HP, Nordex Expected To Refund Incentive Funds After Failing to Meet Goals

by Mark Friedman  on Monday, Aug. 26, 2013 12:00 am  

Companies that take cash from the Governor’s Quick Action Closing Fund and then fail to deliver on the promises of jobs should expect to repay some of the incentive money.

Since the beginning of this year, Allied Wireless of Little Rock, Nice-Pak of Jonesboro and Pinnacle Foods in Fayetteville have repaid the fund a total of $215,000 for missing promised employment goals after receiving a total of $8 million from the economic incentive account.

Soon Nordex USA and Hewlett-Packard will be added to that list.

Both companies received millions from the fund and pledged they would bring hundreds of jobs to the state. But in June, Nordex, which received $2.5 million from the fund, announced it was stopping production at its Jonesboro wind turbine plant. In July, Hewlett-Packard of Palo Alto, Calif., said it was slashing 500 jobs at its Conway office. HP had been awarded $10 million from the closing fund.

Since its creation in 2007, the Quick Action Closing Fund has announced awards of $87.8 million for 51 projects. Not all of the projects meant the immediate addition of jobs in Arkansas but instead were expected to hire workers over a number of years.

“We’re just now getting into that period where we’re starting to see some clawbacks,” said Arkansas Economic Development Commission spokesman Joe Holmes. “It’s just now starting, and I’m sure there will be some more.”

The AEDC is in negotiations with HP and Nordex for a refund of some of the money they received from the fund.

Exactly how much the companies are on the hook for, though, isn’t publicly available. The staffing and salary numbers and other information used to calculate the clawback are considered proprietary information and not subject to release under the Freedom of Information Act, Holmes said. In addition, there are a number of factors that are taken into consideration when the AEDC asks for money back, Holmes said.

“I think there’s a misconception that this can all happen in two or three days,” he said. “That’s not the case.”

Protecting Taxpayers

In the past decade, the clawback provisions have become common as a way to protect taxpayers when government money is used as an incentive to create jobs in a particular place, said Kathy Mussio, a managing partner at Atlas Insight LLC in New Jersey, a site selection and incentives consulting firm.

“I rarely, if ever, see an incentive agreement without a clawback, and most clawbacks cannot be negotiated out of an agreement,” she said.

 

 

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