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MO: State’s tax incentives a bit too sweet, auditor says

By   /   September 26, 2012  /   News  /   2 Comments

SCHWEICH: State needs to reign in tax credit “stacking.”

By Johnny Kampis | Missouri Watchdog

ST. LOUIS – Democratic Gov. Jay Nixon’s Department of Economic Development and its lucrative tax incentives have led, in part, to a failed industry and a CEO facing criminal charges, state Auditor Thomas Schweich says.

Schweich, in a report released Wednesday, says the DED’s division of Business and Community Services “failed to perform due diligence” on various projects, including the recruitment of Mamtek USA to Moberly.

The company planned to build a sucralose manufacturing plant in the southeast Missouri city, and was promised $17.6 million in tax breaks. Nearly $70 million in bonds were issued for the plant’s construction, but it never opened and Mamtek filed for bankruptcy in January. Sucralose is an artificial sweetener.

The company’s CEO, Bruce Cole, is in an Orange County, Calif., jail awaiting extradition to Missouri to face four felony fraud charges. plus another felony charging him with taking $700,000 from Moberly’s bond funds.

In a written response, the DED said that no tax incentives were awarded to Mamtek because the company failed to create jobs.

Schweich said Missouri allows developers to stack tax credits without generating additional economic activity to benefit the state.

Missouri Watchdog reported this practice in June, noting that a Ford supplier would benefit from $5 million in tax incentives through four separate state programs to build a plant in Liberty.

Under these programs, Schweich said, a developer could theoretically receive $3.27 in state and federal tax credits for each $1 in project costs.

His staff calculated that Missouri issued about $738 million in tax credits for 117 projects that received money from multiple tax breaks between 2000 and 2011.

The Missouri Tax Credit Review Commission issued a report Nov. 30, 2010, recommending the state stop allowing the stacking of such incentives. Its ideas were largely ignored by state lawmakers.

Nixon reconvened that group last month to take another look at the state’s generous use of corporate welfare, which grew to $630

NIXON: Commission now reviewing tax credits practices in Missouri.

million this year.

DED’S division of Business and Community Services “should work with the General Assembly to establish cost containment provisions regarding project costs claimed under multiple tax credit programs,” Schweich wrote in his recommendations.

The audit also noted that Missouri does not reduce the amount of tax credits for low-income housing available to people who receive funding for historic preservation. This results in the state issuing $68 million more in tax credits between 2000 and 2011 than it would have if federal cost-containment features were in place.

Schweich’s report dinged the DED for paying nearly $150,000 for about 160 flights taken by the staff of Nixon’s office in 2010 and 2011, which he said circumvented the appropriations process. He levied the same criticism in an audit of the governor’s office earlier this month.

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Johnny Kampis is National Watchdog Reporter for Watchdog.org. Johnny previously worked in the newspaper industry and as a freelance writer, and has been published in The New York Times, Time.com, FoxNews.com and the Atlanta Journal-Constitution. A former semi-professional poker player, he is writing a book documenting the poker scene at the 2016 World Series of Poker, a decade after the peak of the poker boom. Johnny is also a member of Investigative Reporters and Editors.

  • Mac

    I’m horrified by the waste of taxpayers money. We must hold Nixon accountable.

  • It’s not Nixon, it’s all of them and the problem is a flaw in their logic, that if they court big business to come to Missouri, that we the people will benefit with new and better jobs and a higher tax base. What they refuse to acknowledge is how corporations ‘think’ (no, corporations are not people my friend). Corporations are motivated by GREED, not by public good.