City Eyes $7 million Taxpayer Dollars to Continental Resources

[Rover]

I think we should not compete with incentives and those 450 jobs averaging $130,000 should go elsewhere. We don't want fast growing companies to locate here because we are a Tea Party state and we believe in total complete pure ideals, regardless of realities. We would rather be puritans, right? We don't need that nose, let's just cut it off.

Folks, the PEOPLE voted this in. If it helped us keep CR in Oklahoma and move to OKC vs. losing another company to Dallas or Houston, it is a good investment.

[Easy180]

I think the $7 million is just the price tag for already agreed on incentives. It is not unlike the $1 million used to build Level Urban Apartments. Level doesn't get the money until the construction is done and the dollar amount wasn't agreeded to until well after planning for Level had been announced.

This seems reasonable and I don't have a problem with incentivizing QUALITY employers...Huge inconvenience to uproot your HQ

[Urban Pioneer]

At least "some" of the rich. The pooling of monies after the bailouts whilst small business has few opportunities to obtain loans is sickening.

I can understand why there are people generally angry at all levels.

[soonerguru]

If this situation angers you, then you must really hate Texas. They throw money all over the place to lure companies. If Oklahoma City were to bow out providing incentives and not complete with other cities, then we will be back where we were in the late 1980s. Which do you prefer?

While I agree with this, Pulse, it bothers me to hear so much talk of "Socialism" when it comes to Social Security, retirement pensions, and Medicare, but citizens are supposed to simply accept that corporations deserve free money and tax breaks.

I do agree OKC / Oklahoma should compete and offer incentives, but I'm officially annoyed by the "it's socialism if average people receive benefits but it's simple 'good-old-fashioned-free enterprise' when corporations are on the receiving end" BS.

[Steve]

This bond issue was approved by voters. It was fully reported on prior to the vote.
Sometimes it's useful to look back at what was said prior to the vote:
Story No. 1:
Fund sought to lure new employers

By Steve Lackmeyer
Business Writer
Wednesday, July 25, 2007
Edition: CITY, Section: BUSINESS, Page 1B
Oklahoma City voters may be asked this winter to support creation of a $75 million economic development fund as a replacement for depleted federal grants used to lure new employers.

The General Obligation Limited Tax bonds — called GOLT bonds — if approved by the Oklahoma City Council, would increase a bond issue vote proposed for Dec. 11 to a total of $830 million.

Assistant City Manager Cathy O'Connor told the council Tuesday the city has "exhausted" traditional sources of economic development incentives just as the city has become a top contender for new employers considering expansion or relocation in Oklahoma City.

"We have many more leads and prospects that we're visiting with than I've seen in the past eight years I've been doing economic development with the city," O'Connor said. "We're working with several prospects out there on the possibility of coming to Oklahoma City. It's a very competitive environment, a very competitive marketplace to get the investment in your community."

Roy Williams, president of the Greater Oklahoma City Chamber, urged the city council to add the GOLT bonds to stay competitive with other cities across the country.

"No one philosophically likes incentives," Williams said. "But unfortunately, we can't ignore the reality that economic incentives are important to getting a development. ... In reality, Oklahoma has slid on the scale of being competitive in luring these projects."

Williams said special tax elections, such as those attempted in the early 1990s to lure airline maintenance plants, are no longer sufficient in an age of fast-moving deals.

"We would be the first major city in the United States to do this," Williams said. "Cities elsewhere have done this in bits and pieces, but none have done this to this extent. We would be the first, best and the only city in the U.S. to have a strategic fund to address jobs and economic development."

City council members questioned whether a countywide vote should be considered or whether neighboring suburbs should be included in the initiative. Williams said a change in state statutes would be needed to allow Oklahoma City to partner with suburbs in "economic districts."

Ward 4 Councilman Pete White recalled Oklahoma City once believed it only could attract new employers by throwing cash at them. He reminded Williams that the failure of approved sales taxes to lure airline maintenance centers led to the city's decision to invest in itself with the 1993 Metropolitan Area Projects and the follow-up MAPS for Kids overhaul of schools.

