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In The News

Amazon seeking $4.5 million from state for distribution center

From Delaware Business Now

Amazon plans to seek $4.5 million from the Delaware Strategic Fund for a fulfillment center.

An agenda item from the Delaware Council on Development Finance contained the request from Amazon and listed Wilmington as the location. The council will hold a meeting on Monday.

The Strategic Fund ties assistance from the state to the number of jobs created by the employer. Payback comes from additional income tax revenues.

The council passes its recommendations on to the state’s director of Small Business.

The Philadelphia Inquirer reported the request is related to a proposed distribution center at the former GM Boxwood plant west of Wilmington.

Read more:

https://delawarebusinessnow.com/2020/02/amazon-seeking-4-5-million-from-state-for-distribution-center/

What does Delaware’s $200 million surplus say about its budget management?

Earlier in 2020, the Delaware Economic and Financial Advisory Council announced revenue projections revealing a $200 million state budget surplus. While some lawmakers see this as an opportunity to fund new projects, political advocacy groups like A Better Delaware, founded by Chris Kenny, are concerned that the surplus is a sign of mismanagement, and are troubled about a lack of voter input into how lawmakers will spend the funds.

Where did the “surplus” come from?

New tax increases over the past few years resulted in over $200 million in additional revenues by raising taxes on corporate franchises, realty transfers, alcohol and cigarettes. The $200 million surplus is being treated as if it came from better fiscal policy, but A Better Delaware argues that it’s a sign that the state is overtaxing Delawareans.

Delaware’s portion of income that goes to state and local taxes is 10.2%, above the national average. Delaware taxes can also be difficult for businesses; not only do they have high corporate income taxes of 8.7%, but they’re also one of only six states to impose a gross receipts tax. Even so, lawmakers continue to propose and pass new taxes, despite these already high tax rates and the fact that they don’t seem to need the additional revenue if they’re collecting in excess of their budget.

A Better Delaware, therefore, wants taxpayers to know that they have been “overcharged.” Tax increases enable the government to authorize additional spending, when many people feel that they’re paying too much in taxes already.

What will happen to surplus funds?

When the “surplus” was announced, the initial plan was to wait for a final projection in June from the Economic and Financial Advisory Council in order to accurately disperse the funds. Shortly after the announcement, though, nearly all of the $200 million was promised to various projects at the call of Dover politicians.

House Minority Leader Danny Short, R-Seaford, cautioned that all new spending proposals be “scrutinized completely.” Unfortunately, says A Better Delaware, it appears that this won’t be the case and that voters won’t get a say in how the state spends the additional funds. The new proposed spending has been raised with minimal transparency or public input into how to remedy the situation. It also appears that a refund to taxpayers is not being considered as an option.

Building on a concerning past precedent

This isn’t the first time that Delaware is dealing with an unexpected surplus. Last year, Rep. John Kowalko, D-Newark, criticized another surplus issue resulting from excess charter school transportation funds, saying that letting charter schools keep the excess funds without further scrutiny was the wrong move, as it gave “no oversight and no accountability to the taxpayers or anyone else” and that the move was “a shocking display of disregard for taxpayer money.”

The same objections can easily be applied to the current $200 million in additional revenue from over-taxing, A Better Delaware says. That’s because once again, the state’s inaccurate budgeting means that taxpayers’ hard-earned funds will go to projects that weren’t designated as part of the initially agreed-upon budget.

How do Delaware taxes compare?1

  • Delaware has the 9th highest combined corporate tax rate
  • Delaware ranks 41st for personal income taxes
  • Delaware has one of the highest real estate transfer taxes in the nation
  • Delaware is one of only 5 states to still have a gross receipts tax

How can taxpayers object to the current budget situation? 

While funding key projects is important, A Better Delaware believes taxpayers should be concerned by the manner in which the state currently managing its budget and the general lack of accountability to voters. Given the group’s claims of mismanagement, A Better Delaware argues that excess funds would be better off back in the hands of the state’s taxpayers.

