Corporate Accountability Is Not a Priority in Rhode Island

When writing the headline for this piece, I initially went with: “Corporate Accountability Is an Afterthought in Rhode Island.”

But I quickly realized that would be a little misleading to readers, as the word “afterthought” implies a person, or group of people, actually starts thinking of something at some point. And I don’t get the impression our governor and her administration ever became too concerned about holding accountable the corporations that have leaned on taxpayers for years.

Take for instance the case of Navy contractor General Dynamics-Electric Boat and its use of jobs training funding in Rhode Island.

In January 2017, Gov. Gina Raimondo announced, as The Providence Journal reported, “that a request by Electric Boat for $3.6-million to hire and train more than 500 people through the Community College of Rhode Island and New England Institute of Technology” had been approved through her Real Jobs RI workforce development program.

The submarine maker was subsequently hard at work through the close of the state’s 2017 fiscal year, which ended on June 30 last year, training its future workforce at a facility in Westerly that was also partly funded by the state.

Then, in August, came the disclosure Raimondo didn’t think was worthy of a press conference: the 2017 Tax Credit and Incentive Report from the Division of Taxation, which showed Electric Boat also received nearly $2.8-million in jobs training tax credits for the 2017 fiscal year.

Anyway you cut it, this amounts to a double dip into the corporate party bowl of taxpayer dollars, perhaps even a triple dip when you consider this is all funding going to a federal contractor with a business model based on the continual flow of government money.

But the crucial question is whether Electric Boat, as a recipient of government grants, is receiving tax credits it’s not entitled to.

Consider the restrictions of the Jobs Training Tax Credit Act, which defines “qualifying expenses” as “reasonable expenses (less any federal, state, or local grants or other payments received by the employer to provide training or retraining) incurred by an employer.”

When I first asked then-Department of Labor and Training Spokesman Michael Healey, last November, if Electric Boat was receiving tax credits it shouldn’t, I received this reply:

“The JTTC [Jobs Training Tax Credit] helps a lot. It applies to ‘qualifying expenses spent for training or retraining employees.’ The credit only applies to the employer’s spending on training. The law doesn’t say an employer becomes ineligible for the JTTC if it participates in other state-funded training programs (e.g., Real Jobs RI or others).”

That response didn’t seem to explain away Electric Boat’s situation. In a subsequent email, Healey clarified the company had incurred expenses beyond what the government covered in Real Jobs RI funding. “EB invests a lot of time and money into training,” he wrote.

I thought I’d hold Healey to his word, so I sought through an Access to Public Records Act request the application Electric Boat submitted to the Governor’s Workforce Board for its jobs training tax credit for the 2017 fiscal year.

Although question six clearly asks, “Is the company receiving any state, federal, or local grants to offset all or a portion of the training cost?”, and EB clearly is, the company left that answer blank.

screen shot eb app

Electric Boat did, however, detail a training plan that sounded an awful lot like what the state is subsidizing already: “cross-skill training,” “new employee training,” “college courses,” and “technology application.”

This is where corporate accountability in Rhode Island—or the lack thereof—comes into play.

When I discussed this information in a series of emails with Matthew Weldon, assistant director of the Department of Labor and Training, he wrote, “While the application was incomplete, there is no way to connect any credits they may have utilized as a result of the JTTC program with any other grant funded training they’re conducting.”

He suggested this might all be due to a supposed meeting between Electric Boat and the administration of former Gov. Lincoln Chafee “at which both sides agreed to a streamlined process.” That seems highly doubtful, if not impossible, considering the grant money was awarded by the current governor, Gina Raimondo, and Electric Boat President Jeffrey Geiger has also indicated Chafee was less receptive to bankrolling job training at EB than his successor. (See this tweet from Providence Journal reporter Patrick Anderson.)

The last hope for some answers to my questions was the Department of Revenue.

“As a matter of law, rarely are we able to provide information about specific taxpayers,” the department’s spokesman, Paul Grimaldi, replied when I first contacted him about this story. “Be that as it may, I will present your question [to] the Tax Administrator.”

