Two Years After It Was Created, The Enterprise Fund Raises Questions
A fund created nearly two years ago amid fears the IBM plant in Essex Junction would be closed or sold has been generating a lot of debate this week.
That’s because of a decision this month to award $1 million from the Enterprise Fund to GlobalFoundries, which now owns the plant.
The funds are awarded by the Emergency Board, which is made up of the governor and the chairs of the legislature’s money committees.
The GlobalFoundries award raised concerns about how the decision was made and whether or not it is money well spent.
In the midst of the debate, the administration has released a report arguing that the Enterprise Fund is important to bringing companies to Vermont or helping them expand here.
Patricia Moulton, secretary of the Agency of Commerce and Community Development, which prepared the report, says the state has to make every effort to attract and keep its large employers and the Enterprise Fund is part of that effort.
“We’re just not willing to roll the dice and assume we’re going to get there anyway because we’ve been there, done that and haven’t won,” says Moulton.
But Auditor of Accounts Doug Hoffer says there’s little scrutiny applied to doling out Enterprise Fund money.
The governor is responsible for bringing requests for funds to the Emergency Board, with guidance from Moulton’s agency.
Hoffer says the administration is basically acting as an advocate for the company and board members don’t have the expertise or resources to make an objective decision.
“Is this a program? No, it’s not a program,” says Hoffer. “If you want some accountability there needs to be structure to the program. In the end its four people having to make a decision on the run, under pressure and the only information provided is provided by an advocate for a particular outcome.”
So far, all three requests for funds have been approved by the board.
In addition to the GlobalFoundries award, GW Plastics, which has facilities in Bethel and Royalton, received $500,000 for an expansion the company says will result in more than 70 new jobs.
BHS Composites, based in Sherbrooke, Quebec, recently received an award of $200,000 to help the company establish a manufacturing facility in St. Johnsbury
As auditor, Hoffer reviews the documents provided by the governor and businesses when they apply for money from the Enterprise Fund.
He says a number of claims made by the administration in this week’s report are unfounded.
In one instance, the report says Enterprise Fund money helped retain nearly all of the roughly 300 jobs at GW Plastics. In fact, the company was considering where to expand, not whether to leave Vermont.
“The claim that we retained all the jobs at GW Plastics, there’s no evidence of that,” says Hoffer. “The only way you could make that claim is if the company was seriously considering packing up and leaving the state. That’s not what they said,” says Hoffer.
Moulton says the claim is sound because it’s impossible to tell what GW Plastics might have done with the Vermont plant in the future, if it couldn’t expand here.
The GlobalFoundries award announced last week was for work that had largely been completed last November when the company announced that $55 million had been spent and 100 jobs converted from temporary to permanent full time.
“This is work that the team has just finished. This is us ramping up to this new level of production. This is the grand opening party, this isn’t a promise of what we’re going to do,” said GlobalFoundries' Janette Bombardier at the time.
The company has since said it is investing an additional $17 million in infrastructure this year.
Moulton says the award was made late for technical reasons, and GlobalFoundries was always counting on the money.
She says those who aren’t close to the process process can’t appreciate what it’s like for companies in Vermont to compete globally.
“We can’t base our economic development strategy on the opinions of those who aren’t close to these issues; aren’t close to these companies and don’t seem to understand what it’s like to compete,” Moulton says.
Asked how the administration determines whether a company's request for state money justifies an award from the Enterprise Fund, Moulton says, "When you have a company say to you, 'I literally have to watch every penny. When my customers are saying to me, you need to reduce your costs', its our job to help them reduce those costs and help them compete globally so that we can keep those jobs here and grow additional jobs."
"I don't think this is the way we should be doing economic development," says Hoffer, who has also raised questions about the Vermont Employment Growth Incentive program (VEGI), which provides cash incentives to businesses.
"Its time for an honest conversation about every dollar spent on economic development. We're in the habit of continuing the things we've been doing all along without a serious analysis of whether they're really achieving the goals," Hoffer says.
It’s likely the debate over the Enterprise Fund will continue when it is scheduled to expire in June.