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Apr 28, 2008 9:46 pm US/Eastern
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I-Team: MassDevelopment Job Initiative Falls Short
By Maggie Mulvihill, I-Team Producer and Joe Bergantino, I-Team Reporter
BOSTON (WBZ) ―
State legislative leaders have given another $25 million to an agency handing out millions in tax dollars to companies to create jobs - even though most of those firms shed jobs in Massachusetts last year.
In fact, the $25 million already loaned by MassDevelopment to 16 companies since 2003 triggered the creation of just 217 jobs by the end of 2007, MassDevelopment statistics show.
"The job creation numbers are pretty disappointing because they're well below projection and were negative for 2007," said Kenneth P. Thomas, an expert in government incentives to corporations who teaches at the University of Missouri.
MassDevelopment had expected 590 jobs would have been created for Massachusetts workers by the end of last year.
But only four of the 15 companies which had hard job projection numbers for last December had met or exceeded their goals, the statistics show.
No jobs were projected to be created over the next several years for seven of the 16 companies loaned ETF money.
MassDevelopment is a quasi-state economic development agency.
"Overall, this program is really underperforming," said Greg Leroy, executive director of Good Jobs First, a non-partisan research agency which tracks state economic development programs. "If this was a venture capital company, I think the loan committee . . . . would be dusting off their resumes."
The money comes from the Emerging Technology Fund, established as part of a 2003 economic stimulus bill.
The enabling legislation states the fund's first purpose is to stimulate financing for the companies "which will lead to increased and more rewarding employment opportunities for the citizens."
Faced with an increasingly grim economic landscape, state leaders have made job creation a priority in the past few years.
A recent study by MassInc put Massachusetts as next to last in the country for job creation between 2001 and 2006. The state is down 100,000 jobs since 2001, the study said.
But a two-month I-Team analysis of ETF fund records show more than half the companies loaned taxpayer money for the highly-touted job creation program have failed to meet their projections.
For instance, Avant Immunotherapeutics Inc., a Needham-based vaccine manufacturer, reduced its workforce by 15 in Massachusetts last year - including eight at its new Fall River manufacturing facility, according to chief executive officer Una Ryan.
Avant was given a seven-year $903,000 loan at an interest rate of 5.5 percent in 2003 to establish the facility, with the expectation of creating five jobs in Fall River, MassDevelopment records show.
"We lost jobs last year because we did a restructuring," Ryan said.
Ryan added that she did not recall any job goals being created by MassDevelopment at the time the loan was being negotiated, raising questions among economists who reviewed MassDevelopment's ETF internal job tracking documents for the I-Team.
"The legislative language is very clear that job creation is a priority for this program," Thomas said. "I think that achieving job creation projections should be a condition of any investment incentive program . . . I don't see the point of having a program unless the taxpayers have some kind of guaranteed return for their money."
Aspen Aerogels, Inc., a Northborough technology company that makes insulation materials, received a $1.5 million ETF loan in January, 2005.
It had 100 employees at the time it received the money and has roughly the same number today, company officials said.
The company created 61 jobs in 2005 and 2006 but then reduced its workforce by 63 in 2007, MassDevelopment figures show.
Aspen officials declined to appear on-camera. In a statement issued to the I-Team, they said:
"During 2006 and early 2007, market adoption of Aspen's products was slower than expected. In response, Aspen made the difficult but critical decision to reduce the size of the workforce to better align its employee base and overall expenses with realized revenues."
Aspen said it plans to rehire this year.
Cytonome, a biotechnology company based in South Boston, had 13 jobs when it was loaned $600,000 from the ETF in 2005.
By the end of 2007, it expected to have created 48 jobs. It has created none.
Company officials declined to appear on-camera for an interview.
In a statement, the company said "changes in engineering development and funding schedules required the company to reduce staff" last year.
Cytonome said it hopes to rehire staff this year.
MassDevelopment head Robert L. Culver, in an interview with the I-Team, called a less than 40 percent job growth rate in the current economy a "smashing success."
He also disputed that the program was designed to create jobs.
"We don't go into this business to create jobs specifically. It's great that they are created," Culver said. "We are here in fact to be an economic stimulus lender for the commonwealth."
But his statement conflicts with MassDevelopment's own records, which include detailed discussion about tracking company job creation during ETF board meetings and reports to the Legislature.
He also pointed out that none of the companies have defaulted on their loans.
Culver blamed the current recession for hindering more job growth.
"It reflects that we are in tough economic times. We are in tough times," he said.
But company officials said the current recession has had minimal impact on job growth.
"I would say we are pretty recession proof," Ryan said.
Ryan also defended the loan program because it convinced her company to set up a manufacturing facility in Massachusetts when it could easily have established that part of Avant's business elsewhere.
Spherics Inc., relocated to Massachusetts from Rhode Island when it was given the $2.5 million ETF loan in 2005. Spherics makes pharmaceuticals used in bio-adhesive delivery systems.
According to the June 1, 2005 ETF advisory board minutes, Spherics was going to create 16 new jobs in Mansfield immediately and another 35 news jobs over the next five years.
At the time the loan was made the company had 25 employees.
"This is a great win for Massachusetts," Culver said in announcing the loan to Spherics.
By the end of 2007, Spherics projected it would create 21 new jobs but their workforce was actually down four employees since 2005, MassDevelopment statistics show.
Spherics officials did not respond to requests for comment.
MassDevelopment's tracking of the job creation numbers is also seriously flawed.
For example, the agency claims Avant had 66 jobs in Massachusetts at the time it received the funds when it fact it had only 50.
It has repeated this claim in numerous reports to the Legislature and in documents provided to the I-Team.
MassDevelopment has also varied job numbers in different reports to the Legislature.
In some cases, where companies didn't achieve job goals, those numbers have been omitted in Legislative reports.
In its last quarterly report to the Legislature, MassDevelopment claims Cytonome projected creating 29 jobs within 3 years.
But in its own internal job tracking sheets, it states Cytonome should have created 48 jobs by the end of 2007.
The agency also claims Aspen had 117 jobs as of March 31, 2008 - an increase of 17 percent since 2005.
But in a statement to the I-Team, Aspen officials said said: "Aspen's workforce is virtually the same size it was at the time it received the ETF loan."
Middleton Aerospace had 120 workers in Massachusetts when it received a $2,000,000 ETF loan in February, 2006.
It created zero jobs that year and reduced its workforce by 15 by the end of last year.
MassDevelopment claims it now has 124 employees.
In order for those numbers to be correct, Middleton would had to have hired 19 workers in the past few months - an increase of 16 percent.
Yet figures provided by MassDevelopment showing staffing levels on March 31, 2008 said Middleton has only increased its workforce by three percent since it obtained the the loan.
Leroy said before MassDevelopment makes any more loans, the Legislature should scrutinize whether or not they have learned anything from the disappointing numbers of jobs created to date.
As of the end of the year, MassDevelopment had approved another $8 million in ETF funds to companies. Requests from 11 companies for another $21.5 are "in the ETF pipeline," MassDevelopment told the Legislature in its last quarterly report.
"At the very least before the state commits the other 8 million, there should be evidence of a learning curve by the loan committee," Leroy said.
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