"I don't want us to ever go back to that pre-MAPS idea that the only way to get business to come to Oklahoma City is to buy it. Only by reinvesting in ourselves did we get to where we are today. I don't want us to lose that perspective."

Williams agreed with White — but added that incentives have remained a key component in luring employers such as Dell and Quad Graphics.

Williams said hundreds of Texas cities have established their own incentive funds that, combined with state matches, top what can be offered by Oklahoma City. He said Oklahoma City's transformation is attracting interest from companies elsewhere, but the city still must compete with what is being offered by other markets.

"Companies are always looking at how to close a sale, whether it's rebates, pricing or anything else," Williams said. "And that's what this is — it's about making the sale. ... This just makes us competitive."

Including the economic development fund on the ballot could translate into an increase in either the length of the bond issue or in the property tax level to 18 mills, from what now stands at 16 mills. In the past three bond issue elections, the city has been able to promise a "yes" vote would result in no increase to property taxes.

An increase from 16 to 18 mills would result in an increase of $248 to $279 a year for a $150,000 home. An increase in the length of the bond issue would delay when the city could introduce a new bond proposal.

The city council will decide in October whether to include the $75 million in the bond issue election.

"I'm not hearing anyone here saying they are not in favor of job development," Mayor Mick Cornett said. "I think we're in a consensus on that."

HOW THE BONDS WOULD WORK

For the past decade, Oklahoma City has relied mostly on state and federal funding to lure employers. Options included federal Community Development Block Grants, state incentives including the Quality Jobs Act, tax abatement and tax exemptions, and local incentives in the form of job creation grants, land assembly and infrastructure improvement.

Federal grant funding has been reduced the past few years, and city officials say they've "exhausted" what funds remained with projects ranging from the Dell Business Service Center and American Indian Cultural Center along the Oklahoma River, and renovation of downtown's Skirvin Hilton Hotel. If the "GOLT bonds" are approved by voters, Oklahoma City City Manager Jim Couch said $10 million in bonds could be sold at first, and additional bonds would only be sold as needed. Couch said a trust authority, similar to one that oversees expenditures of MAPS for Kids sales taxes, would control the GOLT bonds. He expects the proposed authority and its members would be announced prior to the Dec. 11 election. Couch said guidelines would govern how the bond money could be used, and that it would not be used for employee or corporate retention.

The incentives would be capped at $75 million.
Trust proposed to oversee funds

By Steve Lackmeyer
Business Writer
Tuesday, October 9, 2007
Edition: CITY, Section: BUSINESS, Page 4B
Oklahoma City Mayor Mick Cornett is asking fellow council members to approve creation of a trust today that would oversee a $75 million economic development fund that is included in an upcoming bond issue.

The fund is proposed to provide incentives like those used to lure Quad Graphics and Dell Computers. The fund can only be created if approval of an $835 million bond issue in an election tentatively set for Dec. 11. The General Obligation Limited Tax Funds – called GOLT bonds – are advocated by the Greater Oklahoma City Chamber as a way to replace depleted federal grants that were previously used to lure new employers.

Cornett is asking council members to also approve five nominees for the trust: former Mayor Kirk Humphreys; Dave Lopez, an executive at American Fidelity Assurance Co. and former Oklahoma SBC president; veteran Automobile Alley developer Meg Salyer; and council members Larry McAtee and Patrick Ryan.

"We thought having two council members would be appropriate," Cornett said. "We also wanted people in the private sector who have experience with the city, who have created jobs, and know how jobs are created."

Cornett said the trust will operate in a manner similar to the one that oversees the city's MAPS for Kids overhaul of area schools. He said the trust will have the authority to question city staff and chamber officials. Ultimate authority, however, would be retained by the city council.

"It should put a layer of confidence in the system that should stand the test of time," Cornett said.

Roy Williams, president of the Greater Oklahoma City Chamber, said the five proposed trustees should help voters feel comfortable with the unprecedented use of bond funds for economic development.