Delaware residents that want to object to register their objections to spending the budget surplus can call their legislators. Additionally, to prevent similar issues in the future, voters can call their legislators any time a new tax is on the table and demand better scrutiny by the Joint Finance Committee in budgeting.

The Joint Finance Committee will be meeting during February. Find the JFC public hearing schedule here.

Joint Finance Committee:

Chair:

Co-Chair:

Senators:

Representatives:

(1) Sources:

Black Entrepreneurship 2020: A Special Report and Definitive 50-State Ranking

From FitSmallBusiness

Delaware ranks 30th in the nation for Black Entrepreneurship.

Black Entrepreneurs, All 50 State Rankings:

1. Georgia
2. Texas
3. Florida
4. California
5. North Carolina
6. Oklahoma
7. Tennessee
8. New York
9. Mississippi
10. Colorado
11. Wyoming
12. Washington
13. Nevada
14. New Mexico
15. Michigan
16. Missouri
17. Virginia
18. New Jersey
19. Arizona
20. Louisiana
21. Maryland
22. Ohio
23. Arkansas
24. Kentucky
25. South Carolina
26. Idaho
27. Illinois
28. Indiana
29. Massachusetts
30. Delaware
31. Alaska
32. Alabama
33. Utah
34. North Dakota
35. Oregon
36. West Virginia
37. Vermont
38. Pennsylvania
39. Iowa
40. Hawaii
41. Nebraska
42. South Dakota
43. Montana
44. Minnesota
45. Kansas
46. Connecticut
47. Wisconsin
48. Rhode Island
49. New Hampshire
50. Maine

https://fitsmallbusiness.com/black-entrepreneurship-2020/

Why the Delaware Way could prevent livestreaming of General Assembly

From The News Journal

The so-called “Delaware Way,” the bipartisan tradition in which First State politicians make decisions and work out tensions behind closed doors, could get in the way of the latest efforts to increase transparency.

In a state that’s been frequently criticized as having one of the least transparent governments in the country, a group of mostly Republican lawmakers is proposing that the General Assembly start recording its public meetings and posting them online for anyone to watch.

It’s something that the vast majority of states and several of Delaware’s local governments, in some capacity, already do.

But one of Delaware’s highest-ranking lawmakers, who controls the 41-member House chamber’s schedule, could try to block the effort over fears that private conversations could end up being recorded.

“I’m not too crazy about it,” said House Speaker Pete Schwartzkopf, D-Rehoboth Beach, when asked about livestreaming. “I’m not putting cameras and microphones installed in our caucus rooms because we’d be at the mercy of anyone who’d want to tap into it and listen to us have our discussion.”

The bill does not mention recording private caucus meetings, which take place in some of the same rooms used for public meetings. Those caucus meetings are about as common as public meetings when the General Assembly is in session.

The proposal, House Concurrent Resolution 69, would create only a blueprint for how to livestream public floor debates and committee meetings in the General Assembly. Lawmakers would have to introduce a separate bill to actually execute it.

Read more:

https://www.delawareonline.com/story/news/politics/2020/02/14/delaware-lawmakers-lack-transparency-could-prevent-livestreaming/4543708002/

Bloom’s latest blemishes: Delaware job cuts and multimillion-dollar ‘accounting error’

From The News Journal

Bloom Energy, the Silicon Valley company subsidized by Delaware, blamed an “accounting error” for misstating the amount of money it made in recent years.

Startling investors, Bloom said its revenues over the past four years are off by “less than 10 percent,” a limit that amounts to nearly $200 million.

“The adjustment has no impact on Bloom’s total cash,” said the company, which builds fuel cell electricity generators at a plant in Newark.

Released after stocks stopped trading on Wednesday, Bloom Energy’s statement follows rumors of layoffs at the company’s Delaware factory. Asked last week whether the claims were true, Bloom spokeswoman Natalia Blank said “some specific roles in Delaware were eliminated” because of changes to its operations.

Blank said a “small percentage” of its total Delaware workforce lost their jobs, but declined to disclose the number. She revealed only Bloom’s current Delaware head count when combined with the number of people it plans to hire.

