Where are the jobs? Indiana job numbers still don't add up - 13 WTHR Indianapolis

Where are the jobs? Indiana job numbers still don't add up

Updated:
This man and 300 other people just lost their jobs at a mortgage company. The state signed incentive deals worth $1.2 million to get the jobs, but that contract is no longer available to the public. This man and 300 other people just lost their jobs at a mortgage company. The state signed incentive deals worth $1.2 million to get the jobs, but that contract is no longer available to the public.
The man in charge of IEDC says the agency is not required to share information about projects that failed. The man in charge of IEDC says the agency is not required to share information about projects that failed.
Greg LeRoy of Good Jobs First says Indiana is "cooking the books" when it comes to job numbers. Greg LeRoy of Good Jobs First says Indiana is "cooking the books" when it comes to job numbers.
IEDC has removed 169 subsidy contracts from its transparency portal in the last five months. IEDC has removed 169 subsidy contracts from its transparency portal in the last five months.

In 2013, Indiana got a new job transparency law, a new job transparency website, and a new governor who pledged more openness about job-creation projects announced by the state. Despite all the talk about transparency, a six-month Eyewitness News investigation discovered Indiana is keeping secrets about hundreds of projects, thousands of missing jobs and millions in taxpayer dollars used to pay for them.

Bob Segall/13 Investigates

The parking lot is deserted. All six office doors are locked. Rows of cubicles sit empty.

All that's left of Nationstar Mortgage's Indianapolis service center is a few signs -- and bitterness.

"You go into work every day and give it your best, and then one day the lights go out and the place sits empty. We all got terminated," a former Nationstar worker told WTHR.

The employee, a foreclosure processor named Alan, asked Eyewitness News to protect his identity because he's still waiting to receive his severance pay.

He's one of 311 Nationstar workers laid off this month when the company shuttered its northeast side office. The closing – unreported by any local media until now – came as a surprise to most of the people who worked there.

"You could hear a pin drop," Alan said. "The executives from Texas came in and pulled everyone into a room and told us the earnings from the previous quarter were excellent and exceeded expectations, and they said it's all due to the hard work of the people in the room. Then they turned around and very coldly stated the office was closing.  There was a gal who actually collapsed and fell to the floor sobbing."

Former Nationstar employees say, in retrospect, they should have seen the layoffs coming. For the past year, Nationstar had been shifting much of its foreclosure work overseas to employees in India.

But what about the hundreds of jobs promised to Indiana?

Workers like Alan were hired after the state signed incentive agreements with Aurora Loan Services to provide the company $1.2 million in tax breaks and training grants in exchange for 209 new jobs. The Indiana Economic Development Corporation signed the deal in 2010, and two years later, Nationstar took over the financially-troubled company. Fast forward another 18 months and all the promised jobs are gone.

IEDC is not disclosing any information about the deal it struck with Aurora. How many jobs were actually created? How much money did the company receive in publicly-funded tax incentives? Did the company meet its contractual commitments? Will the state receive any of its tax money back?

"I'd like to know all of that," Alan said. "As a taxpayer, I think it should be our right to know."

In Indiana, that right does not exist.

Despite lots of talk about transparency at the Indiana Statehouse, 13 Investigates has discovered the state's economic development agency and its job numbers are still shrouded in secrecy.

Among WTHR's findings:

  • IEDC's new transparency website is missing basic disclosure information that other states release to taxpayers.
  • The state agency is not releasing any information about hundreds of projects it previously announced.
  • IEDC is reporting official job statistics that exclude all failed economic development projects from its calculations.
  • Both IEDC and the governor are citing the state's new job transparency law as justification to withhold information from public disclosure.

Promises of transparency

Last year, state leaders promised greater economic development transparency after a 3-year Eyewitness News investigation exposed questionable practices and claims by IEDC.