"I think when you look back at the MAPS trusts that the public needs to have confidence in the individuals and that they have credibility," Williams said. "These are people who will be perceived as people who can be relied on to lay out this program as it is intended."

How bonds would work

Staff Reports
Tuesday, October 9, 2007
Edition: CITY, Section: BUSINESS, Page 4B
For the past decade, Oklahoma City has relied mostly on state and federal funding to lure employers.

Options included federal Community Development Block Grants, state incentives including the Quality Jobs Act, tax abatement and tax exemptions, and local incentives in the form of job creation grants, land assembly and infrastructure improvement.

Federal grant funding has been reduced the past few years. And city officials say they've "exhausted" funds with projects ranging from the Dell Business Service Center and American Indian Cultural Center along the Oklahoma River, and renovation of downtown's Skirvin Hilton Hotel.

If the "GOLT bonds" are approved by voters, Oklahoma City City Manager Jim Couch said $10 million in bonds could be sold at first, and additional bonds would only be sold as needed. Couch said a trust authority, similar to one that oversees expenditures of MAPS for Kids sales taxes, would control the GOLT bonds.

Couch said guidelines would govern how the bond money could be used, and that it would not be used for employee or corporate retention.

The incentives would be capped at $75 million.

[Steve]

Forgive me, but I think it's important to understand how these deals work. Some companies have been duds. Let's take a look at Spheris:
Incentives to lure med transcription

By Steve Lackmeyer
Business Writer
Tuesday, July 15, 2008
Edition: CITY, Section: BUSINESS, Page 6B
The Oklahoma City Economic Development Trust has asked to consider a $3 million incentives deal to establish a medical transcription operation expected to create up to 1,000 work-at-home jobs.

A report provided by Robin Roberts Krieger, executive vice president of economic development at the Greater Oklahoma City Chamber, forecasts the deal with Tenn.-based Spheris will result in a $36 million payroll within three years.

"We're optimistic based on how this is being presented," said Roy Williams, chamber president. "We think this is an offer they will consider very seriously."

Cathy O'Connor, general manager of the development trust, acknowledged the deal is unique for the city. Spheris has reported to the city it is hoping to employ military spouses.

"With gas prices up as they are, this may be the sort of jobs more people are looking for," O'Connor said.

Earlier this year, Oklahoma City was a top finalist for the regional operation when it was tentatively awarded to New Mexico. Krieger said negotiations were revived when that deal fell apart.

Williams said the jobs are being created in response to tightening privacy rules.

"It's a trend that we understand is taking place in this industry," Williams said. "A lot of this kind of business has historically been off shored. And it's coming back ... this is potentially a growth industry and reversing what we've seen in off-shoring jobs."

ECONOMIC INCENTIVE BONDS

For the past decade, Oklahoma City has relied mostly on state and federal funding to lure employers.

Options included federal Community Development Block Grants, state incentives including the Quality Jobs Act, tax abatement and tax exemptions, and local incentives in the form of job creation grants, land assembly and infrastructure improvement.

Voters in December added $75 million to the mix by approving General Obligation Limited Tax bonds. Before any incentives can be offered, they must be approved by the Oklahoma City Economic Development Trust, whose members are appointed by the mayor.

THE DEAL

Spheris will lease an existing 5,000-square-foot building in Oklahoma City for a training facility and regional headquarters. The company anticipates creating up to 1,000 jobs over the next three years. Most of the jobs would be work-at-home medical transcriptionists with an average third-year wage of $36,000. The estimated payroll by the third year would be $36 million. The city is being asked to offer up to $3 million over three years, with up front capital not to exceed $1 million. The deal would require 80 percent of the employees to reside in Oklahoma City. Spheris will guarantee the year one incentives with a promissory note should the operation not meet the required salary threshold.

Incentive package narrowly approved

By Steve Lackmeyer
Business Writer
Wednesday, July 16, 2008
Edition: CITY, Section: BUSINESS, Page 6B
A $3 million incentives package aimed at luring a medical transcriptions company to set up operations in Oklahoma City won tentative approval Tuesday from the Economic Development Trust — but not without some concerns expressed about the company's financial stability.

