$100 million jobs fund was mistake, lawmakers say

By Andrew Garber
Seattle Times Olympia bureau

May 29, 2007

OLYMPIA, WA-- Washington's largest job-development program, touted by state lawmakers as a way to create "family-wage" jobs, is spending millions of dollars to attract employers that hire low-wage workers.

In many cases, grants were given to projects that provided no information about job creation. In other instances, local communities seeking aid listed the number of jobs expected, but state officials did not vet the information.

In addition, the criteria used to select projects gave more weight to increasing tax collections than to adding family-wage jobs.

Key lawmakers, including legislators involved in creating the program or selecting projects, now say the jobs fund in its current form was a mistake. Although there are good projects getting state money, they say, many of them raise questions.

"This isn't a worthwhile expenditure of money," said Rep. Hans Dunshee, D-Snohomish, vice chairman of the House Appropriations Committee. "The attempt was to get at lifetime employment, real jobs that you can have a family on. Obviously, I don't think it succeeded."

But the cities getting the money argue that retail development will boost their economies, attract new industry and lead to better-paying jobs in the future.

The Legislature has pumped about $100 million in tax dollars into the Job Development Fund since 2005, including almost $50 million in the state construction budget signed by Gov. Christine Gregoire this month.

Projects benefiting from public funding include a Cabela's sporting-goods store in Lacey, a Costco store in Covington and a waterfront commercial development in Wenatchee. Those three projects alone account for more than $21 million in expected state spending.

The millions going to roads to help develop the Cabela's store are cited most often by critics of the fund. The project would create 233 jobs, according to the grant application, but the vast majority pay $9 an hour. The current state minimum wage is $7.93 an hour.

Rep. Mark Ericks, D-Bothell, the prime sponsor of the legislation, defended the jobs fund, saying the Legislature shouldn't decide what kinds of jobs are worthwhile.

"For a representative or a senator to say, 'We're not going to make this tool available for communities to create low-paying jobs,' I disagree with that," he said. "If you pick a city that's identified a need, who are we to say, 'You've identified the wrong need.' "

Gregoire had her doubts

The jobs program was the signature bill of a new economic-development committee created in the House in 2005, Dunshee said.

He chaired the House Capital Budget Committee that approved funding for the legislation, and he urged legislators to vote for it.

Once it passed, lawmakers boasted about the fund back home. House Speaker Frank Chopp, D-Seattle, and Rep. Dave Upthegrove, D-Des Moines, sent out newsletters that said "these projects must meet strict standards for creating family wage jobs, stimulating economic development and promoting community growth."

But questions about the fund emerged from the very beginning, and they snowballed as time went on, Dunshee said.

Sen. Jim Kastama, chairman of the Senate Economic Development, Trade & Management Committee, wasn't involved in creating the program but sent a letter to Gregoire earlier this month asking her to veto its funding.

"The [projects] I saw, that were not worthy, justified just stopping the program and re-evaluating it," said Kastama, D-Puyallup.

Gregoire had her doubts, too.

Certain projects deserved the money, she thought, like a $471,000 grant to the Port of Ephrata that allowed a wind-turbine manufacturer in Grant County to expand -- keeping 110 family-wage jobs in the community.

But she had serious reservations about signing off on money for projects such as the Cabela's in Lacey. In the end, the governor said, she held her nose and signed the bill anyway.

Tax revenue over jobs

Legislators split the jobs program into two rounds of grants.

The first $50 million went to 19 projects identified by lawmakers, without having to document the number of jobs or economic benefits created. That money was approved by the Legislature in 2005.

The second round was supposed to ensure an additional $50 million went to the best possible projects.

The Legislature set up a statewide competition to vet projects and required the Community Economic Revitalization Board (CERB) to oversee the process.

The board winnowed the proposals using a formula that scored projects on such criteria as how much tax revenue they'd generate for the state and local governments, and how many jobs they'd create. A dozen finalists were identified in 2006. The Legislature reviewed the list and approved the spending last month.

The formula, created by CERB and its staff, put more emphasis on "return on the state's investment" than on creating family-wage jobs.

It weighted family-wage jobs at 7 percent. Tax revenues, including sales and property taxes, were weighted at 12 percent. The overall "return on the state's investment" -- which included private investment and expected tax revenue -- was weighted at 30 percent.

"I came to find out that, despite its title, which is job-development fund, they weight tax more heavily than jobs," Gregoire said. "I think that's reverse in terms of priority."

In addition, CERB Chairman Tom Trulove, an economics professor at Eastern Washington University, said his board didn't have the staff to adequately scrutinize the projects. "You just had to accept that the project proponents were telling the truth, and accept their numbers, and go with the basis of what you saw," he said.

Trulove said he believes the projects are worthwhile, but "if we were to do this again, we certainly would give a lot more weighting to jobs."

Rep. John McCoy, D-Tulalip, who served on CERB when it approved the projects, said he was flabbergasted by the list presented to the board last year. "They had to peel me off the ceiling," said McCoy, who left the board in December.

McCoy contends much of the money is going to communities with strong local economies and low unemployment, while areas struggling to attract jobs were ignored.

"I was angry. It was a situation where the rich got richer and the poor got poorer," he said.

"Some kind of incentive"

The city of Lacey is getting $9.9 million from the jobs fund to help build roads for a new development along Interstate 5. Cabela's, a national chain that sells hunting and fishing gear, is the anchor tenant.

Of the 233 jobs Cabela's would create, 88 percent would pay $9 an hour, according to the city's application. The store is expected to provide 25 jobs that pay what's considered a family wage of $41,000 annually. In 2004, the average annual wage in Thurston County was a little over $35,000, according to the numbers the state used in its formula. CERB defined jobs that pay more than the average annual wage as family-wage jobs.

Joe Arterburn, a spokesman for Cabela's, said the company would not build in Lacey without state help.

"We've never built a store anywhere without some kind of incentive," he said, noting that Cabela's will draw other stores, motels and restaurants to the area that would benefit from the road improvements.

Lacey City Manager Greg Cuoio said, "This is about opening up 400 acres of prime commercial property along I-5 that will generate 8,000 to 10,000 new jobs, and by the time it builds out it's going to return $50 million to the state annually."

Another project critics bring up is a $10 million grant to Wenatchee for a waterfront development. The money, among other things, would help build a multipurpose events center and relocate a public ice arena. CERB documents say the project would create 620 jobs, of which 200 would be family-wage jobs.

Allison Williams, Wenatchee's executive-services director, said job projections have increased since the application was made. And, like Lacey officials, she argues the development will ultimately attract more jobs to the region.

In Covington, the state gave the city $2 million for road improvements to help bring in a Costco store. The money was part of the first list of projects that did not have to provide information on jobs created.

Rep. Pat Sullivan, D-Covington, lobbied for the money. He said Costco is known for providing good jobs -- city officials say wages average more than $17 an hour. But more important to Sullivan is the sales-tax revenue the store will generate for the city.

Kastama said the state shouldn't spend tax money to help retail stores. If the economy is doing well, they'll locate in Washington regardless, he said. He also questions the argument that retail developments lead to better-paying jobs in the future.

"That's speculation on their part," Kastama said.

The governor said she supports keeping the jobs fund but said "we're going to redo the criteria, and the number one criteria is job development and it's family-wage jobs."

Andrew Garber:agarber@seattletimes.com or 360-236-8268

Copyright © 2007 The Seattle Times Company


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