WTHR's "Where are the jobs?" investigation showed deserted factories, empty cornfields and abandoned warehouses where the state agency had said there would be thousands of new jobs. The reports revealed how IEDC inflated Indiana's official job numbers and then tried to keep the real numbers secret.

The series of investigations prompted Indiana lawmakers to pass a new job transparency law, and Governor Pence pledged more openness through the creation of an IEDC transparency portal.

The online tool is designed to provide information about economic development deals signed by IEDC and the companies receiving state-funded incentives in exchange for creating jobs.

Launched last April, the website features a searchable database of economic development projects announced by the state and contracts for those deals.

It certainly looks transparent.

"There are some good things here like actual contracts posted online and the ability to download data from the portal. We applaud that," said Greg LeRoy, executive director of Good Jobs First, a Washington, D.C.-based non-partisan, non-profit watchdog organization that tracks economic development policy and transparency.

But LeRoy points out the transparency portal has critical flaws that blemish its claim of transparency.

"You're seeing jobs announced, but you're not getting actual jobs created. You're not getting actual wages paid. You're not even getting the address of the work site. None of that's here, so it's very, very bare-bones disclosure," he said while examining the website. "It's primitive in terms of giving you what you need to know to know if you're getting a bang for your taxpayer buck."

Illinois and several other nearby states do report that type of economic development information online.

After a further investigation of the transparency portal, LeRoy gave a much harsher critique.

"It's sham transparency. There's no other way to put it," he said.

His comments came after seeing what 13 Investigates discovered while comparing information on the transparency portal to data contained in years of IEDC annual reports: hundreds of large economic development projects announced by IEDC don't show up on the transparency portal at all.

Projects like Really Cool Foods, NuSun Solar and Progress Rail all received state incentives for job creation but are not listed on the portal.

Try to use the portal's searchable database to find information on any of those projects – or Aurora Loan Services – and you'll see the same search result for all of them: NO RECORDS FOUND.

"Yep, it says 'no records found.' That's unbelievable," Alan said as he searched the IEDC website. "That project did exist. I know because I worked there."

But looking at IEDC's portal, it's as if the projects simply disappeared.  Actually, many of them have disappeared.

WTHR discovered IEDC has erased 169 subsidy contracts from the website in just the past five months.

There is no way to see deleted data once IEDC has erased it from the portal because the agency disabled an archive function that would allow visitors to view information previously posted on the website. For that reason, 13 Investigates has been downloading all information from the transparency portal monthly to track and compare information that has been erased.

"Gaming the system"

Why are hundreds of projects and contracts missing from the transparency portal – and why are dozens of existing contracts being removed from the transparency website every month?

"Those contracts are inactive," explained IEDC president Eric Doden. "An active contract is where tax credits get earned. If they're inactive, there's no ability for the company to earn tax credits."

In other words, IEDC is not posting contracts and details for "inactive projects" because, according to Doden, companies considered to be inactive are no longer receiving tax dollars for job creation.

But a closer look at IEDC's 400+ "inactive projects" shows most of them are companies that failed to meet job projections announced in IEDC's press releases, and many are companies that did not bring a single job announced by IEDC.

In recent months, underperforming projects were removed from the transparency portal, and those that already failed were never put on the website in the first place.

"To hide so-called inactive deals is to re-write history. It's to act like they never happened," LeRoy said. "In economic development, shortfalls happen. It's normal. But you don't hide it. That's gaming the system."

Doden told WTHR his agency is posting information only about active projects – and withholding information about inactive projects – because that is what the state legislature mandated last spring when it approved the state's new job transparency law.

"When that got debated in the public arena, the General Assembly determined that [disclosure for inactive projects] was not necessary, so that's where we stand," he said. "It was 147-1 in the vote, and I think the General Assembly has spoken."

Governor Mike Pence made the same argument when WTHR asked him about hundreds of documents omitted from the transparency portal.

"The transparency portal actually was established under the color of law, but our administration has actually gone beyond the requirement of the law in that transparency portal," Pence said.

