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Tuesday, February 5, 2019

Green Nonprofit Got $1.3 Million Grant to Create Five Jobs

By Eric Boehm - February 05, 2019 at 10:50AM

While under an active investigation by the Oregon Department of Justice for misleading state officials in an attempt to qualify for tax breaks, a Portland-based environmental nonprofit was awarded $1.3 million to create a mere five jobs at a warehouse in rural Oregon.

It's the latest twist in a bizarre story that began in 2014 when Ecotrust, the nonprofit, was awarded $12 million in tax credits to reopen a sawmill in southern Oregon that had closed the previous year. Ecotrust promised to create 70 jobs, but the reopened sawmill closed again, just 20 months later. A subsequent investigation by The Oregonian found that state officials had missed numerous red flags about the project's viability, including "a simplistic hand-written budget, ineligible costs that could have been detected up front and a recent failure by the mill's operators to keep it open despite substantial public investments."

It was a project that was "doomed to fail," the paper concluded—but it might have been more than just bad luck or poor planning. A 2018 review by Business Oregon, the state economic development agency that made the bad deal with Ecotrust, concluded that the nonprofit had omitted details and inflated project costs to qualify for additional tax credits. The state Department of Justice got involved.

Now, Business Oregon appears ready to be fooled twice. State economic development officials signed off last week on a scheme that would allow Ecotrust to keep some of those ill-gotten tax credits from the failed sawmill project by repurposing them for a new project that will cost taxpayers $1.3 million to create five jobs, The Oregonian reports. Those five jobs will pay about $31,000 per year in a town were the median household income is $73,000—and the tax credits will benefit Office Products Nationwide, which runs successful warehouses all over the West Coast and doesn't appear to be in need of taxpayer-funded assistance, according to the paper.

That's a far cry from using taxpayer dollars to restart a shuttered sawmill in an economically depressed part of the state. It sounds like yet another waste of taxpayer money. Perhaps most incredible of all, Business Oregon seems to know it, but claims they can't do anything about it. The economic development agency can't "factor in the existing success of the benefiting business or the number or quality of the jobs created," an official tells The Oregonian, and "officials have no choice but to turn on the taxpayer spigot if a group seeking tax credits meets minimum federal qualifications," the paper concludes.

The entire saga raises serious questions about how Business Oregon handles tax credits, but also highlights some of the most glaring problems with the very idea of have government subsidize business in the first place. Projects that seek government funding are almost exclusively doing so because they cannot find investors in the private sector, and there's usually a good reason for that. Before investing in, for example, a recently closed sawmill, a private firm is going to take into account the history of the mill—including the fact that it had recently closed due to uncertainty over supply and cost of timber, as the Portland Business Journal reported in 2014—and carefully vet those who want to run it.

Government-run subsidy schemes have no such incentives. The goal is to "create jobs" without paying much attention to the context of how the money will be spent. Indeed, if you believe what Business Oregon says about its vetting process, this myopia is a feature and not a bug. If millions of dollars get wasted as a result—well, there's always more where that came from.


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