Audit claims millions in ‘questionable incentives’ handed out by Gov’s Office of Economic Development

Posted at 1:00 PM, Oct 14, 2014

SALT LAKE CITY -- A new audit claims "questionable incentive awards" and a lack of transparency in the way the Governor's Office of Economic Development hands out incentives to corporations to move to in Utah.

The audit, unveiled before the Utah State Legislature's Executive Appropriations Committee on Tuesday, accuses GOED of misinforming "stakeholders, including the public, regarding projected wages that a newly incented company will pay."

"GOED regularly reports inaccurately that all projected jobs that will received Economic Development Tax Increment Financing will pay more than the minimum wage requirement," the audit said.

The audit alleges GOED "provided special treatment for some companies by altering post-performance assessments for companies that failed to meet GOED's contractual threshold," including:

  • using existing company employees to inflate wages of new employees in order to gain corporate incentive awards;
  • used incorrect benchmarks to improperly issue an economic development tax increment financing award;
  • removed low-paying jobs from averages;
  • handed out incentives to companies that failed to meet the wage criteria under their contracts with the state.

The audit, which scrubbed the names of specific companies, accused GOED of removing 42 low-paying jobs from a company's calculation in order to justify handing out an incentive award. GOED is also accused of adding health benefits to company wages, to make it appear like those employees made more than they actually did.

In another finding, the audit claims GOED handed out $2.8 million in tax credits to a pair of companies, yet could not verify 92 percent of the jobs the companies claimed were created as a result.

Read the audit here:

The audit also alleges that despite the economic conditions improving in Utah, GOED has lowered the threshold for companies to get a tax break from the state. GOED also brought in jobs that paid below the state's own minimum requirements.

In testimony before the committee, representatives from the Governor's Office of Economic Development defended their practices. GOED Executive Director Val Hale took issue with many of the claims, insisting that their incentives have created nearly 13,000 new jobs and pumped more than $120 million into state coffers.

For every dollar spent by the state, Hale said, they get $3.19 back.

"We've done everything we've done within the statute. We have the flexibility," he told FOX 13. "It's in statute."

Hale said the legislature drafted the statute that allows for the incentives. But some lawmakers were critical of how it has been applied -- and a lack of transparency.

"Is it wrong for me to keep hearing you all say, 'It's either good business and no transparency,' and 'We've just got to trust it because it's all secret?'" said House Minority Leader Jennifer Seelig, D-Salt Lake City. "What's going on here?"

House Speaker Becky Lockhart, R-Provo, questioned if the rules were applied evenly to every company. Rep. Joel Briscoe, D-Salt Lake City, felt GOED representatives had been less than forthcoming.

"I don't feel like we're getting to what's really going on," he said.

The committee is not dropping the audit. They voted unanimously to advance it in the legislature, while some lawmakers said they would not rule out bills to reign in GOED's rule-changing authority.