The governor and his IEDC director are right – at least partially.

The portal does indeed exceed the requirements of Indiana law.  In fact, IEDC does not have to publish a transparency website at all.

At the same time the law Pence and Doden are referring to does not even mention the transparency portal – let alone what should be published on it.  The new job transparency law approved last year by the General Assembly sets only the minimum disclosure requirements, not a limit on how transparent the agency can be. There is no state law preventing IEDC from listing inactive contracts.

IEDC has historically argued a corporation's job-specific data should be considered confidential information that, if released, could harm a company and make it vulnerable to its competitors. However, when asked last year at a legislative public hearing to provide evidence to support that position, Doden admitted the agency has no such evidence.

"The whole argument is balderdash," LeRoy told WTHR. "There's no evidence from any state – and we now have 45 states and the District of Columbia disclosing company-specific data online – that there's any harm to business climate. There's no state that can site evidence that they lost a deal or a company because they disclosed outcomes… The only reason you withhold contracts and company-specific information is if you're trying to defend your track record, erase your failures and make yourself look good."

Questioning the Numbers

IEDC's decision to report only on "active" projects also has a major impact on the agency's jobs realization rate.

The rate, which compares the actual number of jobs created to the total jobs expected, is reported annually to the legislature, the governor and the public.

Last summer, IEDC conducted interviews, sent tweets and published reports to boast of a 91.84% jobs realization rate – a significant increase over the 76% realization rate that IEDC reported the year before.

"We are very pleased with that rate," Doden said after the figure was announced in South Bend. "That's outstanding."

How did the rate improve so dramatically, and how can IEDC be realizing nearly 92% of its expected jobs when previous WTHR investigations showed roughly one in four IEDC projects fails to materialize?  

13 Investigates discovered the agency decided to rely only on active projects to figure its calculations, eliminating all failed deals and tens of thousands of unrealized jobs to calculate its impressive number.

Doden says his agency had no part in the calculation.

"We have an independent review that's done by a professional firm, Crowe Horwath, and they do this independent review and they determined that was the realization rate."

Asked whether he agrees with the methodology, the IEDC president replied: "It's not for me to agree or disagree… we don't have any part of this review, so we simply publish the number that is given to us by the independent reviewer."

Documents obtained by Eyewitness News contradict that statement.

In its job realization report published last July (the same report which shows IEDC's 91.84% realization rate), Crowe Horwath stated "IEDC has specified the jobs realization be calculated based on active competitive projects reflected in the Transparency Portal."   

Crowe Horwath declined an on-camera interview, but agreed to respond to WTHR's questions in writing. In its response to WTHR, Crowe Horwath further explained that IEDC chose to use only active projects to align the realization report with the annual Economic incentive and Compliance Report "in order to maintain consistency between these two published reports."

By doing so, IEDC ensured that both its public reports and its public transparency website would be free of any failed projects.  With those non-active projects included in the calculations, the agency's real jobs realization rate would be approximately 64% -- not the 92% rate reported by IEDC.

The 28% difference between the two calculations represents a difference of approximately 53,000 jobs for Hoosiers (based upon the roughly 190,000 jobs announced by IEDC since 2005).

"We can't afford not to be honest," said Tom Lewandowski, president of the Northeast Indiana Central Labor Council. "We know there are way too many Hoosiers who are unemployed and many of these jobs aren't coming. We can see it on the ground. Fudging the figures to make themselves look good is delusional. We have to know both what works and what doesn't, and cherrypicking information doesn't allow us to do that."

LeRoy agrees.

"They're cooking the books to be sure," he said. "It's statistically impossible for Indiana to get to 92%.  Ninety-two percent means the state legislature is being led to believe that there's nothing wrong and that everything's working out OK and there's no need for additional scrutiny, so it's really misleading for your lawmakers and taxpayers."

