the 283 companies (nearly 30 percent) did not respond to IDED’s request to self report by 6/30/05. What steps has IDED taken to ensure that these companies are being held accountable? What is the current status of these companies and their awards?
17) The spreadsheet lists 87 of 283 companies that are listed as receiving an award, yet no money has been disbursed. What is the reason for this, and how does lack of funds from the state impact the companies’ ability to create/retain the jobs promised?
18) You list the following five companies as part of the IVF spreadsheet yet they do not appear on the performance spreadsheet. Please explain this, and provide information on the performance of each of these companies:
• Five-Star Industries
• AVG Automation
• Info USA Sales Solutions – Carter Lake
• Schebler Co.
• Vernon Co.
19) The spreadsheet lists 31 companies that have completed projects. How was the amount of capital investment derived, and has this figure been verified, versus self-reported? Note that your April 3, 2006 letter stated that once per year company self-reports will be verified with “details of capital investment expenditures.” Presumably, independent verification will also occur upon completion of each project. If this is so, who will provide it?
20) I have noted numerous other discrepancies in the data released to me. Please clarify which is correct.
• Hoffman, Inc. is listed twice on the larger spreadsheet, once with no contract signed and a second time with a contract signed.
Other discrepancies are listed in the table below, and involve differences in figures between the two spreadsheets you released to me.
Company IVF spreadsheet 6/30/06 spreadsheet Item
Central Iowa Renewable 31 23 jobs created
Central Iowa Renewable 4 0 jobs retained
Central Iowa Renewable $16 $18.05 salary
Central Iowa Renewable $79,929,015 $75,929,015 capital investment
Clipper Windpower $846,000 $2,846,000 capital investment
Data Builder $116,000 $118,000 award amount
G Commerce 1,000,000 1,350,000 capital investment
Lincolnway Energy 39 34 jobs created
MG Bionics $118,000 $368,000 award
Protocol Driven Health $320,000 $420,000 award
I realize that this letter is detailed, and that my requests for clarification and additional information will involve some effort. Nevertheless, I trust that a prompt response will be forthcoming, as you have always been extremely cooperative in the past. Know that this is appreciated, and that I look forward to hearing from you soon.
Sincerely,
Ed Fallon