Perry changes more enterprise fund deals when jobs don’t follow; White wants more scrutiny

By Kelley Shannon, AP
Thursday, May 20, 2010

More Enterprise Fund companies fall short on jobs

AUSTIN, Texas — Gov. Rick Perry’s office has rewritten three more contracts for companies that are struggling to create the promised number of jobs after getting millions of taxpayer dollars from the Texas Enterprise Fund.

The Associated Press has been tracking the problems of enterprise fund companies and amendments to their contracts for more than two years.

In response to the latest questions from the AP, Perry’s office said Lee Container Corp., Albany Engineered Composites Inc. and Vought Aircraft all fell short of their job creation goals and got their enterprise fund contracts changed this year. Those contracts were amended since the governor told the AP in response to queries in January that 11 other job creation contracts were also changed to make them more favorable to the companies and give them more time to create jobs.

Vought’s initial state contract was for $35 million, while Albany Engineered Composites’ was for $1 million and Lee Container’s was for $300,000.

The new disclosures come as Democrat Bill White becomes the latest Perry campaign opponent to criticize the Republican governor over the millions of taxpayer dollars he doles out to businesses from the enterprise fund. White, who assailed Perry about the fund repeatedly this week, warned that some recipient companies have ties to Perry campaign donors and some aren’t creating the jobs required by their enterprise fund agreements.

The former Houston mayor also wants a private sector audit of the fund.

“We’ve seen that taxpayer dollars are getting wasted, and the results promised are not being delivered. And there’s no public accountability about why decisions were made,” White spokeswoman Katy Bacon said.

Perry defends the enterprise fund as a powerful deal-closing tool that helped attract some 52,600 new jobs and spur billions of dollars in capital investment in the state since it was created in 2003.

“Which one of the companies that brought more than 50,000 jobs to Texas would Bill White be opposed to? Bill White is someone who would completely shut off the economic engine that Governor Perry has created in this state,” Perry campaign spokesman Mark Miner said.

The fund was formed at Perry’s urging with nearly $300 million. House Speaker Joe Straus and Lt. Gov. David Dewhurst, both Republicans, must sign off on grants with Perry, but the governor’s office takes the lead in cutting deals and distributing the money. The fund gets a bipartisan legislative review every session, said Perry’s state spokeswoman, Allison Castle.

This isn’t the first time a challenger has jabbed at Perry over the enterprise fund. Sen. Kay Bailey Hutchison tried to make it an issue in her unsuccessful primary challenge earlier this year. Then-comptroller Carole Keeton Strayhorn raised questions about enterprise fund grants when she ran against Perry in 2006. Neither saw their criticisms stick — and White’s campaign team is hoping his do.

The AP has tracked for more than two years the struggles of companies receiving state enterprise fund grants. The Great Recession has taken a toll on some of the businesses. For example, troubled mortgage giant Countrywide Financial Corp. was taken over by Bank of America, which canceled Countrywide’s $20 million contract with the state in December after Countrywide failed to meet its job creation deadlines.

According to information from Perry’s office this week, Lee Container Corp. was granted an extra five years to create the 105 jobs it promised; Albany Engineered Composites Inc. had its job creation target reduced from 337 to 137 and the amount of taxpayer money it is getting reduced from $1 million to $300,000; and Vought Aircraft slightly lowered the number of jobs it had in place at the start of its contract.

All three companies had to pay “clawback” fees to the state in 2009 or 2010 — ranging from $19,000 to nearly $1 million — for failing to meet deadlines for creating jobs. Vought, meanwhile, stated in a Securities and Exchange Commission filing this year that it may not be able to satisfy its $35 million enterprise fund commitment and could have to pay back some or all of that money over the next nine years.

White cited enterprise fund grants to Lexicon Genetics, Caterpillar Inc. and Sanderson Farms among the cases in which Perry campaign donors were connected to recipient companies. With Lexicon, White’s campaign said the company got $35 million to create 1,616 jobs in Texas, but cut its work force significantly and got the governor’s office to ease its job creation requirement.

Castle acknowledged the Lexicon contract was amended in 2008. She said the number of jobs that were to be created remained the same, though the responsibility for creating them was shifted from Lexicon to Texas A&M University for a five-year period from 2007-2011.

Castle defended the fund against White’s charge that it’s benefiting companies connected to Perry’s political friends.

White’s campaign noted that Peter Holt, owner of Holt Caterpillar, is a Perry contributor. But Castle said the $10 million that went to Caterpillar Inc. to create 1,400 jobs was to relocate an assembly, paint and testing plant in Seguin for the national heavy machinery company. She said it was not paid to Holt’s San Antonio-based company, a Caterpillar distributor.

Perry contends the enterprise fund is a big part of why Texas is a relative bright spot in the national economic picture. The state’s unemployment rate has hovered at 8.2 percent the past few months. That’s high compared to earlier years in Perry’s tenure but well below the national average of 9.7 percent.

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