The Moberly Mirror: Pressured For Asking Too Many Questions About Tax Handouts
A Show-Me Institute supporter contacted me last week to relay the story of the Moberly Mirror, a small newspaper that says it was pressured to close in 2010 for asking too many questions about tax handouts for a development project in Moberly.
This is no rumor. What makes this story even more depressing is the fact that the reporters at the Mirror were right to ask questions: The development in question made big news recently when it left the city of Moberly on the hook for nearly $40 million in debt. This story is an especially relevant warning, because tax credit supporters have recently been touting absurd job creation and business investment numbers as a sign that the state should create more development subsidies.
During mid-2010, state and local officials raced to close a deal with Mamtek, a company that promised to build a factory that would produce SweetO, an artificial sweetener. According to the Mirror, $7.6 million in Missouri Quality Jobs tax credits and $6.8 million in Missouri BUILD tax credits were promised to the company, as well as $2 million in Community Development Block Grant funds, $800,000 in funding for job training, and $368,000 for job training. The city of Moberly kicked in, too, providing nearly $40 million in bonds, and $500,000 in grants and services.
The total came to nearly $50 million in promised state and local tax dollars.
As is always the case with these things, a large press conference was held. In July 2010, Missouri Gov. Jay Nixon spoke to a large crowd about the Mamtek deal.
“And SweetO is about to make Missouri’s economy a just a little bit sweeter, too,” Nixon said then. “Because Mamtek will be creating 612 new jobs and investing $46 million in capital.” He repeated: “612 jobs, they’re investing $46 million.”
Understandably, the Mirror was curious about the promises touted. As editor Janet Morales wrote, the Mirror wondered about the employment numbers and asked whether it might make more sense to use an existing vacant facility instead of building a new one.
But answers were less than forthcoming. Morales wrote that Mamtek wouldn’t answer her question, and directed her to the local Chamber of Commerce. Morales writes that the “[executive director of the chamber] told me not to ask questions or Moberly could lose the Mamtek company.
In the fall, Morales writes that she was informed that area merchants had been told about the Mirror‘s “investigation,” and that they were warned not to advertise with the Mirror. Seeing that businesses were no longer interested in subscribing to the Mirror and that the paper would soon close, the Mirror decided that it might as well investigate the Mamtek deal in its last month.
Some of the Mirror’s unanswered questions and concerns sound strikingly familiar to our questions regarding the Aerotropolis subsidies. Why were there conflicting job estimates? Where were the supporting documents? Why was there such a rush to get the deal approved? Proponents said that their Chinese business interests were involved, but the Mirror was unable to locate them, or anyone who was familiar with Mamtek’s operations in China.
As I already noted, this story does not have a happy ending. The Mirror is gone, though it still hosts the Mamtek story on its homepage. A nearby paper, the Marshall Democrat-News, covered the Mirror‘s closure, noting that Marshall had also considered the Mamtek deal, but considered the public support requested for the project too great. The executive director of the Marshall-Saline Development Corporation told the Democrat-News that “…Moberly offered them $15 million and took (Mamtek) off the market. That was part of the deal. I wouldn’t do that. I wouldn’t ask the city to do that.” He added “I’m not sure it’s legal.”
It now appears that the city of Moberly is on the hook for the nearly $40 million in bonds it issued for the project. And, sadly, it appears that state and local officials have not heeded the Mamtek warning. There is still an effort to expand tax incentive deals in Missouri.
Some critics of the Show-Me Institute have dismissed our concerns about the Aerotropolis tax credits because, sometimes, tax credit deals and public partnerships “work.” Well, a broken clock is right twice a day. There will always be successes. The question is, what level of failure are we willing to pay for in order to attain those successes? Sometimes, in public policy matters, failure is a rarity. But it has been well-documented that tax incentive deals frequently do not deliver the results that were promised.
So, I wonder, how many Mamtek-type failures are tax incentive proponents willing to trade for the chance of success?