Beacon Releases New Study Showing Lack of Transparency & Accountability in State Incentive Programs


January 10, 2019 9:25AM

Today, the Beacon Center of Tennessee released a new report on the state of Tennessee’s economic incentive programs and exposed major issues with many of the subsidies.

Below are some of the findings discovered by the Beacon Center:

  • Many companies that receive taxpayer money are not required to hire the number of workers promised. In fact, all 25 FastTrack agreements reviewed in detail by the Beacon Center only required companies to hire 80% of the promised jobs.
  • Companies that received FastTrack Economic and Community Development Grants often did not submit the required documentation on time. In fact, only 51% of the mandated reports detailing the number of new jobs were filed on time. 
  • More than $218 million of tax credits were claimed in 2017 alone, and an even bigger issue is that the state is on the hook for nearly $900 million of tax money for unclaimed credits that will likely be collected at some point. 
  • The city of Memphis and Shelby County are losing out on hundreds of millions of dollars that could have been used to improve the city. Beacon researched the Economic Development Growth Engine (EDGE) agency’s Payments in Lieu of Tax (PILOT) agreements. Beacon found that using only new jobs and investment, EDGE PILOTS overestimated projected tax receipts by a staggering $451 million for Memphis and Shelby County. 

This report actually leaves us with a lot more questions than answers. There are so many incentive deals that are completely confidential and taxpayers have no idea how much of their money is being given to private companies or the return on investment of these handouts. To make matters worse, even when companies are required to disclose the number of jobs created as part of their agreement, some haven’t submitted reports in years. No matter where you stand on economic incentives, everyone should be for transparency when it comes to how our tax dollars are being spent, and our economic development programs fail that basic test.

Below are two solutions from the Beacon Center to improve transparency: 

  • The General Assembly should make all FastTrack agreements subject to accountability agreements with mandatory clawback provisions if companies fail to meet their commitments or fail to comply with simple reporting requirements. 
  • The General Assembly should assess if there are other agencies more suited to enforce these various programs than ECD. This would remove the perverse incentive where the “cheerleader” is also the “referee,” which can lead to inflated expectations and loss of taxpayer money as showcased with EDGE’s PILOT programs.

You can read the full report here.