The proposed deal with Tennessee-based Spheris calls for the city to provide $1 million up front for setting up operations in Oklahoma City, with the majority of the 1,000-employee operation consisting of work-at-home jobs with an average salary of $36,000.

Trustee and Ward 1 Councilman Pat Ryan questioned the company's financial viability, noting he was able to find reports of losses totaling $2.8 million in 2006 during a search on Google.

"If this were 2006, we'd really be on thin ice," Ryan said. "I have real serious questions about their financial viability."

Finances studied

Assistant City Manager Cathy O'Connor, manager of the trust, promised more research will be done into the company's finances before the deal is finalized. She said the city's outside audit firm, Grant Thornton, may be asked to review the company and the deal before it's submitted to the city council for final approval.

Spheris executives could not be reached for comment Tuesday. But in a May 13 earnings conference call, President and Chief Executive Officer Steven Simpson reported first quarter revenues totaled $49.3 million, down from $52.3 million for the same period in 2007. The quarter ended with an operating loss totaling $700,000.

As with the 2006 news reports of declining revenues quoted by Ryan, Simpson cited a loss of customers and changing technology as leading factors in the latest losses. Chief Financial Officer Brian Callahan, meanwhile, forecasted that revenues would be flat or down for the remainder of the year.

A report on the proposed incentives deal submitted by Robin Roberts Krieger, executive vice president of economic development with the Greater Oklahoma City Chamber, indicated Oklahoma City was one of two finalists for the Spheris expansion when the company initially chose New Mexico.

Site search reopened

The report states "issues regarding Spheris' incentive package with the State of New Mexico" prompted the company to reopen their site selection process in February and Oklahoma City was chosen as the top pick one month later.

Neither O'Connor or Roy Williams, president of the Greater Oklahoma City Chamber, could elaborate on why the deal with New Mexico collapsed.

INCENTIVE PACKAGE

Tennessee-based Spheris Inc. is one of the leading providers of clinical documentation technology and serves more than 500 health systems, hospitals and practices in the United States. The company employs more than 5,500 transcriptionists worldwide, many of them in at-home jobs, with operations centers in Franklin, Tenn., Minot, N.D., Sterling, Va., and in three cities in India.

The proposed $3 million incentive package would be paid from a $75 million General Obligation Limited Tax bond passed by voters in December. The Oklahoma City Economic Development Trust, appointed by the mayor to oversee expenditures from the fund, also on Tuesday approved a $2.9 million deal with AAA to open an office in northwest Oklahoma City that is expected to employ 825 people.

--------------------------------------------------------------

SO WHAT HAPPENED?
On February 3, 2010, Spheris filed for bankruptcy and announced plans to sell its U.S. business to MedQuist Inc, its largest competitor, for $75.25 million. To my knowledge the company did not set up operations in Oklahoma City and it did not receive any money.

[soonerguru]

I think we should not compete with incentives and those 450 jobs averaging $130,000 should go elsewhere. We don't want fast growing companies to locate here because we are a Tea Party state and we believe in total complete pure ideals, regardless of realities. We would rather be puritans, right? We don't need that nose, let's just cut it off.

Folks, the PEOPLE voted this in. If it helped us keep CR in Oklahoma and move to OKC vs. losing another company to Dallas or Houston, it is a good investment.

Why do you always have to so sanctimonious? Most people agree Continental is deserving.

[Larry OKC]

While I agree, at least the rich are creating jobs unlike the welfare class.

True. I have never been employed by a poor person (at least not for very long).

The info by Steve about Spheris leaves me split on the issue

1) Am against giving millions away to someone who obviously doesn't need it...has said they are coming anyway

2) But on the other hand, they are the types to deliver on what they promised

Sort of like trying to get a loan at the bank, they require assurances that you don't really need the money. That it is really just a cash flow function.