Read more:

https://www.delawareonline.com/story/money/business/2020/02/13/blooms-latest-blemishes-delaware-job-cuts-and-multimillion-dollar-accounting-error/4741488002/

Banning Dollar Stores Hurts Underserved Communities More Than It Helps

From The Foundation for Economic Education

According to the US Department of Agriculture, at last count, 12.7 percent of US census tracts fell under the banner of “low-income, low-access.” This simply means a large portion of that tract’s population lives more than one mile from a food store in an urban area or more than ten miles from one in a rural area.

Dollar stores exist in these areas because of the lack of direct competition. Economically depressed areas often struggle to encourage new businesses, like full-service grocers, and struggle to maintain the ones currently operating. Dollar stores fill a very real need for families across this country. If they didn’t, they wouldn’t exist.

By banning dollar stores, especially without the assurance of a full-service grocer, governments are limiting families’ options, forcing them to travel farther and longer to purchase things like tuna, sugar, Pampers, or other name-brand, discount items.

Sarah Nassauer summed it up in her article about Dollar General:

“Dollar General is expanding because rural America is struggling. With its convenient locations for frugal shoppers, it has become one of the most profitable retailers in the U.S. and a lifeline for lower-income customers bypassed by other major chains.”

This statement rings true for both rural and urban low-income communities.

Banning or limiting dollar stores does not, in turn, usher in an age of full-service grocery stores in underserved neighborhoods. It just means fewer options for those who live there.

Read the whole article:

https://fee.org/articles/banning-dollar-stores-hurts-underserved-communities-more-than-it-helps/

Most business incentives don’t work. Here’s how to fix them.

From Brookings Institute

In 2017, the state of Wisconsin agreed to provide $4 billion in state and local tax incentives to the electronics manufacturing giant Foxconn. In return, the Taiwan-based company promised to build a new manufacturing plant in the state for flat-screen television displays and the subsequent creation of 13,000 new jobs.

It didn’t happen. Those 13,000 jobs never materialized, and plans for the manufacturing plant have been consistently scaled back. Even if the project had gone through as planned, there is no way the Foxconn subsidy would have made money for the state, or provided earnings benefits for residents that exceed its costs. It now appears that few of Foxconn’s promises will be fulfilled, even though local governments have gone into debt over the project.

From 1990 to 2015, the size of these types of business incentives tripled. Foxconn-level incentives would escalate them another 10-fold, to 30% of state and local tax revenue. Such a surge threatens public services and the social safety net, turning a tool used to promote jobs and growth into a political and economic disaster.

Research suggests that at least 75% of the time, typical incentives do not affect a business’s decision on where to locate and create jobs—they’re all cost and no benefit. Furthermore, even when incentives do tip a location decision, they do not pay for themselves. They may create new jobs, but frequently they also bring in new workers from outside the city or state, which raises costs to public services that offset at least 90% of any increased revenue.

On average, only 10-30% of new jobs go to state residents who are not already employed. Only when new jobs increase employment rates—thus boosting local earnings and putting upward pressure on local wages—can they provide large and broadly shared local benefits.

https://www.brookings.edu/blog/the-avenue/2019/11/01/most-business-incentives-dont-work-heres-how-to-fix-them/

Delaware deserves a sustainable budget that curbs irresponsible spending

The state budgeting process begins in February, and groups like A Better Delawarefounded by Chris Kenny are concerned that it will once again force tax increases onto Delaware residents without improving their quality of life.

The budget increased by more than 130 million last year, yet Delaware still ranks 45th in the nation for fiscal health, based on the inability to pay its debts, according to a report from the nonprofit Truth in Accounting. State revenues only cover 96% of expenses, and that percentage continues to decline.

A budget that doesn’t cover normal expenditures year-to-year is not sustainable – that’s just common sense – and it’s time to take a hard look at a budgeting process that continues to fail Delawareans.

How the budget is made

The current budgeting process is not transparent, and doesn’t leave much room for voter input. It begins in January, when the Governor submits a recommended budget to the Joint Finance Committee.

The Governor holds a significant amount of power in the process, which results in a near-complete state budget before hearings even begin in February. The Joint Finance Committee then operates within strict limitations of that budget, with pre-allocated funds for schools, government agencies and more, and must find ways to fund any additional projects.

