August 2, 2016

Unnamed on Panel’s Review List, Business Subsidy Will Still Get Scrutinized

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Expansion of Michelin's tire manufacturing plant in Ardmore and Goodyear's plant in Lawton are being subsidized by the state for nearly $89 million over 13 years.

Laura Estes

Expansion of Michelin's tire manufacturing plant in Ardmore and Goodyear's plant in Lawton are being subsidized by the state for nearly $89 million over 13 years.

When a state commission examining business incentives voted in June to review 53 of them over four years, one did not appear by name on the list: a subsidy for big tire manufacturers in Oklahoma.

Lyle Roggow, chairman of the Oklahoma Incentive Evaluation Commission, said when the group voted, members weren’t familiar with the little-known incentive, which is costing the state nearly $89 million over 13 years. Roggow said he learned about it after Oklahoma Watch asked the Office of Management and Enterprise Services why the incentive wasn’t named on the list for review.

State officials say that incentive – known as the Quality Jobs Incentive Leverage Act program – was not excluded from the list. Instead, it will be evaluated along with a similarly structured incentive known as the Community Economic Development Pooled Finance Act program, which is on the list.

“Commerce (Department) says this would be covered under the Economic Development Pooled Finance program, up for review in year four (2019),” John Estus, spokesman for OMES, said in an email. “ So it was on the list.”

The panel’s review would occur two years after the companies receiving the subsidy could apply for additional funding under the program.

The Incentive Evaluation Commission mets on Wednesday to discuss criteria for evaluating incentives scheduled for review this year.

Created in 2002, the Incentive Leverage program is specific to the tire industry and has been used only twice, to finance $65 million in expansions at Goodyear Tire & Rubber Co.’s plant in Lawton and Michelin North America Inc.’s facility in Ardmore. The purpose is to encourage the large employers to remain in the communities and retain or add jobs.

The incentive is somewhat complex. The Oklahoma Development Finance Authority sells bonds to pay for the plant expansions, and the bonds are paid off using state income tax withholding payments from plant employees – money that would otherwise go to the state for appropriations. The cost to the state for Michelin and Goodyear, including principal and interest, is $88.5 million.

After the companies’ bonds are fully paid in 2017, program rules allow for the companies to apply for the additional funding.

Business subsidies such as the Incentive Leverage program are under scrutiny because they are costing the state as much as $500 million a year and are contributing to an ongoing shortfall of tax revenue to support core state programs such as education and transportation.

Although the Quality Jobs Incentive Leverage Program includes the words “Quality Jobs,” it is not a part of the more widely known Quality Jobs Incentive program.

Oklahoma Watch contacted both companies to determine if they had plans to apply for more funding when they are eligible in 2017.

Tony Fouladpour, director of corporate public relations for Michelin, replied in an email, “Michelin is continually evaluating those opportunities but has nothing to announce.”

Keith Price, Goodyear’s director for national media relations and business communications, responded by email, “While no decisions have been made on future funding requests for our Lawton plant, Goodyear is aware of the Incentive Evaluation Commission and will continue to monitor its work.”

Both Goodyear and Michelin have also received funds from the Economic Development Pooled Finance program, which uses employees’ diverted state payroll taxes to pay off bonds or loans for plant expansions and equipment purchases. Goodyear received $20 million in 2010 and Michelin received $10 million in 2013.