Well reiterate what I mentioned before. It is a great thing when these types of deals are conditional, that when the conditions aren't met, the flow of money stops. That said, they have to stick to those conditions and not "forgive" loans etc. There should also be a requirement that any monies given prior to the failing of meeting conditions be returned. that way not only is there a reward incentive but a penalty phase. Not unlike road construction projects. There are financial incentives for every day they complete the job early and penalties for every day it goes the other way..

[Rover]

Why do you always have to so sanctimonious? Most people agree Continental is deserving.

Not meant for them.

Thanks for the sanctimonious scolding about being sanctimonious.

Btw, I was being sarcastic, not sanctimonious.

[Steve]

I think something that needs to be mentioned, and forgive me for not doing so, is that the city began negotiating this deal with Continental in 2010 before the company decided to move its headquarters to OKC. So while the incentive is not for relocation per se, it's probably safe to say the potential of getting this money for the expansion planned after the move probably played into the choice of OKC instead of Houston, Dallas, etc. And as mentioned earlier in this thread, yes, Texas most likely would have thrown this much money if not more to get Continental.
I'm not defending the money game. Just saying it is what it is.
The city has a bit of a challenge in communicating this one - they have said they don't want to use this money to steal jobs from other Oklahoma communities. And indeed, there isn't a dime, from what I can see, going toward the relocation or the existing jobs. But I'd be hard pressed to believe the potential of this deal didn't play into the relocation decision.

[Just the facts]

...they have said they don't want to use this money to steal jobs from other Oklahoma communities.

This has always bothered me. OKC should be going after the top 50 companies in Oklahoma that are not already in OKC. If OKC had been doing this all along Conoco, Phillips, and lots of other companies might be in OKC today, instead of Texas. I know this, cities here in Florida don't care anything about not trying to lure employers from other cities in the state. Downtown Jax has even declared war on suburban Jax. A fund was created just to lure employers to downtown and the first recipient is a company located about 8 miles south of downtown.

http://www.bizjournals.com/jacksonvi...-everbank.html

EverBank wants to expand into Downtown Jacksonville, adding 200 new jobs and relocating 1,000 employees from its Southside office with the help of city funding, according to a news release from the City of Jacksonville. The exact Downtown location of the EverBank move was not contained in the release.

The Mayor's Office is proposing to offer the Qualified Target Industry Tax Refund program with a High-Impact Sector Bonus to provide the bank with $420,000 as well as a $2.75 million city grant funded primarily by the downtown economic development fund to offset EverBank's relocation expenses that are estimated at $26 million.

The proposed agreement with the city calls for the bank to maintain a minimum of 1,000 jobs in Downtown and an average of 1,350 employees between its downtown and Riverside Avenue headquarters during an initial five-year contract period. Mayor's Office spokesperson Misty Skipper said the bank has not finalized a Downtown lease yet.

[Spartan]

My knee-jerk reaction is to be appalled by more corporate welfare. But then I saw the average incomes that we would be talking about... that is something very significant. If someone wants to create 400+ jobs with an average income of $130,000, maybe we should whore ourselves out a little. I'm just tired of subsidizing jobs that average slightly above the Oklahoma average. Corporate welfare for $40,000 jobs makes us look pathetic, and it is pathetic.

[Spartan]

Oh and this affair shouldn't be in the Urban Core development forum.

[Midtowner]

This may very well be unconstitutional.

the credit of the State shall not be given, pledged, or loaned to any individual, company, corporation, or association, municipality, or political subdivision of the State, nor shall the State become an owner or stockholder in, nor make donation by gift, subscription to stock, by tax, or otherwise, to any company, association, or corporation.

Art. 10, Sect. 15, Oklahoma Const.

[Just the facts]

This is the City, not the State.

[Midtowner]

The city is political subdivision of the state. The Constitution applies just the same.

The profound ignorance of your statement is beyond the pale. I mean under your "analysis," the U.S. Constitution, 1st Amendment of the Bill of Rights, beginning "no state shall" would not apply to municipalities or anything but states. You're smarter than that.

[Just the facts]

The city is political subdivision of the state. The Constitution applies just the same.