The easy solution for lawmakers is to take more hard-earned money from Delawareans – who are already owed billions in unpaid, unfunded pension debts – by increasing taxes.

Why it’s a problem

With a budgeting process that gives the Governor so much sway, residents need to be able to count on their leader to make decisions in their best interest. Delaware Governor John Carney approved large tax increases in his first year, including higher corporate franchise taxes, realty transfer taxes, alcohol taxes and cigarette taxes—totaling around $200 million annually.

It’s no surprise that Carney received a D-rating from the Cato Institute, a libertarian think tank based in Washington, D.C., on a recent report card of governors’ fiscal spending. When tax increases resulted in a surplus, Governor Carney allocated the money to new spending projects, instead of paying down the state’s unpaid debt, or returning the money to over-taxed residents.

Delaware’s money problems aren’t going anywhere, anytime soon. The state’s long-term debt liabilities are higher than the national average, and the unfunded pensions that have been promised to residents total $13.75 billion; more than triple the current total state operating budget. With rising unemployment rates, stagnant economic growth, and, according to policy nonprofit Tax Foundation, a poor business climate, now is not the time for our Governor to continue to spend, but instead to focus on genuinely improving the economic outlook in the state.

What needs to change

A Better Delaware, a pro-growth issue advocacy group, believes it’s time for Delaware lawmakers to actually address the ever-growing budget, instead of choosing to raise taxes.

By instituting a policy of data-based spending, lawmakers can use existing funds more efficiently, investing in programs that improve life for the state’s residents, provide more economic opportunity, and begin to pay down the state’s crushing debt.

It’s time for a real solution. Delawareans deserve responsible budgeting of their money, a budget that can weather an economic storm, and better choices from their Governor to ensure a brighter future for the state.

To learn more, sign up for the A Better Delaware email newsletter at abetterdelaware.org.

Wesley College to receive $3 million in state funding

From Delaware State News

DOVER — A state panel this week approved a request for $3 million from Wesley College, with conditions.

The funding is expected to help the college continue operations until it can come to an accord on a merger with another higher education institution, which could be announced in the coming weeks.

In November, the private school submitted a request for $3.2 million from the state’s Higher Education Economic Development Investment Fund. The group, which consists of the director of the Office of Management and Budget, the secretary of state, the co-chairs of the General Assembly’s Joint Legislative Committee on Capital Improvement and the controller general, previously awarded $2 million to the college in 2019.

Wesley also was given permission in the spring to move $1.375 million earmarked for it the prior year to renovate the former Dover library.

College officials were informed in the summer they would not receive any more funding without first submitting a long-term strategic plan to the state, which they have not done as yet.

Read more:

https://delawarestatenews.net/schools/wesley-college-to-receive-3-million-in-state-funding/

Prosperity Partnership’s project pipeline got a lot busier in 2019

From Delaware Business Times

One of the Delaware Prosperity Partnership’s core functions is to assist companies looking to relocate to Delaware or expand within Delaware, providing a range of support services from identifying potential sites, to providing detailed labor and business cost data, to connecting with key state agencies and local partners, to explaining and coordinating incentive options, and more.

DPP calls these engagements with prospective companies “projects,” and collects and analyzes data to better understand and communicate the types of projects that DPP works on, job creation potential, and more. These projects are all at different stages, from initial conversations to pending final decisions by the company. Projects that ultimately choose to locate or expand in Delaware are referred to as “located projects,” and are moved off this active pipeline, as are projects where DPP has lost contact with the company or the company chose a location outside of Delaware, all of which are referred to as “closed projects.”

DPP’s project pipeline grew considerably in 2019. In January 2019, DPP was working 49 active projects. These projects represented the potential for at least 3,302 new jobs, 922 retained jobs, and $186 million in capital investment. By December 2019, DPP was working 63 active projects, with the potential for at least 5,069 new jobs, 515 retained jobs, and $747 million in capital investment.

https://delawarebusinesstimes.com/news/delaware-prosperity-partnership-busy-2019/