As IBM works to meet its contractually obligated quota of workers in Baton Rouge by June 30, new research shows that it’s not rare for companies to lower their job targets after inking tax incentive deals with states, Governing reports.
After receiving a $29.5 million incentive package from the state, IBM was supposed to have created 800 jobs by the start of 2017, but it only produced 572 jobs by the deadline. Gov. John Bel Edwards’ administration extended the deadline until June 30 of this year, but the extension came with a caveat clawback provision—if IBM failed to meet the quota again, the company would pay $10,000 for each job below 800 as a “non-performance penalty.”
Although they are usually difficult to track, such extensions to contracts aren’t unique to Louisiana. The research, part of a University of Texas at Austin study on the transparency of economic development, shows how common they are.
The study found that in 46 out of 165 cases—about 25%—the Texas Enterprise Fund, which awards corporate incentives, amended once-finalized contracts for companies receiving tax breaks. Mostly, the number of required jobs were lowered or the schedule for meeting those requirements was changed. And many times, contracts were renegotiated right before a company would be subject to clawback provisions, which require companies to pay back some of the incentives they receive. Read the full story.