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Auditor claims Commerce Authority’s job creation figures are murky

handshakeState auditors say the Arizona Commerce Authority needs to report whether information on  jobs, wages, and capital investment is based on
commitments companies announce or the actual jobs created and capital
investment made.

The conclusion was part of an overall recommendation that the ACA “can more clearly present its impact on Arizona’s economic development.”

In a new report Thursday, the Auditor General’s Office said the authority claims it is making progress toward achieving its five-year goal of creating 75,000 higher wage jobs. That goal also is to increase capital investment in Arizona by $6 billion between 2013 and 2017.

But audit manager Dot Reinhard said there’s really no way to tell exactly what the authority has done.

“Its reports generally provide information based on commitments companies announce rather than the actual jobs created or capital investment made,” her report states.

So how many jobs were created?

In the agency’s most recent report it says it worked with 97 companies “that committed to creating 17,154 quality jobs over three years.” And the authority says that should create another 24,343 “indirect and induced jobs.”

Overall, the authority claims expansion and relocation projects represent more than $3.3 billion in capital investment.

None of that, however, shows the actual jobs created.

About the closest Reinhard said her staff could come is in one particular group of grants known as “Arizona Competes.”

She said that since 2012 the commitment for deal-closing grants was for 3,914 jobs and $94.7 million in capital investment, with $13 million awarded. But through the 2014 budget year, there were just 1,309 jobs and less than $60 million in capital.

And $4.7 mllion in rural economic development grants generated 879 actual jobs compared with a commitment for more than twice that many; actual capital invested was $97.5 million versus nearlhy $260 million in commitments.

Reinhard said Commerce Authority officials told her staffers that it focuses on commitments because they “more promptly and directly measure the authority’s work to add jobs and investment in Arizona.” But she said, though, that’s not an acceptable practice.

“The National State Auditors Association has developed a set of best practices for carrying out state economic development efforts that indicate that an agency should report relevant information to the public summarizing the results of its economic development program,” she wrote. “The authority should clarify in its annual report and other reports it produces whether the information presented on job created, wages, and capital investment represents committed or actual outcomes.”

Reinhard also said the public is entitled to know the cumulative progress the authority is making toward its five-year goals, rather than one-year snapshots.

But the audit report said the lack of accurate numbers is just part of the problem.

What’s also missing, Reinhard said, is a comparison of the financial incentives provided on a company-by-company basis compared to the actual economic outcome produced. She said while some information is available, the reports “lack a consolidated comparison of the incentives given to the benefits received.”

“Without clear information about the state’s return on investment, it may be difficult for decision makers to make informed decisions about Arizona’s economic development activities,” Reinhard said.

She said that’s clearly possible, citing a report from the Utah Governor’s Office of Economic Development which shows incentive costs, jobs created and new tax revenues.

There is some data in the annual report.

For example, one fund administered by the authority has committed more than $10 million in grants for a projected 2,217 new jobs and $30.5 million in capital investment over three years. Another program has provided $6.3 million in tax credits for 1,042 new jobs at an average annual wage of $53,316.

Reinhard acknowledged that some individual company tax incentive information is confidential. But she said that should not preclude the authority from, at the very least, providing aggregate information so that no one company is identified.

A spokeswoman for the authority said Sandra Watson, its president and chief executive, was in meetings on Thursday and could not personally comment. Nor was there a response to a request for data on actual jobs created in the 2014 fiscal year versus the commitments reported.

But in a formal response to the audit, Watson said there’s a reason for reporting on promises versus actual jobs.

“The authority’s stakeholders are familiar with the industry custom of reporting jobs and capital investment based on company projections,” she wrote. Anyway, Watson said, when companies make public announcements of their projects, it is those projections that are reported in the local media.

Watson also said in a statement, “As indicated in the responses provided in the report, the ACA agrees to implement all recommendations made by the Office of the Auditor General, and in many cases has already done so.”

She did not, however, promise to report actual jobs created. Instead she said the authority will make clear whether the figures reported are based on projections or actual activity.

Editor’s note: The top of this story has been revised to note that state auditors  said the ACA needs to clarify its reporting so the public knows whether the jobs it lists as bringing to the state have actually been created or are just commitments. The audit does not say the authority’s use of the higher commitments figure is “inflated” or “inaccurate.”

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