In a subsequent email, I followed-up to make sure my simple request was as clear as possible: “Can anyone say whether state grants to Electric Boat under Real Jobs RI were factored into the tax credit amount the company received?”

“I haven’t been able to connect with the tax administrator on this,” Grimaldi wrote back on April 9.

Grimaldi never got back to me with an answer to my question.

Electric Boat’s communications director, Liz Power, told me she was “asking around internally” on this but also never got back to me with an answer.

Step back for a second and look at this situation and its implications: the state has been presented with evidence that a company was awarded close to $2.8-million in tax credits yet filed an incomplete application when seeking that money. You’d think government officials who prioritized accountability would want to get to the bottom of that quickly, determine if it gave away tax dollars unnecessarily, or conclusively confirm publicly that it had not.

Instead, Weldon essentially says “not my job,” and Grimaldi uses taxpayer confidentiality to nip my question in the bud.

But I don’t see any compelling reason why EB’s supposed taxpayer rights should shield it from basic public scrutiny. To say whether the grant was calculated into the tax credit would be of value to the public and reveal no proprietary or sensitive employee information, as far as I can tell.

State Rep. Teresa Tanzi (D-South Kingstown) has fought for increased transparency and accountability when it comes to economic development tax “incentives,” and she will be the first to tell you Rhode Island holds its most influential corporations to a completely different standard than its least powerful residents.

“Look at it from the perspective of a welfare recipient,” Tanzi told me recently by phone. “People would be irate that these poor people are trying to manipulate the system. That waste and fraud is pocket change” compared to businesses.

She continued, “I’m not accusing Electric Boat of being fraudulent. I’m just saying we need to have redundancies and checks. We need to make sure they are eligible.”

The problem is Gov. Raimondo, while trumpeting the supposed benefits of tax incentives to corporations, has shown far less interest in making sure the state is holding businesses accountable.

Just think about this fact: Rhode Island has had a law on the books since 2013 requiring it to evaluate its tax incentive programs. But this law was virtually ignored for years. After the deadline for the first round of evaluations passed last June, the state went months without issuing a single assessment.

Then, in March, it released an evaluation of the Motion Picture Production Tax Credit—one down, 22 more to go.

When I reported on the state’s noncompliance with the law, I contacted the governor’s office for an interview on what seemed to me to be a major oversight. I was told Raimondo wasn’t available, but she was willing to provide this statement:

“We’ve created a strategy to combine job training and incentives that enables us to compete and prevent the special deals of the past, and it’s working. We’ve been able to recruit companies to Rhode Island who are creating jobs and hiring Rhode Islanders. I expect the Department of Revenue to take seriously its statutory obligations with regard to both the administrations of the past and future administrations.”

Where’s the sense of concern that the state is not even following its own law—a law that was intended to protect taxpayers from having their money wasted on ineffective programs that benefit corporations like CVS Health, Citizens Bank, and Electric Boat more than they help state residents?

Also, look closely at this line in particular: “I expect the Department of Revenue to take seriously its statutory obligations with regard to both the administrations of the past and future administrations.”

Does that mean she doesn’t expect the department to take seriously its obligation with regard to her administration?

There’s also the story reported last week by Scott MacKay at Rhode Island Public Radio, which found the state is failing on its obligation to keep track of which companies in Rhode Island have employees on government medical assistance programs.

Rhode Island, MacKay reported, has not complied with this law since 2009. The Raimondo administration’s excuse was “Medicaid data is difficult to put together.”

As I previously reported, taxpayers paid $3-million between 2014 and 2017 for medical coverage to Electric Boat employees. The state, thankfully, does make public health benefits paid for by taxpayers to companies receiving government subsidies.

This is all an insult to taxpayers, especially when you consider consider that, earlier this month, Raimondo announced another subsidy deal to the company worth up to $34-million, bringing total grants and other tax incentives or credits allocated to Electric Boat in Rhode Island to more than $55-million since 2008.

Rep. Tanzi is right. If poor or working class people were getting over on our state the way corporations are, there’d be outrage, hearings, and calls for reform.

But when Fortune 500 companies do it at a much larger scale, we can’t get our government to lift a finger.

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