I understand that but the Article you posted said credit of the State cannot be given to a political subdivision. The State is not giving OKC any money. If you are trying to argue that the City is considered part of the State, then that would mean the State couldn't give money to itself or individuals - and it does that every day.

[Midtowner]

Look at the last clause. What's the difference between a "donation" and a payment for services. These words weren't selected at random and do mean something.

[Just the facts]

Look at the last clause. What's the difference between a "donation" and a payment for services. These words weren't selected at random and do mean something.

Explain State Unemployment Insurance, Medicare, Welfare, or public education. How can the State fund the University of Oklahoma?

You know, on second thought - never mind. The State's Quality Jobs Program has already been through all of this and it was ruled consitutional.

[Just the facts]

The profound ignorance of your statement is beyond the pale. I mean under your "analysis," the U.S. Constitution, 1st Amendment of the Bill of Rights, beginning "no state shall" would not apply to municipalities or anything but states. You're smarter than that.

Amendment 1 - Freedom of Religion, Press, Expression. Ratified 12/15/1791. Note

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
--------------------------------------------------------------------------------

The State is NOT Congress. Congress is defined Article 1, Section 1

All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.

The State IS NOT part of Congress. It consistant entirely of the Senate and House of Representatives, whose individual membership is spelled out in the rest of Article 1.

[Snowman]

While I dont know the specifics of this deal in several previous ones the incentives should collected in two years, if the person who's job was 'created' lived and shopped entirely in OKC.

[Rover]

My knee-jerk reaction is to be appalled by more corporate welfare. But then I saw the average incomes that we would be talking about... that is something very significant. If someone wants to create 400+ jobs with an average income of $130,000, maybe we should whore ourselves out a little. I'm just tired of subsidizing jobs that average slightly above the Oklahoma average. Corporate welfare for $40,000 jobs makes us look pathetic, and it is pathetic.

Remember the old joke with the punch line: "now that we know what you are, we are just negotiating over price". In politics, I find it usually has less to do with ideals and more to do with the "who" and "how much". Recent studies show that government contracts are now going to Tea Party freshmen congresspersons' donors at the same preferred rate as the liberal democrats whom they claim sold out. Seems as though it proves my point. Should we incentivize 200 $130k jobs or 2,000 jobs at $40k. Principle is the same.

Oh, $40,000 is not pathetic for people out of work or are stuck in minimum wage jobs as their only possibility of employment. Two people in a household making $40k each is $80k and provides a nice lifestyle for a family.

[Just the facts]

Should we incentivize 200 $130k jobs or 2,000 jobs at $40k.

At the State and local level - I am in favor of both.

[BDP]

The State IS NOT part of Congress.

Yeah, but a State can't subvert congress:

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

[Midtowner]

The State is NOT Congress. Congress is defined Article 1, Section 1



The State IS NOT part of Congress. It consistant entirely of the Senate and House of Representatives, whose individual membership is spelled out in the rest of Article 1.

Seriously.. do not quit your day job. Internet lawyering ain't for you.

The U.S. Constitution is incorporated to the states through the 14th Amendment Equal Protection clause. The state constitution, which I am referring to is applicable to all state political subdivisions. If you don't understand that the University of Oklahoma is a political subdivision of the State of Oklahoma, you just need some very remedial training on state and local government. Money isn't gifted or donated to state political subdivisions, it's part of the appropriations bill.

At any rate, you are right, in In the Matter of Application of Oklahoma Development Finance Authority, 2004 OK 26, 5-3, the Court basically rewrote the law on public money being used for private purposes, very clearly subverting the intent of the Constitution, which Justice Opala's dissent very clearly lays bare. The Petitioner, was of course, Jerry Fent, probably the most stalwart defender of the Oklahoma constitution this state has seen and as far as judicial minds go, Opala is head and shoulders above anyone who has sat on the bench, although, I will say he did some befuddling things in his later years on the bench.

On the law, the dissent was right. The majority wrote new law and basically removed the strong protections our forefathers had written into the Constitution to avoid very corrupt redistribution of wealth from the middle class to wealthy corporations as is being facilitated here.