WTHR informed the governor that IEDC is using a controversial methodology to calculate its jobs realization rate and asked if he believes the statistics published by his economic development agency. He said his administration is committed to transparency but did not answer the question about whether he finds IEDC's numbers to be credible.

Indiana drops in transparency ranking

This week Good Jobs First released its 2014 report card that analyzes and ranks all 50 states on their economic development transparency efforts.

The detailed report, titled "Show Us the Subsidized Jobs," ranks Indiana 13th among states for its online subsidy disclosure – a drop from the state's previous rankings. IEDC's website ranked eighth in GJF's 2010 report (the last time the organization published a report card) and second in 2007.

For its report, GJF scored each state based upon 23 criteria in seven categories.  Indiana received a total of 171 out of a possible 500 points for an average score of 34.  By comparison, Illinois (65), Michigan (58) and North Carolina (48) took the top three spots in this year's transparency rankings, while the bottom four states (Arkansas, Delaware, Idaho and Kansas) all received an average score of 0.

Based on WTHR's findings – and GJF's independent investigation – Good Jobs First subtracted "penalty points" from IEDC's overall score.

In its report, GJF called IEDC's decision to hide projects from the public "the opposite of transparency." The study further explains "We are unable to determine whether omissions such as these are intentional or accidental. However, these absent records make us continue to question the transparency practices in Indiana."

State response

The governor would not comment on GJF's assessment. His communications director called Good Jobs First a "partisan watchdog organization."

Three of the top-scoring states in this year's GJF economic development transparent study – Michigan, North Carolina and Wisconsin – have Republican governors like Indiana.

IEDC spokeswoman Katelyn Hancock respond to Good Jobs First's comments by questioning the organization.

"It is interesting that Good Jobs First is willing to provide the media with feedback about the portal but has yet to provide the IEDC with feedback directly," she wrote in a November e-mail. "On April 12, the IEDC sent a survey to Good Jobs First asking the organization to review the transparency portal before it was officially launched. The IEDC also personally reached out to Thomas Cafcas of Good Jobs First expressing our interest in their feedback on the portal via the survey. As of today (7 months later), Good Jobs First has not provided us with any feedback on the portal, via the survey or otherwise."

What Hancock did not mention in her response to WTHR is that Good Jobs First promptly replied to IEDC's invitation, offering to provide the requested feedback. 

WTHR obtained those e-mails. 

Twelve minutes after IEDC first asked for feedback, a GJF staff member sent the following response:

"We are very excited to hear about new transparency developments in Indiana. I track economic development issues for the state of Indiana and am the best contact here. Recently, we have worked with Maryland and Tennessee on developing improvements to their transparency portals. We would be happy to work with you as you beta test and make improvements to the new portal. Perhaps it makes sense to schedule a call with myself and either our executive director or our research director? Best Regards, Thomas Cafcas"

The following day, LeRoy followed up with another message:

"As Tommy explained, Good Jobs First constantly provides TA, usually pro bono, to public officials and others who seek to improve the transparency and accountability of economic development incentive programs. However, by providing any such assistance, we do not confer any sort of "Good Housekeeping Seal of Approval" to any state's programs and must always retain our autonomy and independence when, for example, we issue studies rating the states on accountability metrics.  As long as IEDC and GJF are all agreed on such respective roles, we are happy to participate in a survey about your new portal and/or otherwise provide expert feedback on Indiana's efforts."  

IEDC did not respond to LeRoy's message, nor did IEDC indicate whether it would agree to a shared understanding regarding the scope of any input provided by Good Jobs First. The state agency and policy resource organization have not communicated with one another since, although Doden said he is leaving the door open.

"We have a really great relationship with Good Jobs First," Doden told WTHR earlier this month. "We are wide open in the spirit of continuous improvement to hearing from Good Jobs First and any concerns they may have."

"I'm pleased with our efforts in terms of being transparent and we have a desire to be transparent," he added.

See interview with Governor Pence

See interview with IEDC president Eric Doden

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